EUROPE - Poland’s abandonment of a 5% cap on foreign equities for pension funds will have little impact on the industry, according to Dominik Radziwill, state undersecretary at the Polish Finance Ministry.

Last week, after a protracted legal battle, the European Court of Justice ruled that Poland’s stance on foreign equities had hindered the free movement of capital within the European Union.

Radziwill told IPE matter-of-factly: “We have to comply with this ruling, so we will implement it.” But he added that, based on recent discussions he had had with pension funds, the removal of the cap would no longer have a major impact.

He said he did not expect any “substantial changes” to arise from the ruling, as there was now much less money in pension system after the government slashed second-pillar contributions from 7.3% to 2.3% last year. 

“When there was more money in the funds, there was a danger of them overvaluing Polish equities and distorting prices, but now [pension funds] are less keen to invest abroad,” Radziwill said.

He also pointed out that “not single open pension fund [in Poland] comes close to this threshold”, and that the average allocation to foreign equities was just 2%.