POLAND - Workers who gave up their early retirement rights to join the new pension system can now opt out again and withdraw money from Poland's pension funds.
Thousands of workers who were between 35 and 40 and had early retirement rights when they signed up for the new second pillar pension system in 1999/2000 might choose to opt back into the old system, according to James Kernan, director at PricewaterhouseCoopers in Warsaw.
"People either knew that they were giving up their privileges or they did not pay attention back then," he told IPE. "Now the government has just passed a rather ill-advised law which significantly compromises the integrity of the system."
He explained that these people are now in their 50s, the age for early retirement in some professions. "Their colleagues, who did not sign up for the new system can retire in three years time while they will have to work until their early 60s."
Kernan said he could not estimate how much money will flow out of the system back into the regular pot of ZUS, the Polish governmental social insurance institution. He added that it will be a "significant" amount but it "won't in any way cripple the system… as it does not affect any body else's money".
This development comes amid a renewed debate on who will pay out the annuities when the first people retire under the new system in 2009/2010. The government argues that it might be cheaper if ZUS makes the actual payments rather than 15 pension funds all using their own pay-out methods.
But pension funds fear that ZUS will borrow against the pension money and use it for something else. Apart from that, they will lose fees if the ZUS pays out the annuities.
Another ongoing struggle between the authorities and pension funds in Poland is the issue of mergers. Recently, one of the smallest funds in the system, OFE Polsat with just over PLN1bn (€254m) net assets, announced to plan to take over another pension fund.
No name was given by Polsat's chief executive officer, Anna Horsecka but industry sources think it might be Skarbiec-Emerytura with just over PLN3bn in assets. Skarbiec has been put up for sale by its owner, BRE bank.
"They are not going to allow mergers to go forward; they are going to stop them any way they can," Kernan said referring to the newly merged financial supervisory authority, KNF.
"The only thing that they will allow is if a new financial player wants to get into the market and buy an existing fund."
But he noted that the Dom pension fund, owned by Citigroup, has taken a merger proposal to the Polish high court after being rejected by the authorities. "It won the case and it will now be interesting to see what happens next," Kernan said.
Last year, PLN16bln were put into the second pillar pension funds from the ZUS pot. That is 15.2% more than in 2005.