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The reform of open pension funds in Poland

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Mruk-Zawirski Pawel
Pawel Mruk-Zawirski

Senior Associate


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01 October 2013

On 10 October 2013, the Polish government published a draft bill concerning a reform of open pension funds (OFE) which are collectively considered to be the largest private investor on the Warsaw Stock Exchange.

The main purpose of the reform is to decrease the level of public debt in Poland, and hence the debt-to-GDP ratio, as well as the costs of its servicing.

According to the draft bill, the reform envisages the transfer of treasury bonds and bonds guaranteed by the State Treasury, which account for over half of the OFEs’ assets (approximately PLN 121 billion), from OFE to the Social Security Institution (ZUS) at the beginning of February 2014. These bonds will be effectively redeemed and their value will be represented in the form of entries in sub-accounts of individual pensioners maintained by ZUS. The draft bill also provides that OFE will not be able to invest in treasury debt instruments and debt instruments guaranteed by the State Treasury. As of February 2014, the OFE will be obliged to invest at least 75% of their assets into shares, pre-emptive rights, rights to shares (PDAs) and bond exchangeables into shares. In addition, as of July 2014, previously existing investment limits on OFEs will be abolished.

The draft bill also assumes that the pension contributions of future pensioners will be transferred to ZUS instead of OFE and ZUS, unless individual pensioners decide otherwise by the end of June 2014 or in subsequent years – within certain dedicated timeframes. Moreover, the funds of individual pensioners will be gradually transferred from OFE to ZUS within the period of ten years prior to pensioners reaching their retirement age. The draft bill provides that the publication of any advertisements concerning OFE will be prohibited under a fine of up to PLN 1 million or imprisonment for up to two years.

Market commentators say that the planned reform may have an adverse effect on the ability of OFEs to invest in the shares of companies listed on the Warsaw Stock Exchange, which may, in turn, negatively affect their market price and general stock exchange liquidity. The draft bill has been forwarded for public consultations which are to last for one month.