Employers need more incentive to establish employee funds
Everyone in the country will pay into a pension program in the future. People under 30 will go automatically into one of the privately managed pension funds that are now getting licenses. People 31-50 can switch to a private fund or stay with the state-run, pay-as-you-go retirement program. Poles older than 50 automatically stay in the existing plan.
But the law also envisions that employers might want to offer a company pension plan, as an incentive to keep workers. Speaking at a EuroForum "Managing Funds" conference last week, Miszerak said company pension plans for the small percentage of companies with mostly high-earner workers clearly would pay off for both the employees and the companies.
But the situation is not as clear cut for the bulk of companies with employees who make the average wage. The donation structure is so confusing that workers could think, mistakenly, that the pension fund is costing them take-home pay. That will be difficult to explain and some employers may not want to start down that path.
But Miszerak said there is another downside for employers with a large work force. "The idea that employees get representation on the supervisory board of the (company-sponsored) pension society already has scared off some employers," he said. "They are afraid this could lead to trade unions using this as a negotiating tool so they're backing off from the whole idea."
And, of course, Miszerak said, one of the problems with the current system that starts up in April is that self-employed persons are out in the cold. "They have no options," he said. "The law does nothing for them."
Nor does the law give tax breaks for individuals who want to start their own "individual retirement account" or IRA as has been the case in Britain and the United States. The planners here didn't want to risk tax breaks that could be formidably expensive - even if it did create a huge financial investment pool. Later, perhaps. But they felt they were chewing off a lot as it was.
• • •
And the fact that just about every financial entity is talking pensions is evidence of that. The pension reform conferences in the past few weeks have included those by PricewaterhouseCoopers and Arthur Andersen. Last Tuesday, the Sheraton had the AA half-day seminar, with Peter Ferrigno leading off with an overview and upstairs, a smaller room was chockablock with pension and asset-management specialists for the Euroforum two-day meeting.
They also vied for the government insiders: the Arthur Andersen meeting had Andrzej Chodzko from Social Insurance Office (ZUS); the Euroforum seminar had late additions of Pawel Pelc, vice chair of the pension fund supervision office UNFE and Lidia Kukula, director of its economic analysis department on a panel chaired by Dorota Winczewska, general manager of the new ING BSK Investment Funds Corp., a sister company to the asset management operation headed by Krzysztof Stupinski.
Pelc came under much questioning about a recent UNFE statement that the owners of the privately managed pension funds cannot insist that their own employees sign up for that fund.
Many banks and insurance companies are pension-fund sponsors and many had assumed early on that their own customers, if not necessarily their employees, would be prime for the picking for their pension funds. Pelc said UNFE would insist that employees be allowed to make up their minds on which of the potentially two-dozen pension funds they want to affiliate with when the floodgates open April 1.
• • •
If you want to know how the Chilean, Peruvian and Argentinean pension funds operate ask Kukula. She's got a good command of what red flags were raised by the pension experiences there. That gives some clues on how Poland might act to prevent some of the problems there.
For instance: in some of the early programs, few people knew what they would pay in fees - and the pension fund fee structures varied a lot. In some cases, the fees substantially reduced the returns to the individual pension accounts. Poland will make sure the fees are visible for all to see.
Those looking to lessons learned in other countries also had a chance earlier this month to hear Domingo Cavallo, former Argentinean Finance Minister and now publisher of Forbes Global Business & Finance. He spoke about Argentina's pension reform experience at a conference organized by Smart Group.
• • •
Advertising agencies here are also preparing for the reform. BBDO's media client services director Adam lapinski said financial services already have been booming. That's nothing compared to what will happen next spring when the pension funds go all out to appeal to up to 6 million Poles to choose them - to put their retirement account into their fund - and not one of the two dozen competitors.
It's a massive marketing challenge. And that is why Citibank and Warta went and recruited a marketing veteran, not a banker or insurance expert, to head their pension fund "Dom."
Marek Jandzinski, 46, says he was surprised when headhunter Korn Ferry approached him about the pension fund job. He had a doctorate in accounting and an undergraduate degree in management, but he'd actually been doing sales and marketing for major multinationals such as Procter & Gamble, Nestle and then for the past 15 months, was general director of the Norwegian food company Orkla.
Exactly, the Citibank-Warta bosses said. He finally understood the dimensions of the problem and the short time frame. The pension fund will be treated like a new product, which of course it is, but that could mean TV and billboard campaigns of up to $4 million. The probable message: inviting real folks to be part of the Citibank-Warta "family".
But the law also envisions that employers might want to offer a company pension plan, as an incentive to keep workers. Speaking at a EuroForum "Managing Funds" conference last week, Miszerak said company pension plans for the small percentage of companies with mostly high-earner workers clearly would pay off for both the employees and the companies.
But the situation is not as clear cut for the bulk of companies with employees who make the average wage. The donation structure is so confusing that workers could think, mistakenly, that the pension fund is costing them take-home pay. That will be difficult to explain and some employers may not want to start down that path.
But Miszerak said there is another downside for employers with a large work force. "The idea that employees get representation on the supervisory board of the (company-sponsored) pension society already has scared off some employers," he said. "They are afraid this could lead to trade unions using this as a negotiating tool so they're backing off from the whole idea."
And, of course, Miszerak said, one of the problems with the current system that starts up in April is that self-employed persons are out in the cold. "They have no options," he said. "The law does nothing for them."
Nor does the law give tax breaks for individuals who want to start their own "individual retirement account" or IRA as has been the case in Britain and the United States. The planners here didn't want to risk tax breaks that could be formidably expensive - even if it did create a huge financial investment pool. Later, perhaps. But they felt they were chewing off a lot as it was.
• • •
And the fact that just about every financial entity is talking pensions is evidence of that. The pension reform conferences in the past few weeks have included those by PricewaterhouseCoopers and Arthur Andersen. Last Tuesday, the Sheraton had the AA half-day seminar, with Peter Ferrigno leading off with an overview and upstairs, a smaller room was chockablock with pension and asset-management specialists for the Euroforum two-day meeting.
They also vied for the government insiders: the Arthur Andersen meeting had Andrzej Chodzko from Social Insurance Office (ZUS); the Euroforum seminar had late additions of Pawel Pelc, vice chair of the pension fund supervision office UNFE and Lidia Kukula, director of its economic analysis department on a panel chaired by Dorota Winczewska, general manager of the new ING BSK Investment Funds Corp., a sister company to the asset management operation headed by Krzysztof Stupinski.
Pelc came under much questioning about a recent UNFE statement that the owners of the privately managed pension funds cannot insist that their own employees sign up for that fund.
Many banks and insurance companies are pension-fund sponsors and many had assumed early on that their own customers, if not necessarily their employees, would be prime for the picking for their pension funds. Pelc said UNFE would insist that employees be allowed to make up their minds on which of the potentially two-dozen pension funds they want to affiliate with when the floodgates open April 1.
• • •
If you want to know how the Chilean, Peruvian and Argentinean pension funds operate ask Kukula. She's got a good command of what red flags were raised by the pension experiences there. That gives some clues on how Poland might act to prevent some of the problems there.
For instance: in some of the early programs, few people knew what they would pay in fees - and the pension fund fee structures varied a lot. In some cases, the fees substantially reduced the returns to the individual pension accounts. Poland will make sure the fees are visible for all to see.
Those looking to lessons learned in other countries also had a chance earlier this month to hear Domingo Cavallo, former Argentinean Finance Minister and now publisher of Forbes Global Business & Finance. He spoke about Argentina's pension reform experience at a conference organized by Smart Group.
• • •
Advertising agencies here are also preparing for the reform. BBDO's media client services director Adam lapinski said financial services already have been booming. That's nothing compared to what will happen next spring when the pension funds go all out to appeal to up to 6 million Poles to choose them - to put their retirement account into their fund - and not one of the two dozen competitors.
It's a massive marketing challenge. And that is why Citibank and Warta went and recruited a marketing veteran, not a banker or insurance expert, to head their pension fund "Dom."
Marek Jandzinski, 46, says he was surprised when headhunter Korn Ferry approached him about the pension fund job. He had a doctorate in accounting and an undergraduate degree in management, but he'd actually been doing sales and marketing for major multinationals such as Procter & Gamble, Nestle and then for the past 15 months, was general director of the Norwegian food company Orkla.
Exactly, the Citibank-Warta bosses said. He finally understood the dimensions of the problem and the short time frame. The pension fund will be treated like a new product, which of course it is, but that could mean TV and billboard campaigns of up to $4 million. The probable message: inviting real folks to be part of the Citibank-Warta "family".
