Poland announces details of the employer-sponsored pension plans

The government announced the details of its planned employer-sponsored pension plans PPK. Depending on the scenario it hopes to boost the capital market with PLN 15-32 billion per year by 2021. The baseline scenario assumes that employers and employees contribute the minimum combined 3.5 percent of gross wages, initial flows should start at PLN 6 billion in 2019 and reach PLN 15 billion by 2021. In the scenario where the contributions reach the maximum level of 8 percent of gross wages, the inflows would reach PLN 12 billion in 2019, and PLN 32 billion in 2021. Part of the investment may be located abroad, but it is assumed that the share of foreign investments will not exceed 30 percent. "The implementation of the proposed changes gives a strong stimulus to the development of the Warsaw Stock Exchange and Warsaw as a real financial center in Central and Eastern Europe.The proposed changes create a strong and diversified base for local investors with a long-term investment horizon. portfolio in the economy, including the improvement of the international net investment position,” the government wrote in the impact assessment document attached to the draft, As a result of the implementation of PPK, it is assumed that total pension assets of Polish households will increase from PLN 172.6 billion at the end-2016 to at least PLN 339.7 billion by 2027 assuming that assets OFE, IKE, and IKZE are not increased by new premiums. The new program seeks to have firms and employees put a total of 3.5 percent of gross wages into privately managed Employee Pension Plans (PPK) – 1.5 percent from the employer and 2 percent from the employee. Workers will also have the right to opt out of the program, yet according to government’s estimates, 75 percent will choose to be a part of the plan. It should come into force from 2019 for large companies (over 250 employees), mid-2019 for mid-size (50-249) and mid-2020 for others. Additionally, the state will add PLN 240 per year to each account on top of the PLN 250 start-up bonus, which according to calculations will cost the budget PLN 1.1 billion in 2019, and PLN 2.5-3 billion afterward. In total, some 11.4 million employees would automatically become members of the opt-out system.