Update: Pension system in Poland - are fundamental changes upcoming?

Lawmakers in Poland are working on a draft law aimed at introducing fundamental changes to the Polish pension system. According to the draft law, the new provisions are scheduled to come into force on 1 November 2019 (with certain exceptions). The market rumour has it that the draft act will be considered by the Permanent Committee of the Council of Ministers over the course of next week.

What will change?

• Currently operating pension fund management companies (pl: powszechne towarzystwa emerytalne - PTE) that run open pension funds (OFE) and voluntary pension funds (DFE) will be transformed into investment fund management companies (pl: towarzystwa funduszy inwestycyjnych – TFI). In turn, both OFE and DFE will be changed into specialist open investment funds (SFIO). These changes will be carried out by virtue of law. Nonetheless they will entail:
  • adjusting the current operations to the new legal requirements,
  • drawing up and implementing a range of documents (e.g. statutes of SFIO, issue prospectuses, key information for investors, relevant internal procedures), and
  • providing the Polish Financial Supervision Authority with the majority of the documents/information which are normally attached to the applications for a licence to create a SFIO and TFI (by 22 July 2020).

• The net assets accumulated in OFE (which at present amount to approximately PLN 162 billion) will be transferred to individual pension accounts (indywidualne konta emerytalne - IKE) maintained in SFIO, with the possibility of further contributions being made to them. According to the draft law, this is the default option. However, it will be possible for an OFE member to submit a declaration about his/her transferring to the Polish Social Insurance Institution (ZUS). If this option is chosen, a conversion fee (as mentioned below) will not be charged but future pension payments will be subject to income tax;
• A conversion fee will be charged on the funds transferred from OFE to the IKE amounting in total to 15% of the value of these funds. Payment of the fee will be spread out over 2 years and SFIOs will be obliged to cover this fee.

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