In 1998, Poland introduced a new three-pillar system, including a mandatory government-managed notional defined contribution program, second-pillar mandatory individual accounts, and third-pillar voluntary retirement savings accounts. Participation in the system is mandatory for all economically active persons born after December 31, 1968, and voluntary for those born from January 1, 1949, to December 31, 1968.

Recently, a new law diverting a portion of employee contributions from second-pillar individual accounts, managed by open pension funds (OFEs), to newly created first-pillar subaccounts, managed by Poland’s social insurance institution (ZUS), went into effect.

Therefore, as of May 1, 2011 employees contribute 2.3% of their monthly salaries (in contrast with the 7.3% that they contributed before) to the second pillar and 5% to the new subaccounts. Starting in 2013, second-pillar contributions will gradually increase until reaching 3.5% in 2017, with contributions to the new first-pillar subaccounts decreasing proportionally. Employers do not contribute to the second pillar.

Contribution rates to the pay-as-you-go program remained the same: 2.46% by employees and 9.76% by employers.

According to the government, the diversion of contributions to ZUS is necessary to lower Poland's budgetary deficit, which was approximately 8% of gross domestic product (GDP) in 2010 and to keep the national debt below the limit of 55% of GDP set by Poland's constitution (the Ministry of Finance estimated Poland's debt in 2010 at 53.3% of GDP).

The new law also includes the following provisions, among other:

  • The subaccounts will be indexed according to the average of the previous 5 years' nominal GDP growth (excluding any decline in GDP).
  • Investment limits for the second pillar will be changed, including an increase in the percentage of assets OFEs can invest in equities —from 40% currently to 62% by 2020.
  • A new third-pillar voluntary savings vehicle, called individual pension insurance accounts (or IKZEs), will be introduced in 2012. IKZEs will complement current voluntary individual retirement accounts (or IKEs). Workers will be entitled to set up an IKZE with an authorized institution, such as an investment company, insurance company, bank, or OFE; contributions on the first 4% of gross wages are tax free.


Article with courtesy of Social Security Online


Sources:"IKZE Kontra IKE. Nowy Pomysl na Emerytury," Money.pl, February 6, 2011; "Sejm Przeglosowal Zmniejszenie Skladki do OFE," Money.pl, March 25, 2011; "Controversial Polish Pensions Revisions Signed into Law," IPE.com, April 8, 2011; "Ostatnia Walka OFE o Klientow," Gazeta Prawna, April 13, 2011; "Zmiany w OFE od 1 maja 2011 r.," Gazeta Podatkowa, April 26, 2011; "IKE I IKZE, Czyli Dwa Producty do Dodatkowego Oszczedzania," Parkiet, April 27, 2011; "Mniej na Emerytury w OFE," Gazeta Prawna, April 29, 2011.

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