How the Polish pension fund reform will affect the fund’s investments

In December 2013, the Polish parliament passed a governmental bill to reform the private pension fund sector in Poland despite receiving strong criticism from many economists and experts and ignoring warnings that that the bill could breach the Polish constitution. Even though the constitutionality of the bill will be examined by the Polish Constitutional Tribunal, this will not prevent the bill from entering into force at the beginning of February and some of its provisions from doing so as early as mid-January 2014. The effects of the bill will be seen immediately with the outflow of more than half of the assets held by open pension funds (OPFs) to the Polish state, a move that some commentators openly call ‘nationalisation’. It is expected that the asset transfer, along with other changes that the bill will introduce, will reshape the landscape of the Polish capital market, making OPFs a significantly different player than they used to be.

The bill will require OFEs, which have so far collectively been the largest private investor on the Warsaw Stock Exchange, to transfer 51.5 per cent of their assets, primarily in treasury bonds and treasury bills (worth around PLN127bn or £25bn), to the state’s Social Security Institution (ZUS). It is estimated that the transfer will lead to a decrease of public debt in Poland from around 55 per cent GDP to 47 per cent GDP and this is the main short-term purpose of the reform, rather than providing improved financial security for retirees…

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