By Marcin Goclowski and Jakub Iglewski
Poland announced on Monday the biggest shakeup of its pension system in nearly two decades, with plans to convert state-guaranteed private pension funds into mutual funds and to transfer some of their assets into state custody to cut public debt.
The economy ministry said it aimed to channel 35 billion zlotys ($8.8 billion) worth of assets now held by the pension funds into the state-run demographic reserve fund (FRD).
The remaining 103 billion zlotys worth of assets now held in shares are to be managed by the new mutual funds.
“The shift (of 35 billion zlotys) should cut public debt by two percentage points. It will have no impact on the general government deficit,” said Pawel Borys, who heads a state-run growth fund PFR, which is to manage the assets transferred to the FRD.
Further details on the new plans were not immediately available.
The private pension funds, known as OFEs, were created in 1999 as part of an overhaul of Poland’s retirement system, intended to provide a savings plan to complement pensions paid out by the state.
The funds, controlled by foreign players such as Nationale Nederlanden, Aviva, AXA and MetLife, have invested large amounts of taxpayers’ savings on the stock market, driving the Warsaw bourse’s growth.
They now hold up to 80 percent of some companies and account for about 20 percent of the bourse’s value. But many market observers have questioned their investment results and have criticised the fees OFE managers charge.
The move by Poland’s conservative government, run by the Law and Justice (PiS) party, is not without precedent in a country that shook off communist rule in 1989 and is now the EU’s sixth-largest economy.
The centrist coalition which lost power to PiS last year transferred 150 billion zlotys of treasury debt into the state pension system to prop up the budget in 2014.
Market players had feared that PiS would take the next step and seize control of the funds’ stock holdings.
The Warsaw bourse’s headline WIG20 index started the day with a decline of more than 2 percent, though it later clawed back some losses. ($1 = 3.9677 zlotys) (Reporting by Marcin Goclowski and Jakub Iglewski; Writing by Adrian Krajewski; Editing by Marcin Goettig)