Poland: Retirement plan developments – COVID-19

Dominic Clark and Marcin Krzykowski | 6 May 2020

In Poland, the COVID-19 pandemic has resulted in a delay in the roll-out of mandatory defined contribution plans  as well as a temporary suspension of changes to the state pension system.

Relaxation of timeline for employers to introduce PPK retirement plans for employees

Employee Capital Plans (PPK) are part of a voluntary long-term retirement savings programme which was launched in Poland in late 2019.
In the first phase of the programme, all employers with over 250 employees were mandated to offer a PPK plan to their employees. The participation rate for the first phase was 39% of the eligible work force. The original plan then involved enrolment for the second phase (companies with 50-250 employees) commencing in May 2020.

However, as part of government actions to support small- and medium-sized companies during the COVID-19 pandemic, the deadline for the second phase has been extended to November 2020.

This new deadline coincides with the launch of the third phase of the programme (obliging companies with 20-50 employees to offer a PPK plan to their employees).

Suspension of reversal of pension reforms

In a dramatic move in 2014 the Polish government reversed the “public-to-private” pension reforms that had been underway to that point. The reversal saw the government transfer the equivalent of US $40 billion of bond assets that had been accumulated within the private pension system back to the public system.

The government then announced a further reversal of the previous system and had intended to formalise this in 2020. Account holders were to be asked to choose between transferring the remaining savings to Pillar 3 individual pension accounts (IKE), subject to a one-off tax of 15%, or tax-free transfer of the assets to the state social security institution (ZUS) with income tax then charged at maturity.

Due to the eruption of COVID-19 the Ministry of Finance has decided to suspend these actions for the moment. This move has been triggered primarily by the significant drop in value of the accounts (in March 2020), but also by mis-estimation of the share of participants willing to move their assets to the ZUS.

The Ministry has also stated however that the transfer will eventually be carried out some time in the future.

Dominic Clark

Email: dominic.clark@milliman.com

Tel: +34 609 026 561

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