Poland Approves Plans to Overhaul Pension System
Poland is moving its state-guaranteed private pension benefits to IRA-like accounts. The shift is designed to trim the Polish government’s liabilities and save $5 billion thanks to reduced retirement outlays.
The government-backed private system, called OFE, is valued at about $43 billion. Private pension funds are owned and run by firms like MetLife, NN Group, and Aviva.
The government is transferring assets to fill a budget gap and minimize uncertainty. Poles’ private pension money will be moved to the IRAs at a 15% fee, unless they ask to put it with the state insurer.
OFE manages almost 80% of the assets, which are shares in companies on the Warsaw Stock Exchange. In the 1990s, Poland created privately managed pension funds with partial contributions to the state pension system. Currently, the insurance institution collects a majority of mandatory contributions from employees, which is 19.5% of pre-tax earnings. A smaller amount is set aside for OFE.
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