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Finance minister floats pension plan reforms

PR dla Zagranicy
Nick Hodge 27.06.2013 10:11
Three potential reforms to Poland's pension system look to channel money away from private Open Pension Funds (OFEs) to the country's social security institution ZUS.
Finance Minister Jacek Rostowski at a press conference in Warsaw.
Photo: PAP/Radek PietruszkaFinance Minister Jacek Rostowski at a press conference in Warsaw. Photo: PAP/Radek Pietruszka

Finance
Finance Minister Jacek Rostowski at a press conference in Warsaw on Wednesday. Photo: PAP/Radek Pietruszka

The OFEs will not be abolished outright, as some analysts had earlier envisaged.

Minister of Finance Jacek Rostowski approved three of nine draft programmes alongside Minister of Labour Wladyslaw Kosiniak-Kamysz on Wednesday.

“We hope that the cabinet approves them for further discussion,” Rostowski told public broadcaster TVP1 on Wednesday.

“We want to devote several months to this debate, maybe more,” Rostowski added.

“After these consultations, the government will choose one option.”

In 1999, ten years after the fall of the Iron Curtain, Poland introduced a three-pillar system that cleared OFEs to receive 7 percent of tax-payers' earnings, which were subsequently invested in the stock market and government bonds. Simultaneously, Poland's public social security body ZUS was set receive at 12.22 percent of citizens' yearly earnings.

However, owing to public debt, in 2011 the contributions to OFEs were curtailed to 2.3 percent, with the remainder going to ZUS.

One of the newly proposed variants allows tax-payers to decide whether they want to remain in the OFE system, but they must send a written declaration testifying to this.

Last year, 60 percent of people who had been paying into OFEs did not indicate as requested which fund they wanted to continue with, and thus the proposal would likely see a vast switch to the state-only system.

Another variant allows for tax-payers to stay in the OFE system, but they would be obliged to pay a higher level of tax than those just in the state system (21.52 percent rather than 19.52 percent). Of this, 4 percent would go to the OFEs, the remainder to ZUS.

One other variant would see bonds held by OFEs redeemed and the values of these recorded in worker's personal ZUS account, a measure designed to diminish public debt.

Source: TVP/PAP/WBJ

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