Country profiles

Poland

Country profiles

Poland

Complementary pensions (Mandatory)

Updated: 31 December 2018

2013: Amendment to the Act on Organization and Operation of Pension Funds: half of Open Pension Funds' pension assets - the Treasury bills and bonds - were redeemed, and the OPFs were forbidden from investing in government bonds (both domestic and foreign). The contributions to OPFs became voluntary, with default opt-out. The system may still be considered quasi-mandatory, as the savings of members who choose not to contribute remained in the OPFs (the mix of voluntary contributions and mandatory management of already accumulated savings). Additionally, the advertisement of OPFs was banned (with minor exceptions). Both the minimum rate guarantee and investment limit in equities were removed. The reform also introduced so-called safety slider - starting10 years prior to legal retirement age, the member's savings in OPFs are being gradually transferred to notional account in the Polish Social Insurance Institution (ZUS) (thus, the whole pension benefit from mandatory contributions will be paid by ZUS).

2011: Amendment to the Act on Organization and Operation of Pension Funds: reduced contribution to Open Pension Funds from 7.3% to 3.5% (the total contribution to pension system remains unchanged, the differenced goes to a new notional account in the Social Insurance Institution), total ban on canvassing, increased investment limit in equities, and the introduction of new voluntary saving - Individual Pension Insurance Accounts with EET tax treatment.

2003: Amendment to the Act on Organization and Operation of Pension Funds; modifies several aspects of the mandatory private pension scheme.

1999: Act on Organization and Operation of Pension Funds; requires open pension funds to be authorized and managed by a pension fund society; provides for limits on the investment of fund assets, a Guarantee Fund, a supervisory framework and other measures aimed at protecting the rights of open pension fund members.

1998: Act on the Social Insurance System; reforms the social security pension system to provide mandatory private pension schemes as a complement to the publicly managed notional defined contribution pension scheme; defines the categories of the population covered by the social security pension system.

1998: Act on Pensions from the Social Insurance Fund; regulates the calculation of pensions under the publicly managed notional defined contribution scheme and the administration of the notional accounts.

Until 2014, all persons covered by the mixed system of old-age protection, consisting of a publicly managed notional defined contribution scheme and mandatory private pension scheme, must become members of a private open pension fund. Since 2014, the membership is voluntary for people entering the labour market.

The mandatory private pension scheme is a defined contribution scheme and contributions accumulate in individual accounts.

Covered persons may choose which open pension fund to join.

Open pension funds: Open pension funds are independent legal entities created and managed by a joint-stock company, which is called a pension fund society.

The creation of a pension fund society requires permission from the Polish Financial Supervision Authority (KNF). The application must include:

- the articles of association of the pension fund society;
- a list of founders, stating whether they are connected and describing the relationships among them;
- a list of members of the society's statutory bodies with a summary of their professional qualifications;
- documents proving that none of the members of the statutory bodies of the society has a criminal record;
- the society's organizational and financial plan for a period of three years.

KNF must refuse permission to establish a pension fund society if:

- the articles of association of the pension fund society contain provisions which may put the security of the fund assets at risk or are otherwise prejudicial to the interests of fund members;
- the pension fund society's organizational and financial plan fails sufficiently to protect the interests of fund members;
- any shareholder is in arrears of taxes.

At its establishment, a pension fund society must have share capital equivalent to at least EUR 5 million in PLN, which must not be from a loan or credit. The pension fund society must at all times have share capital of at least one-half of this amount.

Purchase of shares of a pension fund society requires permission from KNF. However, if the purchaser is an existing shareholder, permission from KNF is only required if the purchase of additional shares results in an increase in voting rights. An entity must not be a shareholder of more than one pension fund society.

The governing bodies of the pension fund society are the:

- management board (which is also the management body for the open pension fund after its creation through the pension fund society);
- supervisory board;
- general assembly.

Members of the management and supervisory board of the pension fund society must fulfil the following requirements:

- have full legal capacity;
- have not been sentenced by a court for any offence against property, credibility of documents, trade or the treasury;
- have higher education.

At least two-thirds of the management board members must have a record of employment of seven years or more and at least one-third must have higher education in law or in economics or be registered on the list of investment advisers.

Persons are ineligible for membership of the management board if they sit on a governing or a supervisory body of:

- a shareholder of the pension fund society;
- another pension fund society;
- a custodian with custody of an open pension fund's assets;
- an investment fund society or a shareholder of an investment fund society;
- a brokerage firm.

At least one-half of the supervisory board members must have higher education in law or economics and at least one-half of the members must neither be shareholders of the pension fund society nor sit on a governing or supervisory body of a shareholder of the pension fund society.

Each pension fund society may only create and manage one open pension fund and may not undertake any business other than that of creating and managing this fund. In order to create an open pension fund:

- the pension fund society's general meeting must adopt the fund's articles of association;
- the pension fund society must obtain permission from KNF to create the open pension fund;
- the open pension fund must be entered in the register of open pension funds.


The fund's articles of association must include the following:

- the name of the fund;
- the pension fund society's share capital, its shareholders, and the numbers of shares held by individual shareholders;
- the types of cost, their maximum amount, manner and procedure for calculating and covering the costs incurred by the fund;
- the fund's investment rules and standards.

The pension fund society must include the following documents with the application to KNF for permission to create an open pension fund:

- the fund's articles of association;
- the contract with the custodian;
- personal data of employees of the society who have significant influence on the management of the fund's finances and a summary of their professional qualifications.

Within two months of receiving permission to create an open pension fund, the pension fund society must file an application with the registration court for the fund to be entered in the register of open pension funds. The following documents must be attached to this application:

- the permission to create the fund;
- the fund's articles of association;
- the articles of association of the pension fund society;
- a list of members of the society's management board.

Any modification to the articles of association of the pension fund society or the open pension fund or to the contract with the custodian requires permission from KNF.

Upon a member's affiliation to an open pension fund, an individual account into which contributions will be paid must be opened for the member.

The Social Insurance Institution (ZUS) collects the total social security contributions for the mixed pension system and transfers a part of this to the open pension fund of which a contributor is a member. The remainder is credited to the contributor's notional account under the publicly managed notional defined contribution scheme.

Expand

Covered population

Open pension funds: The mixed system of retirement protection, consisting of a publicly managed notional defined contribution scheme and a mandatory (until 2014) private pension scheme, covers employees and self-employed persons (excluding farmers) born after 31 December 1948. Employees and self-employed persons born before that date are not eligible to participate in the mixed system.

In 1999, employees and self-employed persons born between 1 January 1949 and 31 December 1968 were free to choose whether to become members of the mixed system (and accordingly to become members of an open pension fund) or only to contribute to the reformed publicly managed notional defined contribution scheme.

Until 2014, employees and self-employed persons born after 31 December 1968 must be members of the mixed system and contribute both to the publicly managed notional defined contribution scheme and the mandatory private pension scheme. Since 2014, the contributions are voluntary for all existing members (member could decide to contribute to OPFs or solely to the Social Insurance Institution (ZUS) every four years), and membership is voluntary for people entering the labour market.

Enforcement of affiliation

Open pension funds: Open pension funds must accept all applications for membership from eligible persons.

Since January 1, 2012, the canvassing is not allowed. Pension funds may advertise their business, but may not employ sales agents to gather new members. A person who wants to join open pension fund must contact the fund directly itself. Since 2014, the advertising is also forbidden, with the exception of so-called transfer windows (the period every four years when members could change their decisions regarding whether to contribute to OPFs).

Sources of funds

Open pension funds: The total employer and employee social security contribution for old age is 19.52% of gross salary. Initially, 7.3% of this is transferred to the open fund of which a person is a member while the remainder is credited to a person's notional account under the publicly managed notional defined contribution scheme (OPFs), but the rate was reduced to 3.5% in 2012 and then (along with making it voluntary) to 2.92% in 2014. Contributions are paid on salary up to the limit of 250% of the average Polish salary.

Member contributions

Open pension funds:
Employees contribute 9.76 per cent of gross earnings to the mixed system for retirement. Since 2014, the voluntary contributions of 2.92% may be transferred to their open pension fund and the remainder is credited to their notional accounts under the publicly managed notional defined contribution scheme.

Self-employed persons contribute 19.52 per cent of insured income to the mixed system for retirement Since 2014, the voluntary contributions of 2.92% may be transferred to their open pension fund and the remainder is credited to their notional accounts under the publicly managed notional defined contribution scheme.
For employees, the maximum earnings for contribution purposes are 250 per cent of national average monthly earnings.

For self-employed persons, the minimum insured income is 60 per cent of national average monthly earnings.

Employer contributions

Open pension funds: There is no employer contribution to the mandatory private pension scheme. Employer contributions of 9.76 per cent and 6.5 per cent of payroll, for retirement and for disability and survivorship benefits respectively, are paid to the publicly managed notional defined contribution scheme.

Other sources of funds

Open pension funds: None.

Methods of Financing

Open pension funds: Funded in individual accounts.

Asset Management

Open pension funds: Each pension fund society may create and manage one open pension fund. The open pension fund management board (see section Institutional Framework) manages the investment of fund assets.

Since 2014, the open pension funds are not allowed to invest in Treasury bills and bonds (either domestic or foreign).
The fund may invest only in the following assets and the following investment restrictions apply:


- bank deposits and bank securities in domestic currency (up to a maximum of 5 per cent of total assets in a single bank or a group of affiliated banks);
- shares of companies, subscription rights, allotment certificates and convertible bonds listed on a stock exchange or quoted on a regulated over-the-counter market or of those companies which otherwise have been admitted for public trading;

- investment certificates of closed-end investment funds or hybrid investment funds (up to a maximum of 2 per cent of total assets);
- units sold by open-end investment funds (up to a maximum of 5 per cent of total assets in units of one open-end investment fund and a maximum of 15 per cent in different investment funds managed by a single investment fund society);
- publicly traded bonds and other debt instruments issued by local government entities, their associations and the city of Warsaw;
- fully secured bonds of issuers other than local government entities, their associations and the city of Warsaw;
- bonds and other debt securities issued by listed companies.

The total value of the fund's investments in all securities of a single issuer or of two or more affiliated issuers must not exceed 5 per cent of the fund assets.

Open pension funds may, invest assets outside Poland in securities listed on major stock exchanges of OECD countries or such non-OECD countries as may be named by the Minister. The total exposure to assets denominated in foreign currency is limited at 30%.
Investment in derivatives may be made only to limit the exchange rate risk of investments outside Poland.

Open pension funds must not invest assets in:

- shares or other securities of the pension fund society managing the fund;
- shares or other securities of a shareholder of the pension fund society managing the fund;
- shares or other securities of partners of the pension fund society or shareholder of the pension fund society managing the fund.

Fund assets must be kept by a custodian.

Preservation, portability, transferability

Open pension funds: Open pension funds operate according to a defined contribution formula and the accumulated pension capital is completely portable.

The 2013 amendment to pension law introduced so-called safety slider - starting10 years prior to legal retirement age, the member's savings in OPFs are being gradually transferred to notional account in the Social Insurance Institution (ZUS). Thus, the whole pension benefit from mandatory contributions will be paid by ZUS, and open pension funds serve only as accumulation vehicles.

Retirement Benefits

Benefit qualifying conditions

Open pension funds:

As a result of 2013 amendments to the pension law, when a member reaches the legal retirement age (65 for man, 60 for woman), all his/her savings in OPFs are already transferred to notional account in the Social Insurance Institution (ZUS).

Withdrawal of funds before retirement

Open pension funds: Not permitted, except in the case of disability.

Benefit structure / formula

Open pension funds: Defined contribution.

Open pension funds pay no retirement benefits. The OPFs serve only as accumulation vehicle, and the benefit (life annuity) is paid by state social security institution (ZUS).

Benefit adjustment

Open pension funds: Not applicable (see explanations above).

Survivors

Benefit qualifying conditions

Open pension funds: Upon death before retirement and if the deceased's accumulated account balance was subject to community property, the spouse receives a transfer of one-half of the balance in the deceased's account to the spouse's account in an open pension fund. If the spouse does not have an account, the open pension fund must open one.

When entering into the contract with an open pension fund, the member may name one or more beneficiaries to receive the remaining capital not paid to the member's spouse. If the deceased member did not name a beneficiary, the account balance is paid in equal parts to the deceased member's closest relatives (the spouse and the children are primary beneficiaries and the parents and grandchildren secondary beneficiaries). The beneficiary may choose to receive the capital as a lump sum or by instalments spread over no more than two years.

Benefit structure

Open pension funds: Not applicable (see explanations above).

Benefit adjustment

N/A

Disability

Benefit qualifying conditions

Open pension funds: Disability pensions are payable from the Social Security scheme and are technically independent of the first or second pillar (pension funds) of the public pension system. It is possible for a person who receives disability pensions to have some contributions accumulated in pension funds (before his or her disability). At the moment, there are no regulations governing specifically what will happen to these accumulated contributions when such a person reaches the statutory retirement age.

Benefit structure

Open pension funds: Not applicable (see explanations above).

Benefit adjustment

N/A

Protection of Assets

Open pension funds: Pension funds are independent legal entities and their assets are legally separate from the assets of the pension fund societies managing the funds.

Fund assets must be kept by a custodian.

Financial and Technical Requirements / Reporting

Open pension funds: Pension fund societies must submit periodical reports and daily information on their performance and financial standing to the Polish Financial Supervision Authority (KNF). In particular they must submit:

- daily reports containing investment activity and financial standing: balance sheet, profit and loss account, portfolio, transactions and orders;
- monthly reports on the respective percentage shares of different categories of investment instruments in the fund's investment portfolio;
- biannual reports on the respective values of different investment instruments in the fund's investment portfolio and on their respective percentage shares in the fund assets, naming the issuer of each instrument;
- yearly comprehensive reports on the structure of the fund investment portfolio, including investment instruments accounting for less than 1 per cent of assets.

The yearly report must also be published in a national newspaper and be delivered to a news agency designated by KNF.

Pension fund societies must prepare an annual report for approval by KNF.

 

Whistleblowing

Open pension funds: Custodians must inform the Polish Financial Supervision Authority (KNF) of any act or negligence by a fund which in the custodian's opinion contravenes the law or the fund's articles of association, or as a result of which the fund members' interests are not duly taken care of.

Standards for service providers

Open pension funds: The custodian of open pension fund assets must be a bank which:

- is a domestic bank as defined by the Banking Law Act;
- has its own funds of at least the equivalent of EUR 100 million in PLN;
- is not a lender or a creditor of the fund whose assets it holds or of the fund's managing society;
- does not employ and does not have on its governing bodies persons who sit on the management board or supervisory board or are employees of the pension fund society of the fund whose assets it holds.

Fees

Open pension funds: Pension fund societies have three sources of income as follows:


• Distribution fees on contributions, calculated as the percentage of contributions paid. Since 2014, it is capped at 1.75%.

• Management fees which cover a fund's administration costs. If follows the regressive formula starting from 0.045% of net assets per month for the assets under PLN 8 billon, and falling to 0 (no fee) for the portion of assets exceeding PLN 45 billon (the formula also translates to nominal cap on management fee of PLN 186 million annually).
• The performance fee (premium fee) depends on investment returns generated by the fund, but may not exceed 0.005% of net assets per month. A premium fee is charged proportionately to investment returns. A pension fund management company with a high rate of return may charge the full variable portion of the fee, while a company whose fund generated a lowest rate of return may not charge the fee.


The costs of purchase, sale or custody of fund assets are paid directly by the fund.

Charges must be the same for all members.

Winding up / Merger and acquisition

Open pension funds: The Polish Financial Supervision Authority (KNF) may revoke permission to create a pension fund society if a fund has conducted its business contrary to legal requirements or to the articles of association or in a manner prejudicial to the interests of fund members.


When an open pension fund is wound up, either because of liquidation or merger, its assets are transferred to the fund of the new pension fund society.

The takeover of the management of a fund or the merger of two pension fund societies is subject to the permission of the KNF.

Bankruptcy: Insolvency Insurance / Compensation Fund

Open pension funds:
Where a society (management company) is declared bankrupt, or when liquidation proceedings have been initiated, the Polish Financial Supervision Authority (KNF) must revoke permission to create the society.

A Guarantee Fund is established to compensate for any losses caused by the failure of a pension fund society to perform its fund management obligations if this results from circumstances beyond its control. The Guarantee Fund consists of:

- a base part, managed by the National Securities Depositary, financed by pension fund societies' contributions, based on a percentage, which is the same for all funds, of the net assets of the fund managed by that society. The value of the base part must not exceed 0.1 per cent of the net asset value of all open pension funds unless the Guarantee Fund's liabilities to open pension funds exceed that amount;
- an additional part, comprising the reserve of each open pension fund (see section Financial and Technical Requirements / Reporting) which must be between 0.3 per cent and 0.4 per cent of the net assets of the open pension fund. These resources constitute a part of the funds' assets and must be converted into accounting units.

The Polish Treasury covers as guarantor any deficit which cannot be covered by the Guarantee Fund's resources.

Disclosure of information / Individual action

Open pension funds: At least once a year, open pension funds must publish their articles of association, information on their investment performance, and their approved annual report in a national daily newspaper.

At least every 12 months, open pension funds must send a written report to each member containing

- the balance in the member's account;
- dates of receipt of member contributions;
- information on the fund's investment performance.

A fund member (or a former member if within six months of leaving the fund) may complain to the Polish Financial Supervision Authority (KNF) about the fund if, in their opinion, the fund conducts its business unlawfully or in contravention of the fund's articles of association.

Other measures

Open pension funds: Pension fund societies are liable to compensate members for any loss suffered through non-performance by the pension fund society of its duties as the fund manager, except where non-performance is due to circumstances for which the society is not responsible.

Taxation of member contributions

Open pension funds: Tax-deductible.

Taxation of employer contributions

Open pension funds: Tax-deductible.

Taxation of investment income

Open pension funds: Tax-exempt.

Taxation of benefits

Open pension funds: Taxable.

Ministry of Labour, Family and Social Policy: Regulates both the publicly managed notional defined contribution scheme and the mandatory private pension scheme.

Ministry of Labour, Family and Social Policy
ul. Nowogrodzka 1/3/5
00-513 Warszawa
Poland

Tel.: (+48) 22 661 10 00
Fax: (+48) 22 661 13 36

http://www.mps.gov.pl

 

Polish Financial Supervision Authority (KNF): Supervises pension fund societies and open funds and has, among others, the powers to:

- instruct the pension fund society to make available copies of the documents related to the business of the fund;
- call on members of the society's management board and supervisory board and on employees of the society to supply such information or explanations as it may demand;
- authorize inspectors to enter the premises of the pension fund society and/or the custodian and inspect books and documents, copy documents and demand information from members of the inspected party's governing bodies and employees.

The KNF must authorize any modification to pension fund societies' and open pension funds' articles of association which it may refuse where a modification is unlawful or against fund members' interests.

The KNF is financed by supervised entities.

Polish Financial Supervision Authority
Plac Powstanców Warszawy 1
00-950 Warszawa
Poland
Tel.: (48 22)33 26 600;
Fax: (48 22)33 26 793 (602)

Internet: http://www.knf.gov.pl

Copyright

Short excerpts from the Country Profiles website may be reproduced without authorization for non-profit purposes on condition that the source is indicated. For for-profit purposes, rights of reproduction, or translation, application should be made to the ISSA Secretariat at ISSAISD@ilo.org.