Poland's government plans to dismantle the nation's privately owned pension fund industry, calling it ineffective and saying a revamp will boost household savings and prop up the economy.
In Poland's biggest pension overhaul since 1999, the assets of the 139 billion zloty ($34.5 billion) industry will probably be transferred to individual retirement accounts, with at least a quarter of the holdings to be managed by a state entity, the Development Ministry in Warsaw said on Monday. The plan also assumes pension savings will get a boost from incentives offered to Poles to opt for long-term investment.
“The plan is to give the assets of pension funds to Poles and build Polish capital,” Deputy Prime Minister Mateusz Morawiecki said. “Private pension funds haven't worked out, the system isn't serving anyone, doesn't provide higher pensions and has failed to support growth.”
The revamp would help the 8-month-old government of the Law and Justice Party fulfill its election promise by funding state-backed investments and achieving what its leader Jaroslaw Kaczynski on Saturday called a new “economic order” based on wealth redistribution. Managers of the pension funds targeted by authorities include Allianz SE, MetLife Inc. and ING Groep NV.
While the plan can't be called nationalization after a Constitutional Court ruling deemed pension fund assets public, it entails a government takeover of a quarter of the industry's holdings, similar to the path taken by Hungary and Kazakhstan.
Poland's privately run pension funds, set up in 1999 to provide long-term financing for the nation's companies and make Warsaw into a regional capital hub, own a fifth of the shares traded on the Warsaw stock exchange. They were stripped of 51% of their assets in 2014, when the previous administration sought to reduce the country's debt burden.
Laying out the case for dismantling the funds, Mr. Morawiecki proposed to transfer three-quarters of the assets that stayed under their management, or 103 billion zloty of Polish stocks, to a voluntary pension pool that could be managed either by private institutions or a state development entity. The remaining quarter of assets would be injected into the state-operated Demographic Reserve Fund and help finance government-backed projects.