Pension systems under construction – this could be the title for many situations in European countries at the moment. Poland is no exception in this regard. The country’s pension system is in the midst of a mayor transformation with consequences for corporate pension plans in businesses operating in Poland.
The Polish pension system consists of three pillars at the moment:
• The 1st pillar is run by the Social Security institution and based on notional DC accounts, where employee and employer pension contributions are being “registered”.
• The 2nd pillar consists of pension funds where employee contributions are invested on the financial market.
• The 3rd pillar is a tax qualified corporate pension scheme (Pracownicze Programy Emerytalne, PPE).
Besides the three pillars explained above there is a 4th pillar of non-qualified corporate plans and individual pension products (so called IKE and IKZE).
Changes on the horizon:
• The 2nd and 3rd pillars are going to be changed significantly if the reform becomes effective.
• The 2nd pillar funds will be closed and transformed into investment fund companies. Major part of the current fund assets and their members will be transformed as well.
• In terms of the 3rd pillar, new Auto Enrollment Pension Plans (Pracownicze Plany Kapitałowe, PPK) will be introduced.
Expected characteristics of the PPK:
• As of 2019 companies will be obliged to offer PPK and contribute at least 1.5% of the individual total salary.
• Companies which employ more than 250 employees will be covered by new legislation as of January 2019, and for companies with 50-250 employees as of July 2019.
• Under certain circumstances, the new PPK plans will work as an auto enrollment model.
• However, companies offering PPE will not be forced to set up PPK. In order to maintain this exception, the employer contribution in PPE will have to be at the level of 3.5% of individual total salary.
• PPK assets will be managed by private investment fund companies as well as dedicated governmental institution (s) because the Polish model follows UK Auto Enrollment and NEST, the National Employment Savings Trust concept.
The pension reform in Poland will affect any business and subsidiary in Poland. The new Capital Employee Pensions Plans will be obligatory to offer, so businesses have to check their current corporate pension schemes or alternatively set up PPE plans to make sure that they adhere to the new regulations.
Andrzej Narkiewicz, Leader of Pension Consulting Team, Mercer Poland, Warsaw
Krzysztof Nowak, Partner Mercer Marsh Benefits Poland, Warsaw
HR professionals and pension managers in multinational businesses operating in Poland.