Polish pension fund reform to cut state borrowing needs by EUR 5-6bn per year

By bne IntelliNews October 11, 2013

The changed to the open pension fund (OFE) system, presented by the government in a draft law, will translate into the lowering of the state borrowing needs by PLN 20-25bn (EUR 4.8-6.0bn) annually in 2014-2017. The changes will also lead to cutting the public debt (as measured according to the Polish methodology) by 7pps.
The savings will result from the lower costs of state debt servicing (as the government plans to write off treasury papers held by the funds, worth of around PLN 120bn) as well as lower amounts of old-age pension contributions refunded by the state budget for the Social Security Board (ZUS). Under the new rules the contribution to OFE will be 2.92% of gross wage, but at least half of the current 16.4mn OFE members is expected to switch to ZUS.
The draft law amendment stipulates for writing off of T-bonds held by OFEs (i.e. 51.5% of their portfolio) on Feb 3 of 2014. As a result, the state debt's servicing costs are expected to fall by around PLN 4.8bn in 2014 and by as much as PLN 8.7bn in 2017.
As a result to the OFE system changes, the government will be able to lower the so-called emergency thresholds in the public debt-to-GDP ratios to 43% and 48% from current 50% and 55%, respectively.
The government stresses that in 2012, old-age and disability pensions paid out from ZUS's Social Security Fund (FUS) amounted to 9.8% of GDP in 2012, while old-age pensions alone constituted 7.0% of GDP.

Related Articles

Protests against judiciary reform continue to rock Poland

Polish protests against the government's judiciary reforms continued for a sixth day on July 23, as crowds sought to add to pressure on President Andrzej Duda to veto the controversial bills that ... more

Czech judiciary denounces Poland's move to end separation of powers

Senior Czech judges on July 21 denounced Poland's judicial overhaul as an attack on the rule of law. With big street protests in the Czech Republic's neighbour seemingly gathering momentum – 120 ... more

Strongly profitable Czech petrochemical maker Unipetrol puts cracker explosion behind it

Unipetrol looks to have finally got over the August 2015 fire and explosion that wrecked its steam cracker, an indispensable installation in the production of ethylene feedstock needed to manufacture ... more

Dismiss