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(en) Poland, Workers Initiative: Employee Capital Plans - from when, for whom? [machine translation]

Date Sat, 20 Jul 2019 09:59:41 +0300


From the beginning of July, Employee Capital Plans (PPK) will be introduced in companies employing 250 or more employees. The program will be implemented gradually, ultimately it will cover all employees in January 2021. Employee Capital Plans are a savings program strongly reminiscent of OFE, but in this case their character is theoretically voluntary. PPKs are not a pension scheme in the strict sense - the funds are private, can be used before the retirement age and can be inherited. ---- In the case of people between 18 and 55, voluntariness boils down to being able to unsubscribe from the program. This means that each person from the machine is registered in PPK, but he has the right to cancel the program by submitting a written statement. The declaration of resignation from the PPK should be submitted at every change of work, and regularly every 4 years. In turn, people between 55 and 70 years of age will be able to save in the PPK, if they declare such a wish.

PPKs are not a typical retirement plan - unlike OFE, funds to PPK are not deducted from the pension contribution, only directly from the remuneration. Joining the PPK will therefore be associated with a depletion of wages. The deducted part will constitute 2% of the gross remuneration. The government from this amount offers ZUS relief and tax relief (this amount will be treated as a deductible cost). In addition, we can voluntarily report that we want to pay more - then the program will receive another 2% (both amounts calculated from the gross amount). On the part of the employer, the PPK is obligatory, the employer will pay 1.5% of the remuneration, plus (voluntarily) 2.5%. In addition, the state offers a 250 PLN welcome contribution and pays PLN 240 a year to the program if the total amount of payments in a given year is at least 6 times the premium from the lowest remuneration.

How is this supposed to work in practice? For example - Earning PLN 2100 gross and dedicating 2% of your salary will be deducted PLN 42. On the part of the employer, PLN 31.50 will go to the fund. Assuming that our salary will not change, after 25 years we should collect a total of PLN 28,300. That's how much we collect from our donations. The program has no guarantee of profit, assuming a rate of return at the level of 3.5% (rate of return slightly above the current level of interest rates on treasury bonds and bank deposits), we will accumulate approximately PLN 45,000 on the account. After reaching the age of 60, you will be able to pay 25% of the collected funds once, that is 11,000. PLN, and then for 10 years in monthly tranches, we would receive PLN 275.

The program can theoretically be interrupted at any time, but you have to reckon with the loss of bonuses added by the state. The whole of our payments will be in the pocket, as well as 70% of the amount provided by the employer. The rest will go to ZUS. We will be charged income tax on the money we have received from resigning from the PPK.

Money accumulated in PPK can also be used as an own contribution to finance a mortgage loan, as a kind of interest-free loan. You will be able to take advantage of this option before reaching the age of 45 and use up to 100% of the accumulated capital. It will have to be returned in full within 20 years. This type of withdrawal can be made only once. In addition, funds from PPK will be able to be paid in the amount of 25% of the accumulated amount in the event of a serious illness.

With the introduction of the TNC, trade unions are given the competence to choose the managing authority. Non-representative unions are also entitled to such consultations. In the absence of agreement between trade union organizations or failure to meet deadlines, the employer himself indicates the fund to which the money will be sent.

Employee Capital Plans are a product that raises mixed feelings. On the one hand, it is a poor hybrid of a savings and pension program, in which the monthly deduction is quite low. In the event of an emergency, or when buying a flat, it may be money that will realistically affect someone's financial situation. On the other hand, it should not be forgotten that this project from the point of view of the pension system is completely irrational - there are NO guarantees that the funds will make a profit. It is difficult to say that it would protect future retirees in any way. Undoubtedly, however, it is a great product for companies that will manage these resources - they do not bear any risk, but considering the size of the group that the program is supposed to cover, management fees (charged of course on the total value of the funds raised, not on the earned profit) can, overall, turn out to be very lucrative. However, as regards the competences assigned to trade union organizations - it might as well not be because the choice of the fund will take place "in the dark", based on marketing information. In some respects, it is worth subscribing to the PPK (but one should not expect too much) - although the program estimates approximately PLN 4 billion from the state budget per year, it may be beneficial for an individual employee in some cases. because the selection of the fund will take place "in the dark", based on marketing information. In some respects, it is worth subscribing to the PPK (but one should not expect too much) - although the program estimates approximately PLN 4 billion from the state budget per year, it may be beneficial for an individual employee in some cases. because the selection of the fund will take place "in the dark", based on marketing information. In some respects, it is worth subscribing to the PPK (but one should not expect too much) - although the program estimates approximately PLN 4 billion from the state budget per year, it may be beneficial for an individual employee in some cases.

From the social point of view, this program should be called the next installment of the privatization of pensions. PPK has the same disadvantage as any other private pension system - money can end there and we can stay with poor means to live. The workers' movement should fight to maintain the social character of pensions and keep their organizations as far as possible from the capital markets. It remains a matter of dispute whether the system should be based on a guaranteed benefit (in other words, as before the ZUS reform of 1999) or a civic pension system financed directly from the state budget. The current system based on a guaranteed premium (our pension is proportional to If we accumulate savings on the account in ZUS for years), it does not follow the social reality - the scourge of junk contracts deprives and deprives employees of retirement savings, which will result in a very low ratio of pension received to the last salary received (the so-called replacement rate). The introduction of the PPK may perhaps ease some of the employees (some may also lose) the transition to a low pension, but it certainly can not be said that this is the healing of the Polish pension system. The condition for this is to cut the system from market speculation. Society will not make a stable and just pension system, as long as bankers will take care of it. which will result in a very low proportion of the old-age pension received to the last salary received (the so-called replacement rate). The introduction of the PPK may perhaps ease some of the employees (some may also lose) the transition to a low pension, but it certainly can not be said that this is the healing of the Polish pension system. The condition for this is to cut the system from market speculation. Society will not make a stable and just pension system, as long as bankers will take care of it. which will result in a very low proportion of the old-age pension received to the last salary received (the so-called replacement rate). The introduction of the PPK may perhaps ease some of the employees (some may also lose) the transition to a low pension, but it certainly can not be said that this is the healing of the Polish pension system. The condition for this is to cut the system from market speculation. Society will not make a stable and just pension system, as long as bankers will take care of it.

Wojciech Nadglowski

http://ozzip.pl/teksty/publicystyka/gospodarka/item/2505-pracownicze-plany-kapitalowe-od-kiedy-dla-kogo
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