published Feb 14, 2018, 11:00:00 PM, by Konrad Krasuski and Marek Strzelecki
(Bloomberg) —
Poland’s government is drafting a voluntary, employer-provided pension program that its author says will boost the country’s savings by 20 billion zloty ($6 billion) a year and strengthen Warsaw’s capital market.

Pawel Borys, the architect of the program who’s also the head of the state’s development fund, told Bloomberg the government program may take effect from the start of next year. The program is set to be the first stage of a bigger industry revamp, with the cabinet also planning to overhaul the existing system of pension funds, which manage $54 billion in assets, including 43 percent of the Warsaw bourse’s free float, he said.

“We want to address the very-low saving rate among Poles,” Borys, 40, said from his office in central Warsaw. “This is a key element for building a capital market hub and spur innovation in this part of Europe.”

While the government will outline these plans during a news conference on Thursday, Borys said the proposals already received positive reviews from several international investors, who likened it to the U.S.’s defined-contribution 401(k) plan and the U.K.’s workplace pensions system.

The retirement revamp, whose details first appeared in 2016, is set to be the first bigger economic legislation drafted by Prime Minister Mateusz Morawiecki, who took over from a party colleague in December. The western-educated former bank executive was tasked with keeping Poland’s economy growing while softening the government’s international conflicts, including its rule-of-law row with the European Union and clash with Israel over alleged Polish complicity in the German Nazi extermination of Jews during World War 2.

Borys said the employer-provided programs includes the following points:

Plan will be voluntary but Poles will be signed to it by default to help boost participation rates and scale of savings; assumes at least a half of nearly 12 million entitled Poles will want to take part Annual savings seen at 15 to 20 billion zloty a year after full implementation Envisages employees putting aside 2 percent of their salaries on tax-free retirement accounts, with employers adding another 1.5 percent of their workers’ income; the government will offer contributions that may cost up to 3 billion zloty per year Employers will be responsible for picking asset managers and investment strategies from products offered on the Polish market Mutual funds that want to provide their products to saving plans will need to be active for at least 3 years and to fulfill additional capital requirement criteria Wants providers of new retirement plans to offer target-dated funds as part of portfolio; new saving plans will be launched gradually by the biggest employers Government expects new accounts may reflect similar asset class structure as existing mutual funds: with roughly 30 percent in equities, 30 to 40 percent in government bonds and the rest in other assets, including corporate debt
Borys said the revamp of the existing pension funds will be detailed at a later date. Two years ago, the plan envisaged transferring about 75 percent of the funds’ assets to individual retirement accounts and giving the rest to the state’s demographic reserve fund. The main elements of this program “remain unchanged,” he said.