In what is considered to be the biggest pension overhaul in the country since 1999, Poland announced its plans to dismantle its privately-owned pension fund system and transfer $35 billion worth of assets to individual retirement accounts, a quarter of which will be managed by a state entity.
While the decision cannot be called nationalization, especially after a Supreme Court ruling deemed pension-fund assets to be public, the proposal will still entail a partial government takeover.
“It’s not the worst-case scenario we feared and doesn’t imply an immediate sell-off,” Marcin Gatarz, head of equity research at Pekao Investment Banking brokerage in Warsaw, said in a note. “While this doesn’t envisage the state gobbling up a big chunk of assets, uncertainty remains as the plan may change. That should keep Polish stock valuations lower.”
The revamp risks worsening concern over state interference in the economy after the Law & Justice party, which has pledged to spur growth and distribute wealth more evenly, won elections eight months ago. A standoff with the European Union over democratic standards prompted the country’s first-ever credit rating downgrade and spooked investors. Foreign owners of the pension funds targeted by authorities include Allianz SE, MetLife Inc. and Nationale-Nederlanden NV.
But Deputy Prime Minsuter Mateusz Morawiecki said privately-owned pension funds have not been performing efficiently. “Private pension funds haven’t worked out, the system isn’t serving anyone, doesn’t provide higher pensions and has failed to support growth,” he said.