Poland opens debate on controversial pension reform that strengthens state fund

WARSAW, Poland – Poland’s government opened a debate Friday on a controversial plan to transfer part of pension savings from private funds to a state account.

The government argues it would reduce risk for pension savings, but critics say the state wants the money on its books to make up for an unexpected deficit in public accounts.

Under the plan announced late Thursday, private pension funds operating within the obligatory pension system would have to transfer their government bond holdings — some 55 per cent of their assets — to a state account, called ZUS, that is guaranteed by the government. The funds would be allowed to keep stocks.

Every Pole will have to decide by July whether to stick with only the state fund or have a private one, too. The decision concerns less than 3 per cent of gross monthly earnings.

Prime Minister Donald Tusk’s government says the state plan’s guarantees will help protect the value of pensions from financial market turmoil such as that seen during the recent years’ crisis.

Many Poles, however, are angry over the need to make a decision on their financial future while not fully understanding its potential effects. Opinions from experts range from praise of the reform to accusations that the government is planning a seizure of private money. In 2012, some 11 billion zlotys ($3.5 billion) were put aside in the private funds, labour ministry says.

Critics also argue that by suddenly changing the rules, the government risks appearing less reliable, both with Poles and with the foreign managers running the private funds.

To become law, the changes need approval from lawmakers and President Bronislaw Komorowski.

The current system, which supplements ZUS with private funds, was introduced in 1999 and was supposed to guarantee pensions much higher than could be expected from ZUS alone. Before 1989, under communism, ZUS pensions were small as its funds were often used to fuel the state coffers. That memory adds to the general distrust of the reform.