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WARSAW, April 15 (Reuters) - Poland’s government plans to transfer all state-guaranteed private pension funds to individual retirement accounts, Prime Minister Mateusz Morawiecki said on Monday.
The ruling Law and Justice (PiS) party has long planned to move the assets managed by state-guaranteed private pension funds, many of which are owned by foreign managers such as MetLife, NN Group or Aviva, and has for months been debating how best to redistribute them.
Pension savings are a ticking time-bomb in Poland. It has one of the lowest birth rates in the European Union and faces a mounting burden of paying out state pensions to people who did not save enough under communism.
The plan announced on Monday assumes that all the assets managed by OFE - a total of 162.3 billion zlotys ($43 billion) - will be transferred to 15.8 million individual retirement accounts.
Pensions will be paid out from both the private retirement accounts and from the country’s social insurance institution.
“The government presents a proposal to transfer all assets from OFE to private retirement accounts,” Morawiecki told a press conference.
Under current law, the insurance institution collects most mandatory contributions from employees, equivalent to 19.5 percent of pre-tax earnings, and a smaller chunk is paid into OFE.
Currently, 78.5 percent or 126.9 billion zlotys of the assets managed by OFE are shares in companies listed on the Warsaw Stock Exchange.
To prevent a sell-off on the Warsaw exchange, OFE will be obliged to reduce their share in stocks by around 2.5 percentage points annually and the OFE-based retirement will only be paid out after reaching the retirement age.
The government expects appropriate legislation to be approved in the autumn so that OFE can be transformed into individual accounts in January 2020.
Critics were concerned that if some assets of the pension funds were moved to the fund, the government could use them to finance its costly promises before the general election later this year. ($1 = 3.7761 zlotys) (Reporting by Agnieszka Barteczko; Writing by Joanna Plucinska;)