Poland’s government hasn’t yet decided on whether it will cut contributions to privately managed pension funds to narrow the budget deficit, Finance Minister Jacek Rostowski said.
“Any information about the reduction in pension fund contributions is pure speculation at this stage,” Rostowski told the TVN24 television channel today. “We are only at the beginning of a general review of the pension system.”
The state may limit the transfers by taking over the part of the contributions that the funds would invest in bonds, the Warsaw-based newspaper Gazeta Wyborcza reported without saying where it got the information. The government is also considering shifting the assets that funds already hold in government securities into social security, it said.
The European Union’s largest eastern economy is facing its worst slowdown in 12 years. The budget deficit reached 61 percent of the annual target at the end of February as tax revenue declined. This year’s shortfall may be about 10 billion-zloty ($3.1 billion) more than planned, Citigroup Inc. said yesterday.
The zloty weakened 0.1 percent to 4.1911 per euro as of 11:02 a.m. in Warsaw. It has lost 2.5 percent this year, the fourth-worst performance among more than 20 emerging-market currencies tracked by Bloomberg, behind the South African rand, the Hungarian forint and the Czech koruna.
While the budget situation is “tough,” the review of the pension system has “nothing to do” with the country’s fiscal situation, Rostowski said. Fourteen Polish pension funds managed 271 billion zloty of assets at the end of last year, with about 45 percent invested in government debt, according to financial regulator’s website.
“It’s not a money grab,” Rostowski said. “That’s out of the question.”
The government in 2011 reduced cash transfers to privately-managed pension funds to 2.3 percent of a worker’s pay from 7.3 percent to help narrow the deficit and trim public debt. It also pledged to gradually increase the level of contributions to 3.5 percent.
Eastern EU members including Poland in 1999 diverted pension contributions from the pay-as-you go state system to private accounts to set up a model that the 27-nation bloc said would be more sustainable. The overhaul sapped their budgets of funds to pay current retirees. Two years ago, Hungary took over $13 billion in privately-managed pension assets to meet EU-imposed deficit targets.
In a separate report today, Dziennik Gazeta Prawna said the Labor Ministry is working on a plan to shift mandatory contributions and savings from the pension funds to the social security system 10 years before retirement. It didn’t say where it got the information.
The government will present proposals for how to pay out retirement benefits from the privately managed system by May or June, Rostowski said today.