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M ain F eatures of the Polish Pension System:

Pension F unds and the F inancial C risis The ca se of Poland Wojciech Wyszynski Deputy Director Pension Investments Supervision Department. M ain F eatures of the Polish Pension System:. Diversified Based on d efined c ontribution formula Privately managed pension funds

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M ain F eatures of the Polish Pension System:

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  1. Pension Funds and theFinancial CrisisThe case of PolandWojciech WyszynskiDeputy Director PensionInvestmentsSupervisionDepartment

  2. Main Featuresof the Polish Pension System: • Diversified • Based on defined contribution formula • Privately managed pension funds • Accumulation and payout phases separated

  3. The Market in Numbersas of 31.12.2008 • Number of funds 14 • Accumulated assets PLN 138.3 bln • Assets to GDP 10.9% • Contributions (in 2008) PLN 20.9 bln • Members 13.8 mln

  4. Pensions Fund’s InvestmentPerformance • Sources of the increase of OPF’s assets (bln PLN, 1999 -IQ2009)

  5. Crucial Role of the Open Pension Funds

  6. OPF’s Rates of Return

  7. Investment Portfolio Structure

  8. Effectiveness of OPFInvestment

  9. The Impact of Financial Crisis on Individual Pension • The system now is in its early development stage, about 20 – 25 years before maturity (pension assets stable in relation to GDP). • Thus, the current pension from open pension funds constitutes only about 8% of the total retiree’s pension (this ratio will change gradually, reaching about 50% in fully matured two-pillar system).

  10. The Impact of Financial Crisis on Individual Pension (2) • In matured system, the 18-month crisis of that magnitude would result in the fall of total pension of about 11%, of which 8 p.p. attributed to stock marker shortfall.

  11. Crisis and Pensions – the Public Debate • Fortunately, there was no significant discussion about nationalization or temporal suspension of OPF operation. • The need for a better protection of pension funds assets against the adverse effects of economic cycles is recognized and amendments to pension law are being discussed.

  12. Crisis and Pensions – Pension Reform (1) • The following elements of the funded pension system that need an upgrade have been identified: • Multi-funds: in a way similar to Chile or Mexico, pensioners should have a possibility to choose between safe and risky investment portfolios.

  13. Crisis and Pensions – Pension Reform (2) • The following elements of the funded pension system that need an upgrade have been identified: • Capital adequacy: currently, there is no linkage between OPF’s assets and the capital of pension society that manages OPF.

  14. Crisis and Pensions – Pension Reform (3) • The following elements of the funded pension system that need an upgrade have been identified: • There should be stronger linkage between fees and pension funds performance. Currently, the high profitability of pension societies has been almost unaffected by the crisis.

  15. Crisis and Pensions – Pension Reform (4) • The following elements of the funded pension system that need an upgrade have been identified: • Tightened supervision: PFSA should have new tools for developing the risk-based supervision scheme and early warning systems.

  16. Thank you for your attention

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