Poland overhauls pension system to keep public debt down

Poland on Wednesday said it will transfer government bonds held by private pension funds to the state pension sector in a move aimed at curbing public debt amid an economic slowdown, AFP reports. Prime Minister Donald Tusk however ruled out nationalising private pension funds set up in Poland in 1999 to diversify the overburdened social security system run by the state. Poles will be able to continue contributing premiums to their chosen private fund on a "voluntary" basis, Tusk told reporters in Warsaw. Those who want to remain in the so-called private "second pillar" must notify authorities within the next three months, otherwise their premiums will be automatically transferred to the ZUS public system. Known by their acronym OFE, 14 private pension funds currently operating in Poland will be able to hang on to assets invested in stocks traded on the Warsaw Stock Exchange. These account 48.5 percent of total OFE holdings. The less volatile Polish treasury bonds comprise the remainder of their assets and are to be funnelled into the state system. The private funds include international players like ING, Axa, Aviva and Generali. "The system's impact on public debt has proven crushing," Tusk told reporters. Finance Minister Jacek Rostowski said the overhaul would allow Poland's public debt now at 55 percent of GDP to be cut by up to eight percentage points over time. Amid an economic slowdown, Tusk's centre-right government has had been forced to amend the 2013 budget to widen the deficit in order to meet spending obligations amid falling revenues. The move came as Warsaw slashed its 2013 growth estimate to 1.5 percent down from an earlier projected 2.2 percent. In a bid to keep its social security system solvent over the long term, last year Poland hiked its pension age to 67 for men by 2020 and 2040 for women.