(Bloomberg) -- Poland is having second thoughts about the pace of its pension reforms amid concern the savings plan could impose too large a burden on companies.
A month after publishing a draft bill allowing for voluntary, employer-provided pension programs, the cabinet is confronting criticism over the proposals, due to take effect from the start of 2019. The energy minister and the National Bank of Poland are among those to cite risks from rising labor costs for employers, especially those with low profitably and high headcounts, in opinions on the proposals.
While the cabinet plans to deliberate on the views put forward around the draft legislation next month, it’s already contemplating some changes, Pawel Borys, the program’s architect and the head of the state’s development fund, told reporters Tuesday. Modifications include the gradual build up of pension saving rates. The original blueprint called on employees to put aside 2 percent of their salaries in tax-free retirement accounts, with employers adding another 1.5 percent of their workers’ income to this.
Changes to the system would delay new inflows to capital markets, projected initially at 6 billion zloty ($1.8 billion) in 2019, when the saving plans start at the biggest companies, and at 12 billion zloty in the following year, when smaller businesses join. Other key elements of the program, including workers being signed to new plans by default shouldn’t change, Borys said.
“Any amendments and criticism to the proposal are definitely negative signals as investors would now conclude that a liquidity boost may come later than they expected,” Dariusz Gorski, head of equity analysis at Bank Zachodni WBK SA, said by phone. “It’s also proof of Polish short-termism, as policy makers may delay reforms boosting investments in what is the best year for the local labor market in history.”
The retirement revamp, designed to emulate the U.S.’s defined-contribution 401(k) plan, is the Polish answer to inadequate private savings, even at a time of record low unemployment. Faith in the country’s pension system was undermined in 2014, when the previous cabinet transferred more than half of pension fund assets to reduce state debt. Plans to overhaul the funds, left with $54 billion in assets, mostly stocks, have repeatedly been postponed.
Talk of softening the latest proposals “poses the question of whether these saving plans have a chance in the future, when the economy may not flourish at the same pace,” Bank Zachodni’s Gorski said.
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