Employee Capital Plans in Poland

Polish politicians have been considering the issue of the financial security of pensioners. The Program of Employee Capital Plans (PPK) they introduced into law, is intended to provide future support for the oldest social class. In principle, it should help with the accumulation of savings and provide for higher retirement benefits. 

The Act on Employee Capital Plans was signed by President Andrzej Duda on November 19, 2018. The actual implementation will take effect from 1 July 2019, and this process will be continued until 2021.

What are Employee Capital Plans?

The program is supposed to be an additional mechanism for providing citizens with additional financial safeguards after retirement. According to the Act, the funds transferred are the private property of the taxpayer and will be paid out after the taxpayer has reached the age of 60. Employee Capital Plans consist of a voluntary accumulation of savings by employed persons who pay ZUS contributions regardless of the type of contract. This additional element of the pension system is created and co-financed by employers, as well as the state. Employees aged 18-55 are automatically included in the system if their employer pays contributions. For people between the ages of 55 and 70, it is possible to ask the employer to enter into a contract on their behalf.

Applicable Rates

The Act on Employee Capital Plans lists the specific percentage amounts to be allocated to the PKK per employee:

• Basic payment - 2% of remuneration,
• Basic payment, which may amount to less than 2% of remuneration, but not less than 0.5%, if the total remuneration received by a PPK participant from various sources, in a given month, does not exceed the amount corresponding to 1.2 times the minimum remuneration,
• It is also possible to declare an additional payment of up to 2% of the total remuneration.

In addition to the contributions of emplyoyees also employers are required to make the following contributions:

• The employer pays the basic payment of 1.5% of the taxpayer's remuneration,
• The employer may decide to pay an additional amount of up to 2.5% of the remuneration.

It is worth adding that the state will also get involved in the financing of the PKK: the annual payment will amount to PLN 240 per employee, and the welcome contribution is set at PLN 250.

Implementation phases of the PKK

The PPK project will cover more than 11 million employees. Nine million of them work professionally in the private sector, and the rest work in the public sector. Due to the scale of the project, it will be implemented gradually and not for everyone at once. The main criterion that has been considered is the number of employees. The entire implementation process has been divided into the following individual stages:

• For companies with more than 250 employees (3,3 mln) – from July 1st, 2019
• For companies with 50-249 employees (2 mln) – from January 1st, 2020
• For companies with 20- 49 employees (1.1 mln) – from July 1st, 2020
• For all other employees (5.1 mln) – from January 1st, 2021

The funds accumulated will be managed by the Investment Fund Societies, general pension companies, insurance companies as well as employee pension companies. These institutions must have business licenses from the Polish Financial Supervision Authority.

The gradual implementation of the PPK is intended to ensure its long term success, and conequently to an increase in the pensions of retired employees.