Investments (PTE PZU)

Market situation

At the end of 2020, the net asset value of open-end pension funds was nearly PLN 149 billion, down 4% versus the end of 2019. The decline of assets was significantly affected by the environment of the COVID-19 pandemic. For the most part of 2020, high volatility of prices on stock markets was observed. Growth was restored only in the last two months of 2020, which allowed open-end pension funds to offset most of their first quarter losses.

PTE PZU’s activity

Open-end Pension Funds – percentage of net asset value as at 31 December 2020 (in %)

Source: KNF, monthly data on the OFE market, Data for December 2020

At yearend 2020, the PZU Voluntary Pension Fund (DFE PZU) ran 33.2 thousand individual pension security accounts (IKZEs) in which assets worth more than PLN 343 million were accumulated. It kept the leading position in the voluntary pension fund segment.

In spite of the challenges posed by the year 2020, the voluntary pension fund market increased the value of its assets. The active reallocation of portfolios into equity assets was allowed by the much smaller asset values of these funds compared to open-end pension funds.

Also, the value of DFE PZU’s assets is strongly affected by current contributions, which in 2020 were higher than the year before.

Factors, including threats and risks, which may affect the pension funds’ operations in 2021

Key challenges: 

• the economic climate on the capital market in particular on the Warsaw Stock Exchange, resulting from the course of the COVID-19 pandemic and affecting the value of assets of the funds and the level of fees collected by pension fund companies for management; 
• opportunities arising from the achievement of the objectives specified in the Capital Accumulation Scheme and the Responsible Development Strategy the pursuit of which will depend on the development of detailed solutions and the entry into force of necessary legislative changes;
• active participation in the work on enhancing the performance of the third pillar and making it more attractive, and influencing the need in public awareness for accumulating additional savings for future retirement; 
• transfer of funds from open-end pension funds to individual retirement accounts.

On 12 March 2020, the Sejm of the Republic of Poland received a government bill on amendment of certain acts in connection with the transfer of funds from open pension funds to individual retirement accounts. The act is to enter into force on 1 June 2021, and the transformation of OFE into specialized open-end investment funds will take place on 28 January, 2022.

Assumptions for the project of redesigning the operating model of OFEs:

• universal pension fund management companies (PTEs) which currently manage open-end pension funds (OFEs) and voluntary pension funds (DFEs) will be transformed into mutual fund management companies (TFIs); 
• OFEs and DFEs will become specialist open-end mutual funds (SFIOs) that will be managed by TFIs; 
• an OFE member will have the following options what to do with the funds accumulated on his or her OFE account:
• the default option will be the transfer of funds from the OFE account to an individual retirement account (IKE) with the possibility of continued payment of contributions on a voluntary basis. The transfer of funds from OFEs to IRAs will be subject to a 15% transformation fee. The payment will be distributed over two years. The disbursement of pensions from IRAs will be exempt from income tax, and savings accumulated in IRAs will be inheritable, 
• OFE members may submit a declaration on the transfer of assets from OFE to the Demographic Reserve Fund (FRD) at the Social Insurance Institution (ZUS) and have the value of the transferred funds added to their capital accumulated on the Social Insurance Fund account. There will be no conversion fee if the OFE member selects this option. The funds accumulated in ZUS will not be inheritable, and future pensions will be subject to income tax in accordance with the rate of the applicable tax bracket, 
• under the umbrella SFIO established as a result of the transformation of OFE, a pre-retirement sub-fund will be separated for the accumulation of assets owned by fund participants approaching the retirement age, 
• the investment policy of the pre-retirement fund will be aligned with the age group of the insureds, meaning that the fund’s investment risk will be significantly limited by statutorily imposed investment limits, 
• the fees charged by the mutual fund management company for managing the assets of open-end pension funds transformed into individual retirement accounts as well as all other fees and costs will be strictly limited,

The basis for the operation of the transformed open-end pension funds will be the amended Act on Individual Retirement Security Accounts and Individual Retirement Accounts and the Act on Mutual Funds and Management of Alternative Investment Funds. The bill provides for amendments to several dozen statutes directly related to the operation of open-end pension funds and the social insurance system.

No transition period has been envisaged for adapting the activity of the transformed open-end pension funds to the provisions on mutual fund management companies. From the day of transformation into a mutual fund management company, the universal pension fund management company will be required to apply the provisions of the Act on Mutual Funds and the implementing regulations to this Act as well as the provisions of Community law pertaining to collective investment institutions and managers. Such provisions include in particular the Commission Delegated Regulation (EU) No 231/2013 of 19 December 2012 supplementing Directive 2011/61/EU of the European Parliament and of the Council with regard to exemptions, general operating conditions, depositories, leverage, transparency and supervision.