Retirement Worries Grow
By Marcin Poznan, Warsaw Business Journal
October 27, 2008
Poland's open pension funds (OFEs), the "second pillar" of the pension system, have lost around half their value since the beginning of the year. According to the Polish Financial Supervision Authority (KNF), between the 1998 reform of the pension system and the beginning of 2008, OFEs earned around zł.49billion. Meanwhile, around zł.24.2 billion has been lost so far this year.
Falling stocks are mostly to blame, as most OFE fund managers have invested one-third of their pensioners' savings in stocks (a maximum of 40 percent is allowed by law), and invested the rest in bonds. Meanwhile, between September 4 and October 23, the overall WIG and blue-chip WIG20 indexes lost 36 and 27 percent of their values, respectively. All open pension funds reported losses in September, with ING the inglorious leader, while Polsat, Allianz and AXA saw the smallest losses.
Women who have funds in an OFE and are retiring next year will be the hardest hit by these losses. Under the Polish system, women can retire five years earlier than men, and thus often have less money in their pensions to begin with. However, a large share of their pension payments will be paid by the "first pillar" of the pension system, the Social Insurance Institution.
The outlook is better for today's 30-40 year olds than for those retiring soon. Open pension funds are dedicated for long-term savings. When the stock exchange bounces back, future pensioners' savings will grow again.
"The current turmoil will not have a significant effect on future pensions," Grzegorz Chłopek, chief investment officer and vice president of the board at ING PTE, told WBJ.
"Even if the pension payments are low in the short-term, there will still be capital left on the customers' [retirement]accounts. And if the situation on financial markets improves, it should positively influence the size of pension payments in the future," Chłopek added.
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