The launch of the capital plan was an almost brick effect in January at the WSE. It's just not yet near January
On November 19, 2018, President Andrzej Duda signed a law on employee capital plans (PPK), a new form of savings for retirement.
– We know what the current situation of the Social Insurance Institution is and how much uncertainty as to what retirement from Social Security will be for 10, 20 or 40 years – emphasizes President Andrzej Duda.
He also stressed that the Law concerns people who are currently in prime time and working.
– If someone earns a median of Polish income (around PLN 3,500 gross ed.), Then, considering the current value of money, after 30 years of savings in KDP, his pension will be higher by PLN 800 per month. If he spends less time, there will be more than hundred zlotys, "said Marek Dietl, president of the Warsaw Stock Exchange.
– KDP is certainly one of the biggest economic reforms after 1989 in Poland. This is a reform that involves one of the most important fields for the future, because it involves a pension system, Poland's financial security in a situation when society is getting older and we need to counter this negative trend by building bigger retirement depositors for Poland who – unfortunately, as we know – this tendency to save so far is quite low – added Paweł Borys, president of the Polish Development Fund, which will coordinate the KDP system.
Not too fast
PPK will invest premiums in the capital market. The scale of their operations, however, is very unknown. Government documents show that it will potentially cover 11.5 million people. However, the employee covered by the system will not be able to join him (if he does not change his mind, he must repeat the declaration like that every four years). According to DM Bank analyst Ochrony Środowiska and Vestor DM, 75 percent. Participation in the capital market in 2020 will reach PLN 15-16 billion. Vestor DM assumes that by considering the investment limit, in 2020, KDP for the purchase of Polish shares can allocate PLN 2.5 billion, and in the following years around PLN 5 billion.
According to Vestor DM, high participation can be assumed because contributions to employers and the state will be given to employee contributions which reduce their net salary. Vestor DM estimates that in January 2020, PPK will receive an additional 900 million PLN in connection with the welfare premiums added by the country. The point is that every KDP participant, after three months of paying his contribution, receives a welcome deposit of PLN 250 from the country (and then an additional PLN 240 per year).
Why would the country pay a welcome contribution only in January 2020? The law came into force on January 1, 2019, but more to the technical elements. Real money setting in old age in KDP will start far later. The biggest entrepreneurs will be the first to join the system – employing at the end of 2018 250 people or more. This law applies to them starting July 1, 2019. However, the contract to operate the PPK can contain up to the 10th day of the month after the expiration of three months from that date. Realistically, it can end with only two monthly contributions in 2019. A similar shift will include companies that employ 50-249 and at least 20 employees. The last action covers July 1, 2020 and then the construction of the PPK system is officially terminated.
Representatives from financial institutions indicated that for KDP companies it was an additional burden, so they might not be willing to handle the procedure sooner than the latest possible date resulting from the action. On the other hand, the prospect of the entry of the KDP market can actually stop stock supply and thus increase valuations.
The biggest unknown
However, not all system makers believe in the participation of three quarters of prospective participants in KDP, and this requires adjusting the impact of KDP on the stock exchange.
– The level of participation, which can be considered successful, is more than 50%. Personally, I believe that it will be more than 60 percent. – Paweł Borys comment.
A separate problem is how many companies that are theoretically closed by KDP will not join the system at all. Especially in the first phase, which consisted of entrepreneurs who employed 250 people and more, attendance might be seen. According to the WSE President, in the first stage theoretically, 3.6 thousand. companies that employ more than 3 million people. However, it should not be followed by companies that have launched employee pension schemes (PPE) with a minimum premium of 3.5 percent. employee remuneration. PPEs exist mainly in large companies (or capital groups), but what scale do they really know.
– Among large companies there are more than 2.5 thousand who do not have PPE – said Paweł Borys. – Of the 3.6 thousand companies that employ at least 250 people, PPE is around 1 thousand. But there is a possibility that even they will join KDP, because PPE is usually followed by employees who get better income – said Marek Dietl.