No tendencies for systematic saving for retirement pension as well as very low knowledge of the IKZE (Individual Pension Insurance Account) mechanism are the main reason of the low interest in this programme, as reveal the results of research by Millward Brown ordered by Komitet Obywatelskiej Inicjatywy Ustawodawczej RAZEM (the Commitee of the Legislative Initiative of Citizens RAZEM and the Polish Insurance Association). According to the respondents, introduction of the changes in IKZE suggested by RAZEM and PIU may increase interest in these products by about 8 percentage points.
At the end of the second quarter of 2012 the means were paid into only approx. 12 thousand IKZE accounts while the number of the set up accounts amounted to over 300 thousand. The research of Millward Brown indicates that only 10 percent of Poles save for their pension systematically. This data is very alarming because in the capital pension system the average rate of the salary replacement will amount only to approx. 30 per cent for women and 40 percent for men.
‘Poles should start to realize how important it is to start saving additional money for their pension so that its amount was satisfactory. Unfortunately, the current labor market situation discourages from using the 3rd pillar. On the other hand, as shown by the Millward Brown research, the current products do not fully meet the future pensioners’ needs. Similar situation applied to the IKZE implemented last year which did not raise much interest,’ said Jan Grzegorz Prądzyński CEO of PIU.
The research reveals that only 2 percent of those who save additionally for the future pension use IKZE (0.2 percent in the population). What is interesting, the objective of IKZE was just to encourage to the more common saving. The private insurance connected with 3rd pillar still remains the most popular form, used by 59 percent of persons actively saving for their old age. ‘This proves the huge social importance of insurance of saving and investment character. It shows that the majority of people who want to save in the long term choose this model in particular. It is therefore crucial that the conditions are created for further stable development of this segment of the market in Poland,’ said Jan Grzegorz Prądzyński.
Limited popularity of IKZE may result from the fact that Poles do not know much about it – only 11 percent of the respondents think that they know how these products work. However, even after being presented with the methods of IKZE operations, only 21 percent of the respondents would consider systematic saving for their future pension using this system. Interestingly, the group increases up to 29 percent when the products included the changes suggested by the “Razem” Committee and PIU regarding income tax exemption on the means paid out upon reaching the retirement age and indicating the maximum allowed sum saved in IKZE as an amount of e.g. PLN 4,000 and not in percent, as it is done now. Moreover, the respondents who would consider saving in the current form of the IKZE system, would pay average amount of PLN 115 each month. Upon introducing the suggested changes, this amount would increase up to PLN 123 each month.
It can be said already that IKZE does not fulfill its function and that the involvement in this form of saving for pension is very low. The structure of the products is too complicated and the advantage coming from this is too small for the savers, as for example when reaching the retirement age and upon withdrawal of the resources we would still have to pay the income tax. Therefore, let’s use the good patterns coming from the European countries. The tax exemption on the withdrawal of the resources upon reaching the retirement age was introduced in Denmark and Spain. The quota limitation and not percentage one has been functioning in the UK, Ireland or Spain,’ explains Adam Sankowski, the RAZEM Committee representative.
The positive opinion on the solutions given by the RAZEM Committee and PIU was well received by the Tax Studies Institute. ‘The tax exemption or the quota limits proposals are the right direction of changes in IKZE. These solutions are socially significant because its beneficiaries shall include most of all the persons with average and lower incomes. The project is drafted in a clear and straightforward way and at the same time it gives actual incentive for saving. Most of all, however, it is a solution which can be possibly accepted by the government,’ said Witold Modzelewski, professor, the CEO of the Tax Studies Institute.