The PPK Act creates new opportunities to raise funds for employed people. The extension of the long-term savings system to this new solution is based on the experience of many countries with similar work programmes. We explain how in practice they are to operate in Poland.
Employee Capital Plans is a common long-term savings system. Any person employed who is subject to compulsory pension insurance may join the scheme. Savings are created jointly by employees, employers and the state.
In 2019 The Labour Capital Plans Act (PPK) enters into force. Include gradually:
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- from 1 July 2019 – hiring companies, at least 250 persons per day 31 December 2018;
- • from 1 January 2020 – hiring companies, at least 50 persons per day 30 June 2019;
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- from 1 July 2020 – hiring companies, at least 20 persons per day 31 December 2019;
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- from 1 January 2021 – other entities, including public finance sector entities.
Account power
The employer, in agreement with the trade union organisation operating with him (and in the absence of a representative of the employees selected in the mode adopted with him), will select the financial institution in which he will set up private PPK accounts for employees.
The accounts will be fed by monthly contributions from the employee and employer and by a welcome and annual payment from the State. Payments of the employee and employer will be charged a percentage of the gross remuneration. In turn, the State will transfer fixed amounts – independent of employee income.
The funds collected in the accounts will be invested in funds taking into account the age of the relevant PPK participant – so-called defined date funds.
Welcome and annual payment
Workers who by, at least 3 full months will be participants of the Polish National Security Agency and for these months they will receive the so-called welcome payment (250 PLN).
Annual surcharge (240 PLN) all participants in the PPK, (except for certain exceptions described in the Act), whose basic and additional payments in a given year will be at least 3.5% 6-the times the minimum remuneration in the year for which the payment is due.
Participants whose basic payments are lower than 2% (persons with lower incomes), must collect at least 25% the above amount.
Payment from the PKP account
The employee may at any time reimburse the funds collected in the PPK. When applying for reimbursement, the participant shall receive the savings it has accumulated, less:
- • tax on capital gains,
- • 30% value of payments on the employer's side - collected 30% is credited to the employee as his contribution to pension insurance in ZUS,
- • the funds derived from payments from you.
Moreover, the Act provides for special living situations in which the accumulated savings can be paid before 60 year of age:
- • in the event of serious illness of the participant, his or her spouse or the child (to 25% measures, without obligation to reimburse),
- • to cover own contribution in connection with the taking of a loan for building a house or buying an apartment, but only for participants before 45 age (up to 100% appropriations with a maximum repayment obligation 15 years).
Tax on PKP
The payments financed by the PPK by the employer constitute, in accordance with the Income Tax Act, the taxable income of the employee. The employer will be obliged to deduct the appropriate tax from the employee's salary.
Inheritance of PPK
After the death of a participant of the PPK (regardless of its age) the funds collected in the PPK are subject to a transfer payment to the PPK, IKE or EPP of a person entitled or subject to a cash payment. The Participant may indicate the person entitled to his or her funds, and if he or she does not, the funds shall be awarded to his or her heir (inheritance on general terms).
If, at the time of his death, the PPK participant remained married, the financial institution will pay the transfer of half of the funds collected in the PKK account of the deceased PPK participant to the PKK, IKE or PPE account of his spouse (insofar as these funds were the subject of matrimonial property union) or at his request will pay him these funds in monetary form.
The achievement of the retirement age is not related to the possibility of payment of funds from the PPK either by the participant or by the eligible person. The PPK participant may withdraw funds from the PPK after completion 60 years of age regardless of the status of professional activity and gender.
The PKP was designed to increase the financial security of Poles, influence the development of the economy, businesses and jobs, and increase private pension savings of employees. Time will show how they will work on the Polish market.
Written by Rafał Czepik. Legal advisor, graduate of the Faculty of Law at the University of Warsaw, specialist in economic and civil law.