Dariusz Adamski, Deputy Chair of the KNF, attended the panel ‘Annuitisation of pension capital: perspective of an individual, the market and the state’ at the ZUSlab seminar titled ‘Decumulation of pension capital. How to transform savings into a stream of retirement income?’. The seminar was organised by the Polish Social Insurance Institution (ZUS) and the Financial Ombudsman.

The Deputy Chair of the KNF has noted that first of all, private pension products per se, i.e. products that enable old-age needs to be met, are essentially missing in Poland. The third pillar is of rather hybrid nature, combining pension savings and investments; benefits paid out throughout the period of 10 years starting from the age of 60 (PPK, PPE, IKE) or the age of 65 (IKZE) do not secure individuals, in any manner whatsoever, in the later period of their life, when they are 70 and 75.

Secondly, for the payout of cash in the form of life annuity (annuitisation) to be possible, the capital must be accumulated first, which is difficult given the still relatively low disposable income available to the majority of the working population and the common deep underestimation of longevity risk. Educational activities concerning the consequences of increasing longevity are not easy in a society ‘working its way up’ under the circumstances of permanent external uncertainty.

Dariusz Adamski drew the attention of the audience to the potential of products based on reverse mortgage. ‘Even people with lower income possess capital in the form of apartments or houses. For those without any heirs, reverse mortgage may be an attractive solution. The development of the market for this type of products requires, however, standardisation, appropriate regulations, and supervision that eliminates the risk of market degeneration.’

With respect to reverse mortgage, the Deputy Chair pointed to the need of:

• initiating dialogue with market participants,
• developing appropriate standards,
• establishing a regulatory framework to support market development.

The UKNF is planning to actively engage in all these areas. 

When summing up his speech, Dariusz Adamski emphasised that the development of the pension product market in Poland requires:

• increasing the society’s savings;
• raising the awareness of the consequences of increasing longevity;
• stronger support from the state, including greater fiscal incentives for the development of pension products, and
• gradual building of appropriate regulations and market institutions.

He has also highlighted that instead of funding infrastructural investments directly from the state budget, the role of investor could be taken over by pension funds, if they can start grow faster that they do now. This would be beneficial for investments, for those who save for their retirement, and for the State Treasury.