The Polish Ministry of Labor and Social Policy has proposed a draft amendment to the Polish pension law that would double the proportion Open Pension Funds (OFEs) can invest in stocks but reduce by half workers’ contributions to them. The Polish Confederation of Private Employers Lewiatan, a high-profile business advocacy group, opposes the idea.

Labor Minister Jolanta Fedak said the amendment, which could come into force next year, would allow OFEs to invest up to 90 percent of their assets in stocks, more than double of the current 40 percent limit.

The proposed modifications would also reduce the proportion of contributions to be transferred to the OFEs from 7.7 percent to three percent, while increasing payments to the state-managed social security system.

OFEs are privately managed funds which form the second pillar of the 1999 Polish pension system reform, when the country diverted part of social security contributions to mandatory private pension funds.

Redirecting part of the contributions from the OFEs to the state-controlled social security system could help control the budget deficit – a pressing issue under EU deficit limits, argues the Labor Ministry.

The Polish Confederation of Private Employers Lewiatan strongly opposed the reform proposals.

In an op-ed published in Bankier.pl, Lewiatan appeals “not to introduce solutions that negate the success of one of the most successful reforms of the period of economic transformation.”

The reduction of OFE contributions would indeed help the government to lower the actual deficit to the acceptable EU threshold, they say, but also increase the risk that future pensions will be lower.

Reform of the pension system is necessary and should be implemented through the elimination of extra pension benefits for farmers, miners, the uniformed services and by raising the retirement age for women, the confederation argues.

By changing the rules for retirement savings, the government risks undermining the workers’ confidence in the pension system, the confederation warned.