The government has decided to increase tax incentives for private pension savings, which until now have been a marginalized part of the country’s pension system. It will introduce a single flat-rate tax on the money paid out of the individual voluntary pension accounts (IKZE) in place of the standard progressive rates (currently 18 and 32 percent).
The government hopes that people will invest their money in IKZE accounts
The government hopes the tax reduction will bring more money into IKZE accounts, which could then be invested in government bonds.“The range of financial products offered by brokerage houses will be expanded to allow IKZE assets to be invested in State Treasury bonds,” the Council of Ministers wrote in a statement. According to the same statement, the limit for individual IKZE savings, which is a tax-deductible amount, has been set at some zł.4,000 a year. Currently the limit is set at 4 percent of the annual income, which translates into some zł.1,800 for a person with an average salary. The change is thus aimed at encouraging people with lower and middle incomes to save in the private pension system.
At the end of 2012, financial institutions maintained 496,821 IKZE accounts, which were valued at zł.52.8 million.
The tax incentives will be a part of a large pension system reform the details of which the government announced in early September. The changes are set to come into force in March 2014. The draft legislation will be prepared by the end of September, the government said after its Tuesday sitting. According to the reform, private pension funds (OFEs), which are a mandatory part of Poland’s pension system, will transfer all of the treasury bonds in their possession to the state-run social security system. They will also no longer be allowed to invest in state debentures, which will significantly curb the market for T-bonds.
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