On Tuesday, February 28, employees’ declarations of resignation from making payments to Employee Capital Plans (PPK) expire. From April 1, employers will resume making payments to PPK for persons whose declarations have expired. Employees under 55 who have not changed their minds and do not want to take advantage of this offer should submit the declaration again.
Pursuant to the Act of 4 October 2018, participation in PPK is voluntary and each employee may resign from it. However, there is an automatic rewrite every 4 years, and now is the time.
If we do not resign, the first payment after March 1, 2023 will be reduced by the payment to the PPK. The money will be transferred to the financial institution (with which our company has an agreement) from April 1 to April 17.
Automatic enrollment in PPK applies to employees who are over 18 and at the same time under 55 years of age.
PFR Vice-President encourages PPK: PLN 100 saved is an additional PLN 100 from the state and the employer
Currently, about 2.5 million Poles participate in the PPK program against 11 million entitled persons.
– Tomorrow, 8 million people will start to decide whether to join the PPK or not. This is important because anyone who makes a conscious decision: to be or not to be, will do themselves, colloquially speaking, financial harm or a financial gift. If a person stays in the PPK, the employer and the state will add another PLN 100 to each PLN 100 saved, said Bartosz Marczuk from the Polish Development Fund on Tuesday in Channel 1 of Polish Radio.
– People who earn up to 120 percent of the minimum wage, i.e. up to about PLN 4,200 gross, will only need to pay 0.5 percent of their salary to PPK, and the employer will add 1.5 percent to them – he added.
Money from the PPK can be withdrawn before switching to retirement, but then we will pay the so-called Belka’s tax (on capital gains) and the money that the state pays us will be forfeited (the welcome payment from the state is PLN 250, and the annual – PLN 240).
PPK rules of subsidies
The basic contributions to the Employee Capital Plans are as follows: 2% of the salary is deducted from the employee’s salary. his gross remuneration (with the exception of persons earning less than 120 percent of the minimum wage may apply for a reduction of the contribution to 0.5 percent), and additionally 1.5 percent. the employee’s gross salary is paid by the employer.
Note that 2 percent. of the employee’s gross salary is deducted from the salary, which means less salary is credited to the account. In addition, the employer is obliged to deduct the advance income tax from his payment.
PPK, is it worth it?
When asked whether it is worth saving with the Employee Capital Plans, everyone must decide for themselves, it is a very individual matter, most often depending on the level of their earnings. It is worth recalling here the results of the opinion poll commissioned by PFR, which were published in 2020, i.e. two years after the program was launched, when knowledge about it was already a bit more widespread.
The most frequently mentioned disadvantages of PPK perceived by Poles are:
Reliance on government administration and no guarantees – low confidence in state institutions prevails and fears that the current rules of the PPK may change (including the liquidation of the PPK) as a result of political decisions.
Associations with OFE – negative and still fresh experiences related to the reduction of open pension funds as a result of political decisions cause skepticism about the promises of future profits and the inviolability of participants’ private funds.
Low deposit balance – small funds set aside under PPK are not considered sufficient to ensure a decent standard of living in retirement.
Withdrawal conditions before age 60 – no payout above 25% funds (without deductions) in the event of a serious illness, inability to withdraw without deductions in other random events, e.g. job loss.
Payment terms after age 60 – 100% payout is not possible. one-time funds without deducting tax on profit, the need to pay 75% of funds in installments (minimum 120 installments).
Dependent on employer contributions – concerns about whether employers will reliably participate in the program, whether there will be an effective legal mechanism to enforce payments from them.
Collecting PPK contributions in the event of job loss – anxiety related to the lack of knowledge of how the PPK works in the event of job loss: who will then pay the contributions? Can they be paid out?
Profit uncertainty – lack of conviction that the funds collected in the PPK will be managed competently, and any profits will not be absorbed by administrative costs.
On the other hand, Poles most often pointed to the following benefits of PPK:
Automatic and regular – it’s easier to postpone when funds are collected automatically, without involving participants.
External discipline, “whip over the head” – deductions from early payment effectively discourage the depletion of accumulated funds. Low financial burden – a small amount of money transferred from the remuneration to the PPK account makes the saving imperceptible to the budget, “does not cause pain”.
Employer and state contributions – this is additional income, which is a clear benefit of participation in PPK, “additional, free money”.
Financial reserve – funds accumulated in the PPK constitute money “for a rainy day”, which can be withdrawn in a crisis situation (although with deductions) and used.
Flexibility – the possibility of modifying the amount of contributions of the employee and the employer is treated as a real impact on the saving strategy under the PPK.
Transparency – access to information about the account balance, and thus the ability to check deposits and investment profits, provide a sense of control over your savings.
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