Regular saving is the art also when we are on emigration. It is good to be in the black because demographic projections show that future pensions will be much lower. That is why many countries are initiating additional programs to collect funds for the future. In Poland, 2019 Employee Capital Plans have been introduced. This topic is new and multidimensional, so many of us do not clearly understand, if is it worth it? Is it mandatory for all? Who can be participants? What about migrants? In this article, journalist Małgorzata Kozłowska-Doczyk, with the help of a regional PPK expert and economist Alina Nieplowicz, will try to explain it for Foundation Ukraine and our readers.
Employee Capital Plans (Polish PPK) is a universal and voluntary long-term saving system, available to employees in Poland, who fits with notions of the person employed pursuant to the Act on PPK and are obligatory covered by the retirement and disability insurance. The system is organized by employers and the state. For employers, this program is mandatory, but for employees, it is an option that they may or may not exercise.
Conditions that must be met
To access this form of savings, we must be over 18 years old and have to be obligatorily covered by the retirement and disability insurance to which we are entitled when we work for an employment agreement, contract of commission, or the other agreement for the provision of services, agency agreement or cooperative employment agreement. The specific-task contract is not included in this program as no obligatory contributions of social insurance are paid from it. There is one exception when a specific-task contract is possible for an employee who have employer agreement in the same time. A self-employed person who runs a one-person company cannot join the PPK. However, you can work remotely with a Polish employer and live in another country.
Age and seniority are important
When we are between the ages of 18 and 55, our employers will automatically subscribe us to PPK, and the employer does not obligate to inform us about it. If we want to quit, we can submit a declaration of resignation. This declaration is valid until the next auto-enrolment which will take place every four years. The nearest one will be at the end of 2023.
If our age range is 55-70, we can join PPK by submitting the application in our employer. When we are over 70, the programme is unavailable for us.
The idea of PPK is regular savings up to the age of 60 and this is the age specified for both women and men. However, the PPK also offers participants various options, such as early withdrawal of funds.
The employee always in black
As a participant of PPK we have access to a personal account (also online) in the financial institution, the impact of how we prefer to save (stocks or bonds), and the possibility to change defined date fund, where the money is invested. We have the possibility to resign and join again, and withdrawing the gathered funds at any time.
– “From the economic point of view, the PPK is a clear benefit for the employee, because of additional money from the employer and the state. For every PLN 100 that an employee saves, PLN 75 must be paid by the employer. Although in the net remuneration we will see a slightly lower amount, at the level of PPK a higher amount. Example: With a gross salary of PLN 4,000, the employer will transfer PLN 140 to the employee’s PPK account, of which PLN 80 (2%) is the employee’s payment, PLN 60 (1.5% of the salary) is to be paid by the employer. In the net salary, we will see PLN 90 less, because the employer will reduce it by the employee’s contribution (PLN 80) and the income tax on the employer’s payment (PLN 10). This means that each month an employee will receive PLN 50 more on the PPK account than the deducted from the net salary. In addition, we will receive a welcome payment of PLN 250 from the state which is a one-time payment, and each year for PLN 240 an annual surcharge”- explains Alina Nieplowicz, an economist and expert of PPK in Lower Silesia and Opole region.
The basic payment on the part of the employee is 2% of the gross salary. But if we want to save more we can declare an additional 2% (max. 4%). When our income is low and in total does not exceed 120% of the current minimum wage, we can pay 0.5% to the PPK.
The employer pays everyone 1.5% of gross salary or if he/she decides to make an additional payment – a max. of 4% of the salary. From the state, we receive a welcome payment of PLN 250, and then PLN 240 annual surcharge.
– “The employer must implement the PPK. It is an often demanding organizational project. The employer calculates and transfers payments to the employee’s PPK account, collects the required documentation (e.g. declarations of payments submitted by employees), and must find the money for subsidies for each employee who participated in the program” – explains Nieplowicz.
Savings in PPK are totally private
There is a legacy on privacy of funds in the Act on PPK.
– “The funds gathered on the PPK are private, just like our money in the bank, apartment or car. The privacy of our funds on the PPK account does not differ from any other components of our property” – explains Nieplowicz.
Also funds are fully inherited, but we can make not family related Authorised person, who will receive our gathered money of PPK in case of our death.
Nationality and the place we stay do not matter
– “Participation in PPK is not influenced by nationality. It is matter that we are employed individuals who are obligatory covered by the retirement and disability insurance. We can check PPK account online and transfer our funds with one click. It does not matter where we are at the moment. The rules of using the funds gathered in the PPK before the age of 60 and after the age of 60 are the same for all participants, regardless of their nationality and country we stay” – explains Nieplowicz.
If we have more than one job in Poland, we can have several accounts PPK.
Repayment or withdrawal of funds
The strength of the program is its flexibility. If we join automatically, we can quit at any time, and come back later. It is our personal decision. After any time we can withdraw funds.
Repayment – the withdrawal of funds before exceeding the age of 60.
– “The repayment of funds can be performed at any moment by the participant without reason. We can do this even after a month of saving. When we make the repayment, we receive 100% of the funds that come from the employee’s contributions and 70% of the funds that come from the employer’s contributions. But 30% of the payment from the employer will be credited to our individual retirement account in ZUS (Social Insurance Institution). Therefore, if we do not want to save in long term we can use funds from the employer’s subsidies. If the defined date found where our money is investment make a profit we will have more than just our amount paid, but then we have to pay 19% capital tax” – concludes Nieplowicz.
There are two situations when we can withdrawal the funds without any deductions:
- In the event of a serious disease of a PPK participant, co-spouse, or child, we can apply for a non-returnable payment of 25% of the funds gathered on the PPK account
- When we are not over 45, we can transfer up 100% of the funds on the PPK account for the own contribution by taking credit for a flat or house building. But the money must be returned during 15 years in the non-interest-bearing instalments.
Withdrawal – it is the withdrawal of funds gathered on the PPK performed by the participant after exceeding the age of 60. We have three ways:
- Divide the funds into 120 instalments (10 years or more) – no capital gains tax
- 25% – withdraw one time, 75% in instalments
- Withdraw the whole sum of the gathered funds (19% Capital Gains tax)
Migrants have the same rights as Polish citizens
Even if we plan to stay in Poland for 2 or 3 years, it is worth considering PPK. Because we always can have money saved. However, when we prefer to get more salary “in cash”, we can look for other options of saving money.
We should take time to study the program as there are many details that may be important depending on our individual needs. PPK has its official website https://www.mojeppk.pl/, where we can find a lot of information, free online training, downloadable materials (in Ukrainian or English), and calculate how much we can save. There are also some groups in social media, where we can share experiences with PPK and ask questions to the experts.
Certainly, the PPK is a reasonable and quite flexible alternative if we think about saving money for an additional retirement pension, and “the rainy days”. After all, investing on your own is not that easy. If you still have questions about employee capital plans, we invite you to take advantage of a free legal consultation at the Institute of Migrants’ Rights. You can sign up via our social pages or at https://www.instytutpm.eu.
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