Polish pension market performance in comparison to selected benchmarks

Dorota Witkowska 1Krzysztof T. Kompa 2

1. University of Lodz, Faculty of Management (UL), Matejki 22/26, Lodz 90-237, Poland
2. Warsaw University of Life Sciences, Nowoursynowska 159C, Warsaw 02-787, Poland


The pension system in Poland was reformed at the end of the XX century. Due to this original reform, the defined benefit plan was replaced by the defined contribution one. The new pension system consisted of two mandatory pillars: Social Insurance Institution (SII), representing the pay-as-you-go system (PAYG) and open pension funds (OPF), representing fully founded system. The third voluntary founded pillar completed this system.

The reform of the pension system was very profound but it suffered from several shortcomings. The main problem has been the permanent shortage of funds to pay pension benefits for 15 years after the main reform, what causes the increase of the budget deficit.

The criticism of the pension system functioning resulted in introducing essential transformation of the system by the government, concerning:

·      distribution of retirement contribution between SII and OPF,

·      retirement age, and

·      pension funds functioning, among others.

The changes in the pension system, which went into affect in 2011 and 2014, influenced the pension funds the most.

The new law shifted 51.5% of the assets held by the pension funds to the state-run PAYG pension system. This included all debt securities issued and guaranteed by the State Treasury. Beginning from 2014 founded pillar became not obligatory, and even if it is selected as a part of the pension system the contribution collected by Social Insurance Institution has been 5.7 of the contribution collected by pension funds (while due to the original reform this proportion was 1.7). Pension funds can experience further shortage of funds due to gradual transfer of the retirement funds managed by OPF to SII, which will start ten years prior to the individual’s official retirement.

The overhaul of the pension system also included the changes in the pension funds’ investment portfolios since private pension funds were no longer allowed to invest in government bonds. That leaves the pension funds with most of their assets held in shares of companies listed on the Warsaw Stock Exchange and give them a peripheral role in the future retirement benefits of Poles. However the pension funds operating in Poland became allowed to increase the share of foreign investments in their portfolios, what may cause the capital outflow from the Polish market.

The aim of the research* is evaluation of the investment efficiency of private pensions funds operating in Poland** in the years 2000-2013 in comparison to Social Insurance Institution, constructed benchmarks, investments made in equity, bonds and money markets. Analysis is provided applying reward-to-variability ratio and information ratio defined by Sharpe, Treynor, Sortino, Sharpe-Israelsen, Jensen measures and so called Sharpe’s alpha.

The final results may be summarized as following:

·      The majority of investment efficiency measures point out that the performance of pension funds was better than Social Insurance Institution, and constructed benchmarks.

·      The portfolios constructed due to the new regulations, i.e. without Treasury Bonds performed worse than the ones, which represent the portfolio from the original reform.


* This research was conducted in frame of the project “Analysis of Open Pension Funds Market as Compared to the Open Investment Funds Market Functioning in Poland” 2013/09/B/HS4/00493 financed by National Science Centre.

**Some results are already presented.

1. Witkowska D., Kompa K. (2014), Pension Funds in Poland: Efficiency Analysis for Years 1999-2013, Dynamic Econometric Models, Vol. 14, p. 105-124.

2. Witkowska D., Kompa K. (2016), Efficiency of Private Pension Funds in Poland, AESTIMATIO The International Journal of Finance, Vol. 12, p. 48-65. http://www.ieb.es/wp-content/uploads/2015/02/n12/2.pdf

3. Kompa K. (2014), Polish Pension System in Transition: Impact on the Investment Portfolio Construction, Indian Journal of Fundamental and Applied Life Sciences ISSN: 2231– 6345 (Online)
An Open Access, Online International Journal Available at http:// http://www.cibtech.org/sp.ed/jls/2014/01/jls.htm Vol. 4 (S1) April-June, pp. 2102-2110/Kompa
Research Article



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Presentation: Invited oral at Current Economic and Social Topics 2015, by Dorota Witkowska
See On-line Journal of Current Economic and Social Topics 2015

Submitted: 2015-06-02 10:59
Revised:   2015-12-06 11:13