Poland’s government is drafting a voluntary, employer-provided pension program that its author says will boost the country’s savings by 20 billion zloty ($6 billion) a year and strengthen Warsaw’s capital market.

Pawel Borys, the architect of the program who’s also the head of the state’s development fund, told Bloomberg the government proposal may take effect from the start of next year. The plan is set to be the first stage of a bigger industry revamp, with the cabinet also preparing to overhaul the existing system of pension funds, which manage $54 billion in assets, including 43 percent of the Warsaw bourse’s free float, he said.

“We want to address the very-low saving rate among Poles,” Borys, 40, said from his office in central Warsaw. “This is a key element for building a capital market hub and spur innovation in this part of Europe.”

The government outlined its plans and started a process of public consultations for the proposals, which still face final cabinet and parliamentary approvals. Borys said the proposals received positive reviews from several international investors, who likened it to the U.S.’s defined-contribution 401(k) plan and the U.K.’s workplace pensions system.

“The new pension scheme can be positive for Polish equities in the longer term, but key to success will be to convince Poles to stay in the program,” Lukasz Janczak, an analyst at Ipopema Securities SA brokerage, said in a research note. Risks include squeezing company margins by effectively increasing labor costs, he said. If the plan is a success, it can also entice the government to “take over more assets” from existing pension funds.

The retirement revamp, whose details first appeared in 2016, is set to be the first bigger economic legislation drafted by Prime Minister Mateusz Morawiecki, who took over from a party colleague in December. The western-educated former bank executive was tasked with keeping Poland’s economy growing while softening the government’s international conflicts, including its rule-of-law row with the European Union and clash with Israel over alleged Polish complicity in the German Nazi extermination of Jews during World War 2.

Borys said the revamp of the existing pension funds will be detailed at a later date. Two years ago, equity investors focused much on the government’s broader plan to transfer 75 percent of the funds’ assets to individual retirement accounts, and giving the rest to the state’s demographic reserve fund. The main elements of that scenario “remain unchanged,” Borys said.

Source: Bloomberg

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