Open Pension Funds in Poland,

the snapshot of next decade 2009-2019

Tomasz BańkowskiPekao Pioneer PTE

FIAP Conference, Warsaw, May 2009

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OFE to day and after next 10 years ….

Key factors influencing public opinion and social understanding of OFE in 2009

Assessment of key factors from public and OFE perspective OFE towards improvments Forecasted results of changes in next decade Will it become truth…

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Key factors influencing public opinion and social understanding of OFE in 2009

External as:

Economical cycles and public trust to financial institutions

Public knowledge on financial part of social reform and mass media function

Process of legal framing and business stability

Political climat for more rational and complex shape of OFE

Internal as:

OFE investments results and risk diversification

Safety of collected and located OFE assets

Operational efficiency of PTE and customer care

Operational and system costs of OFE/PTE

OPF

industry

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Assesment of key factors from public and OFE perspective

External factors, independent from OFE industry influence negative on

public opinion and trust. Partial approach to structuring and

implementation of social reform makes difficult to expand public

understanding of financial part of reform and pension reform both

Internal factors, dependent from OFE industry influence les negative way. Investment results are criticised due to unrealistic awaiting. Luck of competition between OFE is criticised. OFE fees are publicly treated as not justified. But capital market as additional but necessary vehicle of pension reform is accepted more widely

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OFE towards improvements

Implementation of portfolios with different risk/profit ratio Opening for other investment categories and limits allowing

better risk control and global risk differentiation Setting external benchmarks in place of Av. Int. R.of Return Reducing risk of misselling and sunk costs by rationalisation

of member transfers Implementing temporary and than permanent Pension

Clearing Houses within rationale financial frames Searching for better coordination and development between

all three pillars of pension system

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Forecasted results of changes in next decade

Different OFE risk/profit portfolios will split members opinions and will not raise their level of satisfaction. The balanced portfolio strategy may win again in longer investment horizon

Expanded list of investment categories and higher foreign with risk controlling options will reduce volatility of OFE investment result

External benchmarks will replace AMRR but will open a window for deeper reduction of fees and passive index investing

Regulator will limit distribution activity on OFE secondary market which will freeze transfer activity

Discussion on organisation and costs of Pension Clearing Houses will not end

Better model in terms of more stable pension pay outs between non financial and financial pillar of pension reform will be proposed

Costs of financial part of pension reform will be reduced due to market concentration and technological progress

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Will it become truth…….

Benefits from financial part of pension system will overweight non financial part

Investment process regulation of pension funds will be standardised in E.U.

OFE operational costs will be seriously downgraded Public understanding and trust to individual and financial

pension system will be much stronger