Integrative pension plans in Poland | An overview about ZUS, IKE, IKZE, PPE
What are the pension plans possibilities in Poland? This overview is useful for any type of workers working in Poland, whether you have a regular employee or a B2B contract.
When are working in Poland with both a regular employee or a B2B (business to business) contract you need to pay ZUS.
What is ZUS? ZUS is the public social security institution in Poland. The name cames from Zakład Ubezpieczeń Społecznych. The contributions to ZUS are obligatory.
If you have a regular employee contract the contributions to ZUS are taken directly from your gross salary and paid by your employer; if work with a B2B contract you have to do the payments by yourself.
At the following link you can login into ZUS and check what is the status of your contributions for your pension: https://www.zus.pl/portal/logowanie.npi
While ZUS is a mandatory pension scheme, below there are other options that work on voluntary basis.
What is IKZE? IKZE stands for “Indywidualne Konto Zabezpieczenia Emerytalnego” which means Individual Retirement Security Account. It is a type of voluntary pension scheme in Poland with some tax incentives.
There is a limit in the amount of money that you can invest into IKZE each year, that is 1.2 times the average monthly salary forecast in Poland for a given year. For 2021 that limit is 6310.80 PLN
when you deposit some money into IKZE, at the next tax declaration you can get a tax refund for the money deposited based on your income tax bracket. For example if you are in the 32% tax bracket and you invest 6,310.80 PLN then at the next tax declaration you will get a refund of 2019 PLN.
A flat tax rate of 10% of the funds paid out after the retirement age.
In case of inheritance there is not any inheritance tax, the person inheriting the funds from IKZE will have to pay only a flat income tax at the rate of 10%.
What is IKE? IKE stands for “Indywidualne Konta Emerytalne” which means Individual Retirement Account. It is a type of voluntary pension scheme in Poland with some tax incentives.
There is a limit in the amount of money that you can invest into IKE per year, that is 3 times the average monthly salary forecast in Poland for a given year. For 2021 that limit is 15,777 PLN
The greatest advantage of IKE is zero tax on capital gains (in Polish it is called Belka tax), if you keep the investments until the retirement age.
In case of inheritance there is not any inheritance tax.
How to invest in IKE and IKZE
You can invest in IKE and IKZE via your own Polish bank account. However, some banks have a limited number of financial products where to invest the money deposited into your IKE/IKZE accounts.
There are a couple of financial institutions that allow to invest into a wide variety of financial products:
With both IKE and IKZE you are not obliged to make regular payments - you can decide how much and when, as long as you do not exceed the possible maximum payment limit in a given year. However, in order to be eligible to withdrawn the funds with the tax benefits you need to reach the retirement age and having done the payments at least in 5 calendar years.
PPE - Employee Pension Program
PPE stands for Pracowniczy Program Emerytalny = Employee Pension Program You can find it also called as Employee Pension Scheme EPS.
Big corporations in Poland often offer an extra voluntary Employee Pension Scheme.
In this case, the company offers to invest an extra percentage, usually around 3.5 % on your gross salary, into some pension funds. Plus the employee can add voluntary contributions until certain limits per year.
Since, the contribution by the company is on the top of the gross salary, if there is such possibility, it makes sense to adhere to it, at least for the part offered by the company.
The allocation of the money can be:
Life cycle where the allocation of contributions changes automatically with the age of the employee between shares and bonds. With age the proportion of bonds gets bigger over the share investments.
Individual where the employee decides how to allocate the investments between the funds available at the Employee Pension Program of the company.
- the invested amounts are not charged with the social and health insurance premiums.
Therefore if you decide to add a voluntary contribution to your Employee Pension Program, then for the same amount taken from your gross salary, the amount that it will added to your Employee Pension Program it will be a bit higher than the net amount that you would get in your monthly paycheck.
- after the retirement age the withdrawn of the investments is exempt from capital gain tax and income tax.
Your own savings and investments
Independently to where you work or for whom you work, you can always save a portion of your monthly income and invest it. This is a good practice for any type of jobs, across any countries.
Consider that investing as early as possible has positive long term consequences as explained in the compound interest article: https://www.enricotips.com/post/compound-interest/
Disclaimer: This article is for information purposes only. It is not intended to be an investment advice. Before making any commitment of financial nature you should seek advice from a qualified investment adviser.
When choosing a financial adviser it is a good practice to consider an independent one who is not working for a bank or other financial institutions so that she/he does not have any interest to sell you financial products that might not be the best for your needs.