Guide to PPK (Employee Capital Plans) in Poland
For any individual, having savings for retirement is always a concern. Many countries across the European Union offer voluntary pension savings schemes, and as of 2019, Poland followed suit.
PPK, or Employee Capital Plans, offer a three-pronged savings approach to all employees across the country, including foreign staff and contractors. In order to increase financial security post-retirement, or in case of serious illnesses, PPK helps employees across the country to work together with their employers and the state to save for the future.
What is PPK (Employee Capital Plans)?
PPK is a Polish government universal savings scheme that helps employees to save for the future. It is for any economically active individual between the age of 18 and 60 who is employed, or under a contract of mandate.
The government, the employee and the employer all contribute to the PPK, making it a shared responsibility of all three to help save for the future. It was created as a solution to financial security in the later years of life.
It’s similar to many schemes across the world, including the UK’ and New Zealand’s pension schemes, both of which are countries that Poland modelled PPK on.
Who does PPK apply to?
PPK applies to employees, whether those employed under contract, based on a contract of mandate, hired through an agency or board directors who are paid for their function. Employees are eligible for PPK as long as they are subject to the mandatory pension and disability social security insurance.
Once an employee has worked at a company for 90 days, and as long as they are subject to mandatory pension and disability social security insurance for the reason of their employment, then they are eligible for PPK.
It is worth noting that PPK is a voluntary scheme, and employees can choose to opt out if they wish. Employers cannot discourage employees from joining PPK.
Who isn’t eligible for PPK?
PPK isn’t for everyone, there are some people, due to certain circumstances, who aren’t eligible for PPK. These are:
- The self-employed, as there is no employer to contribute to the scheme.
- Those who employ individuals not relevant to their business activity, for example, a director employing a part-time housekeeper.
- Small businesses where all employees have asked to be opted out.
- Employers who already pay into a retirement pension scheme (PPE) of at least 3.5% of the salary, and where 25% of employees are in the PPE.
When can an employee withdraw from PPK?
Employees can primarily withdraw from PPK after the age of 60, as it is designed to be used after retiring. However, there are other situations where withdrawing is possible.
In case of illness
If an employee has a serious illness, up to 25% of the pension funds can be withdrawn to help cover the potential loss of income.
To cover a mortgage deposit
Up to 100% of the pension fund can be withdrawn to cover the contribution when taking out the mortgage. However, this only applies to those under the age of 45.
At any point an employee can close their PPK and withdraw all monies.
How are employees enrolled in PPK?
At the creation of PPK in 2019, there was no auto-enrollment set up. Employees could choose to opt-in as and when their employer joined the scheme.
However, as of the 1st January 2023, the regulations for joining PPK have changed. Much like other pension schemes across the EU, there is now an auto-enrolment period.
For employees aged between 18 and 55, PPK is now done on an opt-out basis rather than an opt-in. All this means is that employees have to actively choose to opt out of PPK, , which was introduced to ensure as many people as possible were taking advantage of the scheme.
As of April 1st 2023, any employee who is eligible, and did not submit an opt-out notice between February 1st 2023 and March 31st 2023, will be opted into the PPK scheme.
If an employee does resubmit their declaration to opt out of the PPK, the employer will stop making PPK contributions starting from the month in which the employee submitted the relevant declaration, and the contributions collected in that month will be refundable.
Auto Enrollment in PPK
From April 2023 onwards, every four years a new auto-enrollment period will begin. This means that every four years, regardless of the employees’ current opt-out status, they will be automatically opted in to PPK once again.
The next two auto enrollment dates will be 2027 and 2031. After four years, the employing entity will be required to inform employees, by the end of February in that year, that those who have submitted PPK opt-out declarations prior to that date are once again covered by the PPK. Consequently, the employing entity will also then be required to make PPK contributions for these individuals as of the 1st of April of that year.
Informing employees about PPK
Employers are legally required to inform their employees about the PPK scheme, including information about whom to contact to opt out. They are also required to inform their employees before a new auto-enrollment period begins.
There is no stipulation about how this information has to be presented, however, it is an offence to discourage employees from participating.
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