The Polish Insurance Association applies to the Minister of Finance for exempting insurers from asset tax. This concerns the exemption of funds which would be accumulated under Employee Capital Plans (PPKs) and new agreements on occupational pensions (PPEs).
The new version of the Act of 24 May 2018 on PPKs lists insurance companies as institutions entitled to manage PPKs, yet the lack of asset tax exemption practically eliminates Polish insurers from all regulated and collective forms of long-term saving in Poland. Insurers are effectively burdened with asset tax exceeding 0.5226% per year. The act recognises the tax basis as all assets of insurance companies, i.e. also the funds which would be accumulated under Employee Capital Plans. The tax rate is therefore, higher than the suggested limit of management costs in PPK agreements, amounting to 0.5%.
Mainstreaming is key for PPKs
Exempting funds accumulated under Employee Capital Plans (PPKs) from asset tax will enable companies to participate in the programme which, in turn, will have a positive impact on the implementation of the main objective of PPKs, namely to become mainstream. Insurers have broad access to entrepreneurs with whom they have established long-term business relationships while protecting their property, offering group insurance, health insurance or occupational pensions. Insurers also have solid partnerships with employees of various companies and institutions, mainly thanks to cooperation with trade unions or directly with individual organisational units responsible for the property or staff management areas. Insurers, through their relationships with employers, are also able to provide savers with educational support, by promoting the advantages of long-term savings through PPKs.
Possible insurance coverage
It should also be stressed that, as part of the 0.5% management fee collected, insurers will be adding insurance coverage to the pension product. Such a structure, in our opinion, will make it easier to convince employees not to abandon their payments into PPKs, as the product will not only fulfil a long-term retirement saving objective, but it will also provide specific protection, which will make the product more attractive, especially for young people. Tax exemption of assets accumulated under PPKs will be neutral in terms of the State budget. Investment fund societies and general pension societies are not subject to asset tax, so the lack of asset tax exemption for insurers in the area of PPKs will render the plans manageable solely by investment fund societies and general pension societies.
In practice, the current version of the bill also excludes insurance companies from operating occupational pensions (PPE). The act introduces a limit of costs and fees collected by financial institutions amounting to 0.6% of the value of managed funds per year, which, assuming that asset tax of 0.5226% is retained, will render the maintenance of PPE economically unprofitable for insurers. Consequently, PPE agreements will only be concluded by financial institutions that are not burdened with asset tax. Within a certain timeframe (probably in about a year), all occupational pensions run by insurers today, which represent about 60% of all occupational pensions, will be taken over by investment fund societies and general pension societies, which are not subject to tax.
Therefore, the decision not to exempt insurers from asset tax in a part relating to assets accumulated under PPK agreements and new PPE agreements means the elimination of Polish insurers from all regulated and collective forms of long-term saving in Poland.