Poland’s Employee Capital Plan

PPK – What is it ?

Employee Capital Plans (PPK), is a program intended to allow staff to save money for the future. This is a so-called additional pension fund, where staff who reach the age of 60 will have better financial security. This is a way to save money, which constitutes staff member’s private capital. The operation of PPK consists of accumulating funds in a staff member’s dedicated account, which can then be withdrawn after reaching the age of 60. If staff don’t reach the age of 60, the money is inherited by statute or by testamentary inheritance and transferred to the individuals’ relatives.

Resignation from PPK – how to resign?

Each staff member under 55 years old, is automatically enrolled in the program. However, there is an option to opt out by making a written declaration. Nevertheless, participation in the program is renewed every 4 years. This means that every 4 years, staffmust submit a declaration of resignation and the employer is obliged to inform staff about the possibility of participating in PPK every 4 years. The employer who receives a declaration of resignation from the participant, is obliged to inform the financial institution about the resignation within 7 days.

Sample declaration of resignation from PPK

PPK contributions

Staff:

• Basic amount – 2% of salary
• Optional: additional – an amount not exceeding 2%

Employer:

• Basic amount – 1.5% of employee’s salary
• Optional: additional – 2.5%

Country

• Welcome fee – PLN 250, if staff are using the program for at least 3 full calendar months. The employer receives the welcome fee after the end of the quarter in the staff member’s PPK account within 30 days. The welcome fee applies to each person once.
• Annual surcharge – PLN 240. The condition of payment to the PPK account must be at least 3.5%, 6 times the minimum wage applicable in the year which the payment is due. The annual subsidy appears on the participant’s account by April 15 of the following year, after the year it is granted.

PPK management agreement

The company concludes a PPK contract with one of the financial institutions.

List of financial institutions

Which entities are exempt from the PPK program?

Micro-entrepreneurs:

• The entrepreneur employs on average of fewer than 10 staff per year
• The annual net turnover from the sale of goods and services of the enterprise does not exceed the PLN equivalent of EUR 2 million. Alternatively, the total assets of the balance sheet prepared at the end of one of these years, does not exceed the PLN equivalent of EUR 2 million.

However, despite meeting the above criteria, the most important condition for exemption from the introduction of PPK in a company, is the resignation from the program of all staff employed in a given organisation. Therefore, if even one of the company’s staff wants to participate in the PPK program, the employer will be obliged to implement the program in the employing entity.

Natural persons not conducting business activity

Self-employed people, uniformed services, and farmers

Early withdrawal of funds from PPK

If you decide to withdraw money from PPK without giving a reason, the amount of savings accumulated in the PPK account will be reduced by the money paid by the state (welcome fee and annual subsidies). This is 30% of the amounts paid by the employer and capital gains tax on the remaining funds from the employer’s contributions, and own contributions. In such circumstances, you can only withdraw all the funds in your account (not part of them).

In special circumstances, you can withdraw funds without any deductions, even if you are under 60 years old. In case of serious illness (including spouse or child), you can withdraw up to 25% of your savings from your account.

You can also withdraw all the money in your account for housing purposes, to cover contributions to take out a mortgage. Importantly, payment for housing purposes without any deductions can only be made by program participants who are under 45 years old. This must be on the date of submitting the application for payment of funds and it is treated as a type of loan that must be repaid. According to the provisions of the PPK Act, the repayment should start no later than 5 years from the date of payment, and the participant has 15 years to repay the entire “borrowed” amount.

Withdrawal of money after the age of 60

Payment of funds after staff turns 60, takes place by default in the following way:

• Staff receives 25% of the value of the accumulated funds in the form of a one-time payment
• Staff receive 75% of the accumulated funds in the form of installments (at least PLN 120).

  It is also possible to pay the entire amount in 120 installments.

  Either of these options allows you to avoid paying 19% capital gains tax.