POLAND - Investment restrictions on Polish Open Pension Funds (OPFs) in other European member states have been found to be in breach of a key European investment law.
The EC said these provisions limited members' scope to invest across the European Union. With higher management fees and transaction costs, the EC ruled the plan made foreign investments "less attractive compared to investment in Poland" and were not legally justifiable.
As a result, the EC has passed the case on to the European Court of Justice (ECJ) for arbitration.
In a statement on the ruling, the EC said: "By imposing restrictions on the investment activity of OPFs the [Polish] State has limited the possibility for OPFs to compete and diversify their portfolio and thus obtain better risk-adjusted financial results."
It added the 5% limit on investments outside of Poland was not "proportionate", did not protect the interests of members and could not be justified by the current crisis on the financial markets.
OPFs, introduced in 1999, act as a form of personal pension savings account to stand alongside the pay as you go (PAY-G) first pillar state system. Key to the EC ruling was the interpretation OPFs could not be classed as "public entities" since they were complimentary to and not a replacement of, the main state system.
The ruling added: "The [EC] considers that because OPFs are engaged in an economic activity of investing money of insured persons, regardless of their legal status and role in the pension system, and the fact that the contributions have a public character, they are economic undertakings and thus cannot be treated as public entities."
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