Poland - Individual retirement account - report

25 inspected undertakings, 115 standard forms examined and 13 pending proceedings – this reveals the latest analysis of the President of UOKiK concerning individual retirement accounts

Under the law all employed persons must pay retirement premiums in I pillar (pl. ZUS, ie. social insurance institution) and II pillar (open pension funds). Additionally, everyone may save funds under III pillar, which is a totally voluntary choice. There is a wide selection of products offered to consumers concerned about their future pensions and one of them is the individual retirement account (pl. IKE) – an agreement concluded by a consumer with one of financial institutions. The party to such agreement, depending on the selected form of saving, can be the following: brokerage houses, social insurance institutions, banks or investment funds.

The latest report of the President of UOKiK concerns the inspection preformed in 2011 when 115 standard forms applied by 25 financial institutions offering individual retirement account were examined. It has been the first such inspection carried out by the Office. The undertakings were selected both according to the highest value of accumulated funds and at random. The inspection covered the following:

• seven banks: Bank Gospodarki Żywnościowej, Bank Polskiej Spółdzielczości, Bank Millennium, BNP Paribas, BRE Bank, Krakowski Bank Spółdzielczy and Powszechna Kasa Oszczędności Bank Polski,
• three entities running the brokerage activity: BDM, Bank Ochrony Środowiska and BZ WBK,
• ten investment funds: Amplico, BPH, BZ WBK AIB, Fortis Private Investments (currently BNP Paribas Polska), ING, Legg Mason, Millennium, Pioneer Pekao, PZU and Skarbiec,
• five insurance companies: TU Allianz Życie Polska, ING Towarzystwo Ubezpieczeń na Życie, NORDEA Polska Towarzystwo Ubezpieczeń na Życie, PZU Życie and Towarzystwo Ubezpieczeń na Życie Spółdzielczych Kas Oszczędnościowo–Kredytowych.

The President of the Office questioned the practice applied by 16 financial institutions. The charges of UOKiK mainly concern the application of clauses infringing economic consumer interests and regard the following:

• no option for disposing funds – the Office was concerned about limiting the right of persons saving for their pension to decide about the already accumulated capital.

Among the contested clauses is restricting in agreements the possibility to sell assets accumulated by the consumer at their discretion in the case of withdrawal of funds in instalments. According to the Office, a client saving the funds for their pension enjoys the right to decide which financial instruments they wish to invest in, and so, when withdrawing funds in instalments, a cosumer should have influence on the sequence of their sale. For this reason it is contrary to law to limit cilents their right to dispose of accumulated funds.

Furthermore, the President of the Office contested the fact that consumers were deprived of their right to select a subfund where they could allocate their sources in the case of closing one of these funds.

• no indexed insurance amount – the President of the Office was concerned about the clause stating that rising inflation causes the proportionate increase in the insurance premium whereas the insurance amount remains unchanged. Following this, a consumer pays more and does not receive higher amounts in case of insurance event. According to the Office, the practice is contrary to law as all paid premiums should result in the change of policy.
• too stringent requirements for sources withdrawal – the clauses hindering consumers withdrawal of their funds raised doubts of the President of UOKiK. For example, it turned out that undertakings made withdrawal of funds allocated on individual retirement account after the death of its owner dependent on fulfilling additional conditions. It is worth noting that these requirements do not have any legal basis, eg. authorization of the death certificate in a Polish diplomacy institution.
• no liability for monetary operations – under the law, running a bank account agreement must specify inter alia the undertaking’s liability for irregularities in monetary settlements and rates of compensation for losses suffered for this reason. The President of the Office stated that not including in agreements information on the rates of compensation in the case when the undertaking fails to perform the contract accordingly, definitely violates the law.

The examination of individual retirement accounts provided the basis for instituting 13 proceedings by the President of the Office concerning the violation of collective consumer interests. There will be 8 actions brought to the court for regarding in total 17 clauses as unlawful. Particulars concerning all the inspected entities and irregularities identified were included in the report and the appendix.

According to the data of Komisja Nadzoru Finansowego (the Polish Financial Supervision Authority), in the period from 2004 till the first half of 2011, only one in twenty professionally active Poles decided to join the individual retirement account. There were opened 799 thousand accounts with PLN 2.9 billion accumulated funds. Unfortunately, still very few consumers decide to save money this way. In case of doubts concerning the performance of individual retirement account agreement, please follow the guidebook by the Office.