On 1 September 2004, Commercial Union Poland launches an individual pension account that conforms to the requirements of Polish legislation which becomes effective on that day.
On 1 September 2004, Commercial Union Poland launches an individual pension account that conforms to the requirements of Polish legislation which becomes effective on that day.
The new pensions product of Commercial Union Poland Life Insurance Company complements the existing offering of long-term investments. Individual pension accounts will be offered initially by CU insurance agents.
According to the new law, profits from investing money paid into an individual pension account will be free of capital gains tax providing that they remains in the account until retirement. The maximum amount that can be paid into an account in a particular calendar year is set at 150% of the country’s average monthly salary published by the National Statistics Office. This year each customer can pay PLN 3,435 into an account. Each customer can have only one individual pensions account.
"We consider the individual pension accounts as a necessary but insufficient encouragement to save and invest money for financing capital pensions. Unfortunately there is no government educational and promotional campaign. The amount which can be paid every year into an individual pension account is too small in order to collect a significant capital sum.
"At the moment, if we want to receive a monthly pension of PLN 1,000 we need to save about PLN 200,000 of capital in pillars 2 and 3 of the reformed pensions system. The new law also introduces too many limitations. If somebody is forced, in an emergency, to withdraw even PLN 1 from his or her individual pension account before retiring, such person loses the capital-gains tax exemption from the whole collected amount.
"This is a particularly risky solution for young people who have to keep money in their accounts for 30 or more years," said Zygmunt Kostkiewicz, deputy general manager of CU Life.
Commercial Union Individual Pension Account is available as unit-linked life insurance product in two forms:
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- with declared frequency and amount of contributions – minimum contribution is PLN 150 monthly, PLN 450 quarterly, PLN 900 every six months and PLN 1,8000 annually (with possibility to pay supplementary contributions in the amount of at least PLN 150)
- without declared frequency and amount of contributions – the first contribution can not be lower than PLN 1,800, subsequent contributions (in the amount of at least PLN 150) can be paid in at will.
Customers can invest in two life insurance capital funds with different asset structures: Stable Growth Fund and equity-oriented Growth Fund. Each customer makes his or her own a decision concerning allocation of contributions between these funds. However, allocation to each fund can not be lower than 5%.
The new offer contains also an insurance protection element. In the event of death of an insured person (account owner) during the agreement, CU Life will pay out the account cash value plus 1%.
CU Life charges a handling fee in the amount of PLN 5.73 for each contribution paid into the individual pension account. A one-off fee of PLN 150 will be deducted from the first payment(s) into the account (regardless of the above handling charge) for risk and distribution costs. After the above amount is deducted, following payments into the account are allocated at 100% after deduction of the handling charge. The fee for managing assets in the Stable Growth Fund is 3% asset value per annum and in the equity-oriented Growth Fund is 4% asset value per annum.
The company also prepared a promotional offer for existing customers of CU Life choosing the version without declared frequency and amount of contributions. The minimum initial payment within the offer is PLN 100 (instead of PLN 1,800) and the charge for insurance risks and distribution costs is PLN 50 (instead of PLN 150).
"We regard the individual pension account as a supplement to our long-term investment program offering. Despite certain hesitance regarding the efficiency of such a service for the customers, we will be acting on the basis of a good advisor.
"If a customer is interested in the individual pension account, and our financial analysis shows that it could be a beneficial solution, our agent will present him with an account offer. However we think that in many cases it would be more beneficial to enter into an unit-linked life insurance agreement or to pay additional contributions within existing policies.
"In our opinion, termination of policies taken earlier, either life insurance or unit trusts contracts, in order to open a new individual pension account, would be a mistake and we advise against it," said Anita Bogusz, board member of CU Life.
Commercial Union Polska Group serves over 3 million customers and manages assets with a value of almost PLN 24 billion. It is one of the largest institutions offering long-term investment programs in Poland. CU is the market leader in individual and unit-linked life insurance. It also manages the biggest pension fund in the second pillar of the pensions system and offers four unit trusts.
For further information please contact:
Grazyna Goslings, director of corporate communication of CU Poland Group, tel +48 22 557 40 93, fax +48 22 557 40 26, e-mail: bohdan_bialorucki@cu.com.pl. Additional information on Commercial Union Poland Group can be found at http://www.cu.com.pl