Govt of Poland Confiscates Half Of Private Pension Funds To "Cut" Sovereign Debt Load

While the world was glued to the developments in the Mediterranean in the past week, Poland took a page straight out of Rahm Emanuel's playbook and in order to not let a crisis go to waste, announced quietly that it would transfer to the state - i.e., confiscate - the bulk of assets owned by the country's private pension funds (many of them owned by such foreign firms as PIMCO parent Allianz, AXA, Generali, ING and Aviva), without offering any compensation. In effect, the state just nationalized roughly half of the private sector pension fund assets, although it had a more politically correct name for it: pension overhaul.



By way of background, Poland has a hybrid pension system: as Reuters explains, mandatory contributions are made into both the state pension vehicle, known as ZUS, and the private funds, which are collectively known by the Polish acronym OFE. Bonds make up roughly half the private funds' portfolios, with the rest company stocks.
And while a change to state-pension funds was long awaited - an overhaul if you will - nobody expected that this would entail a literal pillage of private sector assets.
On Wednesday, Prime Minister Donald Tusk said private funds within the state-guaranteed system would have their bond holdings transferred to a state pension vehicle, but keep their equity holdings. The funds would effectively be left with only the equities portions of their assets, even this would be depleted, and there will be uncertainty about the number of new savers joining.
But why is Poland engaging in behavior that will ultimately be disastrous to future capital allocation in non-public pension funds (the type that can at least on paper generate some returns as opposed to "public" funds which are guaranteed to lose)? After all, this is a last ditch step which no rational person would engage in unless there were no other option. Simple: there were no other option, and the driver is the same reason the world everywhere else is broke too - too much debt.
By shifting some assets from the private funds into ZUS, the government can book those assets on the state balance sheet to offset public debt, giving it more scope to borrow and spend. Finance Minister Jacek Rostowski said the changes will reduce public debt by about eight percent of GDP. This in turn, he said, would allow the lowering of two thresholds that deter the government from allowing debt to raise over 50 percent, and then 55 percent, of GDP. Public debt last year stood at 52.7 percent of GDP, according to the government's own calculations.
To summarize:

1. Government has too much debt to issue more debt
2. Government nationalizes private pension funds making their debt holdings an "asset" and commingles with other public assets
3. New confiscated assets net out sovereign debt liability, lowering the debt/GDP ratio
4. Debt/GDP drops below threshold, government can issue more sovereign debt

Buy gold before your assets are confiscated before your eyes.

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Originally Posted by socal

While the world was glued to the developments in the Mediterranean in the past week, Poland took a page straight out of Rahm Emanuel's playbook and in order to not let a crisis go to waste, announced quietly that it would transfer to the state - i.e., confiscate - the bulk of assets owned by the country's private pension funds (many of them owned by such foreign firms as PIMCO parent Allianz, AXA, Generali, ING and Aviva), without offering any compensation. In effect, the state just nationalized roughly half of the private sector pension fund assets, although it had a more politically correct name for it: pension overhaul.

....the government can book those assets on the state balance sheet to offset public debt, giving it more scope to borrow and spend. Finance Minister Jacek Rostowski said the changes will reduce public debt by about eight percent of GDP......

1. Government has too much debt to issue more debt
2. Government nationalizes private pension funds making their debt holdings an "asset" and commingles with other public assets
3. New confiscated assets net out sovereign debt liability, lowering the debt/GDP ratio
4. Debt/GDP drops below threshold, government can issue more sovereign debt

Buy gold before your assets are confiscated before your eyes.

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First the daylight bank robbery in Cyprus, and now this in Poland.

It can happen anywhere.

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Originally Posted by barbaro

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Originally Posted by socal

While the world was glued to the developments in the Mediterranean in the past week, Poland took a page straight out of Rahm Emanuel's playbook and in order to not let a crisis go to waste, announced quietly that it would transfer to the state - i.e., confiscate - the bulk of assets owned by the country's private pension funds (many of them owned by such foreign firms as PIMCO parent Allianz, AXA, Generali, ING and Aviva), without offering any compensation. In effect, the state just nationalized roughly half of the private sector pension fund assets, although it had a more politically correct name for it: pension overhaul.

....the government can book those assets on the state balance sheet to offset public debt, giving it more scope to borrow and spend. Finance Minister Jacek Rostowski said the changes will reduce public debt by about eight percent of GDP......

1. Government has too much debt to issue more debt
2. Government nationalizes private pension funds making their debt holdings an "asset" and commingles with other public assets
3. New confiscated assets net out sovereign debt liability, lowering the debt/GDP ratio
4. Debt/GDP drops below threshold, government can issue more sovereign debt

Buy gold before your assets are confiscated before your eyes.

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First the daylight bank robbery in Cyprus, and now this in Poland.

It can happen anywhere.

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Yes its fucking criminal. Outright theft.

Gold is showing its utility more and more every day.

All the Poles live in the UK now so none of them noticed.

It would help if the author knew anything about finance, or bothered getting his facts right.

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Originally Posted by socal

Government has too much debt to issue more debt

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Untrue- Polands govt debt is considerably below that of the US, UK, Japan etc.

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Originally Posted by socal

non-public pension funds (the type that can at least on paper generate some returns as opposed to "public" funds which are guaranteed to lose

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Untrue- government controlled funds held their value much better than private pension funds thru' the GFC and it's aftermath.

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Govt of Poland Confiscates Half Of Private Pension Funds

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Untrue- the assets have not been confiscated at all. The Trustee has been changed, or is changing.

Of course, what quality a sovereign government may possess as a Trustee & debtor is another question.

I'd need to know a good deal more about the situation to meaningfully comment, but yes- possible grounds for concern. Truth be told, had the US government stepped in when several corporates were plundering their own employees pension funds, those people would be a lot better off now.

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the assets have not been confiscated at all. The Trustee has been changed, or is changing.

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Right. Like you, I don't know much about Polish pension funds but it seems that this is about transferring the funds from private (ie banking) hands to state hands but that for pension holders, the situation is unchanged. The merits of states vs banks managing pension funds is debatable (my general feeling is that the banks have proved beyond all doubt that they're crooks and shysters who are just not up to the job,) but it's not a story of the Polish government stealing people's pensions.

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Originally Posted by sabang

It would help if the author knew anything about finance, or bothered getting his facts right.

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Originally Posted by socal

Government has too much debt to issue more debt

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Untrue- Polands govt debt is considerably below that of the US, UK, Japan etc.

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Originally Posted by socal

non-public pension funds (the type that can at least on paper generate some returns as opposed to "public" funds which are guaranteed to lose

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Untrue- government controlled funds held their value much better than private pension funds thru' the GFC and it's aftermath.

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Govt of Poland Confiscates Half Of Private Pension Funds

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Untrue- the assets have not been confiscated at all. The Trustee has been changed, or is changing.

Of course, what quality a sovereign government may possess as a Trustee & debtor is another question.

I'd need to know a good deal more about the situation to meaningfully comment, but yes- possible grounds for concern. Truth be told, had the US government stepped in when several corporates were plundering their own employees pension funds, those people would be a lot better off now.

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1) ZeroHedge is the most knowledgeable Austrian leaning financial media source in the world. Of course Poland and most of Europe is in better financial shape then the print zones of US and Japan. The North American media propagandizes Europe to cover up their own problems.

2) That is garbage. I'm not even going there.

3) Grounds for concern eh.....:rolleyes: Understatement of the year. My gold, I can touch it, I can see it. Somebody had to put in time in the past to procure my gold as I had to put in time in the past to be the owner of it. All these digital financial "assets" are backed by the promise of someone to produce in the future.

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Originally Posted by Zooheekock

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the assets have not been confiscated at all. The Trustee has been changed, or is changing.

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Right. Like you, I don't know much about Polish pension funds but it seems that this is about transferring the funds from private (ie banking) hands to state hands but that for pension holders, the situation is unchanged. The merits of states vs banks managing pension funds is debatable (my general feeling is that the banks have proved beyond all doubt that they're crooks and shysters who are just not up to the job,) but it's not a story of the Polish government stealing people's pensions.

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:rolleyes:
The response to the confiscation was, naturally, one of shock:

The reform is "a decimation of the ...(private pension fund) system to open up fiscal space for an easier life now for the government," said Peter Attard Montalto of Nomura. "The government has an odd definition of private property given it claims this is not nationalisation."

"This is worse than many on the markets had feared," a manager at one of the leading pension funds, who asked not to be identified, told Reuters.
"The devil is in the detail and we don't yet know a lot about the mechanism of these changes, what benchmarks will be use to evaluate our performance... (It) looks like pension funds will lose a lot

Well, once you nationalize private assets, the public debt will lindeed appear lower than it was before confiscation: we give them that much.
End result: "The Polish pension funds' organisation said the changes may be unconstitutional because the government is taking private assets away from them without offering any compensation.... This may lead to the private pension systems shutting down," said Rafal Benecki of ING Bank Slaski."
of flexibility in what they can invest."




Nomura Group (野村グループ Nomura Gurūpu?) formerly Nomura zaibatsu (野村財閥), is a Japanese multinational conglomerate, or zaibatsu of financial services, financial management consulting companies and related organisations, headquartered in the Nihombashi district of Tokyo, Japan.[5][6][7] Nomura Group is the global marketing name of Nomura Holdings, Inc. (Tokyo) and its direct and indirect subsidiaries worldwide.[8]
Nomura Holdings hit the global headlines in October 2008, when it acquired most of Lehman Brothers Asian operations together with its European equities and investment banking units. The group is involved in numerous industries, from oil and gas to construction, chemicals and fast-moving consumer goods, as well as what it is known for internationally – the provision of investment, financing and related services to corporations, financial institutions, individuals, and governments and governmental agencies worldwide.

(^Federal Reserve primary dealer )

The bankers will obviously be screaming- they are losing the lucrative fees from managing those assets (I certainly would have been :)). They may have a case for being compensated- that depends on the polack legal system. They also lose those assets on their quasi balance sheet, which in typical bank style are used for further leverage/ debt funding. But thats corporate bullshit- the banks can fight their own battles.

From where I sit, the important thing is how these assets are segregated. If they go into an amorphous pool of 'government' assets- not segregated on the basis that they are not government assets at all, rather the property of the contributors they are holding these assets in trust for- then the potential for abuse and mismanagement is rife.

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Originally Posted by sabang

The bankers will obviously be screaming- they are losing the lucrative fees from managing those assets (I certainly would have been :)). They may have a case for being compensated- that depends on the polack legal system. They also lose those assets on their quasi balance sheet, which in typical bank style are used for further leverage/ debt funding. But thats corporate bullshit- the banks can fight their own battles.

From where I sit, the important thing is how these assets are segregated. If they go into an amorphous pool of 'government' assets- not segregated on the basis that they are not government assets at all, rather the property of the contributors they are holding these assets in trust for- then the potential for abuse and mismanagement is rife.

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Yes. The crony bankers are the biggest socialists of them all. The bottom line is, they are all supporters of easy money. They are all low life.

When the first bailout in 2008 happened, capitalism ended. Nomera, Warren Buffet , would have all went broke.( he said it himself:Warren Buffett's Letter to Uncle Sam)

But the end game doesn't change. My gold has to be physically stolen from me.

Irrespective of who has "your assets" on their balance sheet and who can leverage the said assets "better", the fact remains that placing your hard earned wealth into the hands of lying, cheating and generally bad people (bankers and politicians) is not a good idea for anyone.

The benefit of placing your wealth in the "shiny" stuff allows for full knowledge of the Value, the security and the ability to spend at will. Whilst some may question the growth available to those who hold their wealth in this manner others have found, to their cost, that the "growth", promised upon signature those many years ago, has not in fact happened.

"...Austrian leaning financial media source..." Sounds interesting. What is it?

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Originally Posted by Rainfall

"...Austrian leaning financial media source..." Sounds interesting. What is it?

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Austrian School - Wikipedia, the free encyclopedia

Zero Hedge is a news website, content aggregator, and collection of blogs by contributing editors. It reports on economics, Wall Street, and the financial sector and is credited with bringing the controversial practice of flash trading to public attention in 2009 via a series of posts alleging that Goldman Sachs' access to flash order information allowed the firm to gain unfair profits. The news portion of the site is written by a group of editors who collectively write under the pseudonym "Tyler Durden", a character from the novel Fight Club.

By September 2009, Zero Hedge had begun drawing more traffic than more established financial websites[4] with 333,000 unique visitors a month, impressing even those who say the news site is full of conspiracy theory and "apocalyptic world view".[3] Durden says two-thirds of its readers are from Wall Street.[1] According to Quantcast, Zero Hedge has as of 2012 a monthly global traffic of 1.8 million people.[6] Under the name Tyler Durden, Ivandjiiski was interviewed on Bloomberg Radio[2][7] and Zero Hedge has been quoted in the Columbia Journalism Review.[8]
In December 2012, Bank of America blocked its employees' access to Zero Hedge.[9]
Zero Hedge celebrated one billion views in June 20

Essentially what this move achieves is to allow the government to use the pension funds as security to borrow money which it can then squander, thereby making the debt situation even worse.

Obama will be impressed.

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Originally Posted by socal

(many of them owned by such foreign firms as PIMCO parent Allianz, AXA, Generali, ING and Aviva)

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many of them are under pressure...
life insurances and private pension funds are in trouble with the continous low interest rates - the insurers have problems to pay the promised profits...

if i was an insurer in trouble, i might think of shifiting long-term-pension money to pay current short-term-debts to the clients...

as person elegible for pension funds from the named companies, i might be rather happy, the money has been "secured"...

but bottom line, its criminal and will damage the "scene" (of private investors) heavily...

can we have the link to the story, I suspect socal has "distorted" a few facts as usual

found the story on Reuters, all interpreted opinion by a writer and a few fund managers, nobody has the exact details how it will happen or what is exactly the government plan

story not clear at all and sensationalist,

^ Basically Socal has posted a blog as a news item. Should be trashed or placed in Speakers corner (same difference)

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Originally Posted by alitongkat

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Originally Posted by socal

(many of them owned by such foreign firms as PIMCO parent Allianz, AXA, Generali, ING and Aviva)

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many of them are under pressure...
life insurances and private pension funds are in trouble with the continous low interest rates - the insurers have problems to pay the promised profits...

if i was an insurer in trouble, i might think of shifiting long-term-pension money to pay current short-term-debts to the clients...

as person elegible for pension funds from the named companies, i might be rather happy, the money has been "secured"...

but bottom line, its criminal and will damage the "scene" (of private investors) heavily...

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So you are happy that the money is "secured " ? On the asset side of a indebted government is what you call secure ?

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Originally Posted by Gerbil

^ Basically Socal has posted a blog as a news item. Should be trashed or placed in Speakers corner (same difference)

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I guess you didn't read the part that said ZeroHedge is a legitimate financial news source. But if you want to believe everything the corporate crony media tells you then go ahead.

ZeroHedge is the same news source that "sensationalized " :rolleyes: the theft of private segregated funds at MF Global.

MF Global Client Theft Estimate Doubled To $1.5 Billion? | Zero Hedge



MF Global Trustee Speaks: It Was All Corzine's Fault | Zero Hedge

MF Global: Where's the Cash -- Part II | Zero Hedge

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Originally Posted by Butterfly

found the story on Reuters, all interpreted opinion by a writer and a few fund managers, nobody has the exact details how it will happen or what is exactly the government plan

story not clear at all and sensationalist,

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Yeah the corporate media shills buttered it up as best they could.

And you fell for it. :mid: