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Poland Confiscates Half Of Private Pension Funds To "cut" Sovereign Debt Load

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http://www.zerohedge.com/news/2013-09-06/poland-confiscates-half-private-pension-funds-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:

Government has too much debt to issue more debt

Government nationalizes private pension funds making their debt holdings an "asset" and commingles with other public assets

New confiscated assets net out sovereign debt liability, lowering the debt/GDP ratio

Debt/GDP drops below threshold, government can issue more sovereign debt

Nice. The govt can commit the ultimate theft with total immunity from prosecution. I bet the people of Poland are relieved that the govt is now holding their pension funds.

A move Argentina successfully executed during it's own fiscal crisis.

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Gordon Brown would be proud. Steal off private sector workers to subsidize unfulfillable pension promises made to public sector workers.

I wonder if half their young working age population moving to the UK has accelerated polish problems?

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I was surprisex to read of this as I thought the Polish economy was doing very well but it appears to now be doing an India - i.e. it grew rapidly on borrowed debt and now the increase in bond rates is causing it huge problems????

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I was surprisex to read of this as I thought the Polish economy was doing very well but it appears to now be doing an India - i.e. it grew rapidly on borrowed debt and now the increase in bond rates is causing it huge problems????

Polish private pension holders are certainly getting 'surprise sexed' :lol:

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:unsure: Don't worry, the UK's deb to GDP ratio is shooting over 75%, it'll be ages before it falls anywhere near 50% :blink::wacko:.

more at www.economicshelp.org/blog/334/uk-economy/uk-national-debt/

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Bail in.

Very interesting, I'd like to read some considered opinion on this.

The whole issue of 'bail-in' is very fraught in legal terms.

The several thousand lawsuits in progress, as a result of the Cyprus bail in, are all being brought under Theft Of Property. Rights to property are enshrined in law and the act of Theft is clear. But the issue is certainly fuzzied by state or EU decrees. The instigator of the bail-in theft in Cyprus is the Eurogroup, which is not a legal entity and can't be sued.

The Supreme Court in Cyprus dodged the issue by declaring it was not competent to rule and the bail-in was a private matter between depositors and the contractual obligations of banks, referring all cases to district courts. At the end of the bank chain of responsibility is the ECB, the executor of the Theft, so this could become interesting. Lawyers representing the depositors are quite prepared to go all the way.

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Interesting news.

The French government is planning to do the same with the 21 billion euro held in self employed pension schemes. Draft legislation has been published.

http://www.lefigaro.fr/retraite/2013/09/06/05004-20130906ARTFIG00558-l-etat-lorgne-les-21milliards-des-liberaux.php

Thankfully the massively indebted british government will never do this.

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Interesting news.

The French government is planning to do the same with the 21 billion euro held in self employed pension schemes. Draft legislation has been published.

http://www.lefigaro.fr/retraite/2013/09/06/05004-20130906ARTFIG00558-l-etat-lorgne-les-21milliards-des-liberaux.php

...not only do these socialists drink champagne ..they commit theft to fund it.....so much for the Euro....and will this move become a Euro finance law....?... :rolleyes:

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The whole issue of 'bail-in' is very fraught in legal terms.

The several thousand lawsuits in progress, as a result of the Cyprus bail in, are all being brought under Theft Of Property. Rights to property are enshrined in law and the act of Theft is clear. But the issue is certainly fuzzied by state or EU decrees. The instigator of the bail-in theft in Cyprus is the Eurogroup, which is not a legal entity and can't be sued.

The Supreme Court in Cyprus dodged the issue by declaring it was not competent to rule and the bail-in was a private matter between depositors and the contractual obligations of banks, referring all cases to district courts. At the end of the bank chain of responsibility is the ECB, the executor of the Theft, so this could become interesting. Lawyers representing the depositors are quite prepared to go all the way.

Theft is always theft, no matter who is doing it. It isn't complicated, but some how, state propaganda manages to make people think otherwise. Crazy, I know!

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As of this year, employers must enrol staff on to a private pension scheme. Only if the employee actively opts out, can they avoid paying into the never never pot.

Even if only 10% of workers remain in the scheme ( anecdotal evidence suggests up to 70% retention), that will fatten the schemes nicely. I reckon they'll be the first raided after the 2015 GE.

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As of this year, employers must enrol staff on to a private pension scheme. Only if the employee actively opts out, can they avoid paying into the never never pot.

Even if only 10% of workers remain in the scheme ( anecdotal evidence suggests up to 70% retention), that will fatten the schemes nicely. I reckon they'll be the first raided after the 2015 GE.

If they dared to raid mine you'll probabily see me on the news! I'd get one of the b*****ds. I'd certainly get a decent standard of living in my old age in prison.

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Thankfully the massively indebted british government will never do this.

Yes, unless you have your savings out of their system they will take them from you eventually. Look at the damage low interest rates have done.

If they dared to raid mine you'll probably see me on the news! I'd get one of the b*****ds.

They have been doing this for years and nobody has done anything. Bit by bit, pound by pound they will take everything from you. You cannot lose if you don't play their game.

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As of this year, employers must enrol staff on to a private pension scheme. Only if the employee actively opts out, can they avoid paying into the never never pot.

Even if only 10% of workers remain in the scheme ( anecdotal evidence suggests up to 70% retention), that will fatten the schemes nicely. I reckon they'll be the first raided after the 2015 GE.

That is very easily done by waiting until they take the first contribution, then signing and sending back a slip of paper, they then count you out and send back your first contribution? Anyone with any sense will be doing this. Although having said that, a pension that I started about 15 years ago has always seemed to perform well and have increased in value every time they send a statement. It is paid up, I don`t contribute to it any more. Doesn`t matter how big it grows if they can dip in though?

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In business planning P.E.S.T / P.E.S.T.L.E. (Political, Economic. Social, Technological / Legal, Environmental) is used to assess outside influences on business.

The P (Political) is surely the most invasive, perverse and the most certain to come and bite you. You simply can no longer have any faith in governments to play fair. This in itself is crippling to any nation. The problem the self-serving politicians that rise to the top. The more desperate they become they more they will betray you.

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That is very easily done by waiting until they take the first contribution, then signing and sending back a slip of paper, they then count you out and send back your first contribution? Anyone with any sense will be doing this. Although having said that, a pension that I started about 15 years ago has always seemed to perform well and have increased in value every time they send a statement. It is paid up, I don`t contribute to it any more. Doesn`t matter how big it grows if they can dip in though?

Opting out is as easy as you've described. The scheme is about 6 months old now, and has not been fully rolled out. However, the feedback I've had through HR & finance departments is that up to 70% of people have stayed within the scheme. It puts a net cost of 2.25% on to a company's payroll. A lot of businesses budgeted on most people opting out. With current levels of uptake, I expect a lot of 0% pay awards this year where firms would have paid 2-2.5%.

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Yes, unless you have your savings out of their system they will take them from you eventually. Look at the damage low interest rates have done.

They have been doing this for years and nobody has done anything. Bit by bit, pound by pound they will take everything from you. You cannot lose if you don't play their game.

People seem under the impression they can't take your house.

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People seem under the impression they can't take your house.

Well, they've already taken everyone's future (potential earnings as collateral) and borrowed against that, so I'd suggest they can take what they like.

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