The Demographic Reserve Fund

The Demographic Reserve Fund (Fundusz Rezerwy Demograficznej, FRD) was established in 2002 by virtue of the Act of 13 October 1998 on the social insurance system and is a reserve fund for the old-age pension fund separated from FUS. It has a legal personality and the Social Insurance Institution is the administrator of its resources.

The Council of Ministers or – up to the amount specified in FUS financial plan – the Management Board of the Social Insurance Institution may decide on releasing FRD resources. In such a case, the Council of Ministers shall order the use of FRD funds to provide for the payment of benefits financed from the pension fund or for an interest-free loan for the realisation of an additional annual cash benefit for pensioners and the costs of servicing the payment of this benefit.

The revenue of the FRD consists of:

• part of the old-age pension contribution,
• resources from the privatisation of the State Treasury property,
• amounts due to interest on ZUS bank accounts on funds obtained from enforcement, in respect of which the director of the ZUS branch is the enforcement authority in the event of concurrent enforcement,
• profits from investments,
• interest on deposits which do not constitute FUS and ZUS revenue,
• revenue from other sources.

The Social Insurance Institution invests FRD resources in specific financial instruments to ensure that they are as safe and profitable as possible.

The structure as at 31 December 2023 was defined according to the catalogue of financial instruments listed in the Regulation on investments of the Demographic Reserve Fund and does not include the cash remaining in the bank account in the amount of PLN 620.27 thousand nor the receivables from the loan to the Solidarity Fund, which as at 31 December 2023 amounted to PLN 16,504,268 thousand.

Taking into account the main objective of the FRD investment policy, i.e. maximum security combined with the profitability of the invested funds, the FRD portfolio in 2023 was dominated by treasury securities. The average annual share of debt instruments in the Fund’s total assets over the period was 83.39%. The management of funds in the debt part of the FRD portfolio was carried out taking into account the current situation in the debt markets. The earned rate of return in 2023 in this part of the portfolio was 5.52%.

Taking into account the main objective of the FRD investment policy, i.e. maximum security combined with the profitability of the invested funds, the FRD portfolio in 2023 was dominated by Treasury securities. The average annual share of debt instruments in the Fund’s total assets over the period was 83.39%. The management of funds in the debt part of the FRD portfolio was carried out taking into account the current situation in the debt markets. The earned rate of return in 2023 in this part of the portfolio was 5.52%.

For the equity part, the rate of return was 32.64% with an average annual exposure of the Fund’s assets to equities of 12.79%.

The earned rate of return on the Fund’s total assets in 2023 was 9.18%. The result on the total assets under management of the FRD in 2023 amounted to PLN 3,878,589 thousand.

In the period from 2009 to the end of 2023, an account of FRD was credited with a total of PLN 21.56 billion in respect of the State Treasury assets privatisation. Out of this amount, the FRD transferred PLN 19.39 billion to the old-age pension fund account between 2010 and 2014. Moreover, in 2019, FRD paid back a part of the funds paid under privatisation of State Treasury property in the amount of PLN 427 thousand, in accordance with the letter of the Ministry of Entrepreneurship and Technology.

As at 31 December 2023, the value of FRD funds amounted to PLN 47,472,257 thousand.