The Demographic Reserve Fund
3 listopada 2016
The Demographic Reserve Fund (Fundusz Rezerwy Demograficznej, FRD) has the status of a special purpose state fund. It was established by the Act of 13 October 1998 on the social insurance system, to better secure the solvency of the old-age pension benefits.
The Demographic Reserve Fund plays the role of a contingency fund for the old-age pension fund separated from the Social Insurance Fund.
The Demographic Reserve Fund has its own legal status as an entity. The Social Insurance Institution is a FRD administrator, and any decision on making FRD funds available may be taken solely by the Council of Ministers and – since 1 February 2014 – up to the amount detrmined in FUS financial plan – also by the ZUS Management Board. The Council of Ministers can order to use FRD resocurces to guarantee the payment of benefits financed from old-age fund.
The FRD is formed from:
a part of old-age pension contributions,
from monies derived from the privatization of State Treasury assets and properties,
from profit derived from investments,
from the interest earned on deposit accounts run by ZUS, which are not the incomes of FUS and ZUS,
from other sources.
To maximise the security and rate of return of its resources, the Demographic Reserve Fund invests them in certain financial instruments, i.e. in government bonds – 78.87%, shares – 13.48% (as on 31 December 2016) as well as public companies bonds and deposit accounts.
According to the adopted investment policy in 2016, the majority of FRD consisted of government securities. The rate of return equaled 1.32%.
The resulting rate of return was higher than adopted for this part of the assets of the benchmark (i.e. the annual inflation rate calculated for December 2014 / December 2015, which equaled – 0.5%) by 2.56%. The achieved result translated into taking 2nd place out of 12 debt funds of Polish securities.
The rate of return of all funds managed by FRD in 2016 amounted to 2.65%.
The funds collected in FRD may be used only to:
cover the deficit of the FUS old-age pension fund for demographic reasons,
grant a no-interest loan to complement the FUS old-age pension fund for the purpose of current payments, to ensure the liquidity of the Social Insurance Fund; the loan should be repaid within 6 months from the day of its receipt.
In the period from 2009 to the end of 2016 the FRD account was credited with a total of PLN 20.25 billion in respect of the State Treasury assets from privatisation. From 2010 to 2014 the Demographic Reserve Fund transferred to the old-age pension fund account a total amount of PLN 19.39 billion to cover the deficit related to demographic reasons.
In 2016, the FRD did not transfer any funds to FUS to the old-age pension fund.
At the end of 2016, the total assets managed by the Demographic Reserve Fund amounted to PLN 27.76 billion only thanks to a considerable inflow of resources from privati sati on and investments.
(Note: 1 EUR = ca 4.26 PLN)