The Demographic Reserve Fund - ZUS
The Demographic Reserve Fund
The Demographic Reserve Fund
22 June 2023
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 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 take a decision on releasing FRD resources. In such a case the Council of Ministers orders the use of FRD resources to ensure the payment of benefits financed from the old-age pension fund.
The revenues of the FRD consist 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 2021 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 3.9 thousand.The sharp increase in yields on the debt market in the fourth quarter of 2021, caused by the interest rates increase by the Monetary Policy Council, coupled with the significant share of debt instruments in the Demographic Reserve Fund’s portfolio, translated into a negative return on total Fund’s assets of -3.53% at the end of the year.
In the debt part of the portfolio, the rate of return was -5.80% and the average year-end exposure to fixed-income instruments accounted for 90.62% of the Demographic Reserve Fund's total assets under management.
The equities held in the Fund’s portfolio generated a return of 26.78%. In comparison, the WIG index rose by 21.52% and the WIG20 index by 14.26% over the same period. The average annual share of equities in the Fund's portfolio was 8.13%.
In the period from2009 to the end of 2021 an account of FRD was credited with a total of PLN 20.97 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 by virtue of privatisation of State Treasury property in the amount of PLN 427 thousand, in accordance with the letter of the Ministry of Entrepreneurship and Technology.