POLAND - Poland's latest pensions product, the individual retirement account, IKE in Polish, was launched on September 1.

These voluntary accounts form part of the third pillar and are designed to boost the low wage replacement rate currently provided by the compulsory pay-as-you-go state system state system, and the mandatory second pillar system of open-ended capitalised funds launched in 1999.

Poland's existing third pillar scheme, the employee pensions programme or PPE, has not proved a success. Only 230 company schemes covering 100,000 people have been set up to date. Part of the reason for the low interest was legal: until April 2004, when the law was revised and relaxed, the schemes were rigid and difficult to close down, deterring most companies from even contemplating them.

Although they offer tax incentives on employer social security contributions, they are still not the ideal solution for making up the shortfall of the compulsory systems in wage replacement in the current weak Polish corporate climate, and of no relevance to the self-employed.

IKEs are the most versatile of Poland's pensions offerings to date. Under the law, passed by parliament in April 2004, they can be set up by banks, life insurance companies, investment funds and brokerages, and can be started by individuals as young as 16. Initial forecasts by the Ministry of Social Policy ranged for IKE take-up in the first year ranged from 1.7 million to 3.5 million, but according to a recent Pentor Institute survey, around two million Poles expect to establish an IKE.

Of those that had decided which financial institution to use, 32% were opting for banks, 18% for life insurance, 8% for investment funds and 4% for a brokerage. As of the beginning of September the insurance and investment fund companies were making most of the running, while brokerages, with a richer than average client base, showed the least interest.