Is PPK worth it?

On a PLN 8,000 gross salary, with contributions of 2% from you and 1.5% from your employer, PPK costs you PLN 174.40 a month, while PLN 280.00 goes into your PPK account, plus payments from the state. If you're 35 and the fund earns 7% a year, at 60 PPK will give you PLN 243,551, while the same PLN 174.40 a month paid into an IKE (a Polish individual retirement account) would give PLN 141,277. Taking the money out early (a “zwrot”) comes with deductions, but still gives more than the IKE: after 5 years you'd get PLN 16,931 instead of PLN 12,102. Below are the same numbers for three salaries, what withdrawing early costs and the situations in which opting out can make sense.

What does PPK cost you, and how much goes into your account?

PPK (Pracownicze Plany Kapitałowe, employee capital plans) is a workplace savings scheme in which your employer and the state add to your own contributions. The money goes into your account with a financial institution chosen by your employer and is invested in funds. Employers enrol employees aged 18 to 54 automatically; from 55 you can join on request.

Two contributions go in every month. Your basic contribution is 2% of your gross salary, and you can add up to 2% more voluntarily. If you earn no more than PLN 5,767.20, which is 120% of the minimum wage, you can lower your basic contribution to as little as 0.5%. Your employer pays at least 1.5% of your gross salary and can add up to 2.5% more.

The employer's contribution counts as your income: you pay PIT (income tax) on it, though no ZUS (social security) contributions. Your employer deducts that tax from your salary, so your take-home pay drops by your own contribution plus the PIT on the employer's. That sum is what PPK really costs you.

On top of that come the state's payments: a PLN 250 welcome payment (wpłata powitalna) after 3 full months of saving, and a PLN 240 annual payment (dopłata roczna) for every year in which your and your employer's contributions add up to at least PLN 1,009.26. With a lowered basic contribution, PLN 252.32 is enough.

This is a month in PPK on three gross salaries: the minimum wage with a lowered contribution, PLN 8,000 and PLN 15,000.

On a PLN 15,000 salary the PIT on the employer's contribution is 32%, so every PLN 100 of cost puts PLN 141 into PPK. On the minimum wage with a 0.5% contribution it's PLN 294, because the employer pays 1.5% of the salary however much you pay in.

PPK or the same money in an IKE?

To judge PPK fairly, we compare it with an IKE (indywidualne konto emerytalne, an individual retirement account) into which you pay, every month, exactly what PPK costs you: your contribution and the PIT on the employer's. The money earns the same in both, 7% a year, and after 60 you can take it out of either without tax on the gains. You start at 35 and withdraw at 60, 25 years later.

At 60, PPK gives you PLN 243,551 and the IKE PLN 141,277, PLN 102,275 less. The difference is the employer's contributions and the state's payments, with what they earned. With the assumed inflation of 3.5% a year, PLN 243,551 in 25 years is about PLN 103,058 in today's money.

This is how the comparison comes out on the three salaries from the table above:

Put another way: on a PLN 8,000 salary, PPK works as if your PLN 174.40 a month earned about 10.3% a year instead of the IKE's 7%. That's the rate at which your own money, paid in every month, would grow to the same amount as in PPK. You can check it in the compound interest calculator.

After 60 you get 25% of the money at once and 75% in at least 120 monthly installments — tax-free. If you choose fewer installments, you pay capital gains tax. The money waiting for later installments stays invested, and the calculator compares the value of PPK on the day of the withdrawal.

What's left if you withdraw early?

You can take your money out of PPK at any time before 60. Such a withdrawal is called a zwrot (literally “a refund”), and it comes with three deductions:

• 30% of the money from your employer's contributions goes to ZUS and is recorded on your social security account as a pension contribution, but you don't get it in hand.
• The state's payments, the welcome payment and the annual ones, are returned.
• You pay 19% tax on the gains on the rest — the podatek Belki (Poland's capital gains tax).

The money from a zwrot is paid out within the time set in the fund's rules. We worked out a zwrot in the same scenario after 5, 10, and 20 years of saving. Next to it is an IKE with the same monthly cost — before 60 you also pay 19% on its gains.

At each of these dates a zwrot gives more than the IKE, even without counting the money that goes to ZUS. The calculator assumes a steady 7% a year, and fund values go up and down. If the fund earned nothing for 5 years, a zwrot would give PLN 14,640, PLN 4,176 more than PPK cost you (PLN 10,464).

Before 60 you can also take money out tax-free in two cases:

• up to 100% as the down payment on a mortgage for a flat or house, if you're not yet 45. You must pay it back, starting no later than 5 years after the withdrawal and finishing within 15 years;
• up to 25% in case of a serious illness — yours, your spouse's or your child's — with no need to pay it back.

What are the fees, and what does PPK invest in?

Your PPK money goes into a target-date fund (fundusz zdefiniowanej daty) matched to your year of birth. Such a fund adjusts its risk to your age: the closer you get to 60, the more cautiously it invests. The returns of all target-date funds are published on mojeppk.pl.

The institution running PPK can charge at most 0.5% of the assets a year for management. On top of that it can take up to 0.1% a year as a success fee, but only for a year in which the fund made a gain, beat its benchmark and reached at least 75% of the best return among funds of the same date.

The calculator doesn't deduct fees. If fees took the full 0.6 percentage points of the return every year and the IKE cost nothing, PPK would give PLN 221,659 at 60 — still PLN 80,382 more than the IKE (PLN 141,277).

The money in PPK is your private property and can be inherited. You can check your balance on the financial institution's website, and all your PPK accounts in the PPK service (Serwis PPK) on mojeppk.pl, logging in through login.gov.pl.

How do you opt out, and what is re-enrolment?

You can opt out of PPK at any time. You give your employer a written declaration that you no longer want PPK contributions made (deklaracja o rezygnacji z dokonywania wpłat do PPK). The contributions stop from the month you submit it, and any already deducted that month are returned to you. You give up the employer's contributions and the state's payments — in our example PLN 120.00 a month from your employer and PLN 240 a year from the state.

Opting out only stops new contributions. The money collected so far stays in your account: you can leave it until 60 or take it out as a zwrot, with the deductions described above. You can rejoin whenever you like by giving your employer a request to restart the contributions (wniosek o dokonywanie wpłat do PPK).

Opting out isn't open-ended, though. Every 4 years, from April 1, employers restart the contributions for everyone who opted out, and must tell them by the end of February that year. Employers last did this on April 1, 2023 and will next do it on April 1, 2027. If you still don't want to save in PPK, you submit the declaration again. If you turn 55 before the restart date, the contributions only restart if you ask by the end of February.

When can opting out of PPK make sense?

Opting out is your decision, and you may have reasons the calculator can't see. If you want to opt out to invest the same money yourself, compare that with the numbers above. In our example an IKE with the same monthly cost gives less than PPK — both at 60 and on a zwrot after 5, 10, and 20 years. There are, however, two situations that can be set against these numbers.

You're short of money for everyday spending. PPK cuts your take-home pay by PLN 174.40 a month. If that means you don't make it to payday, you live on your overdraft or you have no savings at all for emergencies, the money may matter more to you now than after 60. A zwrot is possible at any time, but not instantly, it comes with deductions, and on the day you withdraw the fund may happen to be down. If you earn no more than PLN 5,767.20, instead of opting out you can lower your contribution to 0.5% — your employer still pays at least 1.5%.

You're paying off expensive debt. Every złoty you put towards a debt saves you its interest, with no risk at all. In our example a zwrot after 5 years gives as much as you would save by putting the same PLN 174.40 a month towards a debt at about 18.3% a year. For a zwrot after 10 years the break-even rate is 11.9%, and after 20 years 8.8%. If your debt's interest rate is higher, repaying it faster gives more than PPK in this calculation. If it's lower, PPK gives more, even if you take the money out before 60. This is a simplification: it assumes the debt would last the whole time and the fund would earn 7% a year, and it leaves out the money that goes to ZUS on a zwrot. Once the debt is paid off, you can rejoin PPK at any time.

How an IKE compares with an IKZE, and when it makes sense to have both, is explained in our guide IKE or IKZE.