OKI is an interesting product, but it needs some work

The Personal Investment Account (OKI), or OKI for short , is a savings and investment product announced by the Ministry of Finance. It aims to enable investors to invest up to PLN 100,000 without having to pay the 19% capital gains tax, known as the Belka tax . Is OKI a good idea? We posed this question to market experts during a debate we organized in front of the Ministry of Finance building in Warsaw. The debate was moderated by Cezary Szymanek, deputy editor-in-chief of "Rzeczpospolita" and editor-in-chief of the Stock Exchange and Investors Gazette "Parkiet," and Przemysław Tychmanowicz, deputy editor-in-chief of "Parkiet."

What is OKI for?

"As usual, the devil is in the details. However, it's important that we're even discussing support for investing in Poland," said Tomasz Korab, president of Eques Investment TFI. In his opinion, investing in Poland doesn't need any extraordinary reduction in the Belka tax. "It's a tax on profits, and its rate isn't excessively high. Back when Poland was a poor country, we needed capital accumulation, and then tax exemption made sense. Today, this capital is already there, and the state needs taxes. So, if we're going to introduce tax preferences, we should do it in a way that benefits the economy. And the OKI (Office of Internal Audit) offers the opportunity for funds to flow into investments, the stock market, bonds, and corporate bonds," says Korab.

Cezary Szymanek asked if he would establish an OKI. "I'll decide when I learn the final shape of this solution. What I know today would encourage me to establish an OKI," replied the president of Eques Investment TFI.

"I will definitely set up an OKI," declared Grzegorz Chłopek, president of Michael/Ström TFI. He quickly added, however, that unfortunately, for most people, OKI will be a rather expensive product, due to the structure of their savings. "We hope this product will shift savings towards pro-development, as it is tailored to this type of investment. The question is whether people are ready to take on greater investment risk. Let's hope so," said the president of Michael/Ström TFI.

Kamil Stolarski, head of the stock market analysis team at Santander BM, also declared the establishment of the OKI. "The fact that today's savings structure is dominated by banks and deposits, but also by real estate, has a significant impact on the economy. Banks won't finance some of the investments in our economy. A bank will lend to a business that's already operating. It looks at history, how much we've done, what we've achieved, and only then does it provide financing. The capital market, on the other hand, looks to the future; it's not interested in what happened two or three months ago. This allows it to finance projects that involve risk and may fail, but are innovative and modern," said Kamil Stolarski.

He pointed out that one of the key elements of the OKI project is to use tax incentives to shift some savings from deposits or real estate to the capital market. He believes these incentives could be further improved. "This will be good for me, because of course I will also establish an OKI, but also for the economy. We will invest in more innovative projects that potentially offer higher rates of return. This will prevent Poland from stagnating like Germany, but will allow it to continue catching up with wealthier countries," said the Santander BM analyst.

Michał Piątkowski, an investment advisor at Ipopema Securities, also announced the establishment of an OKI (Open Accounts). He also announced that he would encourage his loved ones to do the same. He believes that most people who are active in the stock market and already investing will allocate at least some of their funds to the new product, because under these circumstances, it can simply be profitable. This includes larger amounts, exceeding PLN 100,000. "However, I doubt this will fundamentally change Poles' approach to investing," said Michał Piątkowski. "We already have good solutions: IKE (Independent Pension Accounts) and IKZE (Independent Savings and Pensions), which after a dozen or so years of operation have one million and 600,000 participants, respectively, although they offer greater savings than an OKI can provide," he explained.

In his opinion, OKIs have the advantage that funds deposited in them are accessible at any time, rather than being invested long-term, as is the case with IKE and IKZE. This could increase the popularity of this solution, although, as he emphasized, another crucial element is necessary for its success. "Without proper and widespread financial education for Poles, OKIs may not generate the level of interest the Ministry of Finance hopes for," predicted an investment advisor at Ipopema Securities.

"Currently, we have better products than OKI. First and foremost, these are PPK and PPE, and we should use them if we're eligible. Next come IKE and IKZE. Only after that comes OKI," said Grzegorz Chłopek.

What can be improved at OKI?

During the debate, Grzegorz Chłopek also calculated that to effectively utilize the instruments currently available, assuming we save 10% of our salary, we would need to deposit PLN 38,000 in a given year. And only then should we use the OKI.

"The advantage of OKI is that you can access your savings at any time. It's a lifeline that every person who manages their finances and savings rationally should have," argued Michael/Ström TFI CEO. "The problem is that most people can't afford to first deposit PLN 38,000 into a PPK or PPE, IKE, and IKZE. Therefore, OKI will be a product for the wealthy," reiterated Grzegorz Chłopek. He argued that solutions should be sought that will encourage less affluent and less educated individuals to invest. "We need to engage a mass of investors," he explained.

Additionally, OKI is a product that promotes higher rates of return than those on government bonds. It is designed, at least for now, to lower taxes when rates of return are higher and consistent.

"This product will be attractive to many people with savings of up to PLN 100,000. They can start investing in the capital market this way, with a tax-free incentive. It serves as an educational opportunity and an incentive to enter the capital market. We need this," argued Tomasz Korab. He believes India is a good example in this regard, where over the past 4-5 years, the number of investment accounts has surpassed well over 120 million. "Of course, we know the scale of the situation there, but they have achieved several-fold growth thanks to the promotion of investing," pointed out the CEO of Eques Investment TFI.

He pointed out that although Poland is experiencing a bull market and the market is growing, it seems as if few people know about it, as inflows into the market are not impressive at all, even though it has been generating solid rates of return in recent years. "We have two economies, in a sense. We have state-owned companies pursuing various goals. And we have private companies, thanks to which we are one of the fastest-growing economies in the world. The problem is that it was impossible to invest in them. Years of growth caused these companies to grow, and now they have taken over the WIG20. There are more of them in the WIG20 than companies with a state shareholding," said Korab.

In his opinion, we are now at a turning point. "We need capital that will ensure we have many good companies that will want to go public. Therefore, we need to encourage investment so that there is capital for these companies on the stock exchange. The moment is right. Employee Capital Plans (PPK) are growing in strength, offering good rates of return, participation is increasing. The stock exchange is changing its structure, moving towards good, private companies. All of this has a chance to work out," argued the head of Eques Investment TFI. Asked what changes should be made to the OKI itself that could additionally support the market, Korab replied: "We don't really know what's in the OKI yet. If we were to wish, we would probably want the tax-free investment amount to be as high as possible. However, if we let our imaginations run wild, there will be no tax at all," Tomasz Korab pointed out. This is out of the question. Andrzej Domański, Minister of Finance and Economy , stipulated this in an interview with "Parkiet" and "Rzeczpospolita" (read more on pages 2 and 3). "So if we have those 100,000 PLN exempt from tax, the tax rate on the excess over this amount will be important, stated President Korab. Andrzej Domański allows for changes at the consultation stage.

"This tax is to be modeled after the Swedish solution, meaning the base is the yield on a short- or medium-term treasury bond. All of this is intended to yield more than a relatively safe treasury bond , in order to encourage riskier investments," Korab pointed out.

He also pointed out that people who are already retired often have significant savings and don't need to save for retirement. They may be interested in investing at least part of this capital with the help of OKI. This is capital that can be utilized.

Both heads of investment funds declared that if OKI appear, they will be included in the offer of their institutions.

OKI with 800+?

Kamil Stolarski proposed an interesting idea for supplementing the OKI account. "The 800+ benefit could be withdrawn from the OKI account," he proposed. He explained that money tied to children could thus work long-term for their future. This solution would ensure that the new product would reach millions of customers immediately and immediately significantly support the capital market. "Of course, parents could withdraw it, but many of them would probably try to keep the money in these accounts with their children's future in mind," argued the Santander BM analyst. "A slight degree of coercion would be advisable in this case. Even a parent who decided to withdraw money from the OKI account would keep it there for a while. This would build a culture of saving. And that's also very important," he added.

At least some of the debate participants also believed that tax exemptions for deposits of up to PLN 25,000 were not entirely necessary. "Our primary concern is that this tax-exempt money be channeled into the capital market," they said. "When considering changes, we need to consider what the most important goal of this product is. Is it to support the Polish economy and the Polish capital market, or to fulfill Belka's election promise and lower the tax. If the latter, we should increase the share of deposits," said Michał Piątkowski. In his opinion, however, this shouldn't be the primary goal. Supporting the stock market and the economy should be the goal. "So I would lower the share of deposits," said investment expert Ipopema Securities.

He argued that investing in investment funds should also be possible, which would be beneficial for less experienced investors. "Although our stock market is in a very strong bull market this year, we are seeing very large outflows from equity funds and very large inflows into bond funds, which primarily invest in short-term securities," said Michał Piątkowski. He also urged the OKI to seek a solution to this problem.

How to encourage OKI?

What could be the key argument in encouraging the public to join OKI? "If the goal is to attract new investors, then investment funds should be promoted," said Tomasz Korab. "And I'm not saying this because I represent funds," he added. He explained that the point is that not everyone has the time or inclination to actively invest on their own. For them, funds are a good solution. Their portfolios are built by professionals.

The head of Eques Investment TFI also argued that the problem of the Polish economy is the large share of real estate in savings.

"Among OECD countries, Poland ranks second from the top in terms of the share of real estate in household wealth. This is a significant threat. We don't see it because real estate prices are rising. But what will happen if they depreciate slightly? This will affect consumer sentiment. The entire economy will face a problem because the majority of Poland's GDP is consumption," said Korab.

"Are you a supporter of cadastral tax?" asked editor Szymanek at this point. "Absolutely. All properties except the first should be taxed," replied the head of Eques Investment TFI. "There's a lot of work to be done in real estate," he added.

According to Michał Piątkowski, the introduction of a cadastral tax would certainly help the stock exchange. "However, it's hard for me to imagine any government deciding to do this, because taxing profits is one thing, and taxing assets is another. For political reasons, it won't be possible," said the investment advisor at Ipopema Securities.

"The cadastre is an atomic bomb," said Grzegorz Chłopek. In his opinion, taxation of the real estate and capital markets should be equalized, so that the exemption after five years of investment applies to both. "This is absolutely necessary," Chłopek stated. He explained that people go where the rates of return are higher. That's why they go to the real estate market, especially as prices rise.

The CEO of Michael/Ström TFI cited calculations indicating that Poland had PLN 2.614 trillion in savings at the end of the first quarter. Eighty percent of this amount is in treasury bonds, cash, and deposits. "It's difficult to move this money to a riskier market. And today, we truly need solutions that will help with this," said Grzegorz Chłopek.

Kamil Stolarski pointed out that politics is about creating incentive systems. "That's probably a task for Minister Domański. He should be looking for analyses that will show whether the housing market requires more support, or whether the economy needs more innovation. Should we keep real estate unchanged forever, or should we shake things up? In my opinion, it's worth shaking things up," said the head of the stock market analysis team at Santander BM.

The topic of encouraging young people to invest in the stock market also came up. "The question is how to do this, since for most young people, Bitcoin is the investment. We really need to put on the table the question of what asset class we want to promote through OKI. And level the playing field in some respects," said President Chłopek.

List of demands

During the debate, experts also pointed out solutions that could be included in the draft law on the OKI.

"Perhaps the most important thing is to support this product with appropriate education. It has its advantages; the exemption up to PLN 100,000 is undoubtedly beneficial. Above that amount, it should also bring benefits to investors. The success of this product depends on whether this knowledge reaches a sufficient number of people, whether enough people understand it," began Michał Piątkowski. "It's meant to be a mass product that will also encourage new investors to the stock market. And without appropriate education, without an information campaign, this will be difficult. So, this is actually more important than the final shape of the product," he argued.

He explained that there are 21 million adult Poles and only a million IKE accounts, although they are very profitable. IKZE accounts have even fewer. And in his opinion, these are very well-designed products. "There is a persistent lack of awareness of the benefits they offer. And now the goal is to prevent this situation from repeating itself with OKI," said the Ipopema Securities expert.

He added that OKI could be promoted by engaging well-known individuals who would boast about owning such a product. Others went even further with their ideas.

"I would urge the Minister of Finance to pull the trigger. And link the 800+ program to the OKI," said Kamil Stolarski. "An additional incentive to use this product could be a complete tax exemption after the investment has been in place for three years. Or possibly five years," Stolarski added.

"I would eliminate deposits from this project. It's an investment solution. Banks are for savings, not investments," said Tomasz Korab. "As for the possibility of investing abroad, I would offer that option. It might not literally promote the Polish economy, but it promotes investing and portfolio diversification," he added.

In his opinion, work on the OKI is also the perfect time for a major investment campaign, showcasing the benefits not only of this new product but also of IKE and IKZE. What did Grzegorz Chłopek propose?

"I would define quite precisely what instruments should be used here. I would arrange it so that the majority of the funds would have to be invested in our country. I would also eliminate all speculative products, options, and contracts," said Chłopek.

And will OKI give the stock market a new lease of life? That remains to be seen. But let's not expect it to happen overnight, for people to line up for OKI, experts agreed. So, initially, the new product likely won't have a significant impact on the stock market. In the long run, this may begin to change.

Michał Piątkowski, investment advisor, Ipopema Securities

OKI needs to be supported by appropriate education. The success of this product depends on whether knowledge about it reaches a sufficient number of people and whether enough people understand it. Without appropriate education and information campaigns, it will be difficult to develop this into a mass product that will also attract new investors to the stock market.

Kamil Stolarski, Head of Stock Market Analysis Team, Santander BM

I would urge the Minister of Finance to tighten the lever even more and, for example, link the 800+ program to the OKI. An additional incentive for using this product could be a complete exemption from capital gains tax after the investment has been in place for three, or possibly five, years.

Tomasz Korab, president, Eques Investment TFI

I would eliminate deposits from the OKI project. It's an investment solution, and banks are for savings, not investments. As for the possibility of investing abroad, I would add that option. While this may not literally promote the Polish economy and capital market, it does promote investing and portfolio diversification.

Grzegorz Chłopek, president, Michael/Ström TFI

When discussing OKI, I would define quite precisely which instruments can be used within this product. I would also eliminate all speculative products that involve financial leverage. I would also structure it so that the majority of the funds are invested in our market.