(ProQuest: ... denotes formulae omitted.)IntroductionThe pension system in Poland was reformed at the end of the XX century. Due to this original reform, the defined benefit plan was replaced by the defined contribution one. The new pension system consisted of two mandatory pillars: Social Insurance Institution (SII), representing the pay-as-you-go system (PAYG) and open pension funds (OPF), representing fully founded system. The third voluntary founded pillar completed this system.The reform of the pension system was very profound but suffered from several shortcomings. The main problem has been the permanent shortage of funds to pay the pension benefits, what causes the increase of the budget deficit. The criticism of the pension system functioning resulted in the essential transformation of the system, concerning: (1) the distribution of the retirement contribution between the SII and the OPF, (2) the retirement age, and (3) the pension funds functioning, among others.The new law (which went into affect in February 2014) shifted 51.5% of the assets, held by the OPFs (about 150 billion PLN1) to the state-run PAYG pension system (i.e. to the SII), including all debt securities issued and guaranteed by the State Treasury. According to the new regulations, the second founded pillar became no longer obligatory. There was an automatic transfer of the retirement contributions to the SII, instead of the OPF, unless an individual OPF member files a declaration2 requesting his/her contributions to be transferred to the selected OPF. Now the contribution, which goes to a chosen private fund, is only 2.92 percent of the individual's income. In the original reform was 7.3%, i.e. the contribution collected by Social Insurance Institution was 1.7 of the contribution collected by pension funds. At present this proportion is 5.7 for the individuals who decided to transfer the part of their pension contribution to the OPF. Also all employees, in the age equals the official retirement age reduced by ten years and higher, must transfer all their pension contribution to the SII.Overhaul of the pension system also concerns changes in the OPFs' investment portfolio since private pension funds have no longer been allowed to invest in government bonds. That will leave the pension funds with most of their assets held in shares of the companies listed on the Warsaw Stock Exchange and give them an increasingly peripheral role in the future retirement benefits of Poles. However the pension funds operating in Poland became allowed to increase the share of foreign investments in their portfolios, what may cause the capital outflow from the Polish market. Further outflow of funds from OPFs or lack of inflow will result from the gradual transfer of each person's retirement funds managed by OPF to SII, which will start ten years before reaching retirement age3.The changes, which took place in the years 2011 and 2014, have been considered (by the government) necessary to lower Poland's budgetary deficit. Many specialists call these changes the significant step backward4, un-privatizing the pension system5 or even the most drastic nationalization of private assets since Soviet times6. However, Polish Prime Minister Donald Tusk claimed it is no more than a bookkeeping change in the way to handle the public's retirement money (Bilefsky, Zurawik, 2013).The new regulations, introduced in 2014, will lead to a change in the composition of assets' portfolios managed by OPFs not only due to the forced transfer of assets to SII but also due to new rules applicable to OPF investment activities. According to Polish Financial Supervision Authority7, shares of Treasury bonds and equity instruments in the OPFs' portfolios in 2013 were the biggest among all instruments and nearly equal i.e. 42% and 43%, respectively. At present pension funds are not allowed to invest in Treasury Bonds thus they will look for other instruments for investments, also abroad. …