PPK and a bank deposit – comparison of the effects of long-term savings

Is investing in PPK profitable? Is it better to choose a safe deposit? By keeping money in the bank, due to inflation and low interest rates, we are making a real loss. Last year shows that even in times of market turmoil, systematic investment of funds can bring profit. The longer the investment period, the greater the chance of multiplying your money.

Employee Capital Plans (PPK) are a new way to accumulate additional savings. The aim of the PPK is to build a financial cushion for the fall of life – the point is that the money set aside in the PPK will be support after the end of the professional career of a given person. Of course, PPK participants can withdraw money from their individual account at any time, but it is more profitable to save and invest in the long term.

Regular investing and deposit – what gives better results?

The past 2020 was a test for PPK. Participants’ money is being invested, and last year there were powerful turmoil in the financial markets that could scare some people. The PPK, however, passed the test and managed to multiply the capital – in 2020, all funds of the defined date generated a positive rate of return.

In PPK, payments are invested regularly, every month. This means that the total rate of return on investment of a given PPK participant may be different than the fund’s result calculated from the beginning of the year. How is this possible? In PPK, each payment is invested at a different time and generates a different result – the rate of return of the entire investment is the result of the “work” of individual contributions. On the other hand, the fund’s rate of return for a given year is calculated as a change in the unit’s valuation at the end of the year compared to the end of the previous year – as a result, it does not take into account the different moments of investment of individual contributions in the PPK.

PPK, Salon24

So how much could PPK participants in Nationale-Nederlanden PTE 2020 actually earn? With payments made regularly in 2020, the rates of return range between 4.9% and 16.0% (Table 2). In our simulation1 the highest profit was achieved by investors who regularly transferred funds to funds with a relatively higher share of shares (funds with dates 2045, 2050 and 2055). As for the 2025 fund, the money paid to the PPK increased by + 4.9% in 2020. That’s less than the year-to-date rate of return – why? The 2025 Fund focuses mainly on debt securities – as a result, its unit valuation fluctuates less. In the past year, lower fluctuations mean lower declines during the stock market low, but also a lower rate of return during the stock market rebound, and, as a result, a lower rate of return on the entire investment.

Last year and the divergences between funds clearly show that systematic investment in the capital market, especially in equities, helps to multiply capital. The regularity of withdrawing and investing payments means that we buy securities at different prices. Simply put, on the one hand, we limit the risk of investing a large part of funds “on the hill” (it is harder to earn on them, and easier to lose), and on the other hand, we can take advantage of the emerging market “discounts” (here it is easier to earn). Such a strategy turned out to be good in turbulent 2020.

Let’s also compare the PPK to bank deposits. By keeping money “in the sock” we do not risk that its value will fluctuate over time (especially during turmoil on capital markets). However, in view of historically low interest rates, deposits practically do not generate profit for savers, and in real terms they even bring losses – savings are simply eaten up by inflation, which cannot be “made up” because money does not work.

Long-term investments bring results

And how do PPK fall out in the long run? Although the funds operate for a little over a year, we can use a certain simulation2which will show how much could the participants of the PPK in the Nationale-Nederlanden PTE could earn if the PPK had been launched 20 years ago.

The sum of the payments made is just over 28 thousand. PLN. This is what could have been saved if we decided to put aside 3.5% of the average gross salary (putting aside without interest). If that amount were to be invested then the current value of the capital would be over 45 thousand PLN, which gives a rate of return of + 61.8% (diagram 1).


This simple simulation is actually an answer to the question of what effects can investing in the long term. If we decided to put aside funds in a deposit or savings account, the generated interest could perhaps compensate for the impact of inflation. Investing that amount would pay you 61.8%.

1 We assume that every month, PLN 184 goes to the individual funds of Nationale-Nederlanden DFE Nasz Tomro (our contributions are charged on the basis of the average salary in 2020, i.e. PLN 5227 gross). The first payment was made on January 15, 2020, and the next ones at the end of the following months (February-November). The rate of return relates to the valuation as of 31/12/2020.

2 We assumed that every month the amount corresponding to 3.5% of the average gross remuneration (as in the PPK) was invested in accordance with the assumptions of the Nationale-Nederlanden DFE 2040 fund. calculate how much you could have hypothetically earned in the past 20 years.

Author: Katarzyna Czupa, Nationale-Nederlanden PTE

Source: Salon24.pl: Strona główna by www.salon24.pl.

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