Individual Retirement Account (IKZE) is one of the tools that allows Poles to effectively save for retirement while taking advantage of attractive tax relief. In the face of demographic challenges and low retirement benefits from the state system ZUS, it is worth considering whether the Individual Retirement Account is a solution for you. It is a product from the same category as the Private Pension Account (IKE), but there are many differences between them.
Table of contents
- What is an Individual Retirement Account?
- How does an Individual Retirement Account work?
- How much can we recover from payments to an Individual Retirement Account?
- Who is an Individual Retirement Account a good solution for?
- What are the conditions for withdrawals from an Individual Retirement Account?
- What happens if an Individual Retirement Account is closed early?
- What are the biggest advantages of an Individual Retirement Account?
- Are there any disadvantages of an Individual Retirement Account?
- Summary of information about an Individual Retirement Account
Only one saver can save on an Individual Retirement Account. This means that the Act does not provide for maintaining a joint Individual Retirement Account, e.g., for spouses.
An Individual Retirement Account can be set up regardless of whether you already have a Private Pension Account or whether you are a participant in a PPK – the employee pension program.
In this article, we will discuss in detail how an Individual Retirement Account works, what its advantages are, what the conditions for deposits and withdrawals are, and who particularly benefits from setting up this account.
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What is an Individual Retirement Account?
The Individual Retirement Account (IKZE) is a form of voluntary saving within the so-called third pillar of the pension system in Poland. It was introduced in 2012 as a supplement to the existing Private Pension Account (IKE).
The main goal of the Individual Retirement Account is to enable citizens to save for an additional pension while simultaneously taking advantage of tax relief during saving. The Individual Retirement Account is regulated by the Act on Individual Retirement Accounts and Individual Retirement Security Accounts, which ensures clear rules for its operation and protection of funds accumulated in the account.
How does an Individual Retirement Account work?
- Contributions to the Individual Retirement Account
You can deposit funds into the Individual Retirement Account up to a specified annual limit. This limit is set every year and depends on the average salary in the national economy. For people running a business, the limit is higher. In 2024, the deposit limits are:
- For individuals: PLN 9,388.80
- For people running a business: PLN 14,083.20
Deposits to the Individual Retirement Account can be made flexibly — there is no obligation to make regular deposits, which makes it accessible to people with irregular income.
- Tax relief
One of the greatest advantages of the Individual Retirement Account is the possibility of deducting deposits from the tax base in the annual PIT return. Thanks to this, savers can recover part of the deposited funds in the form of a tax refund. The amount of the refund depends on the saver’s income and the tax threshold they enter.
How much can we recover from deposits to the Individual Retirement Account?
| Annual Income | Tax Rate | Tax Refund |
| Below 120,000 | 12% | PLN 1,126.66 |
| Above 120,000 | 32% | PLN 3,004.42 |
For people conducting non-agricultural business activities with a maximum contribution of PLN 14,083.20 for 2024 to the Individual Retirement Account, the tax refund is:
| Annual Income | Tax Rate | Tax Refund |
| Below 120,000 | 12% | PLN 1,689.98 |
| Above 120,000 | 32% | PLN 4,506.62 |
| Flat tax | 19% | PLN 2,675.80 |
- Investing funds
The funds accumulated in the Individual Retirement Account can be invested in various financial instruments, such as:
- Bank deposits
- Investment funds
- Treasury bonds
- Shares
- Insurance capital funds
Thanks to this, savers have the opportunity to multiply their funds, which in the long term can significantly increase their retirement capital.
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Who is an Individual Retirement Account a good solution for?
The Individual Retirement Account can be an attractive saving tool for various groups of people, but it is particularly profitable for:
- People with higher incomes
Thanks to the higher tax threshold (32%), savers can obtain greater benefits from deducting contributions from the tax base. - Self-employed people
A higher contribution limit for entrepreneurs means that people running a business can invest more while reducing their tax liabilities. - Young people starting their careers
Thanks to the long savings horizon, young people can take advantage of the compound interest effect, which will significantly increase the value of their accumulated capital in the future. - People planning to retire early
The Individual Retirement Account can be a great way to secure an additional source of income after ending professional activity.
What are the conditions for withdrawals from an Individual Retirement Account?
Funds accumulated in the Individual Retirement Account can be withdrawn in the following cases:
- Withdrawal for retirement
According to the regulations, to benefit from preferential tax conditions, funds should be withdrawn after the saver reaches: - Age 65
- Having regularly made deposits to the account in at least 5 different calendar years
In such cases, the withdrawal is taxed at a flat income tax rate of 10%, which is more favourable than the standard tax brackets.
- Withdrawal before reaching retirement age
You can withdraw funds from the Individual Retirement Account before reaching the age of 65, but then the entire withdrawal amount will be added to your income in the given tax year and taxed according to the applicable tax brackets (12% or 32%).
What happens if the Individual Retirement Account is closed early?
If you decide to close your Individual Retirement Account before you reach retirement age, the consequences can be severe:
- Loss of tax relief: All previous tax benefits (deductions) will be lost. This means you will have to pay tax on contributions deducted in previous years.
- Taxation of funds: The amount withdrawn will be treated as your current income, which may increase your tax rate for that year.
Therefore, closing the account early should be a last resort, as it means losing the main benefits of the Individual Retirement Account.
What are the biggest advantages of an Individual Retirement Account?
The Individual Retirement Account offers many benefits that make it one of the most attractive ways to save for retirement in Poland. Here are the most important ones:
- Tax relief
Deducting payments from the tax base allows for an ongoing reduction in liabilities to the tax office, which is especially beneficial for people with higher incomes. - Flexibility of payments
The lack of obligation to make regular payments makes the Individual Retirement Account available to people with various financial possibilities. - Simple tax structure
A flat-rate tax of 10% on withdrawals after the age of 65 is a beneficial solution compared to standard tax rates. - Possibility to invest funds
Savers have great freedom in choosing financial instruments, which allows them to adjust their investment strategy to their own needs and preferences. - Inheritance of funds
The funds accumulated in the Individual Retirement Account are heritable, which means that in the event of the death of the account holder, they will go to their loved ones.
Are there any disadvantages of the Individual Retirement Account?
Although the Individual Retirement Account has many advantages, it is also worth remembering some potential limitations:
- Deposit limit – The maximum amount that can be deposited may be insufficient for people who would like to save more.
- Tax on withdrawal – Despite the preferential rate of 10%, withdrawal of funds is associated with taxation, which does not occur, for example, in the case of inheriting funds from an Individual Retirement Account (IKE).
More information about the Individual Retirement Account can be found on the official government website at https://www.gov.pl/web/rodzina/ikze-indywidualne-konto-zabezpieczenia-emerytalnego
Summary of information about the Individual Retirement Account
The Individual Retirement Account is an excellent solution for people who want to take care of their financial future while taking advantage of tax relief today. The flexibility of deposits, the possibility of investing, and preferential tax conditions for withdrawals make it an attractive saving tool for a wide range of people.
However, before you decide to open an Individual Retirement Account, it is worth carefully analysing your financial situation, needs, and possibilities. It may turn out that opening an Individual Retirement Account (IKE) may be a better solution in your situation. There is also nothing to prevent you from having both of these accounts under the third pillar of the pension system.
Properly planned savings with the Individual Retirement Account can bring tangible benefits because you can receive a tax refund and at the same time ensure a peaceful retirement.
We encourage you to visit our website regularly and expand your knowledge.
