Polish court says moving pension fund assets to state was legal

(Adds Tribunal's decision)

WARSAW, Nov 4 (Reuters) - Poland's Constitutional Tribunal ruled on Wednesday that a government shakeup of the pension system that transferred assets from private pension funds to the state did not violate the constitution.

The decision means that Poland will not face a significant rise in public debt, as some had feared, especially lawmakers in the Law and Justice (PiS) party which won a parliamentary election last month and is now forming a new government.

The pension reforms introduced by the previous centre-right government in 2014 shifted assets from the privately owned pension funds to the state balance sheet. The move reduced Polish public debt by about 8 percent of gross domestic product GDP, giving Warsaw greater scope to borrow and spend.

The transfer moved 153 billion zlotys ($39.34 billion) of bonds from the funds to the state-run Social Security Office (ZUS), effectively halving the value of assets managed by the private funds.

Former president Bronislaw Komorowski and former ombudsman Irena Lipowicz had asked the Tribunal to decide whether certain aspects of the reform were legal.

The Tribunal confirmed on Wednesday that most aspects of the reform were legal, including the asset transfer to ZUS and a ban on bond investments imposed on the private pension funds.

Poland's public debt stood at nearly 48 percent of GDP in 2014, according to local accounting rules. The country has a constitutional debt ceiling of 60 percent of GDP. Breaching it would trigger drastic budget cuts in subsequent years.

Before the 2014 overhaul, private funds held assets worth about one fifth of Polish economic output and were among the biggest investors on the Warsaw bourse.

Since the reform, the Warsaw Stock Exchange main index has lost around 10 percent.

Pension funds assets stood at 147.5 billion zlotys at the end of October, according to the Analizy Online investment fund performance tracker. ($1 = 3.8890 zlotys) (Reporting by Marcin Goclowski and Pawel Sobczak; additional reporting by Jakub Iglewski; editing by Gareth Jones)