WARSAW - A growing number of Polish firms are preparing share buybacks because they fear the government plans to plunder stocks from privately run pension funds to plug holes in the state budget, company chiefs and fund managers say.

The conservative government has said until now that it has no such plans but the leader of the governing Law and Justice (PiS) on Saturday signalled new plans for the assets held by the funds , known as OFEs.

"There's a proposal which regards the question about what is to be done with the money parked in OFEs," Jaroslaw Kaczynski told a party convention.

"The money, which as a matter of fact is losing its value and which could be a basis for new, important ventures, could build the power of our economic policy and support millions of Polish households. We need to do this, and such proposals are already here."

Kaczynski gave no details, but the looming changes are a concern for companies in which pension funds hold big stakes. They fear a loss of control of dividends and finances and that a raid on the funds would increase the state role in the economy.

A seizure of stocks from pension funds could also drain the Warsaw bourse of liquidity as the funds , largely owned by foreign players such as Nationale Nederlanden, Aviva, AXA and MetLife, invest taxpayers' savings heavily on the exchange.

The concerns have prompted at least seven medium-sized companies to draw up plans to buy back their own shares or to seek ways to reduce dependence on OFEs, fund managers, company executives and investment bankers told Reuters.

They said it was not clear exactly how the government might seize shares from pension funds but that 100 billion zlotys ($25.29 billion) worth of stocks could be at stake.

One of the companies making preparations for a share buyback is Robyg, a residential developer whose shareholders have given the green light for a share buyback.

"This is not a measure meant to distribute profits to our shareholders," Artur Ceglarz, chief financial officer of Robyg, told Reuters before Kazynski's comments. "It's meant to be defensive in the case of potential changes to the capital market and pension funds ."

The company, the second biggest by market capitalisation in its market in Poland, builds middle-tier housing, mostly in Warsaw.

The OFE pension funds , which were created in 1999 as part of an overhaul of the retirement system and are intended to provide a savings plan to complement pensions paid out by the state, jointly hold 60 percent of Robyg's shares.

Also planning a share buyback is Kruk, Poland's largest debt collector, 41 percent of whose shares are held by OFEs. Kruk fears any government move on the OFEs would start a process that could end in the funds in effect being shut down.

"We treat a potential pension funds liquidation as an unlikely but very negative scenario for us. The share buyback programme is a tool for possible bad times," said Michal Zasepa, chief financial officer at Kruk.

Other companies are making preparations quietly for reducing the amounts of shares OFEs hold in their ownership structures but are not discussing their plans in public, the fund managers and company executives say.

The government, which came to power in an election last October, faces a struggle to keep down the budget deficit, especially since launching a child subsidy programme in April which was part of its election platform.

The government aims this year and next to keep the deficit just below 3.0 percent of gross domestic product, the maximum level under the European Union's fiscal deficit rules, but some investors doubt it will manage to do so.

"The government promised to fill the gap with increased tax collection but we do not see a big improvement," said Piotr Poplawski, a senior economist at ING BSK who forecasts the deficit will reach 3.5 percent of GDP next year.

Asked whether the government might try to plug gaps by seizing stocks from the OFEs, the ministry responsible for the pension system said last month that it was not working on merging funds or on nationalising them.

Drawing funds from pension funds would not be unprecedented in the country of more than 38 million which shook off communist rule in 1989 and is now the EU's sixth-largest economy.

The centrist coalition which lost power to PiS last year transferred 150 billion zlotys worth of treasury debt into the state pension system to prop up the budget in 2014.

CONCERNS FOR WARSAW BOURSE

The OFE funds hold up to 80 percent of shares in some companies and make up about 20 percent of the Warsaw bourse's value.

Their future operations had already been called into question when the previous government took control of their bond holdings to offset public debt.

Now almost 17 million savers have until the end of July to decide whether they want to stay in the OFE system or transfer assets to the state agency ZUS, a step set out under the 2014 reform.

One way for the government to take control of shares held by OFEs might be to pool all remaining OFE holdings in one entity which could then be controlled by the state.

Nominally, the money invested by OFEs belongs to the state.

"Listed companies fear potential changes in the retirement system, which could result in OFE nationalisation," a manager at one pension fund said, speaking on condition of anonymity.

"More and more companies are discussing and offering buybacks . Moreover, the biggest shareholders of some of them are thinking about other options, like public tender offers."

Many foreign investors are concerned by the government's economic performance so far and by its declared aim of having a bigger say in the economy.  Wariness is also growing over the possible impact on the Warsaw bourse of any move on pension funds .

Investors' activity has already stalled since the previous government's seizure of bonds held by OFEs and the value of Warsaw's main WIG20 index has declined by one-fifth since then. Market turnover fell to 45 billion zlotys in the first quarter of 2016, the lowest in four years.

"Under a dark scenario, if further changes to the retirement system were implemented, there would be a (further) decline in turnover and share prices," Sebastian Buczek, chief executive of Warsaw-based mutual fund Quercus TFI, said before Kazynski's latest remarks.