Bleakest scenario for pension funds: 35% empty accounts

In private pension managers’ worst-case scenario the share of clients for whom employers do not pay contributions to privately managed funds (2nd pillar) every month could climb to 35% of the total, compared with 30% at present. “I think the rise in the contribution to 2.5% of the salary (as of March, now it amounts to 2%) will be largely mitigated by the clients for whom contributions are not paid monthly. If the companies’ indiscipline is tolerated, the number of empty accounts will rise to 35% of the total,” said Ioan Vreme, general manager of Generali Pensii, the third-largest mandatory pension manager on the Romanian market, at an event organised by Media XPRIMM.

In the past year many companies had financial problems and did not pay their social security contributions, and, by way of consequence, to private pension funds. At the end of last year mandatory funds had over 4.9 million clients, 1.5 million of whom do not receive contributions on a regular basis, which in the end will see their pension reduced. “I think the share of these accounts will see a slight rise, to 32-33% in 2010,” believes Cornelia Coman, president of ING Pensii, the largest fund manager on this market. Pension fund representatives expect 2nd pillar assets to reach 1 billion euros by the end of 2010, compared with 570 million euros last year.