Clients lose 200m euros from freezing of private pension contribution

The pension of a participant to the private pension system will be 1,600 euros smaller because the government did not comply with the initial plan to boost contributions. The amounts accumulated in the accounts of mandatory private pension funds (2nd pillar) are 800 million-RON (200 million euros) smaller than if contributions to these funds had not been frozen last year at 2%, instead of being raised to 2.5%, according to Emilia Bunea, general manager of ING Pensii, the largest private pension manager on the Romanian market. 2nd pillar pension funds started to collect contributions in May 2008 – amounting to 2% of the participants’ gross salary. The level was supposed to be boosted by 0.5% a year, to 6%. The contribution was however frozen by the government at 2% in 2009 due to the rising deficit of the social security budget, considering that contributions to private funds are subtracted from this budget.

“If the legal schedule had been respected, assets could have amounted to 2.7 billion RON in 2009 and to 5.4 billion RON in 2010. In 2009 and 2010 the cumulated losses incurred by participants due to the fact that the original schedule has not been applied will amount to 800 million RON,” Bunea said yesterday at the “Mediafax Talks about Private Pensions” seminar.