Optional private pensions make comeback

Pension funds reform needs two-three months of “transition” when the optional pension funds with voluntary contribution should be operating, while privately-managed public pension funds, with a compulsory contribution, should not be established from the very beginning, Labour and Social Protection minister Marian Sarbu said at the end of last week.

“The way these optional funds gain clients and manage funds may stand for eligibility criteria when they are accepted as pension fund administrators,” he said.

Following an intensive lobbying campaign launched by insurance companies operating on the Romanian market, the former Mugur Isarescu-led government last autumn endorsed an emergency ordinance for the pension system reform, aimed at relieving the state budget from the pension payment burden.

This ordinance was among the first documents abrogated by the new Adrian Nastase-led Cabinet.

The draft law, as initiated by the Social Protection Ministry together with the World Bank, stipulates that three pillars, namely three pension sources, will be created.

The first pillar, made up of the public system, will attract a 10% lower contribution, the second pillar will be fed by 10% of the current contribution to the pension and welfare system fund, which stands at 38.5% of the gross salary, while the third pillar will be voluntarily fed by optional additional contributions.

The pension reform largely relies on the second pillar, with compulsory contributions and an optional choice of the fund’s administrator.

“The third pillar is actually operating, as the insurance services also offer post-retirement benefits paid to contributors. So I think this is not such a fortunate decision,” says Viorel Vasilascu, director with Interamerican, the largest Greek insurance company.

Interamerican has expressed its intention to invest on this market, together with other big international names such as Allianz, the largest insurance company in Germany, Nederlanden, the largest in Netherlands, Commercial Union, the market leader in Great Britain and American International Group, the largest financial services and insurance group in the world.

“I believe this should be a consistent system, whose components should all be regulated at once. I do not think the current approach is the right solution,” says Violeta Ciurel, head of Nederlanden Asigurari de Viata Romania.