Private pensions unburden responsibility from the state

The effects of the privatisation of the pension system will be felt not only on the labour market, where employers will become more responsible, but also in the minds of Romanian contributors that are set to become investors in their own pensions.
“The paternalistic state is being dealt a heavy blow with the launch of the private pension system as part of the state’s social security duties now fall into the hands of the private sector,” stated President Traian Basescu during the “17 September – start of the mandatory private pensions in Romania” seminar organised by ZIARUL FINANCIAR. The public pension system. which is faulty and vulnerable because of the inequitable method of calculating pensions and the poor management of the employees’ contributions, will be replaced by the new private pension system.
“The public pension system was severely affected by early retirements, by the inequity in calculating pensions, as well as by forced retirement. Mandatory private pensions are a healthy equitable system whereby each contributor is in charge of their own pension,” President Traian Basescu stated.
The launch of the private pension system marks the end of the process of transition from a socialist economy to a capitalist one, creating the premises for a long-term economic stability, believes Varujan Vosganian, Economy and Finance Minister.
“The privatisation of the public pension system will thus ensure the transition from populism to guaranteeing the freedom and dignity of retired people,” Vosganian went on to add.
The state’s role from now on, regarding the private pension system, will be as a market guarantor, not a leading player. The state will continue to support the development of the private pension system by providing positive development conditions for both private pension managers and the overall capital market.
The listing of the major state-run companies and the Property Fund is becoming increasingly necessary, considering “The Stock Exchange will be pension funds’ first target” stated President Basescu.
“The listing of the Property Fund will become a reality on the market by the end of the first half of 2008,” Vosganian said.
“It is essential that beyond the support the state will continue to provide, the contributions should increase as soon as possible. Pension funds will manage several hundred billion euros within the next few years and yet, 2% is one of the lowest levels of contribution to pension funds. The 0.5% annual growth will encourage the development of the private pension system but not sufficiently,” Basescu added.
After its first three years, the pension system will stabilise, as private pension scheme managers unable to attract at least 50,000 contributors will be eliminated from the market.