Will pensions remain private or return to the state?

When the private pension system was launched pension companies’ strongest argument was linked to the very word “private”. Now, two of the majority shareholders in the respective companies ING and AIG, have come to receive support from the state, the Dutch and US one. Will this change the system of private pensions?

“I do not believe government intervention means the return of private pensions to the state. There’s a very big difference. We’re managers and we manage private pension funds, and the manager and the fund are two different legal entities. The American state owns stock in AIG, but has no access to the fund we manage; these are two completely different things. For customers, there will be no impact because rules and market supervision are very clear (…),” says Mihai Coca-Cozma, general manager of AIG Fond de Pensii. AIG has over 243,000 customers for the pension fund it manages (pillar II) with a 6.4% market share. AIG holds assets worth 35.9m RON (over 9.7m euros), whilst its market share in terms of assets revolves around 7.2%. ING is the leader of this market, with 1.3 million participants and assets worth 193.8m RON (52.4m euros). The fund’s market share depending on the number of contributors stands at 34% and depending on assets at almost 39%. Overall, the funds managed by ING and AIG control 40% of the number of clients and 46% of the net assets of the market. ING officials state the support received from the Dutch state will not change the pension business at all. The money will be further invested, which is the main difference between the state and private systems. “The state does not effectively become a shareholder. The stock issue carries no voting rights, or dividend rights. This is not nationalisation or state aid, but a commercial deal. The deal has no direct impact over the assets of the pension fund,” maintains Emilia Bunea, general manager of ING Fond de Pensii. Radu Craciun, chief investment officer of Interamerican Pensii and head of the Association of Financial-Banking Analysts of Romania, believes the pension system will further operate as a private one, despite the financial help managers received from their governments.