WB Recommends Romania To Raise Retirement Age Above 70 By 2050

According to the World Bank’s estimations, the deficit in Romania’s pension system will overrun 5% of the gross domestic product until 2020. Following reform, Romania’s pension system is projected to generate ever-larger deficits relative to GDP for the next three decades before improving slightly to 6.2% of GDP by 2050.

These deficits are driven by the aging of the population, as well as by the generous benefits in the reformed system (especially given recent large increases in benefits) and the transition costs associated with replacing part of the unfunded first-pillar scheme with a funded second-pillar scheme, the World Bank report stated.

Population aging alone will reduce the number of contributors relative to the number of beneficiaries to such an extent that by 2050 the number of pension system beneficiaries will approach the number of contributors.

According to the World Bank experts’ calculations, the ratio between the population with an age of over 65 and the population between 20 and 64 years of age will grow by 56.6% in 2050, compared with 23.6% in 2005.

The lower retirement age applied to women, in combination with their longer life expectancy, greatly increases their lifetime benefit costs relative to their contributions, the World Bank stated.

To restore long-term fiscal balance to the first-pillar scheme without recourse to general revenue financing, the Romanian Government needs to raise retirement ages further, the institution recommends.