Embassies Ask Romanian PM To Raise Pvt Pension Contribution At 2.5% This Yr

Five diplomats of the countries dominating the private pension market in Romania, with a market share of over 80%, asked prime minister Emil Boc to reconsider the decision to freeze the level of contributions to private pensions, as the 2% level would have long term effects on future pensioners.

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The letter was signed by the ambassadors of the Netherlands, Jaap Werner, Germany, Roland Lohkamp, Italy, Mario Cospito, Great Britain, Robin Barnett, and the United States’ charge d’affaires, Jeri Guthrie-Corn.

The law regulating the private pension system states that contributions to mandatory private pensions need to increase 0.5 percentage points each year, from 2% in 2008 to 6% in 2016.

However, according to the 2009 state budget draft obtained by MEDIAFAX, Romanian employees’ contribution to mandatory private pension funds will be maintained at 2% of the employee’s gross income this year.

"While we understand that this is intended as a budgetary measure in the current difficult economic environment, we are concerned about the potential negative consequences of this measure for participating firms, individual contributors, and the future of the pension system as a whole," the letter reads.

"This change to the law, even if temporary, would create an unwelcome precedent. Because the private pension fund system constitutes a long-term, major investment for all participants, stability and predictability are essential for building trust in the system and for ensuring that it remains viable in the future. The proposed freeze on contributions would diminish long term returns to the 4.6 million individual account holders and would adversely impact the interests of participating firms, which have invested over 500 million euros in this sector," the letter states.

The Romanian private pension market (Pillars II and III) currently hosts 20 companies, with shareholders from the Netherlands (ING, Eureko, Aegon), Great Britain (Aviva), the United States of America (AIG), Italy (Generali), Germany (Allianz), Austria (BCR, thorugh Erste, Asirom, thorugh VIG, Raiffeisen), Slovenia (KD, PRVA), France (BRD), Greece (Bancpost) or Hungary (OTP).

By assets managed on the two pillars, the most important players are ING – RON402.77 million, Allianz - RON223.78 million, Generali - RON76.1 million, Aviva - RON69.8 million and AIG - RON68.9 million.

These five companies, together, hold a 82.9% share of the market, according to official data issued late January.

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