Keeping Contribution To Romanian Pvt Pension Funds At 2% In ‘09 Lowers Contributions By EUR80M

“Those four million people should be the most vehement, because with this measure, the government literally has its hands in their pockets. If the government makes this political decision, they will lose a total of over EUR80 million that should have gone into their pensions this year, money that will be used for populist measures instead,” Crinu Andanut, head of the Association for Private Pensions in Romania, said in a press release Sunday.

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.

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.

Andanut said a decision to keep private pension contributions at 2% instead of raising them to 2.5% infringes employees’ rights.

"This measure pawns the future of the current generation of employees and sacrifices the interest of over 4 million Romanians on the altar of monetary political interests, in the attempt to cover huge errors in the administration of public money so far,” he said.

The association will send official letters to government authorities Monday and announces international protest actions, as the measure would also affect pension fund administrates beside employees.

"The association will respond harshly at an international level if a decision is made to freeze private pension contributions. The measure affects the business plans of large international financial groups, who invested over half a billion euros (…) just on the mandatory private pension segment. Instability and unpredictability in the legislation (…) will hurt Romania’s image again and will again chase way potential long-term international investors,” Andanut added.

According to calculations presented by the association in January, freezing the contribution to the mandatory private pension segment at 2% would translate into a reduction of about 2,000 lei (EUR1=RON4.2775) of the sum transferred this year to the private pension account of each employee.

Contributions that should be paid in 2009 to the mandatory private pension segment have been estimated at a total RON1.7 billion.

If the measure proposed in the budget draft is adopted, the 14 pension funds operating the mandatory segment will receive contributions lower by over RON330 million. The 14 funds operating this market segment have a total 4.58 million contributors.

At the end of 2008, net assets of funds on the mandatory private pension segment stood at RON831.9 million.