Romania’s Pvt Pensions Contributors Stand To Lose EUR1B By 2017 - Assoc

According to the press release, the Government's first negative measure against private pension funds was the 2009 decision to maintain contributions at 2%, the lowest level in the EU and the world, instead of upping them to 2.5%, as required by law. Consequently, five million contributors have lost EUR200 million in 2009 and 2010 and will lose a further EUR800 by 2017. This measure will reduce the pensions of current wage-earners by as much as 15%.

The press release adds that the Government wants to place Pillar II pensions under state control and "pawn off" the future of over five million employees, who were promised decent retirement plans in 2008, when the parallel pension system was launched. APAPR also blames the Government with ignoring expert advice and refusing to implement necessary reforms.

Association representatives claim that the recently announced 2% state budget cut to be achieved by eliminating Pillar II contributions cannot cover the 46 billion lei (EUR1=RON4.1532) budget deficit, 9.1% of the country's GDP, and will only save RON660 million, or 1.4% of the total budget deficit.

In June, APAPR will ask that the International Monetary Fund, the European Commission and Eurostat exclude the budget gap caused by Pillar II contributions from overall budget deficit calculations, in accordance with international and European practices.

The association also suggests that the temporary budget deficit caused by Pillar II be converted into long-term bonds. The deficit could also be covered from the sale of state-owned shares in various companies. APAPR added that Romania's market for long-term bonds is the most poorly developed in the EU, generating the mistrust of foreign investors and lowering the country's standing for Eurozone accession.

Romanian Finance Minister Sebastian Vladescu said Wednesday that the contribution to mandatory private pensions will be reduced through a budget revision scheduled for the end of June or the beginning of July.

Vladescu has recently told employers and unions that private pension contributions will be reduced from the current 2.5% to 0.5% of the contributors' gross wage until the end of 2011, in a bid to save some money to the state budget, part of the country's drastic spending cut plan.

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