Romanian Govt Says Pvt Pension Contribution Freeze In ’09 Is Temporary, Needed To Cover Deficit

"Keeping the level of contributions to private pension funds at 2% in 2009 is motivated by the need to strengthen and control the deficit in the public pension system, considering budget revenues are lower than expenditure. The measure is temporary and the improvement of the sustainability of the pension system as a whole is still a priority in the short and medium term," according to a government document.

Law 411/2004 regulating private pension funds stipulates that contributions to mandatory private pensions need to increase 0.5 percentage points each year, from 2% of the employee’s gross income in 2008 to 6% in 2016. Under the law, contributions in 2009 should rise to 2.5%.

In the 2009 state budget draft, the government decided to keep this year’s contribution level at 2%, which, according to the Association for Private Pensions in Romania, will lower by more than EUR80 million the sums transferred into the private pension accounts of the country’s 4.6 million contributors.

The measure prompted 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 and on the interests of companies on this market.

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 letter was also sent to the minister of finance, the minister of labor, speakers of the two chambers of Parliament and heads of parliamentary commissions for budget, finance and banking.