Romanian Employers Could Lower Staff Costs By Offering Voluntary Pvt Pensions As Benefits

At the same time, employees would gain 2.3% above their net salary if they accept a voluntary private pension instead of a bonus in cash.

„Compared to offering a bonus in cash or wage raise, paying a contribution to a private pension account for an employee is 5% more efficient from the point of view of employers’ additional payment obligations,” the association said in a press release Wednesday.

The association calculated the benefits of voluntary private pensions taking into account an average company with 100 employees with an average gross monthly salary of 2,000 lei (EUR1=RON4.2626), with staff expenses accounting for 33% of the company’s total expenses and a gross profit rate of 7%.

With the application of the unitary pension system as of January 1, 2011, contributions to voluntary pension funds (Pillar III) are exempt from social security payments, within deductibility limits set by the law. This, the association says, makes voluntary private pensions an attractive benefit for employers to offer employees due to its favorable taxation regime.

Employers may deduct as much as EUR400 per year from voluntary pension fund contributions when paying income tax, profit tax and social security for their employees.

At the end of 2010, voluntary pension funds had 221,600 contributors. In 55% of the cases, contributions were paid exclusively by employers, who offered voluntary private pensions as benefits for employees. In 33% of the cases contributions were paid by employees alone, while in 12% of the cases contributions ere paid by both employer and employees.

Deductions are available for both employers and employees, which means as much as EUR800 can be deducted if contributions are paid by both.

Launched in May 2007, the voluntary private pension segment is operated by 13 pension funds with total net assets of RON328 million at the end of 2010.