Pension Pillar II Records Its Best Performance in 2023 History

The Association for Privately Administered Pensions in Romania (APAPR) announces record figures for Pillar II of pensions at last year’s level. The yield reached almost 18%, the best performance in the entire history of the system.

The 7 mandatory private pension funds that form Pillar II recorded a weighted average return of 17.94% in 2023, the best annual performance in the entire history of the system and more than 10 percentage points above the inflation rate estimated for last year, according to calculations APAPR.

At the same time, the net assets managed by Pillar II reached 126.7 billion RON (25.5 billion EUR), a record value for the system, increasing by 31.4% compared to the end of 2022. An almost equally high level of the average yield was also reached in 2009 (17.7%).

In 2022, on the other hand, Pillar II finished the year in the red (-3.8%). 8.1 million Romanians are enrolled in Pillar II of private pensions, i.e. the majority of the active population of the country, half of whom (over 4 million) contribute regularly, month after month. Money from Pillar II is the second most valuable financial asset of the population, after bank deposits.

The very good results recorded by private pensions in 2023 stem equally from the recovery of government bond prices and the appreciation of stock market quotations. Last year, the value of government securities recovered from the fall in 2022 amid the reduction in inflation and interest rates, and the indices of the Bucharest Stock Exchange, where Pillar II pension funds are the largest institutional investors, recorded sustained increases, of over 30%.

Over its entire lifetime (2008-2023), Pillar II recorded an average annual return of 7.82% against an average annual inflation of 4.35%. In monetary terms, mandatory private pension funds generated a total gain, net of all fees charged, of 36.9 billion RON (7.4 billion EUR), in addition to the contributions received in administration, exclusively for the benefit of contributors.

At the same time, starting from January 1, 2024, the contribution transferred to Pillar II increases from 3.75% to 4.75% of gross monthly income, as part of Romania’s commitments to the European Union through the PNRR. Thus, compared to an average monthly contribution of around 270 lei in 2023, the level of the average monthly contribution for 2024 is likely to exceed 350 lei.

The tax regime applied to payments made by private pension funds to beneficiaries (participants and heirs) also improved as of January 1, 2024. If until the end of 2023 the tax base was the entire amount paid by private pension funds to beneficiaries, from January 1, 2024, the tax base is reduced only to the earnings obtained by investing pension funds.

2023APAPRAssociation for Privately Administered Pensions in Romaniabest performancehistorypension Pillar IIrecord
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