Minister of Public Finance, Eugen Teodorovici, said on Tuesday that Romanians can opt between Pension Pillar I and Pillar II, adding that the Government will discuss this issue.
Finance Minister Eugen Teodorovici has assured that the state can efficiently manage the money from the pension funds.
“There is no impediment. Nothing is impossible. It’s true, so far the state hasn’t proved it was a good manager in many areas of the economy. But this does not mean that the state is condemned to a label of being incapable of managing the money, whether public or private, in a judicious manner,” Eugen Teodorovici said.
Asked whether the money in Pension Pillar 1 could be invested, Teodorovici said any state normally and usually has the same approach to investing in and out of the country.
Regarding an alleged emergency ordinance, Eugen Teodorovici says there will be no such ordinance, and the possibility for the taxpayer to choose between Pillar I and Pillar II will be made through a mechanism that is to be discussed by the Government.
“I said work is ongoing to set up a mechanism that would allow the possibility for the taxpayer to choose between Pillar I and Pillar II. So nothing is hidden,” he said.
Opposition claims emergency ordinance looming – the nationalisation of Pension Pillar II
In reply, PNL Senator Florin Citu said that the nationalisation of Pension Pillar II will be made through an emergency ordinance that will be an “nasty variant”, generating higher interest rates for the state budget.
“Next week there will be an emergency ordinance that will have a nasty variant to nationalise the Pension Pillar II. Any such intervention means volatility on the financial markets, it means higher interest rates for the state budget, it means higher costs for everyone. What the Minister of Public Finance tells us, the Labour Minister and, in general, the PSD, is translated in higher costs for all those who work today in Romania just to pay the pensions they have increased by the pen, some special pensions, and thick-skinned pensions. We talk about the private money from the Pension Pillar II, some RON 42 billion, this is actually the stake that is being discussed today, which means about 5% of the GDP. They want to take this money by force, in order to be able to keep their promises during the election campaign,” Citu said.
RON 1,1bn less in Pension Pillar II
The failure to comply with the growth chart of the privately managed pensions has led to a 12.9% drop of accumulation in Romanians’ accounts during the past ten years, with the impact on Pension Pillar II of EUR 1.1 billion. The figures were submitted on Tuesday to the members of the Senate Economic Committee by the by the Association for Private Administered Pensions in Romania (APAPR), digi24.ro informs.
Law no.411/2004 regarding the private managed pension funds included a schedule for the increase of contributions to Pension Pillar II from 2% of the gross income in 2008 to 6% in 2016. Following several delays, the contribution reached 5.1% in 2016 and 2017 and has fallen to 3.75% in 2018.
“Due to the failure to meet the law, after 10 years of Pension Pillar II Romanians have amounts by 12.9% lower in their personal accounts against the level reached if the law had been observed. The impact on Pension Pillar II is of EUR 1.1 billion, unpaid contributions,” the document reads.
The investment yield on the basis of the Average Net Asset Value on the Unit for the period May 2008 to February 2018 was of 128.3%, i.e. an average of 8.8% per annum since its launch hitherto, according to APAPR.
“The total assets managed totalled RON 41.7 billion in February 2018. Of this amount, RON 7.2 billion (EUR 1.5 billion) represents the net gains of the participants by investing their money,” the presentation reads.
APAPR says that 92% of Pension Pillar II assets of around EUR 9 billion are invested in the Romanian economy and 75% of the assets are invested in bonds and on the money market.
“At the Bucharest Stock Exchange, the Pension Pillar II funds hold about EUR 1.9 billion (20% of the freely traded shares), providing about 15% of the liquidity. (…) Pillar II had a decisive role in the success of public bids launched on the BVB, with pension funds buying up to 20-25% stakes in bids,” the report also reads.