President Traian Basescu has recently talked about a deficit of two billion euros this year in the public social assistance system (pensions and medical assistance), but I believe we can appreciate around three billion euros, BNR governor's councillor Lucian Croitoru declared on Wednesday, May 19. As for the pending decision to cut the contribution for the compulsory private pensions' funds from 2.5% to 0.5%, Croitoru believes that a solution must be found to return as quickly as possible to the initial calendar.
"I'm not sure if the decision was taken already, but it is these days when it will be decided that the transfers for compulsory private pensions funds to be reduced from 2.5% of the gross income to 0.5% until the end of 2011. Given the difficult situation, I can understand that they did not have any choice, solely for the time being. On the other hand, I know we are out of the boundaries of the programme that the Romanian authorities have taken responsibility for and this decision can only lead to a massive delay. You can't sacrifice the future, the reform of the public system when it comes to spending is strictly necessary and if this decision cannot be avoided, a solution for a comeback to the initial schedule must be found immediately", Lucian Croitoru declared on Wednesday, while taking part in an event celebrating two years of private pensions in Romania at the Central Bank (BNR).
According ton him, "this decision means a massive drop in revenues for fund administrators and a delay in [making the transition from] a system of public pensions with a deficit to a system with a pension system with private funds.
APAPR: The decision to reduce the contribution to the 2nd pier - the bankruptcy of the private pensions system
The Romanian Pension Funds' Association (APAPR) data show that after two years of transfers to the second pier (compulsory private pensions), 2.63 billion lei have been transferred to the system, and the net actives managed by the pensions funds amount to 3.14 billion lei. This means a net profit of 511 million lei for the over 5 million participants.
"Yesterday minister Vladescu [Finance] made official the fact that the compulsory private pensions system will be affected by reducing the contributions' level by 2%. One generation is set against the other. There's been a decision to nationalise the private pensions system, not in the literal meaning, but when state authorities interfere and affect private accounts, it can only be nationalisation. Moreover, if this decision will be adopted by the Government, we are looking at the bankruptcy of the private pensions' system", APAPR president Crinu Andanut.
Romania ranks last in the region in money raised so far in the personal private pension's accounts
APAP represents 99% of the private pensions' market. According to its president, "the decision to cut contributions from 2.5% to 0.5% will mean the bankruptcy of the five million contributors, the destruction of 12 years of legislative build-up and the recognition of the private pensions system's bankruptcy and the annihilation of the main solution meant to solve this problem".
According to APAPR data, Romania ranks last in the region in regards to the money raised so far in the population's accounts for private pensions. Therefore, in Romania, the average value of the individual account for the second pier is 152 euros. The first three positions in the region go to Poland, Hungary and Croatia, with average values of 3,446 euros, 3193 euros and 2,854 euros, respectively.