Major change. Romania’s second pension pillar could have optional contributions

PM Mihai Tudose said that the government will decide whether the contributions of Romanian employees in the second pension pillar could become optional, following an analysis that is being carried out at this moment.

Under current rules, the contributions are evenly split between the first pension pillar, managed by the state, and the second one, which is managed by private administrators. There is a third pension pillar which is private.

“Nobody will dismantle pillar II, nobody will nationalize it, nobody will harm it. (…) It will become optional,” said Tudose in an interview for Digi24.

The PM went on to say that the first pension pillar had better results based on the minimum wage, but he failed to provide data in comparison to the second pillar.

“There was this analysis, based on an information that was confirmed, that some management commissions were collected – instead of being taken in the first year, they were taken for around 10 years – and out of over seven billion generated from the money of Romanians in pillar II, one billion went to management,” said Tudose.

Tudose has been a staunch critic of the financial sector in Romania. He has recently stated that there were banks that avoided paying the profit tax for years and that needs to change if they want to do business in the country. The PM added that he gets his wage in cash and doesn’t use a bank account so as to avoid the payment of a commission.

This spring, NN Pensii, one of the administrators of the second pension pillar, was fined after it notified its clients of the government’s intentions to nationalize the funds in pillar II. At that time, the government vigorously rejected such rumors.

The second pension pillar has close to 7 million contributors.

Dragos Neacsu, the CEO of Erste Asset Management, says that between May 2008 and the end of 2015, the private pension system had an average yearly yield of 5.37 percent, ranking first in the European Union, according to a report by Better Finance published in 2016.

“Only two thirds from today’s pensions are paid by the contributions of active persons – while one third is covered through transfers from the state budget,” said Neacsu, who is also board member in the association Romanian Business Leaders.