Market deleted. EUR 10 bln private pensions market in Romania risks being blown away by government decree

Sorin Melenciuc 25/02/2019 | 11:15

The seven private pensions fund managers in Romania want to leave the market following the new regulatory framework introduced through the famous emergency ordinance 114/2018 of the government, according to the central bank’s chief-economist Valentin Lazea.

“The vast majority of Pillar II private pension managers in Romania, if not all seven funds, want to withdraw from Romania, are seriously thinking of withdrawing from Romania, because the market conditions seem particularly onerous – a big financial effort for a non-existent gain,” Lazea said.

Pillar II pension funds had assets worth more than RON 48 billion (EUR 10.5 billion) on January 31, 2019, a 17.1 percent growth compared to the levels recorded in January 2018, according to the Financial Supervision Authority (ASF).

The seven Pillar II private pensions managers in Romania have to increase their capital by RON 3.55 billion (EUR 760 million) until the end of this year in order to continue their activities, following the new regulation approved at the end of last year by the government, according to the calculation made by ASF.

The pensions funds managers have to increase their total capital by RON 1.6 billion until the end of June and by RON 3.55 billion until the end of the year, a very high amount for a market with total assets of close to EUR 10 billion at the end of 2018.

Contributors are also allowed to move their contributions from Pillar II scheme to Pillar I (public pensions), but ASF estimates that very few Romanians will make such a decision.

However, the new regulation will generate to the 7 fund managers losses between RON 43.4 million, in the best-case scenario, and RON 50.4 million in the worst-case scenario.

The seven Pillar II fund managers in Romania are NN, Allianz, Aegon, BCR, BRD, Generali and Metropolitan.

Romania’s mandatory private pensions funds had assets of RON 48.2 billion (EUR 10.4 billion) under administration at the end of November, up by 2.4 percent compared with October, and almost two thirds of the amount are invested in government bonds.

Almost 63 percent of total amount is invested in government securities, while 19.35 percent is placed in shares and 7.8 percent in bank accounts, according to official data.

At the end of December, the government has adopted an emergency ordinance that introduced major changes in mandatory private pensions (Pillar II) scheme.

The government slammed pension funds’ fees and forces private funds managers to increase their capital in order to continue their activity in Romania.

At this moment, seven fund managers are active on the Pilar II market in Romania.

At the end of 2017, the government cut the contribution to Pillar II to 3.75 percent of gross wages in 2018, from 5.1 percent last year, justifying the decision by the increase of gross earnings by 25 percent after the transfer of social contributions from employers to employees.



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