Confusion over voluntary entry in Romania
ROMANIA - The Private Pensions Commission has changed its mind and will now allow Romanians aged 35 to 45 more time to choose whether or not to join a second-pillar pension fund.
Last week, the commission CSSPP had announced people who are over the age of mandatory participation for supplementary pensions from 2008 will only have four months between August and the beginning of December to join a second-pillar pension fund.
The commission has now decided voluntary entry into a supplementary pension fund can be done any time before reaching the age of 45. However, Mircea Oancea, chairman of CSSPP, said a formal regulation of the issue will happen at a later point in time.
instead, the four-month time limit is only now being applied to people under the age of 35, and they are still required to sign a contract for a supplementary pension by December or they will be assigned a provider.
There are doubts, however, whether the Romanian public is sufficiently informed to make this decision in such a short time even though the government is making efforts to mitigate this lack of information.
"People have been hearing about the pension reforms over the last five years because that is how long it had been debated," Ruxandra Stoian from PricewaterhouseCoopers (PwC) in Bucharest told IPE.
"There is currently a lot of media coverage of the topic - albeit less on the pure information side. But the Government, assisted by a World Bank loan, is considering investing $1m (€750,000) in an information campaign to start in summer," she added.
Too little information can lead to complications a few years later into the pension reform, as PwC's Jim Kernan, who was recently transferred from Poland to Romania, knows.
"Many people in Poland, now close to retirement age, are asking to be let out of the system. Either they were not aware or did not care when signing up in 1999/2000 that their colleagues who did not voluntarily join the second-pillar can retire earlier," said Kernan.
"My prediction is more people will probably join [the voluntary scheme] than should because the whole system is based on agents selling to individuals and a good salesman can get you to buy something you do not necessarily need or want. However, I think that Romania has learned from the experience of other countries in the region and has already considered improving these issues," he added.
Insurance companies and banks will be allowed to start selling second-pillar pensions from August. However, they will have to obtain a license from the authorities - and this is only granted to providers who set up a separate pension company - a move most insurance companies but fewer banks have made.
Apart from this regulatory obstacle, Kernan sees a more practical problem for banks seeking to sell their pension products.
"People could go into a bank and sign up but experience shows that only a few people do that as they would rather sign up with salespeople," he explained.
"So my money on who's going to be the largest funds it is going to be on the insurance companies. This is what has happened in other CEE countries that have introduced similar reforms."
That said, Kernan added t"the CEE governments that have undertaken these reforms should be commended, as it is an example of how the new member states have again leapfrogged the older member states in an important area of public policy and economic reform".