ROMANIA - Romanian pension funds posted strong average returns of at least 9% in the first three months of this year thanks to gains in both the local listed stocks and bonds markets and , according to data published by the Romanian pensions regulator, the CSSPP and interpreted by the Romanian pension fund association, APAPR.

Mandatory second pillar private pension funds returned an average 9.5% for the first quarter of 2010 to their five million Romanian workers, and delivered 24.2% over the 12-month period ending March 2010.

Romanian pension funds are invested relatively conservatively but maintained good growth as the decreasing interest rates environment raised the value of domestic bonds, alongside accelerated activity in the equities market. The average second pillar fund has just 10% in equities, while third pillar funds hold 14%.

Voluntary third pillar private pension funds, meanwhile, which have just under 200,000 plan members, generated a 9.1% average return over three month and of 23% over 12 months.

This is against inflation of 4-5% over 12 months and interest rates for locally-denominated bonds of 8-9%. Pension funds should hopefully fare better this year, however, as Romania’s central bank (the NBR) has an official inflation target of 3.5% for 2010.

Similarly, the IMF has been calling on Romania to improve the fee terms of second pillar pension plans and cut the costs to members, so any further improvements could increase the potential returns to members. (See earlier IPE story: IMF wants higher fees in Romanian second pillar)

The total value of Romanian private pension arrangements is now at over RON3.2bn (€780m) but the collective value of pension funds is projected to hit a possible €1.2bn by the end of the year.

There are currently 10 mandatory pension funds in the market and 13 active pension funds in the voluntary take-up market. However, that 10 will reduce to nine over the coming months as a result of a merger.