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CEE roundup: Romania slashes second-pillar contributions

The Romanian government has cut the contribution rate to the mandatory second-pillar pension system from next year, from 5.1% of gross wages to 3.75% – the first cut since the system’s inception in 2008.

At the same time prime minister Mihai Tudose’s earlier proposal to make the system voluntary has been dropped.

The government has justified the cut by stating that, as a result of next year’s increase in public sector gross wages of around 20%, contributions to the funds will remain unchanged in real terms.

The wage rises came from a package of amendments to the fiscal code pushed through by emergency decree. Most controversially, these included shifting the bulk of social security contributions from employer to employee.

Currently the 39.25% contribution is split equally between the two; in future employers will pay 2.25% and employees 35%.

While the government assumes that the lower rate paid by employers will enable them to compensate their employees with higher wages, recent trade union protests suggested that not everyone was convinced.

The Romanian Pension Funds Association (APAPR) stated on its website that, while it welcomed the maintenance of the existing mandatory architecture, cutting the rate – instead of increasing it to 6% in accordance with the 2008 law – would affect the long-term viability of the private pensions system.

The APAPR said the decision would shrink second-pillar pensions payouts for future beneficiaries by at least 20%, while lowering capital-market financing possibilities for Romanian businesses.

Financial independence for Bulgarian regulator

Bulgaria’s Financial Supervision Commission (FSC), the country’s regulator for pensions and other non-banking financial services, looks set to become financially independent after the Parliamentary Committee on Budget and Finance adopted a series of amendments to the FSC Act.

Currently the FSC is financed from the state budget, as well as licence fees and fines from supervised entities.

The pensions industry has complained in the past that the fines levied on its sector have been disproportionately high compared with those paid by insurance and investment companies.

In the future, the commission will become independent of the state budget, offsetting the loss through higher licence fees.

Financial independence for the regulator was one of the key recommendations in a World Bank report published earlier this year.

Other adopted recommendations included raising the salaries of FSC staff to the levels earned by supervised entities, and providing statutory indemnity so that FSC staff would no longer be held financially liable for decisions made in good faith.

Legislation begins for Poland’s Employee Capital Plans

The Polish government is set to start working on draft legislation for Employee Capital Plans (PPKs), one of the two strands of the pension overhaul announced last year by finance and economic development minister Mateusz Morawiecki.

The new law, envisaged to start in 2019, would oblige all employers with 20 or more employees to set up a PPK for staff, although employee participation will be voluntary.

The contribution rates have been set at a minimum 1.5% for employers and 2% and for employees, with the option to increase the levels to 2.5% and 3% respectively.

The pension fund management fee has been capped at 0.6% of net assets, with investment management co-ordinated by the state-owned Polish Development Fund.

Paweł Borys, the fund’s head, recently estimated that the PPKs would inject PLN15bn-20bn (€3.5bn-4.7bn) a year into the local capital markets.

In order to boost participation, the government intends to contribute PLN250 a year to each employee’s PPK pension pot, alongside a one-off sweetener of PLN240 when they join the scheme.

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  • Bucharest, Romania

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