Second pillar faith not withered yet
CEE - The current credit crisis has yet to damage people’s faith in the recently introduced funded pension systems in the CEE, suggested delegates at a conference on the region today.
Several countries in central and eastern Europe have introduced funded pillars in their pension systems over the last few years, the most recent example being Romania.
The region has similar demographic problems to western Europe, however, the real retirement wave will only hit it 10 years later as the CEE babyboom occurred at a different time, according to Juraj Draxler, researcher at the Centre for European Policy Studies.
“While the western world was sleeping, [CEE] countries have reformed their pension systems and are now much better equipped for the future if they do not take back the reforms,” argued Torsten Leue, CEO of Allianz in Slovakia.
Both individuals do not believe people have lost faith yet in the new funded pension pillars, despite the losses suffered by pension funds all over the world.
“It will depend on how the governments will deal with the subject, whether they use it in populist campaigns,” Leue told IPE.
The panel noted 2010 will be an election year in several countries of the region, so this might make some politicians go for short-term populist moves and alter existing pension terms.
Draxler also sees a danger in disillusionment: “Right now, people are not more sceptical about the [pensions] system as the feeling prevails that they have their own money in their own accounts,” he said.
That said, the experts said they are getting “a bit jittery” as looking across the borders they note, for example, assets in the Hungarian system have not grown as forecast and the country will be left with a pension gab, added Draxler.
Leue recognises, especially in times like these, governments are using up a lot of money in the budget to save banks whereas money in the second pillar cannot be touched by the politicians.
That said, Draxler fears the indirect influence governments could have on the second pillar.
“Thorugh new investment regulations they can get pension funds to buy more government bonds and what you end up with is a very expensive pay-as-you-go system.”
In contrast, Leue sees this more as an opportunity than as a problem.
“If the volumes are not too high it would certainly be welcome to see the second pillar supporting the state by purchasing government bonds.”