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The current situation of the private pension system is governed by uncertainty. Newly introduced measures require the administrators, all of them part of large financial groups, to bring in around 10 times more capital to support the business, capital which does not have a corresponding risk component.
As most of the investments of the private funds are in state bonds (around 60%), the requirement regarding the capital doesn’t seem to have a reason. This, coupled with other measures like capping the administration fees and introducing the option of participants to stop contributing the compulsory percentage, is part of an “emergency plan” introduced by the government which has not been thoroughly explained to the industry or the wider public.
Unfortunately, in a country that needs retirement savings like fresh air, such measures may mean the end of a private pension system that could have provided supplementary income to retiring baby boomers.
-- Alexandra Smedoiu, partner, Deloitte Romania