ROMANIA - The newly elected government has repealed fledgling law passed by its predecessors in December, which had been set to implement compulsory second pillar pension funds for Romanian workers by the beginning of next year.
The government’s provisional order giving the go-ahead for universal pension funds (UPFs), whereby existing social insurance contributions were to be converted into compulsory private savings invested with private companies under state supervision and authority, had only been in place for only a matter of weeks.
The new government, made up of the former communist party, has blocked the legislation, although according to Iain Batty, a partner with law firm Cameron McKenna who was involved in the drafting of the legislation, no explanation has yet been given for the action.
“ The former communists are back in power but it’s not clear yet whether they are opposed to the private management of funds or whether they just don’t like the way the law was introduced by the last government.
“ It has been suggested to me that they are going to put more of an emphasis on the voluntary third pillar than on the second pillar, but it is still very much up in the air.
“ Certainly, the insurance industry in Romania is going to be lobbying in a big way for mandatory second pillar funds to be introduced.”
One factor that may have influenced the government has been the collapse of a number of investment companies in Romania, says Batty.
He adds: “ The fact is though that these second pillar pension funds would be operated in a very different manner with far more regulation and very high minimum capital requirements.”