ROMANIA - Mandatory second-pillar funds in Romania returned 9.9% over the first half of 2010, and plans to cut contributions are now off the table, according to the Romanian pension fund association APAPR.
The Romanian government had considered cutting contributions to the mandatory second pillar from 2.5% to 0.5% as part of its drastic austerity measures.
But following consultations with the local finance ministry, the International Monetary Fund and the European Union, the proposals were scrapped, according to Mihai Bobocea, secretary general at the APAPR.
A Romanian court also rejected parts of the austerity measures affecting pension reform.
Bobocea told IPE: “We are confident that at least the next one and a half years will see a more stable framework for local pension funds.
“We hope our politicians soon start to understand the importance of funded pensions and the vital aspect of stable, predictable legislation in this field.”
From next year, the contribution level will increase to 3% - part of the government’s intention to eventually raise it to 6% by 2016.
In the first half of 2010, the nine pension funds in the mandatory second pillar posted an average return of 9.9% - only slightly above their first-quarter figures.
Over the year to end-June, mandatory funds returned 20.7%, bringing the average annual return since inception in May 2008 to 16.6%.
The average equity exposure stood between 10% and 12%, which helped the funds in a very volatile stock market environment in the first six months, the APAPR said.
The association also pointed out that the Bucharest stock market index was up only 2.3% over the same period, while the blue chip index was down 0.15% and the index of local financial investment vehicles down 18.7%.
The 13 voluntary third-pillar funds returned 6.6% on average in the first half.
Assets in both pillars increased to RON3.6bn (€840m), 6% of which is in the third pillar.
The number of mandatory funds is down to nine following a merger this spring in which Eureko took over yet another smaller fund, KD Pensii.
According to Bobocea, this merger came as “no surprise”, as pension funds are required by law to have more than 50,000 members.
“From now on,” he added, “those left on the market are here to stay.”