ROMANIA - The average Romanian pension fund has generated a return of 13% in the first nine months and maintained a 17.4% return since the end of last year, when the economic crisis really hit most pension funds, according to figures from the Romanian Pension Funds Association (APAPR).

Mandatory second pillar funds delivered an average return of 13.6% while voluntary third pillar funds generated 12.97% in nine months and 13.18% to the end of September 2008.

ING is still the dominate player in both sectors with over 200,000 members, and the value of assets under management for the entire pensions market now totals €516m, said APAPR.

The mandatory second pillar market only came into existence in March 2008, but since then has achieved a real annualized average return of 9.7% above inflation, while the third pillar regime has suffered a lot more and generated a real annualised return of just 1.08% since its inception in May 2007.

The Romanian pensions market still tends to run relatively conservative portfolios, and the bulk of assets are held in fixed income and money market investments. (See earlier IPE story: Romanian funds increase equity allocation)

The mandatory pillar now has over 4.8 million participants against 179,000 in the third pillar, and contributions are still low said APAPR.

However, Crinu Andanut, APAPR's chairman, said he hoped to see monies paid in rise significantly over the coming years as Romania has to reform the existing pensions regime under the terms of a deal with the International Monetary Fund.

"Double-digit investment returns remained strong, the system's only problem being the low level of contributions, mainly because of Romanian authorities' decision to freeze contributions directed towards the 2nd pillar contributions directed at 2% of gross participants income," said Andanut.

"For 2010, we expect the national central budget to include 2nd pillar contributions of at least 2.5%, if not 3%, to increase savings possibilities for almost five million participants in the system, and also to respect Romania's commitment to respect its arrangements with the international financial institutions," he added.

The Romanian government is currently attempting to overhaul the pensions system to meet IMF demands around a second disbursement of €1.845bn. The agreement signed with the IMF is to reform its public pensions system by the end of December - a move which is expected to introduce a higher pensions age and cut special benefits for certain categories of privileged workers. (See earlier IPE story: Romania aims for pension reforms by December)

The APAPR said the IMF arrangement should see contributions raised to match an earlier calendar of contributions to reach 6% of earnings by 2016.

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