ROMANIA - The IMF has agreed a financial aid package with Romania which will ensure that the country can return to its original schedule for changes to second pillar pension contributions and will in turn put in place pension reforms.
Romania had frozen a scheduled increase of the current 2% contribution rate to the mandatory sector for this year in the wake of the financial crisis. (See earlier IPE article: Romania to look at pension reserve fund and life-cycling)
The Romanian authorities issued a request to the IMF for a 24-month, €12.95bn, “Stand-By Arrangement under the exceptional access policy”, according to the IMF report.
“The freeze in the contribution level during 2009 already caused a loss of about €83m to the 4.3 million contributors to the mandatory pension funds,” said Crinu Andanut, chairman of the Romanian Pension Funds’ Association (APAPR), in a statement on the IMF agreement.
In a “letter of intent” to the IMF, the Romanian government said pension obligations were a “significant source of fiscal pressure over the medium-term” and argued a change in pension indexation and a further raise of retirement age are now at the core of a full-scale pension reform.
By the end of this year, the administration wants to have a bill in place which changes indexation of public pensions from consumer price-linked to wage-linked.
Without giving detailed figures, the government has also hinted that it intends to equalise the retirement ages of men and women.
“We will also continue gradual adjustment of the retirement age beyond the currently agreed schedule (particularly for women) taking into account the evolution of life expectancies, to allow for greater financial stability of the system, as well as to ensure that retirement parameters are more in line with EU practices,” the government said in a letter of intent.
The retirement age is currently scheduled to rise to 60 for women and 65 for men by 2013.
The government said both the mandatory second pillar and the state pension should raise the average replacement rate to 45% from around 36% at present.
The reform will also include a change to public employees’ pensions which will have contributions to the pension system phased-in. (See earlier IPE article: Public sector reform to boost Romanian pensions)
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