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Romanians rush into second pillar

ROMANIA - Over half of the Romanian workforce has already signed up for the new mandatory second-pillar pension system, including many for whom joining is not mandatory.

More than half of Romanian employees between 25 to 35 - the age group for which it is mandatory to join the second pillar - have chosen a pension fund, nine weeks before a deadline requirement to do so.

"Fewer people than expected will be left in the final pension fund lottery," Dragos Neacsu, head of the directorate at BCR Asset Management, told IPE.

Under current government rules, all individuals who have not made a choice by January 17 but are required to do so will be allocated to a pension fund according to certain criteria such as gender and age.

"We had a high number of choices in the first month and we will have strong numbers again in the last month - as experience from other countries shows," he added.

What surprised Neacsu was the high number of people who have already joined the second pillar voluntarily.

Employees between the age of 35 and 45 are not obliged to save in the new pension pillar introduced on September 17, but will be able to do so even after the January deadline.

According to figures published by the supervisory authority CSSPP in mid-October, 37% of the 1.18 million pension contracts were signed by voluntary joiners.

"The age group of 35- to 45-year-olds is moving faster than expected," Neacsu noted.

In general, the former secretary of state at the ministry of finance sees a discrepancy between peoples' drive towards private pension provision and government policies.

"There is a gap between what the politicians offer and what the expectations are as people are pushing for new policies," he explained.

One key driver behind this pressure on the government originates from the 2.5 million Romanians working abroad.

"When no changes for the better could be felt throughout the 1990s, many people in the rural areas took the opportunity to go abroad and start work in countries like Spain, Italy, France and Germany," Neacsu said.

"Now they are supporting their families at home, become investors and sometimes even open small businesses. From being state-aided, they have become entrepreneurial.

"Working abroad they can see how public policies can work in various places. They are not just sending money, they are sending ideas," he pointed out.

Pensions is expected to be a major issue in the upcoming elections for the European parliament later in November, this year as well as in the parliamentary elections a year from now.

Neacsu urged the government to create incentives to bring back the migrated workforce to aid Romania's economy and pension system in the future.

If you have any comments you would like to add to this or any other story, contact Barbara Ottawa on +44 (0)20 7261 4618 or email barbara.ottawa@ipe.com.

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