The assets of the compulsory pension funds (pillar II) could reach 430m euros (1.9bn RON) by the end of 2010, reveals a survey on the development of the private pension system commissioned by the government and conducted by the National Forecast Commission (CNP).
The number of employees to join a compulsory pension fund is expected to come to 2.7 millions in 2008, before rising to 4.7 millions in 2020, when the capitalised value of assets raised by these pension funds is to hit 24.4bn euros (over 75.5bn RON).
Judging by the experience of other countries where the private pension system is already operational, the Commission estimates 70% of contributions by employees will be invested in T-bills, 15% in equity and 15% in deposits.
"The return projected from the assumption on the inter-sector allocation of net contributions left after the payment of the total fee revolves around 8%, (...), similar to the average profitability rate expected to be registered in the Romanian economy in the following years," shows the CNP survey.
The return was calculated after the management and operating fees were deduced from contributions.
In most states where private pensions were introduced, fund managers have cautious investment policies and place more than half of contributions in T-bills and very little in stock.
Only in countries such as the Netherlands, the UK and the US pension funds are less risk averse and the weight of stock in managers' portfolio goes beyond 30%.
In 2008, net sums (not including fees) transferred to compulsory pension funds will exceed 200m euros (688m RON), and will rise to 2.8bn euros (over 8.8bn RON) per year in 2020.
The increase will be due to the rising number of employees to be included in the system and to the fact that transferred sums will go up by 0.5% per year, from 2% of the contribution owed to the state in 2008 to 6% in 2016.
"The introduction of privately managed pension funds has the advantage of a high economic growth rate: on the medium term, by 2013, GDP will rise by an average 5.8% against 2005. On the long term, by 2020, GDP will go up by an average 5.7% against 2005. This economic growth will translate into a rising number of employees and of taxpayers implicitly," shows the survey.
Compulsory pensions will be launched in August, and employees aged below 35 will have four months to choose a fund toward which they will channel part of contributions owed to the state. For employees aged between 35 and 45, joining a fund will be optional. Research shows about half of them will choose to contribute to a pillar II pension fund.
Companies planning to manage compulsory pensions include ING, BCR, Allianz-Tiriac Pensii Private, Aviva, Interamerican, Omniasig, BRD, Slovenia's Prva and BT in partnership with Aegon Dutch company.
Compulsory pension funds
Their assets are likely to reach 430m euros (1.9bn RON) by the end of 2010
The number of employees to join a compulsory pension fund is expected to reach 2.7 millions in 2008, before rising to 4.7 millions in 2020, when the capitalised value of assets raised by these pension funds is to hit 24.4bn euros (over 75.5bn RON)
The National Forecasts Commission estimates 70% of contributions by employees will be invested in T-bills, 15% in equity and 15% in deposits
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