The emergence of universal private pension funds with compulsory contributions has been delayed in Romania to such an extent that they risk no longer being useful by the time they are finally set up.
After the integration into the European Union expected in 2007, private pension funds from the EU area will also be free to sell pension products in Romania. In line with current legislation the first Romanian universal pension funds are due to emerge on the Romania market as late as 2008.
"No other EU member country has such a provision. If this stands, it will in effect turn the entire law on the setting up of compulsory private pension funds on its head," said the chairman of the Association for Privately Managed Pensions in Romania, Tudor Moldovan, on Tuesday during the "The insurance system in the perspective of EU integration" conference organised by Eurolider.
After 2007, direct contribution to private pension funds from Italy, Germany or Hungary will become more attractive since there are already two million Romanians working in Western Europe and their number is rising. Moreover, people have little trust in Romanian financial surveillance institutions, given the SAFI, FNI or Bancorex scandals, where the cases of fraud are yet to be punished.
Two laws on the setting up of private pension funds were adopted in 2004. The laws applied to occupational funds (with voluntary contributions) and universal funds (with compulsory contributions) for first-time employees below the age of 35; however, both are considered too restrictive and impractical by investors.
On the other hand, Mihai Seitan, the new secretary of state at the Ministry of Labour, Social Solidarity and the Family (MMSSF) and chairman of the National Pensions and Social Security Office, said on Wednesday that his priorities included modification of the two laws as well as the Labour Code. Seitan is an expert in private pensions.
"We have been discussing private pensions legislation for 12 years. I have the feeling that we are a country that knows how to think, but is incapable of putting anything into practice. Meanwhile, the costs related to this reform are mounting. At this moment, we are concentrating on three directions for the short term: the public system, private pensions and the Labour Code," said Seitan.
He explained that for the public pension system he would continue to apply the programme of recalculation in line with contributions made over the years and would start "cleaning" the social security system of a series of expenses (such as maternity leave), which should be covered directly by the state budget.
sorin.pislaru@zf.ro
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