Romania's private pension system, which is in the process of being launched this year, has been described as "bold" and "cleverly designed", by Maarten Dijkshoorn, chairman and chief executive of the Eureko financial group, in an interview with ZF.
Domestically, Eureko owns the Interamerican insurance company, which has already enrolled in the private pensions race. "Private pensions besides private health insurance will become a significant part of our activities in Romania," said Dijkshorn; also adding that these would be the group's main lines of domestic business. Interamerican Pensii will operate both on the mandatory private pensions market (pillar II) and on the voluntary pensions market (pillar III).
The legislation concerning Romanian private pensions is one step ahead of the rest of Europe, where systems shift from "definite benefits" to "definite contributions", says Dijkshoorn. The Eureko group has generated global revenues exceeding the value of 14bn euros.
In the case of systems with definite benefits, which are widely available in Western Europe, contributors are aware of the value of pension that they will receive when they retire, but have to save increasingly higher sums in order to secure the respective pensions.
In the case of systems with definite contributions, such as in Romanian and similar countries in the region, employees are aware of the value of their contributions, but do not know the exact amount they will receive when the pension is paid out.
"The disadvantage of this system is the lack of information as far as contributors are concerned, as they would like the certainty of knowing the pension they will finally get," says Dijkshoorn.
The Eureko top man believes confidence is a vital element in any private pension system and it usually takes contributors some time to fully put their trust in these funds.
In Dijkshoorn's opinion, the gradual increase of domestic contributions transferred to private funds will secure the smooth transition from public to private pension systems without encountering any problems of sustainability.
He also believes that private pensions will help make contributors more responsible. Private pension clients would also become aware of the necessity to save amid a crisis in public pensions.
Eureko's head believes that despite the overall success of private pension reforms in Europe, public pension systems still retain a level of importance, particularly in the West. Frans der Ent, CEO with Interamerican and the pension firm connected to the insurance company, believes the public's confidence in private pensions can be gained easily. Private pensions, he believes, could be even more secure than the public pensions.
"Many companies intending to manage private pensions in Romania are backed by financial groups with a far better rating than the actual Romanian state," adds Van der Ent.
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