The largest financial campaign since the 1993 privatisation coupon programme ended last Thursday with an almost 50% higher-than-expected participation rate. People were attracted by two magic words: "private" and "free".
Around 3.6 million clients had chosen a mandatory private pension fund by Thursday, when the four-month campaign ended. This will be the business of the next decade in Romania, with the funds expected to manage between 8 and 10 billion euros.
Over the four months, a fierce battle was fought with advertising budgets worth tens of millions of euros, campaign concepts and strategies, as well as impressive sales forces, which involved tens of thousands of people. Almost the entire country was caught in private pensions fever, considering that the 3.6 million participants account for above one third of the working population and over 70% of employees.
The total number of clients topped even the most upbeat market expectations. Just six months ago, estimates on the size of the market ranged between 2.5 and 2.8 million customers.
On Thursday, mandatory private pensions' polls closed, with the top 5 management companies as the big winners: ING (with around 1.2 million clients), Allianz-Tiriac (900,000), Generali (340,000), Aviva (290,000) and Interamerican (225,000). Jointly, the top 5 funds attracted over 82% of customers on the market. "Given the total number of attracted customers, the campaign was definitely a success, both in terms of participants and the way the process unfolded," says Mircea Oancea, chairman of the Private Pension System Supervision Commission (CSPP).
Pension firms have different views about the end of the campaign, which depend on their achievements relative to the number of attracted customers, but the market sentiment is now a positive one. "The overall feeling is that of a successful campaign, during which public institutions managed developments on the market unexpectedly well. Over the coming period, the main interest revolves around the lottery, whose current rules, we hope, won't change," says Radu Vasilescu, ING Fond de Pensii CEO.
To lure clients, pension firms carried out investments estimated to be worth 500-600m euros.
On average, the sum required to attract a single customer stood at 150 euros (a sum that included the fee paid to agents, advertising, administrative expenses and others), with the investment to be recouped over the next 7-15 years. Over 261,000 sales agents have pursued customers during the past 4 months. The next step for the private pension market is the automatic distribution (lottery) of employees aged below 35, who failed to join a fund or signed with several funds. Between April and May, contributions will start being paid, with the funds this year likely to reach assets worth 300m euros.
Mandatory pensions
Total number of customers on January 17: 3.58-3.6 million
Lottery customers: 300,000-700,000
Total number of customers expected after the lottery: 4 million
Number of agents on the market: over 261,000
Total investments: 500-600m euros
Advertising investments: over 20 million euros
Pension funds' assets in 2008: around 300m euros
Funds' investments on the bourse this year: 60-75m euros
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