The deductibility cap for contributions to optional pension funds should be doubled and the 2% contribution from the gross salary to compulsory private pension funds should be raised considerably so that the private pension system could really work, states Mircea Oancea, chairman of the Commission for the Supervision of the Private Pension System.
"After the first private pension funds become operational and anxiety wears off, we will have to fine-tune the two laws so as to make the system more appealing. In 2-3 years, contributions to compulsory private pensions should come to at least 6%," explained Oancea.
Private pension legislation has been debated for over 10 years, with the biggest concerns, which in fact stood in the way of reform endorsement, being the deficit induced in the public pension system and the possible fraud.
According to some previous statements by Oancea, the first contributions to optional private pensions (the so-called pillar II) should have been made starting January 1st, 2007.
"Firms did not expect requirements to be so strict. By the time the licensing process started, they had not gathered the necessary papers," explained Oancea.
As a result, the first contributions to pillar III may come in late March and by the end of 2007 we cannot speak about contributions to pillar II, no matter how tight the deadlines for issuing the secondary legislation on fund licensing and on contributors joining funds," maintains CSSPP chairman.
Oancea estimates a number of 200,000-300,000 people would contribute to optional private pension funds by yearend, hence a level of assets to invest of 40-50 million euros.
Licensing for the management of pillar III is quite complex. Firms must first get the management authorisation and the approval on the pension scheme, then go to the market and attract the first 100 founding contributors and then go back to the Commission filing an application for the setting up of the fund.
Meanwhile, though, foreign pension funds, from the EU, can enter the Romanian market.
How will the procedure of joining a fund and making contributions to it unfold exactly from the point of view of contributors and employers?
After the Commission licenses the management firm and the pension fund, an employee whom a marketing agent of the management firm persuades to join the fund gets a form from the Fund he or she takes to the employer.
The form is filled in by the management firm's representatives and signed by the future contributor to the pension fund. Once the form is filled, the management firm, the employer and the contributor get a copy of it each.
The employer is bound by law to transfer the contribution to the fund on a monthly basis together with social security contributions.
Private pension promotion costs $1m
CSSPP is working on the conditions of contract books together with the Labour Ministry
There are printed materials, audio-video spots and promotion events. The tender will be organised by the Labour Ministry, the Unit for the Management of the Project. This will be a one-year campaign
"The idea is for people to understand private pensions. This is about raising people's awareness," explained Oancea
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