PM confirms Gov’t intention to cut Pension Pillar II contributions

PM confirms Gov’t intention to cut Pension Pillar II contributions

‘The state is managing pensions better than private companies’

The government is preparing an emergency ordinance to cut the contributions to Pension Pillar II, sources quoted by informed earlier on Friday. Later on in the afternoon, PM Mihai Tudose confirmed the Evexutive’s intention in this respect, saying that, according to the Finance Ministry, “the return of the Pension Pillar I is higher than the one obtained by the Pillar II” and that for this reason he asked for a review of the opportunity to diminish the contribution committed to the privately-managed funds.

“As it is a contribution committed to a zone with a higher return, the funds for every Romania’s pension will rise. It’s a way to increase the pension in the future (…) We found out that the state is a better administration in this respect,” the premier argued.

On the other hand, Tudose denied allegations that the Gov’t would plan to nationalize the Pension Pillar II.

“The debates have started from a wrong premise, that we want to abolish the Pillar II, which is not true, that we want to take money from Pillar II, which is not true. What is already there remains there, only that we’ll give more money to the Pillar I if it’s better for the Romanians,” Tudose explained.

Simulations are being conducted and talks will be held on this topic, the document should be approved in about two weeks.

The motivation is related to the alleged low yield of Pillar II, government sources say. The analyses carried out by the Finance Ministry have revealed that the yield of Pillar II is lower than the one of Pillar I.

Thus, a shift of 2-3% to Pillar I would ensure a higher return for the citizen when getting retired, the sources say, adding that the decision would be made by emergency ordinance.

Information released earlier this week said the Finance Ministry plans to cut by half the contributions to compulsory pension fund, Pension Pillar II. If enforced the decision will dramatically influence the dynamic of the amounts accumulated in the 7 million personal accounts of the participants. Currently, the state pays 5.1% to Pillar II, however the quoted sources said the government intends to cut this amount to 2.5%. In 2017 the level should have been increased to 6%, but the executive decided to freeze it at the last year’s level.

When the compulsory private pension system started in 2008, the schedule provided the increase in contributions by 0.5 percentage points every year, from 2% of the gross earnings of the employee in 2008 to 6% in 2016.

Deputy PM Marcel Ciolacu confirms Gov’t intentions. ‘Some figures are of concern’

Deputy Prime Minister Marcel Ciolacu said on Friday, at Neptun, at the seaside, where the social-democrats want to agree upon the parliamentary strategy for the autumn session, that indeed, the government want to bring changes to the Pension Pillar II, reports.

Ciolacu said the decisions are needed not because the budget has no money, but because, following analyses, “some figures are of concern in regard to the future pensioners.”

“It’s not the government that started the discussion, and not because there is no money. The receipts and the trend show we have no problems with the money and the future budget rectification will be positive. The issue of Pillar II came from the Financial Supervisory Authority (ASF), they came out with several conclusions. They had a meeting with the Pillar II administrators and with the Finance Ministry. There’s no decision yet on Pension Pillar II, it’s not about closing it down or marginalization. The political decision of the government will envisage the best solution for the citizens. I don’t want to offer details about the figures, the people from ASF should better provide them. We are further looking at the figures, there are some figures of concern. It’s about efficiency,” Ciolacu said.

ASF reiterates: Pillar II is solid. It has positive returns

In turn, the Financial Supervisory Authority (ASF) had a response in a statement today, assuring that the Pension Pillar II is a solid one, generating positive returns for participants, also reflected by the analysis of the private pension market on June 30, 2017.

ASF also reiterates that, according to the legal provisions in force, the Authority does not have the right of legislative initiative to amend the normative acts regulating the privately managed pension system .

”ASF is looking very closely the net returns and assets of privately managed pension funds, and if there are detected failures or discrepancies in the system, it will quickly intervene to correct them,” the statement reads./IBNA