Private pension managers fail to protect contributors’ savings

The net asset value of the fund unit for the mandatory private pension funds (Pillar 2) decreased on average by 3.3% during 2022, Ziarul Financiar reported quoting data from the Financial Supervisory Authority (ASF). The decline ranged between -0.43% (Metropolitan Life managed by Metropolitan) and -4.7% (NN managed by NN).

The dynamics of the Pillar 3 pension funds were even worse, which is a detail the fund managers didn’t have the chance to explain properly (why Pillar 2 funds, mainly covered by media, performed better than the voluntary Pillar 3 funds).

However, the big problem is not the moderate nominal decline in the value of the NAV per unit - but the inflation that eroded a quarter of the real value of the contributors’ savings as of the beginning of 2021.

The NAV per unit has recovered, for Pillar 2 funds, to levels close to those seen in January 2021. This means that the savings in contributors’ accounts as of January 2021 returned to their nominal value.

But the consumer prices have increased by 24% over the nearly two years to November 2022 (latest inflation data available). Even the wages increased nearly 20% over the past two years to October 2022 (latest data available). Even if discounting for the “wage inflation”, the savings of the contributors to Pillar 2 funds lost a fifth over the past two years. The contributions made meanwhile were diluted to a smaller extent yet still significant.

Another big problem is the way ASF evaluates and reports the performance of pension fund managers. The November 2022 report (the latest available) indicates an “annualised rate of profitability” at levels between 3.4% and 4.5% for six of the pension funds (medium-risk) and 4.3% for the high-risk pension fund. The “benchmark” level, against which individual profitability levels are judged and assessed, was calculated at 0.12% for medium-risk funds and -0.88% for high-risk funds.

In other words, all the Pillar 2 funds outperformed by far the benchmark while losing at least a fifth of contributors’ money at the same time.

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