Romanian lawmakers endorse amendments to pension fund regulations

Romania's Chamber of Deputies adopted, on February 21, as a decision-making body, a project to approve an emergency ordinance that brings important changes to the functioning and management of private pension funds.

Opposition MP Ionel Dancă criticised the amendments warning that the pension fund managers would exit the market since "their revenues would drop by 20% and they would be forced to invest in state-controlled companies," Economedia.ro reported.

There are, however, positive impacts as well enacted by the new regulations for the fund managers, whose revenues are not really linked to their results as of now.

Under the new regulations, the fund managers will be allowed to charge only a management fee calculated based on assets (furthermore linked to the fund's performance) and no fee charged on the monthly contributions (not linked to the fund's performance).

The management fee will be calculated as a percentage of the total assets of the privately managed pension fund, but not more than 0.07% per month, as follows: 0.02% per month if the rate of return of the fund is below the inflation rate; 0.03% per month if the fund's rate of return is up to 1pp above the inflation rate; 0.04% per month if the fund's rate of return is up to 2pp above the inflation rate; 0.05% per month if the fund's rate of return is up to 3pp above the inflation rate; 0.06% per month if the fund's rate of return is up to 4pp above the inflation rate; and 0.07% per month if the fund's rate of return is more than 4pp above the inflation rate.

Separately, the state imposes stricter control of the Financial Supervisory Authority on the funds, their managers and the investments carried out by the funds – which, again, shouldn't scare the fund managers.

Thirdly, the Government allows pension funds to invest up to 10% in a company majority owned by the state. It is not mandatory, though.

Finally, the right of participants and beneficiaries to claim their rights derived from their contributions are made imprescriptible under the new regulations.

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