"We are not planning to dismantle the pension system’s 2nd Pillar, and even if we were, this is not possible," Romania's labor minister Marius Budai stressed in a press conference on February 20.

On the contrary, he added, transfers to the seven privately-managed pension funds will increase to RON 8.65 billion (EUR 1.84 billion) in 2019, compared to only RON 7.71 billion in 2018, local Agerpres reported. The assets in the pension portfolios managed by the private managers hit RON 47.6 billion (EUR 10 billion) at the end of January.

The statements come in the context of the emergency ordinance (OUG) 114/2018 endorsed by the Government on December 28 and coming in force one day later, which sets more restrictive provisions for 2nd Pillar pension funds. The ordinance is now subject to debates in the Parliament before its final enactment as a law.

Under OUG 114, fund managers are required to increase their capital by up to 10% of the assets under management (the 10% ratio applies to six out of the seven fund managers), meaning that they should come up with some EUR 800 million worth of fresh capital by the end of the year. Furthermore, the fees they are allowed to charge were diminished and pegged to the yields generated by the managed funds. This is seen as a secondary issue, though, as compared to the capital requirements.

A third key amendment to the 2nd Pillar design brought by OUG 114 is that the contributors can pull out and opt for contributing to the 1st Pillar (state pension fund) only, after five years of contributions to 2nd Pillar.

Comments about “de facto nationalization” of the 2nd Pillar seem exaggerated at first sight, given the provisions explained above, but the capital requirement is so restrictive that might squeeze out all the managers from the market leaving the state with the only option of taking itself the responsibility of handling contributors’ savings.

editor@romania-insider.com

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