Pension funds in Romania claim the state took EUR 1.1 bln from the contributors’ money

While Romania’s Government plans to make the mandatory pension funds optional, pension fund managers claim that the state has already failed to meet its obligations towards pension fund contributors by sending less money to pension funds than initially agreed in 2008, when the system was launched. Thus, Romanians who contribute to the mandatory private pension system have EUR 1.1 billion or 12.9% less that they should have had in their accounts, according to the Association for Private Pension Funds in Romania – APAPR. The law for the creation of the private pension system provided that the contributions the state sent to private pension funds should have increased from 2% of the gross wage in 2008 to 6% in 2016. However, the contribution was capped at 5.1% of the gross wage in 2016 and then reduced to 3.75% of the gross wage starting January 2018. Mandatory private pension funds reached assets of RON 41.7 billion (almost EUR 9 billion) in February 2018, some EUR 1.5 billion of which are the gains from investments. The average yield of the private pension funds from May 2008 until February 2018 was 8.8% per year, according to APAPR. However, the state wants to make contributions to the private pension funds optional and to draw more money to the state pension fund. Some Government officials even claimed that the state pension fund has higher yields that the private funds, although the state doesn’t invest the collected contributions but uses them to pay the pensions of current retirees. However, finance minister Eugen Teodorovici said on Tuesday, April 17, that the state may start to invest some of the pension money. Meanwhile, liberal MP Florin Catu says the state doesn’t have any surplus to invest and all money will be used to pay for the pension increases promised by the ruling coalition. Romanian state readies private pension transfer to state system editor@romania-insider.com