Romania’s Finance Ministry wants to diminish the contributions to the mandatory private pension funds, or the second pillar, from 5.1% to 2.5%, sources told Profit.ro.

The measure will be applied starting January 1, next year.

The Finance Ministry has already had talks with industry representatives. In the first meetings, the Ministry came up with the scenario to reduce the contributions from 5.1% to 1%, or an 80% drop.

About 7 million people take part in the mandatory private pension funds. The second pillar was launched in September 2007. Every month, the employer pays a percentage of the employee's’ gross income to social insurance. A part of the money is automatically transferred to each employee’s mandatory private pension account.

Earlier this year the insurer NN Pensii had notified its customers about alleged public discussions on the possible nationalization of the second pillar. This led to a major public scandal, culminating with the Financial Supervisory Authority imposing several sanctions on NN Pensii.

The Finance Minister has also said several weeks ago that Romania might close the mandatory private pension funds system altogether, but later retracted his statement.

Romanian FinMin questions role of mandatory pension funds’ fees

editor@romania-insider.com