Government modifies private pension payments: more money at the beginning, shorter collection period

The government approved yesterday the draft law on the payment of private pensions, with some changes compared to the initially circulated version, namely increasing the amount of money that a beneficiary can withdraw upon reaching retirement age and reducing the payment period for the remaining amount.

Thus, contributors to the mandatory private pension will be able to initially withdraw no more than 30% of the accumulated amount, compared to 25% as provided for in the previous version of the project, and the rest of the money will be paid over a period of no more than eight years, compared to ten as previously circulated. The possibility for pensioners to receive their money throughout their lives, as a life pension, after withdrawing the first installment of no more than 30%, remained unchanged.

Dan Armeanu, vice president of the Financial Supervisory Authority (ASF), declared at the end of the Government meeting that the draft law is related to accession to the OECD. "It is a bill that practically fulfills a strategic objective that Romania has at this moment, namely that of joining the OECD. Following the evaluation we had from the OECD, it was found that the private pension system in Romania is a sustainable system, very well supervised and regulated, which has an important contribution to the economic development of Romania and, always, we had a priority recommendation to fulfill, namely the payment law", said Dan Armeanu, quoted by News.ro.

The ASF representative added that the bill meets all European standards, is established according to OECD principles and "defines from a legislative point of view the entire architecture of the pension system in Romania". Dan Armeanu also said that the rules will also apply to voluntary private pensions - Pillar III and the future Pillar IV - of occupational pensions.

"Including the law for Pillar III and the law for Pillar IV, in all these laws we have as our objective the payment of a sum of money, a pension. This is the product, a pension type", said the ASF representative, according to the mentioned source. Currently, beneficiaries of private pensions in our country can choose between a single payment of the entire amount accumulated upon retirement and a staggered payment, in monthly installments, for a maximum period of five years.

• AURSF and George Moţ: "Limiting citizens' rights and transferring them to the "care" of the state and the financial industry, which will fully benefit from the provisions of the law, brings more collectivization than a democratic state"

Since its launch, the draft law on the payment of private pensions has been criticized in the public space. The Association of Romanian Users of Financial Services (AURSF) and the private pension expert and founder of desprepensiiprivate.ro, George Moţ, argued yesterday that the draft ignores the interests of all participants in the private pension system in our country.

"The adopted draft seriously violates the rights of citizens to dispose of their own financial resources and does not in any way support financial education in this area. Limiting citizens' rights and transferring them to the "care” of the state and the financial industry, which will fully benefit from the provisions of the law, brings more collectivization than a democratic state and creates an oligopoly market to the detriment of a healthy competitive environment. Even more worrying is the fact that all these aspects have been officially notified several times to state institutions and their officials by experts and civil society,” the statement said.

According to the document, George Moţ and/or AURSF officially submitted during the debate period proposals and observations on the dangers of the project in this form to the Ministry of Labor, the Financial Supervisory Authority, the Prime Minister's Office and the four governing parties: PNL, PSD, USR and UDMR. In addition, they expressed their availability and requested the organization of public debates to discuss them in an official setting together with all other stakeholders.

"It is absolutely necessary for the law to provide for the right of the citizen to establish the level of his monthly pension and the payment period, of course within well-established limits. At the moment, this right does not exist, it being replaced by the obligation of the citizen to accept any pension established by the Government," said George Moţ, founder of desprepensiiprivate.ro.

"Romanians have the lowest healthy life expectancy at retirement age in the European Union. Under these conditions, it is not acceptable to impose, during the game, an eight-year period for the payment of private pensions, nor a maximum ceiling that can be withdrawn from the assets held by the participant upon retirement," said Alin Iacob, president of AURSF.

According to other opinions, the draft law is intended to protect fund administrators, who currently do not have massive withdrawals but in ten to fifteen years will face a payment peak.

But Radu Crăciun, president of the Association for Privately Administered Pensions in Romania (APAPR), stated that the law on the payment of private pensions has no justification from the point of view of the possibility or impossibility of pension funds to make payments. "Pension funds are very liquid and can handle payments without any problem, including the upcoming payment peaks," he said at a conference almost two weeks ago, during which he presented how the system will work. "We, as a professional association, look a lot at Europe. The administrators who manage money in Romania manage in many other European countries, and the percentage of 25% is not very different from what is practiced in other countries. In some it is 30%, in others 15%, and from the information we have, I think that only in three European countries there is no provision for partial withdrawal. In contrast, countries similar to us, with a similar system - Pillar I, Pillar II and Pillar III - such as Poland, Bulgaria or Croatia, all have this system, through which part of the amount can be withdrawn," Radu Crăciun also said.

After the Government's approval yesterday, the law will be sent for debate and approval in Parliament, whose session begins on September 1, and subsequently for promulgation by President Nicuşor Dan.