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CNPAS: Ratio between number of public retirees and public employees is worrying

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The ratio between the number of the retirees in the public system and the number of public employees is worrying, namely 0.7 percent, Chairwoman of the National Pensions and Social Security Office (CNPAS) Ileana Ciutan told a seminar on private pensions Wednesday.

According to her, the number of the people working in the public system amounts to 4.7 million, whereas the number of the persons receiving pensions in the public system totals 5.7 million, leading to a 'worrying' ratio that explains the deficit of the pension budget, as well as the fact that sometimes the state budget must support the public pension system.

'This decline in the number of workers negatively influences the support of the public system and the alternative of the private system is not only necessary, but also mandatory,' Ileana Ciutan underscored.

In her opinion, Romania introduced very lately the Pillar III that takes over a part of the individual contribution, but that will start to grant pensions 15-20 years from now, maybe even 25 years. During this period, the pressure upon the public pension system shall be the same or perhaps shall increase, given the fact that the sector copes with many other problems such as this lower number of employees and a high number of pensioners.

Moreover, the pension system goes through a crisis period worldwide. Besides, there are other issues making this situation even more serious, population ageing, low life expectancy, declining birth rate, the international migration of workforce that became a phenomenon. According to the CNPAS president, many EU countries, including Romania, have to bear very high costs ranging between 5 and 10 percent of GDP, in some states even more, in order to ensure the financial resources allotted to the payment of pensions. Ileana Ciutan stressed that the funding sources for pensions must be diversified, the private pension system needs to be further developed and a long and medium term common strategy of the public pension system with the private system has to be drawn up for the future generations.

 

Private pension funds to manage assets of 11 bln euros in next 5 years

 

The total value of the assets managed by the private pension funds both under Pillar II and Pillar III will amount to 11 billion euros over the next 5 years, from the current amount of 2 billion euros, Romanian Association of Privately Administered Pension Funds (APAPR) Vice President Mihai Coca-Cozma told a seminar on private pensions on Wednesday.

In addition, Cozma believes that in the next 5 years, the number of the voluntary insurers (Pillar III) will stand at 700,000-750,000 considering the present number of more than 280,000.

'I believe that in the next five years we shall have a pension system made up of the same three pillars (state-run, Pillar II, Pillar III - editor's note). We shall have of course the Payment Law of pensions, I am almost positive. Moreover, I foresee that the assets will total eleven billion euros and the market will continue to develop. In my opinion, the total number of voluntary private insurers under Pillar III will get to 700,000-750,000 in the next five years,' he also said.

According to him, the annual average yield of 11.5 percent the pension funds obtained under Pillar II in the last five years is very good given the situation the markets went through over this period.

'Thanks to our management, we succeeded in adding a net earning of 1.17 billion lei to the individual accounts of all participants, namely 16 percent of the contributions. We received 7.3 billion lei gross contributions and the assets currently amount to 8.4 billion lei,' Mihai Coca-Cozma said.

As regards Pillar II, 5.7 million people take part at present in the mandatory private pension funds.

In the case of Pillar III, the optional pension funds, the number of participants is 281,000 and the assets stand at 542 million lei with an annual average yield of 7.64 percent (since May 2007).

APAPR has 16 members, 6 million managed accounts and assets of 2 million euros under management, including both Pillar II and Pillar III.

 

Each active person on labor market should sustain two pensioners, not one as so far

 

Future generations, active on the labor market, should sustain two pensioners, not just one as so far, on the backdrop of an accentuated aged population, which puts an increasing pressure on the mechanisms of social protection, said on Wednesday, in a seminar on private pensions, the president of the Committee for budget, finance, banking and capital market of the Senate, Ovidiu Marian.

'The demographic policy should be of a major concern for the future legislative because, according to statistics, every child today should sustain two retirees by 2050, not one as until now, which will be very difficult', Ovidiu Marian said, referring to estimates of the European statistics body, Eurostat.

The senator added that the international institutions estimates placed Romania on the 'worst demographic position' of all the EU countries, which leads to a growing pressure on the public pension system.

'Romania's baby-boomers, namely the 1.7 million people born in the years following the entry into force of the Decree 770/1966 (the so-called 'decree children' - editor's note) will exit the labor market as sudden and massive as they entered it. In 15 to 20 years, when they will hit the retiring age, contributions of a third of Romanian employees will disappear from the budget and the state will have to support those who are active', explained senator Ovidiu Marian.

The President of the Senate Budget Committee also said that the massive wave of retirees should be supported by those born in the years 1990 - 2000, in a period of extremely low birth rates.

'People who cannot add to the pension money from savings or from other assets will face one of the following situations: to work beyond the age of retirement, to retire later, or accept a reduced standard of living', said Senator Ovidiu Marian.

The President of the Senate Budget Committee said that, 'actually, for young people today, the hope of a decent income can be saving into a private pension system'.

 

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