On behalf of its over 430 members, U.S., international and Romanian companies that ensure through their operations the income for over 250,000 Romanian employees and their families, the American Chamber of Commerce in Romania (AmCham Romania) expresses its concern regarding possible measures and public policies that could affect the wealth of the employees during their career and retirement period, and that could at the same time reduce the development potential of the Romanian financial market.
In this context, AmCham calls for preserving the current private pensions framework, an insurance system that proved its long-term sustainability and which represents a prerequisite for improving the living standards of the future Romanian retirees.
AmCham Romania points out that the demographic realities that Romania currently faces, namely, the accelerated ageing of the population, and the increasing emigration wave especially among youth, actually call for measures to support those systems in place that contribute to maintaining the living standards during the active age, also beyond retirement, through diversified sources of revenue.
Under such circumstances, a long-term sustainable social insurance system in Romania is not merely an objective, but a necessity, and the Private Pensions Pillar II represents a reliable income source, complementing the public pension, as the purpose of such financial instrument is exclusively to accumulate savings for the retirement age.
Beyond the future social impact, the private insurance system presently contributes to the development of the local economy, investing 92% of the assets on the Romanian financial market. The success of the state and corporate IPOs in Romania is largely due to the private pensions funds.
Over 7 million Romanians have accumulated savings amounting to approximately EUR 9 billion through the Private Pensions Pillar II in the first 10 years of the system’s functioning, 15% of this amount representing the benefits of the investments placed by the private pensions administrators.
The high performance in the administration of Romanian’s retirement savings is acknowledged by many relevant international entities, although it has been achieved in the context of low cost indexes compared with the ones used by similar financial instruments in other markets.
Despite the professional management and the real positive profits during the entire period of the private pensions funds’ operations, the evolution of the participants’ savings has been negatively affected by political decisions, such as not observing the calendar for increasing the allocation (in three out of the 10 ten years since the system is in place) or most recently, reducing the allocation.
AmCham Romania reiterates the need to put an end to political measures that sacrifice long-term objectives, in this case, the wealth of the future generations of retirees, to compensate short term budgetary needs. The additional revenues to the public social insurances budget through a potential cancellation of the private pensions’ contributions, will in fact have significant negative consequences.
We believe that long-term saving is the only sustainable solution, and is a must for the Government, the Parliament and all the relevant authorities to understand the long term implications that such change could have on the economy at large, on Romanians’ present and future quality of life, especially with the private pensions system being the only saving instrument that most Romanians contribute to.
AmCham Romania outlined its position advocating for the preserving of the Private Pensions Pillar II, in a dedicated letter submitted to the Romanian Government jointly with the Foreign Investors’ Council, and continues to call for genuine consultations before adopting any related decision on this topic.