The Foreign Investors Council (FIC) on Wednesday voiced concern about possible public policy measures on the pension savings scheme through the three pillars and the lack of transparency in which these are being analyzed and promoted, and considers the mandatory privately-managed pensions (Pillar II) are essential for today’s employees to be able to maintain a satisfying living standard at the end of their active life.
The FIC opines that the reform of the Pension Pillar II cannot be justified by the trend in the public debt or the deficit.
“The three-pillar system is fundamental taking into consideration the projections for Romania’s demographic evolution in the following decades. In this context we believe mandatory private pensions are essential if current employees are to maintain a reasonable living standard at the end of their active lives,” shows a press release issued by the FIC on Wednesday.
In FIC’s opinion, the reform of Pillar 2 cannot be justified by evolutions of public debt and current deficits. “The future welfare of current employees cannot be jeopardized by short term thinking. Great calamities and wars might raise legitimate claims to old-age savings in Pillar 2 but deficits and public debt must be brought on a healthy trajectory with different means. The business community in Romania has warned for the past five years that the mix of lower taxes and higher public spending will have a destabilizing effect,” the FIC release maintains.
“The money which is currently being saved by employees in Pillar 2 are not only a form of insurance for the future but there is also an important source of funding for today’s economy. 92% of the 42 billion RON that have been accumulated up to know are being invested in the local capital market. The Romanian Government and Romanian companies use this money to fund their expansion and development. The Romania capital market would suffer terribly by the absence of pillar 2.
FIC member companies believe that the level of contributions to Pillar should not lowered in any way. To the contrary the level should be gradually increased to 6% (it is currently 3.75%) in order to have a reasonable savings rate for old age. Governments have a natural tendency to be less focused on long term dynamics and to focus their attention on the pressing issues of the day. However, sustainable pensions systems take decades to build and FIC encourages Romanian policy makers to keep the course started 10 years ago because experience and calculations have shown that it is the right one.
Together with the American Chamber of Commerce in Romania we have shared with the Government a position paper detailing our arguments for the preservation of the current pension systems and, as always, we are available for dialogue,” the Foreign Investors Council shows in the release issued on Wednesday.
Dragnea says no draft on pension system reform has been officially presented
The Chamber of Deputies’ Speaker Liviu Dragnea, Social Democratic Party (PSD) leader, said on Wednesday that no draft on the pension system reform has been officially presented.
Asked how he comments on a series of skeptical statements by foreign investors that the reform of the pension system is allegedly done with a lack of transparency, Dragnea said he respects any investor in Romania but also respects “the people who speak the truth and who voice opinions on things having been carried out, not rumors.”
“Otherwise, I conclude that it is a political action. It is very simple: when any private or public institution voices its opinion on something that does not exist, it is only part of a chorus of people who have the role to criticize. What reform of the pension system are we talking about when there hasn’t been anything official, a clear discussion hasn’t begun yet? What pension pillar II can we talk about, when no one has officially presented any draft?” Dragnea said at Parliament.
“I am tougher and Mrs. Prime Minister is more elegant. I am telling you: it is a stupidity and a lie, so as not to complicate the answer any further,” added the PSD leader, asked if the Government intends to introduce a zero quota for contributions to the pension pillar II.
Liviu Dragnea and PM Viorica Dancila attended the launch of the 2018 edition of the State Aid Scheme, an event organized at the Palace of Parliament by the Ministry of Business Milieu, Commerce and Entrepreneurship.