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June 30, 2022

Compulsory private pensions’ output, twice higher than inflation

The average output of compulsory private pensions (Pillar II) stood at 11.7 per cent in the May 2008 – December 2011 period, being more than twice higher than the average annual inflation rate of 5.3 per cent registered during the same period, a communiqué issued by the Romanian Pension Funds’ Association (APAPR) shows. “Overall, from the date of their launching to December 2011, the Pillar II funds generated a net profit of RON 730 M for the participants (net assets minus gross contributions to the system),” the aforementioned document reads.

APAPR calculations show that the average output of optional private pensions (Pillar III) stood at 7.3 per cent in the May 2007 – December 2011 period, above the average annual inflation rate of 6.1 per cent registered during the same period.

In 2011 the number of participants to Pillar II grew by 330,000 to 5.52 million, in line with the APAPR prognosis issued in January 2011, which estimated a growth to 5.5 million. The number of new participants was 21.6 per cent higher than the one in 2010, against the backdrop of a slight economic and labor market recovery, APAPR informs. The new assets administered by the nine compulsory pension funds grew by 48 per cent to RON 6.42 bln compared to December 2010, in line with the APAPR prognosis that anticipated assets of RON 6.5 bln. The gross contributions that the National Public Pensions House transferred to the pension funds totaled RON 1.98 bln, up by 26.4 per cent compared to 2010.

According to APAPR, the collection and density of contributions nevertheless continued to worsen in 2011. Thus, while in 2010 the average degree of collection (participants with transferred contributions compared to the total number of participants for the whole year) stood at 66.4 per cent, that figure dropped to 62.8 per cent in 2011.

Gross contributions collected by pension funds totaled RON 108.3 M in 2011, slightly above the RON 103.8 M level registered in 2010 and the RON 105 M level registered in 2009. The number of new participants grew by 12.6 per cent compared to 2010. According to APAPR, approximately 150,000 new participants could join Pillar II pension funds this year, as a consequence of Law 263/2010 and Emergency Ordinance 98/2011. In March the contribution transferred to Pillar II will grow from 3 per cent to 3.5 per cent of the participants’ gross monthly income.

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