The Romanian Government’s intention to suspend the payment of contributions to the privately-administered pension fund – Pillar II – from July 1st to December 31st this year, revealed by a bill published in the Romanian Government’s legislative programme for May-December, has triggered a wave of reactions on the political scene.
The bill which aims to suspend the payment of contributions to the privately-administered pension fund – Pillar II –, from July 1st to December 31st, is the proposal of the National Commission for Strategy and Prognosis (CNSP), and it will not be implemented, Labour Minister Lia Olguta Vasilescu stated on Sunday. Moreover, she said that the pensions law will enter consultations at the end of the current parliamentary session, most likely in July.
The legislative programme was published on the website of the Ministry for the Liaison with Parliament.
According to the document, social security contributions (namely pension contributions) “are to be fully collected at the budget,” with “the suspension of the contributions from 01.07 to 31.12.2018.” At present, 3.7 percent of the social security contributions to Pillar I (the state-administered pension system) are being automatically channelled to Pillar II.
At the same time, the bill mentions a fixed contribution of RON 84 in the first year, which would grow to RON 125 in five years. This contribution would be deducted from the income tax.
Moreover, the bill stipulates a contribution on the part of the employer, equal to that of the employee and deducted from the profit tax depending on the size of the company – 50, 25, or 10 employees.
The latest statements about the Pillar II Pension Fund have stirred a series of controversies, because it was unofficially said that this system would be either “abolished” or set to receive no longer – from Pillar I – the contributions established by law. These contributions have dropped from 5.1 percent in 2017 to 3.7 percent in 2018, against the backdrop in which they were expected to grow to 6 percent in 2018.
Florin Citu, PNL: If they nationalise Pillar II, I’ll file criminal complaint
PNL Vice President Florin Citu stated on Monday that he will file a criminal complaint if the Government decides to nationalise the Pillar II Pension Fund. The statement came against the backdrop of a bill that stipulates that contributions to Pillar II will be suspended from July 1st to December 31st this year.
“In case Liviu, Olguta, Vasilica, Viorel and Eugen nationalise the Pillar II Pension Fund, let me tell you what I will do. I will file a criminal complaint against the aforementioned gang, which I will personally name, and I expect you all to sign it alongside me,” PNL Vice President Florin Citu wrote on Facebook.
Firea on Citu’s criminal complaint: Unacceptable in a rule of law
Referring to PNL Vice President Florin Citu’s intention to file a criminal complaint if the Government decides to nationalise the Pillar II Pension Fund, Bucharest Mayor Gabriela Firea stated on Monday that Citu is afraid of elections and that he should not overturn a legitimate government through such manoeuvres.
“Are they politicians or something else? If that’s how politics is made, by filing criminal complaints, it means we’re no longer in a democracy. It means he is afraid of elections, of the Romanians’ vote. The Romanians’ vote is sacred. They mustn’t overturn a legitimate government through criminal complaints, it’s something unbelievable and unacceptable in a rule of law,” Bucharest Mayor Gabriela Firea stated.
Vosganian: ALDE did not take part in any discussion on suspending Pillar II Pension Fund
Alliance of Liberals and Democrats (ALDE) Vice President Varujan Vosganian stated on Monday, for Mediafax, that his party did not take part in any discussion on suspending the Pillar II Pension Fund and that, at any rate, it would have disagreed with such an initiative.
“We, ALDE, did not take part in any discussion on suspending the Pillar II Pension Fund, and we wouldn’t have agreed with it. At any rate, the funds that are part of Pillar II are exclusively the citizens’, and no law in line with the Constitution could take them from there, and no other long-term solution that would compensate the impact of the demographic evolution’s negative effects on the balance of the pension system was found. I don’t know if Pillar II is a good or a bad solution. It is, nevertheless, up to now, the only one that can raise the financial resources for the payment of pensions when the demographic wave of those who now have around 50 years of age will reach retirement age,” ALDE Vice President Varujan Vosganian stated for Mediafax.
Claudiu Nasui (USR): Pillar II meant independence from the political. They’re taking away our only chance to have a decent and real pension in old age
House lawmaker Claudiu Nasui (USR) states that the Pillar II Pension Fund meant independence from the political, adding that by abolishing it the ruling coalition is depriving people of the chance to have a decent and real pension in old age.
“The Government is taking our money from Pillar II! It’s clear how they will handle the irresponsibly-hiked expenditures. They are taking away our only chance to have a decent and real pension in old age. And, worse than that, they are taking away our only hope of having a sustainable pension system. This is the economic vision of Mr Valcov and of the red economists from the BNR (Florin Georgescu and Liviu Voinea). An economy centred on the state, controlled by politicians and civil servants from ministries, from which they could take as much as they can. Nobody will be independent in such an economy, because we will all depend on them for anything,” Claudiu Nasui wrote on his Facebook page.
The House lawmaker states that Pillar II meant independence from the political, a secure pension that did not depend on how much the state set “on paper.”
“And don’t believe the lies that Pillar II is faring badly, or that the commissions are high, and the administrators are making a profit. The most recent official figures show a yield of 5.37 percent. It’s very good! So that everyone understands, so far these funds received RON 35.7 billion, which they raised to RON 43.2 billion through good investments,” Nasui explained.
He emphasises that Pillar II must not be abolished but defended, so that people could have the chance to a decent pension.
Ciolos on suspension of Pillar II contributions: You irresponsible people, stop spending what you don’t have, stop playing with the citizens’ money!
In a Facebook posting, ex-Premier Dacian Ciolos writes, referring to the Government’s intention to suspend contributions to Pillar II Pension Fund, that PSD is playing with the Romanians’ nerves and purses, believing that it is increasingly clear “that the budget is running on fumes.” He concludes the posting by saying: “You irresponsible people, stop spending what you don’t have, stop playing with the citizens’ money!”
“PSD is playing once again with the nerves and the purses of the Romanians who contribute to Pillar II Pension Fund, after an already-tested method: they launch the idea of a bill that could annoy the contributors, undertaken by institutions of the state (not the “deep” state but the one led by PSD), after which a high-ranking member of the same ruling party comes out and contradicts the bill. They have used this tactic before. It is meant to dissipate the tension that may build up, by straining the nerves over several brief series, so as not to snap the moment the measure is actually adopted,” the ex-Premier writes.
In his opinion, “unfortunately it is becoming increasingly clear that the budget is running on fumes and the pipelines fuelling the citizens’ reserve basin (Pillar II) must be misappropriated toward the Government’s current basin, which is starting to dry up.”
“This is pretty much what the Social Democratic “welfare” boils down to. You become master of the taps and pipelines of those who produce, and you put your label on the end-product, packaged and distributed as being yours. You irresponsible people, stop spending what you don’t have, stop playing with the citizens’ money!” Dacian Ciolos concluded.
RBL: Pillar II retirement account savings trimmed 12.9 pct for 7 ml contributors because of calendar non-observance
Seven million Romanian contributors have 12.9 percent less in their retirement saving accounts because of the non-observance of the Pillar II contributions increase calendar, which resulted in the loss of both the money promised under law and of the money multiplication effect, argue Romanian Business Leaders (RBL) representatives.
“Today, 7 million Romanian employees have 12.9 percent less money in their pension saving accounts because the non-observance of the calendar for the increase of Pillar II contributions has resulted in loss of money promised under the law and of the money leveraging effect. With a 5.37 percent average return overall since the first monthly contributions entered accounts in May 2008 and until end-2015, the system ranks 1st among EU private pension systems, according to a 2016 survey by the Better Finance organization, titled ‘Pension Savings – The Real Return’. For an average annual return of 5 percent on the investment, the value of the individual account doubles in 15 years provided that the monthly contribution stays constant,” RBL explains in a Monday release.
In this context, the organization calls on the authorities to respect their word and not render the entire economy vulnerable and weaken the country’s ability to protect itself against external imbalances for the sake of sorting out, at any cost, short-term emergencies. The failure to comply with the calendar to increase contributions to pension Pillar II seriously harms the confidence of entrepreneurs, investors and the 7 million Romanian employees in the Romanian state’s ability to honor its promises.
According to the cited source, the current pension system is the only structural reform in Romania that has lasted for a decade to the successive ruling formulas. It is a system that contributes to the development of the economy – on the one hand, through investments on the capital market and on the other hand, by offering an alternative financing solution to Romanian entrepreneurs and local public authorities.
“Despite these benefits, the Romanian authorities did not respect their promise to increase the contribution to Pillar II pensions to 6 percent by 2016 and even take contrary action – in 2018 the contribution was cut from 5.1 to 3.75 percent. Failure to comply with the calendar for rising contributions to the Pillar II pension scheme provided for by the Law on Privately Managed Pension Funds has already produced cumulative negative effects,” the release said.
Romanian Business Leaders (RBL) is a non-political, non-profit NGO that provides a platform for action and social involvement for entrepreneurs and private business owners.
According to Financial Supervisory Authority data, assets managed by the mandatory private pension funds amounted to approximately 42.53 billion lei as of March 31, 2018, up 25.22 percent from March 31, 2017.
Prognosis Commission: Payments for Pension Pillar II, not to be suspended as of July 1; scenarios released by mistake
The information on the suspension of payments for Pension Pillar II was just a scenario released by mistake, and the authorities are assuring that this will not happen as of July 1, Ion Ghizdeanu, chairman of the National Prognosis Commission (CNP) told AGERPRES on Monday.
“We are doing all kinds of assessments, scenarios, internal analyzes. (…) So the whole line is an internal analysis, we do not even have a draft with something like that. It was [the information extracted, ed.n] from scenarios and that line with Pillar II was erroneously entered, and to make it even clearer, there was no talk of suspension. It was an error that we assume and we will see who introduced it and we assume this. There are also two errors there, taken also from scenarios, analyzes, and evaluations. The whole post about Pillar II is an error,” Ghizdeanu explained.
According to him, the institution he represents has not officially submitted any proposal on this issue.
Dragnea says payments to pillar II may be suspended or not for some time
National leader of the Social Democratic Party (PSD) Liviu Dragnea said on Monday that depending on the analysis of the financial data to be made to the Government related to the pension funds, it will be decided whether or not payments to pension pillar II should be suspended for a period.
“When that analysis is over, and if such decision is reached, which is an intent in the government programme, a period of option will be created for every citizen to pay into the pension pillar II, and a suspension in payments will become clearer after the analysis and after a discussion with the private administrators of the public money from pillar II funds. To make sure that the millions of Romanians who are now contributing to pillar I and pillar II – and some only to the pillar I – maybe there are more people from pillar I who want to switch to pillar II, and then a bigger sum is needed. A decision will then be made whether or not to suspend the payments or to continue them as before and make further adjustments. It is just a matter of finance and accounting that will be decided with the administrators involved,” Dragnea said at Parliament Palace in response to whether or not PSD and the PSD plus ALDE government is considering suspending paying contributions to pension pillar II for six months.
Dragnea added that this subject should be closed this year, and that all these measures are designed for Romanians “not to be fooled by a well-oiled manipulation campaign” and that they have the opportunity to knowingly choose one way or another.