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“We have fewer and fewer employees, that is, those who pay pensions. In the absence of social contributions, the system cannot exist. After 2030, the number of pensioners will increase rapidly, in that year more than 1.5 million Romanians will retire and the state will have to pay their pension. Imagine the interval 2030-2035 in which the state will have to pay the pensions of more than 6-6.5 million retirees and the number of employees will be a maximum of 4.5 million “, said Claudiu Vuță, economic analyst and founder of Project – E.ro in an online conference dedicated to the x-ray of the pension system.
“The current pension fund is actually a redistribution system called CAS,” added Vuță. Following the model of Western European countries, in 2007 Romania organized the pension system so that Romanians had the opportunity to redistribute part of Pillar 2, which is private but also mandatory.
”The CAS fee of 25% is applied to the gross salary and goes from 21.25% to Pillar 1 and 3.75% to Pillar 2. 3.75% is not enough money to strengthen Pillar 2. 6% had to be legal. Thus, it becomes urgent for Pillar 2 the State, together with specialists in the matter, to seek solutions, think in the medium and long term, so that current employees also benefit from decent pensions when they retire from work. I want to see solutions, not populism, that people get involved, not demagogues. Only by promising money to pensioners will we succeed in one thing: making the pension fund even more deficient. According to data from the Romanian Ministry of Labor, there are 4.7 million pensioners and 5.6 million active employees. Let us look carefully at this public system and understand that it is sustainable only when the number of employees exceeds that of retirees, when there are more people employed than unemployed, according to the economic analyst.
- According to a study by Chartered Financial Analyst (CFA) Romania, the implicit debt of the state with future pensions was, at the end of 2015, 1,295 million lei (approximately 288,000 million euros, at the EUR / RON exchange rate in 2015), or about 182% of GDP for that year. Adjusting the figures published in 2015 with subsequent developments and foreseen by law, the current value of the accumulated pension rights is estimated at 2,821 million lei at the end of 2021 (approximately 590,000 million euros at the current exchange rate), which it represents 250% of GDP. the estimated nominal value for that year.
The results of the CFA analysis show that:
- The CNPP deficit will skyrocket from 2021;
- It could take almost a decade for the deficit to return to “normal” values of around 1% of GDP;
- Demographic trends are very worrying: more retirees and fewer employees.
As a result of this evolution, the dependency ratio increases from 47 (in 2011) to 63 (in 2060) young people and the elderly compared to 100 adults.
In addition, in the period 2025-2035 there will be a peak of retirees, related to the generation called “generation of decrees”.
“Our pension is the one that will count to maintain our standard of living that we hope and work for throughout our lives. We often hear people talk about insecurity, uncertainty about the pension, many say they will not “get the pension.” With each passing day, it is certain that the state will not be able to provide us with that standard of living that we want and that is our right to contributions. We have to think about retirement from the first salary, to inform ourselves and see what our responsibility is, to become aware of the importance of saving. There must be a serious discussion about solutions at the level of decision makers, it is time to think long term and ask for it from the public agenda ”, explains Daniela Șerban, finance professional.
For his part, Horia Gustă, president of AAF, says that the Pillar 1 pension system is built differently from all other systems. It is not based on what you really contribute, but on some formulas, on some pension points that you benefit from when you retire. “It is important that people understand that they should not only trust that pillar, but they should consider having an employment contract and make sure their contribution to pillar 2 is transferred. We need to ask to be informed about pension pillars and contribute to them. The specter of the nationalization of the 2nd pillar of pensions “haunted” a lot and in this case the solution is still the 3rd pillar. At the same time, I recommend to all those who work in the private system that when the funds appear occupational pension is discussed with the employer had such a pension. Let’s not forget to save and invest as possible solutions. A study of the stock market showed that if you save 100 lei per month, in 20 years it would mean 24 thousand cash. By investing using a stock index, the amount would be 149 thousand lei in 20 years, including dividends. Pillars 2 or 3 can never give you an efficiency of about 600% in 20 years. in mutual funds that replicate stock market indices and can give very good returns. The only solution is to educate ourselves in this direction.
What can the government do? It is essential to propose concrete measures to make employment contracts competitive and thus increase the number of employees. One option would be to offer tax advantages for a certain period of time, as happened in TI, ”adds Gustă.
What the other participants at the pension conference said:
- Adrian Codirlașu, Vice President of CFA Romania: “Pillar 1 and Pillar 2 will not be able to guarantee a dignified retirement life for current taxpayers. Therefore, it is necessary to invest in financial education, in the sense that people are aware of what awaits them when they retire to act during their working life. What can be done besides pillar 3? Saving and investing are the answer. The public pillar is very disadvantageous, it is clear that it is a tax, we do not receive even half of what we contribute. available to the State, also for international use, and of which it will most likely implement a combination are: raising taxes, increasing the retirement age, limiting or lowering public pensions. Whatever the mix, it is certain that the future pension public will be less, more expensive and will come later. The solution is to gradually move to a private pension system and increase the part of the salary assigned to the private system. “
- Vasile Strat, Dean of the Bucharest Business School: “Our pension depends on the state and on ourselves. Therefore, there is a need for education among the population, from kindergarten and a serious education among decision makers. We need to find solutions now to make the system work. We look now and we see that in 5-10 years it will not work. It is clear that employees are needed so that their number far exceeds the number of retirees. I see 2 solutions: facilities to make Romania more attractive to employees, but accompanied by a clear strategy that will produce greater added value, and financial education, information for the population. The authorities need to communicate better, constantly, put everyone on the table and build a strategy to convince us why it is good to contribute to Pillar 3. “
