​The government wants to abolish the commission levied by pension fund administrators on the contributions paid by 7.8 million Romanians to Level II pensions (mandatory private pensions) and Level III (optional private pensions) on the grounds that it would lead to to reduce the unjustified private pension, shows the draft of the emergency resolution, published on Monday for public discussion.

What are the main sources of income for Tier II and III pension administrators and what commissions will be cut

Currently, the revenues of 7 private pension administrators managing assets are just over 92.4 billion lei on pillar II they come from the commission for the management of these assets, which consists of 2 sources:

• a) deducting the amount from the paid contributions, but not more 0.5% and
• b) deducting a percentage from the total amount of net assets of a private managed pension fund, but not more than 0.07% per month.

At the third level of pensionsthe asset management fee also consists of 2 sources:

• a) deducting the amount from the paid contributions, but not more 5%provided that this deduction is made before the contributions are converted into fund units;
• b) deduction of a percentage from the total amount of net assets of a voluntary pension fund, but no more 0.2% per monthestablished by the prospectus of the optional pension program.

According to the ASF, they were in Pillar III 577,000 members at the end of March 2022, and the total value of the net assets of voluntary pension funds on that date exceeded 3.3 billion lei.

The Ministry of Labor launched on Monday draft ordinance on emergency situations which proposes the abolition of one of the two sources of income, namely the fee applicable to contributions paid to both Tier II and Tier III pensions.

What motivates the event?

• “The current regulation of the administration fee charged by administrators of private pension funds consists of two sources, both paid by members of private pension funds, creates an unjustified reduction in the private pension to be received at the end of the contribution period. “, it is shown in the GEO project.

Practically, the GEO project will change both Law 411/2004 (which targets component II) as well Law 204/2006 (Pension Level III) so that the administrative fee consists only of the deduction of a percentage of the total assets of the pension fund.

HotNews.ro previously wrote that last year, 7 administrators received an income of more than 577 million lei from the two types of commissions applied in the second level, but of this amount, only 48.5 million lei were collected from the commission for paid contributions.

The right of participants and beneficiaries to claim payment of net personal assets or private pension will be indefinite

Another important change that will be made in both laws regarding Level II and Level III pensions is the introduction of a new paragraph with the following content:

• “The right of participants and beneficiaries to claim payment of net personal assets or a private pension is not time-barred.”

Why is it necessary that this right always remains valid?

Secondary legislation of the ASF provides for Art. 16 of Regulation No. 27/2017 that the statute of limitations for the right to demand payment of the value of the deceased participant’s net personal assets begins from the date of death or from the date of final suspension of the court decision on recognition as deceased.

Article 17 of the same norm provides that the rights belonging to the beneficiary and not claimed in the total limitation period is 3 years they become the fund’s financial resources.

At the same time, notaries warned that there are problems with the payment of a non-state pension regarding the date from which the right to claim the personal property of the deceased participant begins.

• “From the point of view of notarial activities, the question arises, what will happen if within 3 years after the death of the author of the legacy, a request for the issuance of a certificate of inheritance for the shares of the fund related to the pension account in private management is not submitted? which still happens sometimes. According to the ASF rule, if the heirs do not claim them within 3 years after the participant’s death, the fund shares will no longer belong to them, but will become financial resources of the respective pension fund,” Doina Dunka, legal director of the UNNPR, told Buletinulnotarilor.ro last year.

Sanctions prepared in Level II and III: New limits on maximum fines for individuals and legal entities

Returning to the GEO project, the law introduces new limits on fines in the application of law 411/2004 (regarding the second level of pensions) and law 204/2006 (level III), namely:

• a) for legal entities: from 0.1% to 5% of the turnover obtained according to the last audited annual financial statements submitted to the competent authorities;
• b) for individuals: from 2,000 lei to 2,000,000 lei.
• Penalties for violations applied in accordance with this law are 50% of revenues to the state budget and 50% of revenues to the ASF budget.

Currently, these fine limits are as follows:

• a) from 0.5% to 5% of the authorized capital for legal entities;
• b) from 1,000 lei to 100,000 lei, for individuals.

Other changes that will be made to non-state pension provision

The draft GEO provides for the introduction of other changes, which are outlined in the explanatory note:

• – supplementing the existing terms in the two laws to include: the person holding a key position, the relevant person in relation to the administrator and the management structure, the terms used in the relevant regulatory acts;
• – principles regarding investment rules and duties of investment managers as part of administrators;
• – authority of the risk management structure among administrators;
• – principles of assessment of fund assets and managers’ responsibility;
• – addition of pension fund administration activities;
• – establishment of the administrator’s obligation to constantly maintain the appropriate level of liquidity, the amount of which covers the current activity for at least 6 months;
• – the obligation to create at the entity level an investment committee consisting of independent members (which will make decisions on investment/withdrawal operations), as well as a remuneration committee;
• – introduction of provisions on requirements for persons performing key functions and introduction of clear provisions on the powers of these persons;
• – establishing the responsibilities of the board regarding the definition and supervision of the implementation of management mechanisms that ensure effective and reasonable management of the organization, including the division of tasks within the organization and the prevention of conflicts of interest, in a way that contributes to the integrity of the market;
• – distribution of duties and responsibilities of different structures of management, supervision and control, respectively, in order to avoid possible conflicts of interests and to provide necessary powers and independence to control functions;
• – filling out the documentation related to the request for registration permission;
• – information about the remuneration policy and practice;
• – establishment of a single administrative fee, which is paid by the administrator for the implementation of the main and secondary/related activities;
• – provisions regarding the obligation to comply at any time during the operation of the permit and conditions of operation;
• – fulfillment of reporting and transparency requirements;
• – introduction of provisions regarding audits of the administrator’s accounting and private funds;
• – introduction of provisions regarding the approval of persons responsible for the activity of depositing assets of pension funds and for the activity of a marketing agent of a legal entity, which is carried out in the system of non-state pension provision;
• – finalization and clarification of the sanctions application regime.

SEE DRAFT GEO AND KEYNOTE HERE