​Transparency is the key word when we talk about private pensions. Almost every taxpayer can at any time see what is happening with his money and what amount has been deposited into the account. At the same time, administrators of private pension funds offer participants the opportunity to take advantage of funds accumulated over a long period of time, or when a person retires, reaching the limit age, or for medical reasons, due to disability. The applicant may also be an heir under the law of a participant of a non-state pension fund.

Below you can find out the conditions for claiming the accumulated assets and what operational actions must be performed in order to take possession of the accumulated money.

Total assets in private pension funds

In order to have context and understand how robust the private pension fund system is, we must “paint” an overview based solely on concrete data. Thus, according to the statistics of the Financial Supervision Authority (ASF), at the end of March 2023, private pension funds (Level II and Level III) accumulated total assets amounting to 107.09 billion lei (correspondingly, net assets amounting to 107.06 billion lei) , which is 7% more compared to December last year.

Compared to March 2022, in the same month of 2023, the value of assets increased by 15%.

At the same time, it is good to know that the investment policy in the asset portfolios of private pension funds continues to focus on the local capital market. At the same time, the share of investments in fixed income instruments was approximately 72% of the total investment portfolio of non-state pension funds, while almost a quarter (21%) was invested in shares.

What, to whom and how much was paid from pensions at will

Now that we’ve rounded up the total assets of private pension funds, we can take an X-ray of the benefits to taxpayers who chose Tier III as a way to save money.

According to the ASF, between the beginning of this year and the end of the first month of spring, net payments of personal assets worth about 28.7 million lei were made to 2,574 participants or beneficiaries. Of them, 88% are related to the opening of the right to a pension, 5% – in connection with the death of the participant, and 7% – in connection with disability.

Going further, in the direction of official data, we notice that a single payment of net personal assets was the preferred method by participants or beneficiaries in the first three months of this year (54%). Also, as a result of the opening of the right to pension, one-time payments in the amount of 12.9 million lei, as well as staged payments in the amount of 12.4 million lei were made.

Regarding the situation in which a member of the voluntary pension fund died, the heirs received one-time payments in the amount of 1.02 million lei, respectively, staged payments in the amount of 380,000 lei.

In disability cases, the amount of personal net assets paid was approximately 1.6 million lei related to lump sum payments and 418,000 lei in the form of staged payments, according to the statistics of the insurance market regulator.

In general, the total value of assets of optional pension funds at the end of March this year amounted to 3.87 billion lei, having increased by approximately 13.8% year-on-year.

In the same period, the average value of an account in the voluntary pension system was 5,979 lei, and the total number of participants was 646,000 people.

Conditions for claiming assets accumulated in non-state pension funds

In order to take possession of the financial assets accumulated over time in the Pilon III Supplemental Retirement Account, a series of steps must be completed. The process of receiving pension funds, other than those provided by the state pension system, begins with the completion of a personal net worth claim form. The document is available on the website/application of each pension fund.

The pension is paid to the participant appointed by him under a special power of attorney to a trustee or his legal representative.

However, there are certain conditions under which accumulated personal net worth can be used. One of them concerns the age of 60.

Another condition relates to the failure of a disability pension, in which case the net assets accumulated in the optional personal pension account can be claimed at any time.

At the same time, in the event of death occurring before the net personal assets have been declared, the legal heirs of the participant can claim the value of the assets accumulated in the account.

Payment of the net property can be made in two ways: a one-time payment or a phased payment, according to the established schedule (from April 1, 2018).

On the other hand, net assets accumulated and subsequently called for payment are subject to a special tax regime. Thus, pension income is taxed at the rate of 10% only for the amount exceeding the threshold of 2,000 lei, this income is calculated on the day of payment and withheld at source. This tax is later a resource of the state budget. Exemption from payment of this tax is granted to individuals with serious or pronounced disabilities.

In addition, when claiming net assets from an optional pension, contributions for medical care were paid in the proportion of 10%, calculated on income from pensions exceeding the amount of 4,000 lei.

Subsequently, the Romanian Constitutional Court ruled that the application of CASS to pension income is unconstitutional, and therefore this tax is not currently applied to declared assets accumulated in an optional pension fund.

Data source:

* Financial Supervisory Authority (ASF)

* BT pensions

Article supported by Banca Transilvania