Growth in Tier II pensions has been undermined by policies that exempt workers in certain sectors (IT, construction and agriculture) from paying this contribution, say OECD experts, who recommend the government scrap these exemptions and raise the contribution rate to non-state pension funds, as and planned as recent reforms reduce imbalances in the public pension system.

OECD recommendations on the abolition of exemptions from the second level of pensions

OECD experts warned in a study on Romania’s economy published a day ago that Romania’s aging population will continue into the next decade, increasing the number of pensioners, while the active contributing population will decrease, so keeping the pension system viable requires Romanians to contribute more to their pensions

• “The rate of contributions to the non-state pension will increase by one percent, up to 4.75% in 2024. Exceptions to the mandatory non-state pension system should be eliminated.
• The increase in Tier II pensions was undermined by a policy that excluded workers in certain sectors (IT, construction and agriculture) from the obligation to pay this contribution.
• Such exemptions run counter to the goal of having a reliable and stable private pension system. (…) These exemptions also reduce the future pensions of these workers and increase the risk of poverty at retirement age.
• Another consequence is a slowdown in the growth of the private pension system, which supplements the state pension and diversifies sources of income in retirement,” the OECD study says.

APAPR: In 2025, the state must eliminate benefits for a million workers

In a response sent on Wednesday to the OECD study, Mihai Bobochea, a spokesman for APAPR, the association that represents private pension fund administrators, recalled how many workers are not required to contribute to Tier II, saying that under the PNRR obligations they must end these exemptions in 2025.

• “Almost one million workers are currently exempt from Tier II contributions until 2028: construction workers (starting in 2019), agriculture and food industry workers (starting in 2022) and IT workers (starting in 2023) . 2024). The consequences of this exception were discussed not only by OECD specialists, but also by local experts.
• In fact, in the first quarter of 2025, Romania’s National Plan for Recovery and Resilience (PNRR) envisages a milestone for the “elimination of tax incentives in the construction sector” — meanwhile, workers have also been added to the agricultural sector and IT workers. – so that, together with the OECD recommendation, the future government will have every reason to legislatively review these exemptions and strengthen Tier II,” he asserts.

The APAPR representative also emphasizes the OECD’s recommendations in the report that the authorities “should increase the rate of contributions to private pension funds as planned, as recent reforms reduce imbalances in the public pension system.”

• “In other words, after the reform applied in 2023 to the state pension system, which will stabilize in the medium term the financial condition of the state Level I, the authorities should focus on increasing the rate of contributions transferred to Level II” because it was planned”, i.e. at the level 6% of the gross income of the participants, in accordance with the initial provisions of Law 411/2004, which regulates level II,” said the APAPR spokesperson.

APAPR: 22 out of 38 OECD countries have mandatory or semi-mandatory private pension systems, contrary to the perception that they are something exotic

The representative of APAPR also emphasizes that private pension systems based on accumulation and capitalization operate in all 38 OECD member countries, for example, introduced by Romania in 2007 on the recommendation of the World Bank and the European Union.

• “Across the 38 OECD member states, private pension funds totaled US$51 trillion ($51 trillion) at the end of 2022, more than two thousand times more than Romania.
• Contrary to the opinion that private pensions are something exotic or unusual, existing only in Romania or marginal states on the world stage, a simple analysis of legislation and specialized OECD reports show that at least 22 of the 38 OECD member countries have mandatory or semi-mandatory mandatory (“automatically registered”) private pension systems.
• Mandatory private pension systems exist in Australia, Chile, Costa Rica, Colombia, Denmark, Finland, Iceland, Israel, Latvia, Mexico, the Netherlands, Norway, Sweden, and Switzerland. Semi-mandatory private pension systems exist in Estonia, Lithuania, Slovakia, Slovenia, Poland, Turkey, Great Britain, and New Zealand.
• In some cases, employers are required to automatically enroll their employees in private pension funds with the option of opting out under certain conditions.
• In other cases, the obligation applies only to certain categories of workers (for example, the public sector, professions with difficult working conditions, liberal professions, etc.).
• As I said, private pension systems operate on a voluntary basis in all other 16 OECD countries,” he added.

Read more also:

• OECD recommends that the Government abolish tax benefits and plan a transition to progressive taxation of wages – Study
• How many Romanians will no longer contribute to Pillar II, after excluding IT scientists. Radu Krachun: They will suffer in retirement – DOCUMENT
• How We Ended Up Losing a Million People Every 10 Years / Population Aging. Causes, consequences, possible solutions