The government’s proposed changes to Tier II pensions contain provisions that contradict Romania’s commitments under the PNRR, and the abolition of contribution commissions will further highlight the significant reduction in revenues this year, a fact that could affect the sustainability of the operation. Briefly, such a message was sent to the governors of companies that manage assets in this system worth more than 92.4 billion lei.

Last week, the administrators of non-state pension funds submitted to the Government their comments on the draft of the Emergency Ordinance (EOR), which was submitted for public discussion by the Ministry of Labor.

One of the main proposals in the GEO project is cancellation of commissions charged by managing pension funds for paid contributions 7.8 million Romanians who are in Tier II pensions (mandatory private pensions) and Tier III (optional private pensions), on the grounds that this would cause an unjustified reduction of private pensions, according to the draft emergency decree published in Monday for public consultation.

Response of fund managers: The GEO project contains provisions that contradict the PNRR and have a major impact on asset management

In response to 35 pages with more than 100 legislative amendments proposed by GEO, the Association of Privately Managed Pensions of Romania (APAPR), which represents 7 administrators of this system, submitted a 20-page point of view, stated on Monday, August 29, for HotNews.ro Mihai Bobocha, adviser to the Board and spokesperson of the Association.

In the provided comments, administrators warned about the financial consequences and the presence of provisions that contradict the PNRR.

• “The GEO project has a significant impact on the management of non-state pension funds. Given the importance of the changes and the extremely serious impact, we believe that the proposed legislative changes should be the subject of detailed evaluation and discussion, rather than the result of urgent discussions.
• The GEO project contains provisions that contradict the commitments made by the Romanian government under the PNRR, both in terms of the general stability of level II private pensions and the liberalization and flexibility of pension fund investments, as well as the independence of administrators.”, HotNews.ro said this Mihai Bobocha.

What additional losses will administrators have by abolishing Pillar II contribution fees

In the GEO project, the government proposes to abolish the commissions charged 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 will lead to an unjustified reduction in the private pension, according to a draft of the emergency order published on Monday for public consultation.

What does the APAPR spokesperson say about this aspect?

• “This year, against the background of volatility in financial markets and the implied underperformance of pension funds, Tier II administrators will record a decrease in commission income estimated at 43% compared to the value in 2021 (calculations are made exclusively on the basis of data published by the FSA, CNP, CNPP, INSSE ). In addition, the abolition of commissions on contributions would reduce these revenues by another 15-20%, according to the estimates made. The situation is similar in Pillar III.
• This strong reduction in revenues is likely to affect the sustainability of administrators in the Romanian market, and we believe that it should be accompanied by compensatory measures to reduce costs through this GEO project, which, however, are lacking. In fact, the GEO project further complicates the situation by significantly increasing the operational complexity, bureaucracy and operational costs of administrators.” This was announced by Mihai Bobocha on HotNews.ro on Monday.

According to ASF data provided by HotNews.ro, 7 administrators received last year revenues of more than 577 million lei from two types of commissions applied in Pilar II, of which only 48.5 million lei were collected from the commission on paid contributions.

As a result, the 43% decrease in revenues planned for this year will mean that the administrators will reduce revenues to approximately 330 million lei.

If the GEO project is accepted, it will mean that in 2023 (next year) another 55-60 million lei may disappear from the income of administrators related to contribution fees (approximately 12 billion lei).

As a result, APAPR appealed to the authorities to postpone the legislative process on this GEO project to ensure proper discussion and analysis of the implications of the new rules.

Labor minister denies nationalization of Pillar II: This is just a discussion of those who want to be heard on TV

PSD Labor Minister Marius Buday was asked on Friday about changes prepared by the OUG to the second level of pensions, regarding the reduction of some commissions collected by pension fund administrators, and whether the government currently plans to nationalize the pension fund. money from this system.

• “The Minister of Labor has no authority here. The Department of Labor’s Tier II responsibilities are only to transfer amounts of money to private administrators and compile those lists of amounts of money.
• I received from ASF that there are specialists, the text that you see in the public transparency. Everything was written to you. There was no addition in the Ministry of Labor and the Government. ASF does not have the possibility, according to the law, of legislative initiative, and then it was necessary to take it upon itself and submit it to the Government for consideration.
• I also spoke several times about nationalization, Prime Minister and PSD President Marcel Čolaku also replied, we do not discuss such things. It’s just a discussion by some people who want to be heard on television.” – answered Minister of Labor Marius Budai.

Proposed changes to the II and III level of pensions: the UDR accuses the Government of carrying out “expulsion of administrators” and “confiscation of money”

​The USR asked the Căuși government on Wednesday to abandon a draft emergency decree aimed at abolishing commissions charged by pension fund administrators on contributions paid by 7.8 million Romanians in the second level of pensions (mandatory private pensions) and the third level ( optional private pensions). pension).

The USR claims that the GEO project submitted for discussion by the Ministry of Labor includes “harmful changes to level 2 pensions, which aim to abolish it by expelling the administrators of the level from Romania and confiscating the money by the state”.