Romania will have private pensions by 2002 after the government gave the go-ahead to universal pension funds (UPFs). UPFs are funds entrusted to private companies.

Under the new proposal, part of existing social insurance contributions will be converted into compulsory private savings.
“This project marks the beginning of reform in this area,” says Romanian Prime Minister Mugur Isarescu

Reform will involve significant costs as 10% of contributions to the current pay as you go schemes are to be transferred to the private funds.
The government has stipulated that those on a certain income, who have at least 20 years before retirement and who participate in the public pension fund system, have to contribute 10% of their gross monthly income into a UPF.

Individuals with at least ten years before retirement who participate in the public pension system can choose whether or not to contribute to the new funds.

In both cases, contributions to the public pension system will decrease according to contributions paid to the UPFs.

Following the government’s decision, a National Pension Guarantee Fund will also be established and financed by pension companies and suppliers.

As a supplementary guarantee for assets, pension companies have to deposit the fund’s assets at a custodian licensed by the Romanian Central Bank and by the Commission for Regulating and Supervising Pension Companies.

The chairman of this commission will be appointed by the President of Romania and cleared by Parliament.



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