Private pension funds draws 3.7 contributors first year in business

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Following the launch of the mandatory private pension funds on September 17, 2007,
contributions were collected from some 3.7 million contributors, out of a total of 4.3 million that became members of such a fund.
The system was commissioned in 2007, but the first contributions were collected in 2008. On May 20, 2008, the National Pension House (CNP) paid out the first share of the contributions into the accounts of the mandatory private pension funds, for 3.2 million employees.
 
In June, the number of employees for which contributions were paid reached 3.5%, and went up to approximately 3.7 million in August.
There are currently 14 funds operating on the mandatory private pension market, as four funds initially opting to join the system – Marfin, MKB Romexterra, Zepter and AG2R – asked the Private Pension Overseeing Board (CSSPP) to withdraw their business authorization.
 
CSSPP says the funds in question had too few contributors to be able to survive on the market, and their customers were randomly redirected by CSSPP to other funds.
As of end-August, the mandatory private pension funds had invested 60% of the assets under their management in Government securities and municipal bonds, 18.2% in bank deposits, 17.2% in corporate securities, 4.2% in shares and 0.4% in mutual funds.
 
Reports submitted to the CSSPP indicate that the privately-managed pension funds have reduced their investments in bank deposits and continued to acquire Government securities and municipal bonds, all of which have become the main targets in the investment polices of the mandatory pension fund trustees in the long run.
„The trustees acted cautiously this August, reducing exposure to shares to 4.2%, from 5.66% one month before, thus reaching a minimal exposure level. This way, the funds have avoided the negative effects of the world financial crisis and managed to preserve the value of their contributors’ funds,” says CSSPP.
 
Daily Ziarul financiar remarks that participating in the drawing up of the primary legislation in the area of private pensions and the establishment of a guarantee fund for the pensions are 2 high priority projects of CSSPP in the immediate future.
The introduction of the mandatory private pension funds is said to have revolutionised the pension system of Romania, as each employer now has an individual account and their money gets invested. The system previously in use would only use the contributions from the employees to pay out pensions.
 
All employees aged below 35 were placed under the obligation to join a mandatory private pension fund of their own selection, and the same possibility was extended as an option to those aged between 35 and 45.
The contributions to the mandatory private pension funds is 2% of the gross income, which will increase by 0.5% a year in January of the next eight years, to 6% in the end.
 
CSSPP informs that as far as the optional private pension funds are concerned, there are 7 funds operating that drew 24,536 contributors in the first quarter of 2008. As of end-March, there were 75,423 contributors in this system, up 48.2% from end-2007 and 7.7% from the month before.
The optional private pension funds reported net assets of some 6.73 million euros in the first quarter of the year, and more than 11 million euros in net assets in mid-year, and 110,316 contributors.
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