PM Boc: Pension Law, top Gov’t priority

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Prime Minister Emil Boc on Tuesday voiced hope that the draft law aimed at reforming the pension system will be approved during the ongoing session of Parliament, underscoring that privileges and discriminations in the public pension system should be eliminated.

In a speech to a plenary session of the Chamber of Deputies introducing the priorities of his Cabinet, Boc mentioned that Parliament will start a debate on the Pension Law this month, so that in 2011 a new public pension system may be in force regulated under a new law. He added that this law is necessary to secure medium and long-term financial resources for the payment of the public pensions, mentioning that 1.5 billion euros were transferred in 2009 from the Government budget to the public pension fund.

‘If we go on at the current rate, there will be no more money left in the Budget as all the public money would have to be transferred to the pension fund,’ said Boc.
He argued that there is a ‘profoundly unjust’ ratio between the lowest and the highest public pension, of RON 350 to RON 37,241.
‘We have to eliminate privileges in the public pension area and I mean that we have to introduce the fair principle of direct contribution. That will mean that first of all we, the political class, will have to give up on certain rights and the MPs will have to give up their MP pensions as part of the reform,’ said Boc.

The main novelty of the public pension draft law is that all people deriving a professional income will have to contribute to the public social security system, including certified professionals and those working under limited employment contracts, with the exception of lawyers and members of two religious denominations that have their own pension systems.

The main element of the system suggested under the draft law is the existence of contributions that will be paid by the employee, the employer and only the employee, when the employee is an independent worker. The draft Pension Law specifies that the reference computation point for the public pension should be RON 732.8 that will be annually adjusted by 100 percent of the inflation rate and a 50 percent of any increase in the average gross wages performed one year before.

Starting with 2022, an additional 45 percent of the real increase in the gross average wages performed one year before will be added. Starting with 2030, the reference pension computation point will be annually adjusted by 100 percent of the inflation rate one year previously. Social security contributions will be different according to the work conditions, whether normal or special.

The social security contributions will be 31.3 percent for normal working conditions (10.5 percent due by employees and 20.8 percent due by employers); 36.3 percent for non-ordinary working conditions (10.5 percent paid by the employees and 25.8 percent by employers), and 41.3 percent for special and other working conditions in the areas of national defence, public order and national security (10.5 percent on employees and 30.8 percent on employers).

Old age pensions will be paid to people who on retirement date cumulatively meet the standard retirement age and the minimum contribution cycle. Standard retirement age will be 65 for both men and women and the minimum contribution cycle is 15 years. A full contribution cycle is 35 years for both men and women.

The standard pensionable age for active military people, police officers and special public service officers working with the penitentiary administration, in the national defence area, public order or national security is 60; the minimum contribution cycle is 20 years and a full contribution cycle is 30 years.
Early retirement is possible five years before turning the pensionable age for people with a contribution cycle of at least 8 years in excess of the full contribution cycle mentioned by the law.

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