The contributions to the mandatory private pension funds (Pillar II) in Romania will rise to 5% of the gross wage as of 2021, from 3.75% currently, to later increase to 6% as the law provides, finance minister Florin Citu stated in a TV interview on January 7, according to Economica.net.

He argued that the private pension pillar needs to get more attention, because it yields higher returns and leads to higher pensions.

Citu also mentioned that the new Liberal Government, which he is a port of, has managed to save Pillar II, which would have been negatively impacted by reforms adopted by the previous Socialist Government at the end of 2018 (higher capital requirements for pension fund managers).

However, he added that this is not enough and a thorough reform of the whole pension system is needed, with a long-term vision, suggesting that the reform could start in 2021 (after the elections).

“The pension system today is like a ponzi scheme - as long as enough people contribute to it, it is ok, but given the demographic evolution in Romania, those who were born around the 70s will no longer have who to pay their pension,” said the minister, quoted by News.ro.

However, the Liberal Government has kept the massive pension increases adopted by the former ruling coalition, which will be enforced in September this year, despite warnings from economists that such a measure is unsustainable.

(Photo: Octav Ganea/ Inquam Photos)

editor@romania-insider.com