The Pension Landscape Romania

The Pension Landscape in Romania has undergone significant changes during the last decade. Nowadays it is composed of the statutory provision as part of the social insurance, a mandatory private tier, called second pillar and voluntary private pension provision also in the form of occupational pension (called third pillar according to the World Bank’s Multi Pillar model).

Contributions to the private tier of the mandatory system are transferred by the state pension institution, CNPP, to a private fund which is authorized and supervised by the Private Pension System Supervisory Commission CSSPP. With the setup of a regulatory framework in 2006, a way to the voluntary occupational provision was paved and the possibility was opened for employers and/or social partners to create company/industry wide pension plans managed by pension- or insurance companies and asset managers.

Provider: Casa Națională de Pensii Publice CNPP and privately-managed Pension Funds

The mandatory pension system for employees and self-employed persons consists of two components: The statutory provision, as part of the social insurance managed by CNPP, and a privately-managed (compulsory) Pension Fund as a so called second pillar.

Since a reform of 2010; military, police, diplomats and navigation personnel are integrated into the general scheme.

  Social Security Fund managed by CNPP Pension Funds
Financing: Financed on a pay-as-you-go basis through the mechanism of notionally defined-contribution accounts. Fully funded
Participation only at one fund at the same time.
Contributions: Total contribution 26.3 % (2016) of taxable income to the old-age pension insurance, the employer pays 15.8 % and the employee pays 10.5%. 6% of the employee’s contributions are transferred by CNPP to a second pillar private pension scheme. 6% payed by employees only.
Pensions/ Benefits: Covers old-age, disability and death. Covers old-age, disability and death.
Calculation: The pensions are calculated according to an algorithm based on pension points (calculated by comparing the own salary to the average monthly salary). Defined contribution system (DC) type; authorized and supervised by the Private Pension System Supervisory Commission CSSPP.
Portability/Transfer across different pension funds possible.
Occupational plans:

A new law from 2006 regulates occupational pension schemes, and determines tax and investment regulations.

Employers and trade unions can establish voluntary occupational schemes, which are DC plans, at the industry, group or plant level on the basis of collective bargaining agreements. Alternatively employers have the option to establish pension plans individually or at the industry level, voluntarily, after having made the appropriate tax or other contributions to the state. In general, employees can decide if they want to make use of the occupational provision.

Products: Optional pension scheme (savings) managed by private companies - defined contribution schemes (DC) including guaranteed return. Benefits based on capitalisation, respectively on contribution investment and accumulation.
Supervisory authority CSSP.
Financing: Capital funded. Participants' contributions are accounted individually.
Contributions: The contributions are paid by the employee, maximum 15% of the income. The employer can contribute a share.
One has the possibility to participate, at the same time, in several voluntary pension funds (without exceeding 15% of the gross salary).
Tax incentives Contribution deductibility of up to 400 EUR for a fiscal year, for the employee as well as for the employer.
Portability: The transfer between funds is allowed (transfer penalty in case it is made sooner than 2 years since entrance).
Retirement age: 60 (women and men)
Products Additional voluntary pension saving is possible through insurances and pension saving funds.