New regulation concerning the private pensions framework in Romania

Law 187/2011 came into force on 3 November 2011, establishing a fund to guarantee the rights of participants of private pension systems (the “Fund”). This law is intended to consolidate the existing legal system for private pensions in order to strengthen such system’s stability, and to reinforce actual and prospective participants’ confidence in the system.

Role of the Fund

At the moment, the pension system in Romania includes three pillars: pillar I (state mandatory pensions, administered by the state), pillar II (private mandatory pensions, managed by private administrators), and pillar III (private voluntary pensions, managed by private administrators).

The role of the Fund is to guarantee the rights of both participants and beneficiaries of the private pensions systems which is regulated and supervised by the Private Pensions System Supervisory Commission (“PPSSC”).

The Fund shall cover any losses suffered by such participants or beneficiaries in order to protect them if certain pillar II or III private pensions funds’ administrators (“Administrators”) or the private pensions providers (“Providers”) are not able to perform their payment obligations.

The Fund will collect contributions from Administrators and Providers in order to cover any losses of the participants and beneficiaries. The contributions will be collected and payments will be made separately for the second and third pillar pension funds.

The Fund has been granted the right to make investments in a limited number of financial instruments (e.g. EU or EEA government bonds and low risk financial instruments as approved by the PPSSC).

Contributions to the Fund

The Administrators and Providers shall contribute to the Fund with an initial payment of 1% of the minimum share capital, required by law, for operating as an Administrator or Provider. Currently, the minimum share capital, required by law, is EUR 4 million for operating as an Administrator of a pillar II fund, and EUR 1.5 million for operating as an Administrator of a pillar III fund, while operating as a Provider is subject to further regulation. Subsequently the Administrators and Providers will contribute to the Fund with annual payments (i.e. determined annually by the Fund through actuarial methods).

The Fund will be further regulated by secondary legislation.

The aforementioned text is for information purposes only and must not be construed as legal advice, nor relied upon as enforceable legislation.