Evolution of the Private Pension System in The First 9 month of 2021

Bucharest, 26 November 2021 – The private pension market in Romania reached, in the first nine months of the year, total assets of 90.43 billion lei, up by 25% compared to the same period last year.

As a share of GDP, the total assets of the private pension scheme have reached a level of almost 8%, marking a positive development over the last few years.

On 30 September 2021, there were 8.29 million participants in the 17 private pension funds (Pillar II + Pillar III), while at the end of September last year there were 8.10 million participants.

The private pension system has evolved positively throughout its operation, being adaptable to the episodes of volatility encountered over time.

The growth of private pension fund assets is remarkable at the European level, with Romania being among the countries with the highest increases in the last 10 years.

Private pension funds are institutional investors that mainly support the local economy, while acting as a balancing and stabilising factor in the financial market.

Pillar II

The total net assets of privately managed pension funds amounted to 87.06 billion lei at the end of September 2021, up by about 25% compared to the same date in 2020.

The number of participants registered in the Pillar II scheme was 7.73 million, compared to 7.58 million registered in September 2020.

At the level of Pillar II, the average contribution of participants with contributions paid on 30 September 2021 was 204 lei/participant, while on 31 December 2020 it was 192 lei/participant.

Between January and September 2021, contributions paid into the privately administered pension system amounted to 7.28 billion lei, an increase of about 9% compared to the same period in 2020.

The weighted average rate of return of all privately managed pension funds was 5.94% in September 2021, while in December 2020 it was 5.38%.

At the end of September 2021, the average asset value of a participant in the privately administered pension scheme was 11,265 lei, an increase of 14.2% compared to December 2020 and 2.6% compared to the previous quarter.

From the beginning of the year to 30 September 2021, payments of net personal assets to participants amounting to 208 million lei were made to 13,604 participants and beneficiaries.

The distribution of the value of participants' accounts shows a high concentration, with 62% of assets held by only 20% of participants. The largest account has a value of 1,469,858 lei and the smallest has a value of 1 leu. At the same time, more than 20% of the participants hold assets below 1,000 lei.

On 30 September 2021, government securities and equities were the main financial instruments in which privately managed pension funds invested. Pillar II pension funds' investments in government securities accounted for 61% as at 30 September 2021. Investments in equities increased, accounting for 25% of the total assets of Pillar II pension funds in the first nine months of the year.  Significant shares are also invested in corporate bonds and investment funds.

 Pillar III

Total net assets in the voluntary pension scheme amounted to 3.317 billion lei at the end of the first nine months of 2021, an increase of about 22% compared to the same period last year.

The number of registered participants in the voluntary pension scheme was 553,775 compared to 520,879 registered participants on 30 September 2020.

At the level of Pillar III, the average contribution of participants, with contributions paid on 30 September 2021, was approximately 149 lei/participant, up by 12% compared to September 2020.

Between January and September 2021, contributions paid into the voluntary pension scheme amounted to approximately 294 million lei, an increase of 9% compared to the same period in 2020.

The weighted average rate of return of all high-risk voluntary pension funds was 7.18% in September 2021 and 3.71% in September 2020.

The weighted average rate of return of all medium-risk voluntary pension funds was 5.51% at the end of September 2021, higher than in September 2020 (4.13%).

At the end of September 2021, the average value of an account in the voluntary pension scheme was 5,991 lei, 8% higher than in December 2020, while representing 53% of the value of an average account in privately managed pension funds.

Between January and September 2021, payments of net personal assets to participants amounting to approximately RON 75 million were made to 7,569 participants and beneficiaries.

  The average value of participants' accounts varies significantly between the different funds, ranging from 2,765 lei to 7,659 lei. Regarding Pillar II, the value of assets held by participants is highly concentrated, with just over 10% of participants accounting for 50% of assets. The highest value of an account is 1,486,069 lei, while 20% of participants hold assets worth less than 507 lei.

  At the end of September 2021, government securities and equities remained the main financial instruments in which voluntary pension funds invested. Voluntary pension funds' investments in government securities accounted for 61% at 30 September 2021, down 2 percentage points compared to end-2020.

Equity investments accounted for 28% of the total value of Pillar III pension fund assets. Another important category of financial assets in which voluntary pension funds invested is corporate bonds and UCITS securities.

 The report on the evolution of the private pension system in Romania in the first 9 months of 2021 can be found HERE.