Private pension funds in Romania reach new record highs

Bucharest, 9 October 2024 – The private pension system in Romania has shown remarkable resilience and has reached important milestones this year, contributing significantly to the sustainability of financial markets. Assets of private pension funds surpassed EUR 30 billion, with a share of over 9% of GDP, and the number of participants exceeded 9 million.

The value of total assets of pension funds in Romania - privately managed pensions and voluntary pensions - reached RON 153.96 billion (almost EUR 31 billion) at the end of August 2024, up 29.5% compared to the same period of the previous year and 17% compared to the end of 2023, reaching a new historical high.

The share of private pension fund assets in Gross Domestic Product (GDP) has risen to 9.2%, underlining their vital role in local financial markets as an important source of long-term savings.

”Judging by recent developments, we can say that the private pension system in Romania is at its best since its launch in 2008. I estimate that, at this pace, the system's assets will exceed 10% of GDP in the short term and will double compared to the end of 2023 in the medium term”, said Daniel Armeanu, Vice-President of the Financial Supervisory Authority and coordinator of the private pension sector.

The increase in total assets of private pension funds beyond the EUR 30 billion mark was driven, on the one hand, by the optimization of investment activity and, on the other hand, by the increase in the contribution rate from 3.75% to 4.75% of gross income for Pillar II (privately managed pensions), applicable since the beginning of this year. Also, the performance of equities listed on the Bucharest Stock Exchange, with a return of almost 37% in the last year, has been a key factor in the evolution of the private pension system.

According to the Report Pension Markets in Focus 2023, conducted by the Organization for Economic Co-operation and Development (OECD), private pension funds in Romania have recorded a significant increase in the value of assets, our country ranking 7^th among the 71 countries analysed.

A new milestone has also been passed in terms of the number of participants in the private pension system, i.e. 9.01 million people at the end of August 2024. The development was driven by the significant increase of 145,730 participants in Pillar II and 102,610 participants in Pillar III (voluntary pensions). The 15% increase in the number of participants in voluntary pension funds compared to the same period of the previous year reflects Romanians' growing concern about diversifying their savings sources for the post-retirement period.

In a challenging economic and demographic context, the Romanian private pension system has demonstrated remarkable resilience and performance. The levels of returns recorded by Pillar II and Pillar III pension funds have exceeded those in the period before the COVID-19 pandemic, with a weighted average rate of return of 7.2% at the end of August 2024.

Private pension funds invested mainly in Romanian government securities (66.13%), equities (24.63%) and corporate bonds (4.04%). Over 94% of total assets are invested in instruments issued in Romania, contributing to the financing of national development projects. Thus, private pension funds have become the main institutional investors in Romania, supporting the long-term financing needs of the state and contributing to the sustainable development of the capital market.

”In the context of Romania's accession to the OECD, the assessment carried out in June 2024 at the organization's headquarters in Paris highlighted the significant progress made by Romania in aligning with international standards in the regulation of the private pension system. This assessment included a detailed analysis of how Romania's practices and policies align with the OECD Recommendation on Key Principles for the Regulation of Private Pensions and the Recommendation on the Good Design of Defined Contribution Pension Plans. Thus, the increase of the contribution rate to Pillar II to 4.75% and the revision of the investment-related legislative framework were important steps in this process. These measures have been appreciated by the OECD, reflecting Romania's commitment to align with international best practices”, said the ASF Vice-President.

Going forward, the Financial Supervisory Authority aims to support the reform of the pension system and to align the legislation with OECD standards. Strategic objectives include maintaining the complementary role of Pillar II, increasing inclusiveness and diversifying the investment options of private pension funds. ASF also attaches particular importance to the development of legislation for the decumulation phase of private pension funds, thus ensuring a smooth and efficient transition to retirement.

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Despre Autoritatea de Supraveghere Financiară

Autoritatea de Supraveghere Financiară este autoritatea naţională, înfiinţată în anul 2013 prin OUG 93/2012 aprobată prin Legea 113/2013, pentru reglementarea şi supravegherea pieţelor asigurărilor, a pensiilor private, precum şi a pieţei de capital. A.S.F. contribuie la consolidarea cadrului integrat de funcţionare a celor trei sectoare, care însumează peste 10 milioane de participanţi. Mai multe informaţii puteţi găsi pe www.asfromania.ro.