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The Evolution of the Private Pensions Market in the First Six Months of the Year 2020

Bucharest, September 18th, 2020 The value of the total assets under management, at the level of the entire private pensions system, has reached the amount of 68.57 billion RON, at the date of 30.06.2020, exceeding in Euro equivalent the value of 14 billion, increasing by 6.31%, as compared to December, 2019.  

Moreover, the share of private pensions in the Gross Domestic Product[1], at the end of June, 2020, was of 6.39%, above the level of December, 2019.  

„The economic context in the first six months of the year 2020 was influenced by COVID-19 pandemic, which has generated economic imbalances both at the national and international levels. In this difficult climate, the private pensions market has recorded the performance of exceeding the threshold of 14 billion Euro managed assets, therefore confirming the recovery estimated in V. A determining factor in the favorable evolution of assets, in Semester I of this year was the capital market, which has rectified, after the sharp decline recorded by BET index during the lock-down period and has charted an increase of the index in August, up to a value close to that registered at the end of 2019”, stated the Vice-President of the Financial Supervisory Authority, Mr. Dan Armeanu, coordinator of the Private Pensions Sector.

Privately Managed Pensions (Pillar II)

The total value of net assets of the privately managed pension funds was, at the date of 30.06.2020, of 65.94 billion RON (13.62 billion Euro), registering an annual rate of growth of 19.59%,  evolution that takes also into account the recent economic effects caused by COVID-19 pandemic.

At the end of June, 2020 there were registered in the privately managed pensions systems 7.56 million participants, 1.25% more than the end of the year 2019.

Also, the average value of an account in the privately administered pensions system was of 8,859 RON, recording an increase by 5.05% compared to December 2019.  

During January – June 2020, there have been performed payments of the net personal asset by the participants, in amount of 71.25 million RON for 5,188 participants and beneficiaries.  

 

Facultative Pensions (Pillar III)

At June 30th, 2020, the total value of net assets registered by the facultative pensions funds was of 2.60 billion RON (0.54 billion Euro), recording an annual advance payment of 14.53%.   

At the end of June, 2020, 517,057 participants were registered in the facultative pensions system, 3.18% more than the end of the last year. At the end of the first Half of the year, the average value of an account of the participants to the facultative pensions system was of 5,513 RON, recording an increase by 1.70%, as compared to December, 2019.

During the period January – June, 2020 there have been performed payments of the net personal asset to the participants, amounting to 35.29 million RON for 3,775 participants and beneficiaries.

The recovery of the financial markets, towards the end of the first Half of the year 2020 has influenced also the evolution of the rate of return, following a positive trend starting March, 2020. Therefore, in June 2020, the nominal rate of return of the privately managed pension funds was of 4.39%, whilst the facultative pension funds with average risk have registered a rate of 3.83% and those with high risk degree have reached 3.48%, which represents a good performance, given the volatility of the capital markets generated by COVID -19 pandemic.

„The optimization of the portfolios of privately managed pension funds, by the balanced diversification between various financial instruments, through the prudent dispersion of the risk and the identification of the investment opportunities, has led to a return of the profitability rates to values similar with those from the beginning of 2020.  The achievement of this level of return was due to a fine adjustment of the shares of the financial instruments, adjustment performed in an extremely volatile investment environment, as that during the period March – June”, explained the Vice-President of the Financial Supervisory Authority, Mr. Dan Armeanu.  

At June 30th, 2020, the biggest share in the structure of portfolios of the privately managed pension funds was held by the government securities, with 65.52%, being followed by shares, with   19.36% and bank deposits, with 3.94%. The corporate bonds represented 5.32%, whilst the equity interests represented 3.01%.

The private pensions funds are investors on long term and all the investments thereof are being performed by taking into consideration the long-term investment horizon related to the contributivity period of 30-40 years in the privately managed pensions system.  

 „It is pointed out that, given the significant economic adjustment caused by COVID-19 pandemic, the private pension funds have maintained the exposure on the real economy and have proved to be a long-term reliable partner, without ignoring the need of the economy on short-term. The high level of assets ensures a better resilience of the private pension funds to shocks and allows a balanced allocation, for a longer time horizon. In the following period, the management of the private pension funds will take into consideration the macroeconomic evolutions and the existing context in each moment on the market, so that it should a good yield given the conditions of a short-term moderate risk”, underlines the Vice-President of ASF, Mr. Dan Armeanu.

The Report related to the evolution of private pension funds, in the first Semester of the year, can be consulted HERE.

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[1] 1.072.848 mRON GDP of the last four Quarters, avaialable on NIS site (Quarter II, 2019 – Quarter I, 2020)

 

About the Financial Supervisory Authority

The Financial Supervisory Authority is the national authority set up in 2013 by EGO no. 93/2012, approved by Law no. 113/2013, for the regulation and supervision of insurance markets, private pensions, as well as the capital market. ASF contributes to strengthening the integrated operating framework of the three sectors, which totals more than 10 million participants. More information can be found on www.asfromania.ro.