OANCEA: The private pension guarantee fund: what will it look like?
The private pension guarantee fund will adopt the model from the banking market, and pension companies will start by transferring 1% of their share capital to the fund, according to the draft law on the private pension guarantee fund. The draft was prepared by the Private Pension Supervisory Commission (CSSPP) and was posted on the portal www.privatepensions.ro by Mircea OANCEA, president of the institution.
“The Guarantee Fund must be understood as a last resort solution”, says Mircea OANCEA, president of CSSPP. To start, the private pension companies shall transfer 1% of their share capital to the fund, and the amount shall be supplemented later, after the assessment of the risk to be covered by this guarantee fund.
The private pension guarantee fund shall be used only in the highly unlikely situation of fraud. If the money from the pension funds is not enough to cover the pension guaranteed by the system (the amount of the gross contributions) in any other situations, there are another two solutions to use before the guarantee fund. The first would be the technical provisions (the reserve funds) that the private pension funds must establish, according to the law. If, hypothetically speaking, they are still not enough, the respective pension company shall use the equity and own reserves in this respect. And if these are not enough, only then the guarantee fund is used. The fund shall recover the amounts paid in such a situation by winding up the pension company facing difficulties in pay out, explains OANCEA.
The private pension guarantee fund shall be the system’s last resort safety net, therefore both the CSSPP officials and the representatives of the pension companies on the market do not expect the guarantee fund to be used, under normal conditions.
The draft law on the private pension guarantee fund shall be promoted by CSSPP after the Parliament adopts the Law on Ordinance 112/2007, which was denied promulgation by President Traian Basescu and is now re-examined by the Chamber of Deputies (after passing the Senate, without any amendments). This normative act would allow CSSPP to promote draft laws - but until then, CSSPP is not entitled to do so, and the law on the guarantee fund has to wait.
