Pillar II in CEE: 29 million clients and EUR 55 billion worth of assets in 2007
The ten states from Central and Eastern Europe that have introduced the mandatory private pension reform so far (pillar II) counted 28.8 million clients for the mandatory pension fund and administrated total assets of EUR 54.6 billion at the end of last year, according to an exclusive survey conducted by the PRIMM Insurance&Pensions Magazine. Compared to 2006, the number of participants to pillar II in the region increased by 24%, and the net assets went up by 30%.
ROMANIA ranks second in the regional top 10 for mandatory private pensions, in terms of number of participants and is now focusing on two objectives, more difficult than the subscription campaign: 1) to catch up with the other states in the region in terms of assets and 2) to improve the pillar II coverage among the active population, a coverage rate that is now the lowest in the region.
In Romania, the coverage rate for pillar II among the active population is the lowest throughout Central and Eastern Europe. From the total number of active Romanians (10 millions), only 42% subscribed to a mandatory pension fund, while the regional average is almost 66%. In this respect, Romania is rather similar to Slovenia (48%), Lithuania (55%), Slovakia (58%) and Hungary (65%), namely the states ranking below the regional average for the coverage rate of mandatory pension plans.
Romania ranks last with regard to the share of net assets from the mandatory private pension system in the Gross Domestic Product, which is obviously due to the lack of accumulation until the end of 2007. Meanwhile, however, the regional average is 7.3% from the GDP. Poland ranks first in this category as well, with a 12.6% share in the GDP for the mandatory pension assets. Much below the average, next to Romania, we have Lithuania (1.7%), Latvia (2.2%) and Slovakia (2.7%).
Consequently, despite an honorable second place in the region in terms of participants, Romania has a lot to catch up with in terms of asset accumulation. It will be quite difficult to achieve the target in the first several years, given the contribution level of only 2% (in 2008, and going up by a half percentage point per year, to reach 6% in 2016) as starting point. To compare, Poland, the regional leader, collects contributions amounting to 7.3% of the participants' income, while Slovakia, the country that implemented the mandatory pension reform right before Romania, collects 9% - exactly the same percentage as in the state system.
