Romania’s pension system sparks off fresh concerns

A decreasing birth rate together with migration is putting Romanias public pension system at risk

Bogdan Matei, 30.12.2019, 14:00

Politicians in Romania eventually
started to believe what experts in demography, sociologists and economists had
been saying for years, namely that the country’s pension system is put at risk
by the ever decreasing labour force.

Violeta Alexandru, Labour Minister
with the country’s fresh liberal government has put it bluntly in an interview
to the local news agency Agerpres, people must be urged to save money by means
of the private pension system. The Labour Ministry is considering increased
contributions to the so-called Pillar ll private pension funds, which Mrs.
Alexandru has described as a fair system reflecting the employee’s contribution
during their professional activity, and a safe instrument thanks to its
transparency.

Although concerned about the impact
of the 40% pension rise upon the budget starting September 2020, the minister
has given assurances the present law endorsed by the former Social-Democratic
government will be observed and applied by the Liberals as well. She has also recalled
a draft law on banning former employees from cumulating wages with pension
benefits.

However, there are some categories
exempted, such as teachers who can resume activity after retirement due to the
shortage of personnel especially in the country’s rural areas. According to
Minister Alexandru the government has no intention for the time being to raise
the retirement age, although a suchlike trend has been increasingly visible all
throughout Europe. Romania’s Central Bank has also voiced concern over the latest
demographic developments.

In its latest report on stability,
the institution has cautioned on the high migration rate among the young people
corroborated with the phenomenon of population aging, which could significantly
bear on the future economic developments. According to the National Institute
for Statistics, the number of pensioners is expected to reach 5.2 million in
the second half of 2020.

Romania will have 4.8 million old
people in 2060 and if the situation remains unchanged the number of active
people contributing to pension funds, is expected to drop significantly. A
national strategy aimed at promoting active aging and protecting the aging
population has also cautioned against the decreasing role of the pension system
as income provider both in terms of coverage and pensions level.

All in all employment for the
elderly must be encouraged to benefit both the employees and the country’s
economy. Although the need for a prolonged active life isn’t still accepted by
society at large, there are some segments, particularly women, highly educated
individuals or people in need of money who have shown a positive attitude
towards this idea, the same sources have announced.

(translated by bill)