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Youth without old age

Youth without old age. The Romanians’ pensions in 2040

Expert Forum launched on Monday, January 19th 2015, the study Tinerețe fără Bătrânețe. Pensiile Româniilor în 2040 / Youth without old age. The Romanians’ pensions in 2040, within the National Conference for Private Pensions 2015, organized by Media XPRIMM with the support of APAPR.

Romanians, especially the ones born after 1968, are worried that state pensions will not be sufficient for a decent standard of living. The youth feels concerned with heavy taxation when they must support an unbalanced pension system. EFOR addresses these concerns through several case scenarios:

  • What is going to happen with the pension system if the current policies will be upheld?
  • How large is the negative impact produced by limitative and destructuration policies of the 2nd pylon (private administrated pensions)
  • How can employment policies improve the value of the pensions after 2030 and the financial situation of the fund?

 

  1. The best solution to balance the system overcomes the pension related policies and comes from the labour market – the increase of occupation percentage of the active population. A net number of 625.000 new jobs or at least brought to surface from the informal economy is needed in the following 10-12 years, in order for the public fund deficit to reach 0.27% of the country’s GDP in 2040.
  1. An intervention on the 2nd pension pylon would be counterproductive – the results are either weak or would result in an important decrease of the deficit by paying the price of cutting down the pensions to a quarter of the minimum wage in 2040. Moreover, a decrease of the contributions to the 2nd pylon or their nationalisation will significantly decrease internal savings with negative effects regarding the support of private sector credits, given that the financial scaling effect, primed by the 2007-2009 economical crisis, will persist for a certain number of years and the foreign capital flows will become more and more volatile.
  1. The situation of pensions, given the current circumstances and the lack of adequate occupation policies, may become critical in the following 3-4 years – we are dealing with a fragile balance, especially in the context of such ambitious budgetary deficit targets. Hence, it is crucial, starting even with 2015, to implement efficient policies regarding tax collection and reduction of tax evasion which are easier to be approved and implemented. As well, it is crucial that, following the significant reduction of CAS not to adopt rushed measures to increase pensions or the number of retired people through the early retirement mechanism.

The study is available here (Romanian only)


Project financed by the EEA grants 2009–2014, through the NGO Fund in Romania. The contents of this material does not necessarily represent the official stand of SEE grants 2009 – 2014. For official information regarding the SEE and Norwegian grants, access:www.eeagrants.org.

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