Pillar II: Private Pension Funds Have Grown by Up to 7,000 RON. The Real Explanation

The more than 8.3 million Romanians contributing to the Second Pension Pillar have seen larger sums in their personal accounts in recent months. According to an Economica.net analysis, a participant holding 2,000 fund units had, as of 10 July, approximately 7,000 RON more than on 5 May — the date on which Parliament voted the motion of censure against the Bolojan Government. Compared to the beginning of the year, the gain rises to approximately 11,000 RON.

It is important to note that this increase has nothing to do with the change of Government; rather, it is due to the very strong performance of the Bucharest Stock Exchange (BVB), where private pension funds have placed a significant portion of participants' money.

Who contributes and how much

Employees who entered the labour market before the age of 35 are required to contribute to the Second Pillar. The current contribution rate is 4.75% of gross salary.

According to data from the Financial Supervisory Authority (ASF), the net asset unit value (VUAN) was, as of 10 July, 13.7% higher than at the end of last year. Over the same period, inflation stood at 3.9%, meaning the funds' returns were more than three times greater than the rise in prices.

The role of the Bucharest Stock Exchange

Approximately 27% of private pension fund assets are invested in shares listed on the BVB, with over 60% held in government securities. The BET index, which tracks the 20 most liquid companies on the BVB, recently reached all-time highs, posting one of the best returns in the region.

The situation is all the more unusual given that it is unfolding against a backdrop of economic recession: the National Institute of Statistics (INS) reported a 1.2% contraction in Gross Domestic Product (GDP) in the first quarter of the year, and analysts expect the recession to continue.

What comes next

Analysts cited by Economica.net warn that financial markets move in cycles, and periods of growth are typically followed by corrections. Any potential decline in the BVB would be directly reflected in the value of Second Pillar assets.

Those retiring right now stand to benefit the most from these gains. For other participants, the money held in the Second Pillar remains a long-term investment, the value of which may fluctuate depending on the performance of financial markets.