ARHIVELE OLTENIEI - Universitatea din Craiova

REFORMING ROMANIAN PENSION SYSTEM: THE NECESSITY OFSUPPLEMENTARY PRIVATE PENSIONSROXANA RADU, FLORIN NACUThe reform of Romanian pension system had to fulfill the difficult taskof replacing the structure and ideology of a state centralized economy with astructure based on market economy. Crossing the transitional period required thenecessity of rethinking and redesigning a new pension system which had to benot only proper for market relations, but also take into consideration theproblems that Romanian society confronts itself with: poverty, inflation, socialexclusion, low economic growth, ageing tendency etc. because these continuingproblems made impossible to maintain the present structure.In Romania, as well as in all the transitional economies, the actualpension scheme confront itself with a series of major problems such as:unfavorable labor market developments; non-compliance in contributioncollection; ageing; high contribution rates; low average benefit levels andparticularly low replacement rates for higher-income groups (high degree ofredistribution); not enough scope for supplementary pension provisions; crisis ofconfidence in the present pension arrangements.Pension System has as main objectives to prevent poverty in the old-ageand secure adequate replacements rates through: minimum basic pension to allcitizens, regardless of their current circumstances or history of contributions;mandatory pension insurance scheme providing earnings-related pensions,financed by contributions from both workers and employers; voluntary,complementary pension provisions, supplementing the provisions of themandatory scheme; protection of all the components of the retirement packageagainst their erosion by inflation. Pension System should be relatively secure andstable and financially viable in the long-run in order to enjoy public confidence.The capacity of pension system to prevent poverty in the old age dependsof pension’s quantum and distribution. Pensions’ present level and especially theirdistribution are mainly determined by the characteristics of the old Romaniansystem of pensions, still applied in the present times, with certain adaptationsimposed by the modification of wages and pensions’ quantum because of inflationphenomenon. These characteristics led to extremely low levels of pensions incomparison with wages levels and to a small area of pensions’ distribution 1 . That’sthe reason for which it appeared the necessity to appeal to systems ofsupplementary pensions, privately administrated. The private sector is historically1 Maria Molnar, Poverty and Social Protection, “România de Mâine”, Bucureşti,Publishing House, 1999, p. 187.ARHIVELE OLTENIEI, Serie nouă, nr. 21, 2007, p. 299–308