The government of Romania, on August 21, amended the private pension law to regulate the disbursement of the pension rights, according to Europa Libera.
Participants in Pillars II, III and IV will be able to withdraw a maximum of 30% of the accumulated assets, in a single installment, upon meeting the legal withdrawal conditions and will receive the remaining in installments over up to eight year or as a life pension, for the entire duration of life under terms proposed by the newly set up “pension disbursement funds.”
The draft adopted by the government will be sent to Parliament, where it can be amended.
Commenting on the topic, prime minister Ilie Bolojan announced that the fees charged by the pension fund managers will decrease under the revised regulations.
PM Bolojan also touched on a sensitive point by saying that recipients’ decision to withdraw the entire amount of their pension portfolio could jeopardise the rights of the other recipients.
He has not explained further, but it is only reasonable to assume that a sudden decision to liquidate pension accounts would have a significant impact on the bond and equity markets, with those reaching retirement age after the first generation seeing their portfolios significantly diminished. Separately, this would increase the government’s financing cost.
iulian@romania-insider.com
(Photo source: Chernetskaya/Dreamstime.com)
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