“There is a tendency among Romanians to ‘outsource’ the responsibility of actions required to obtain a decent income upon retirement. One in two respondents to the ING Pensii Private survey believes ‘someone else’ is mainly responsible to ensure their pension income. This ‘someone else’ is the state – 37%, the employer – 11% and the respondent’s family – 3%,” ING Pensii Private general manager Raluca Tintoiu said Wednesday during a conference.
She added this attitude also explains the lack of involvement of people who have the legal right to have a privately managed pension account (Pillar II) in making a deliberate and informed decision regarding which pension fund to contribute to.
“For instance, a quarter of the more than 1.8 million contributors to ING Pensii have been assigned randomly over time. The trend for random assignment is more apparent among young people, as 22% of contributors assigned randomly to the fund managed by ING Pensii are aged 20 to 25,” said Tintoiu.
Conducted online by IPSOS Research in June 2014, on a sample of 1,000 respondents, the survey also found the private pension system Pillar II is the only financial instrument most Romanians use to save up for retirement.
“Even so, people don’t have a clear understanding of the private pension system and the benefits it offers. Eighty-six percent of respondents said they do not save regularly for retirement using other financial instruments, either because they can’t manage (62%) or because they haven’t planned to (23%),” Tintoiu added.
The level of awareness and information on the mandatory private pension segment (Pillar II) continues to be limited as one in three respondents (29%) is not aware that they have a privately managed pension although they own such a product. Of these unaware private pension contributors, 38% are aged up to 25.
“It is interesting to note that among the 30% of respondents who said they were not sufficiently informed regarding Pillar II the main reasons leading to this situation were lack of understanding of the information received (24%) and lack of personal interest (57%). Moreover, nearly 20% of respondents who received their annual letter informing them of the state of their private pension account in 2014 have not read it,” Tintoiu said.
One in three respondents was not aware that funds they contribute to private pensions are collected in individual accounts, are theirs alone and are not redistributed to current pensioners, as in the public pension system. Also, 44% are not aware what percentage of their pension contributions goes to the private pension system, while 38% don’t know how much they have saved in their private pension funds so far.
“At the same time, 46% of respondents are not aware the amount saved in their individual pension account will be inherited by their families in case they are no longer alive by the age of retirement, while over 25% don’t know they have the option of transferring their contributions to a different private pension fund,” Tintoiu said.
According to data presented by ING Pensii, Romania will have a population of 17.2 million in 2060, from 21.4 million 2010, of which the active population will account for only 54%. At the same time, less than two thirds of the active population will be working in 2060 and thus will be contributing to the state budget, having to support an increasing number of pensioners in the public pension system. By 2032, a person’s pension is expected to amount to just 24% of the person’s last salary, from a current rate of 36%.
ING Pensii Private is the largest administrator on the local mandatory private pension segment, with assets of RON6.5 billion.
Pillar II was launched in May 2008 and managed total assets of RON17.35 billion at the end of August 2014.