Voluntary pension funds, a smart move for our future

It would be smart to discuss with the employer, even at the first work place, the possibility of contributing to the voluntary pension fund.

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BCR PENSII SOCIETATE DE ADMINISTRARE A FONDURILOR DE PENSII PRIVATE SA

MELANIA MIREA

MELANIA MIREA

EXECUTIVE MANAGER at BCR PENSII SOCIETATE DE ADMINISTRARE A FONDURILOR DE PENSII PRIVATE SA

1. The 6th anniversary of the Romanian private pension system was marked in 2014. How would you describe a mature private pension system? Is Romania’s private pension system heading in the right direction? Please detail. 

 

When talking about a mature pension system, the first thing which comes into mind is the Western European countries, such as the Netherlands, where the private pension already has a rich history. We need to be aware that these more developed systems are based on a different culture than the Romanian one. We are talking about a culture of saving money, looking ahead for securing the future, even from the first paycheck people earn as employees. Regarding Romania, I believe that the data about new clients who chose the voluntary pension show that the entire private pension system is headed in the right direction, but there is still space for improvements.


In 2014, 1 of 3 Romanians who signed up for a voluntary pension chose BCR Pensii. Thus, we reached over 600,000 clients who gave us their trust for managing their pension money, either in pillar 2 or pillar 3 pension funds. In 2015, at the end of June, Fondul de Pensii Facultative BCR PLUS (BCR PLUS) had 105,692 participants, more than 15% increase when compared to the same period in 2014. The voluntary pension market has increased, on average, with 11%*.

 

2. What was the growth rate of the voluntary pension fund investments in 2015, compared to 2014 and what is the minimum investment in a voluntary pension fund?


In order to explain the increase that our fund has brought to our customers, I would like to talk about the fund unit, as the participants at a pension fund buy fund units with their money saved for the pension. BCR PLUS fund unit has increased from the initial value of RON 10.000000 (in 2007) to RON 17.308895 at end of September 2015, according to the Financial Supervisory Authority – FSA – data, which means an increase of over 70%*. Our investment strategy is oriented on the medium and long term and the investment results may vary in this long time intervals.


I believe that the level of the investment in a pension fund is subjective to each individual, with the condition to choose a monthly contributions level between RON 35 (minimum level for BCR Plus) and 15% of the gross salary. We should consider the rule of thumb of having the retirement income equal to 70% of your final employment earnings. Starting from this, each person should decide and prioritize how much money he/ she needs to save for a decent living during retirement.

 

3. How would you describe ‘anintelligent investor’ in the Romanian private pension system?


A smart investor in the private pension system is a person who takes into consideration all the advantages of this system and maximizes them. In order to continue to answer to the previous question, I consider that a smart investment in the voluntary pension is the tax deductible amount of around RON 150, monthly. By saving this amount we feel a fiscal advantage in our pocket which rises up to almost RON 300 per year, money which can be saved in the individual voluntary pension fund instead of going to the state as income tax.


Besides my own contribution, I think it would be smart to discuss with my employer, even at my first work place, the possibility of contributing to my voluntary pension fund. The employer also has fiscal benefits if he or she grants the voluntary pension to the employees. The optimal amount for an employer from the tax deductibility point of view is also around 150 RON/ month/ employee.


Thus, I think that the contribution of RON 300 monthly, a mix between employee and employer, starting with the first paycheck, can define a smart investment regarding private pensions. Afterwards, I strongly recommend following the fund’s results and investment policy and, also, increase the individual contribution amount whenever a person’s financial situation allows it.

 

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