“Even though we are celebrating 10 years since the first contributions were paid into the private mandatory pension funds (Pillar II), I do not think that festive presentations are in order. Having this event in the amphitheater of the School of Economics (ASE) compels us, I believe, to academic rigor. That is why this is I think the right venue to talk about superficial, inaccurate or at times hypocritical approaches. Unfortunately, we have enough such examples by looking at comments surrounding Pillar II alone.

Private pension funds are accused for investing in government securities out of convenience, while it is the law that forces them to have a low risk profile.

Pension funds are blamed for “recycling budget money” by financing Romania`s public debt, while financing foreign public debts, possible under the law, is frowned upon.

We would like to see a higher exposure of pension funds to shares but we obsess about the short-term volatility of funds and jump up every time we go through times of negative returns.

We would like to see a higher involvement of pension funds in Romania`s economy while wishing for a plateau or decrease in managed funds.

In some people`s mind, pension funds should break the fundamental law of every investment whereby only higher risks warrant higher yields, and accuse them of not delivering high yields at low risks.

We have seen concerns expressed publicly about the Romanian economy being taken over by foreign capital, while setting the scene for the destruction of the largest source of local capital: the private pension funds.

The same people fretting over the size of private pensions make rush statements which adversely impact the value of the very shares in which Romanians` private pensions are invested, thus reducing them in value.

Some leaders have been warning us that for decades Romania has been selling itself short, but forcing pension funds to sell will successfully do exactly that: Romanian assets will be sold too cheaply.

We talk about the value of the average retirement private account savings instead of talking about the savings value for an average wage received in the last 10 years. That is about RON 11,000.

We are ranting and raving about the inherent importance of Romanians` rights to choose who manages their pension, without, however, being given the choice to leave Pillar I of the pension system, the public pension system managed by the government.

The government deems unjustified the fact that Pillar II is mandatory as they do not want to force the working population into saving money for their retirement, while having a mandatory Pillar 1 under which the employed have to show solidarity and fund the retirement of others is seen as justified.

We are promoting the idea that the government is a better manager than private funds although there has been nothing in the last decades to confirm that.

Why is it at the end of the day so important to talk about lack of rigor and hypocrisy?

Because at the core of all financial institutions, financial markets, of the overall financial system lies a crucial element: CONFIDENCE. And lack of rigor and hypocrisy are among the fiercest enemies of CONFIDENCE.

And lack of CONFIDENCE is well on course to destroy a country.”

 

Address in my capacity as the President of the Romanian Pension Funds` Association (APAPR) at the “The Romanian Financial Markets” forum on May 31, School of Economics (ASE).

Subscribe to receive notifications when new articles are published