Delay in pushing forward the legislation for private pension contributions in Romania by the government
The proposed Romanian draft law aimed to regulate the disbursement of private pension savings, with the goal of preventing large lump-sum withdrawals that could destabilize financial markets. The key details of the abandoned draft law center around limiting individuals to a single lump-sum withdrawal of up to 25% of their personal account's value at retirement, with the remainder paid out gradually over a period of at least 8 to 10 years or as a life pension via newly created "pension disbursement funds."
Initially, the government planned to allow partial withdrawal, but later increased the limit to 30%. The draft law was intended to provide a long-overdue legal framework for private pension payouts, which have been lacking since pension funds were established in 2008 and a payout law was promised around 2011.
However, the Romanian government abandoned plans to approve the draft law in early August 2025 due to strong opposition from consumer associations, politicians, and organizations like AURSF (Association of Romanian Users of Financial Services) and pension experts. Critics argued the draft excessively limited individuals' rights to access their own pension savings, transferring control to the state and financial industry, effectively creating a more collectivized system and oligopolistic market conditions that undercut financial freedom and competitive fairness.
The average personal account is worth EUR 4,000 for the 2nd pillar and EUR 1,300 for the 3rd pillar. Recipients above a certain threshold (annual minimum pension set for the public pension system, or just over EUR 3,000 currently) can choose between a fixed-term annuity (minimum pension in the public system, can be larger if the fixed-term exceeds 10 years and the personal account exceeds EUR 30,000) or a lifetime annuity, calculated by the pension payment fund on an actuarial basis. Recipients with accounts below the threshold can redeem their funds in full.
The draft law was published for consultation on June 11, but public debates were unlikely due to intense negotiations on a fiscal plan to avoid the country's junk status and financial crisis. The redeeming of personal accounts after 2030 could significantly impact government financing, as pension funds are key investors in government debt. The impact of the non-approval on the pension system's future regulation is yet to be determined.
The debate on August 7-8 focused on the recipients' full control over their personal accounts after retirement age, rather than on technical details. The opposition's challenge to the draft law was primarily based on concerns about the restriction on the disbursement of over 25% of a personal pension account at retirement age. The law's non-approval does not affect the current status of private pensions in Romania.
In summary, the abandoned draft law sought to gradually disburse private pension funds to maintain financial market stability, but its restrictions on full withdrawal sparked political and public opposition due to concerns about limiting retirees' control over their money and increasing state and financial industry control. The law is under reconsideration amid these competing interests.
In light of the abandoned draft law, the future regulation of private pension systems in Romania remains uncertain, as the proposed restrictions on lump-sum withdrawals faced strong opposition from various groups. The disagreement centered around concerns that limitations on individuals' access to their own savings would transfer control to the state and financial industry, potentially creating a more collectivized system and oligopolistic market conditions.
The debate over the draft law underscored the importance of balancing financial market stability with retirees' control over their personal accounts, a critical aspect of business, finance, and general-news discussions in Romania.
