A first intervention came from George COATS, Deputy Editor of the prestigious specialized British magazine, Investment & Pensions Europe. The publishing interests of our magazine made me visit almost all European countries, where I had the chance to shape a direct opinion on the developments of these private pension markets and formulate a few conclusions, stated the British journalist. A first conclusion concerned the advantage of former communist countries from Central and Eastern Europe in the pension system reform process in relation with mature economies from Western states. The demographic evolution raises similar problems in the field of pensions throughout Europe, the need to reform the current systems being clear. In such a context, the situation of EEC countries offered the advantage of building on a “virgin” soil, and this allowed the implement ation of coherent solutions, adapted to the current needs. In Western economies, the change of an economic culture and the reform of systems which developed naturally for 150 years proved to be an extremely difficult approach, added George COATS. Regarding the New Europe markets, despite the diversity of solutions adopted starting from the three-pillar scheme promoted by the World Bank, one can see common conclusions regarding the factors that affect a successful reform. A first conclusion concerns the public perception and the acceptance of the reform: The system must be simple, understandable for persons with low economic culture and very transparent. With regard to the financial dimension and the technical features, it is not enough to ensure the functionality and the sustainability, but the end must all the time be considered: providing decent pensions depends directly on the level of the amounts introduced in the system. In other words, too low contributions can only lead to equally low pensions. Eventually, a general conclusion underlines a dysfunction that was present and generated effects in many of the surveyed countries: Unfortunately, the pension reform depends on the political will, and Governments think on short-term, according to election dates, while private pensions are a long and very long-term business, by definition.
With her personality that needs no introduction in Romania, Violeta CIUREL, General Manager, European and International Affairs ING Group, brought to the attention of the participants, in the second presentation, the future perspectives in the field of European facultative private pensions. Considered as an expression of individual responsibilities towards financial security after retirement, Pillar III of pensions can play an increasingly important role, even more so as in many countries the resources offered by the public system, summed up with the occupational pillar, do not provide a satisfactory living standard, and in the future this situation shall become more obvious, as a result of a higher longevity. Actually, a general observation concerns the fact that there is a tendency, especially when talking about Pillar III, to focus the attention on the accumulation phase, while the importance of the payment phase is underestimated. Nevertheless, the assessment of this phase is the one that can validate the solutions selected in the accumulation phase and indicate what aspects are to become challenges for the future. From this perspective, if in the accumulation phase the accent is placed, naturally, on the asset managers’ capacity to use best the assets managed, in the payment stage, the beneficiaries desire to have a steady annuity to which we associate the reimbursement of medical expenses and long term care, makes the experience of insurers in risk management and distribution annuities become an essential component in the functioning of the private pension market. Last but not least, noticed Violeta CIUREL, we must underline the decisive role that the state plays, through the adopted fiscal policies, in determining the population’s economic behavior, both in the accumulation stage, stimulating the participation to the system, and in the distribution stage, when the taxation method may favor the option for a certain type of distribution, when the taxation method can favor the option for a certain type of distribution. There are examples where the taxation of annuities as income caused the population to chose massively for cashing the benefits in a small amount, exempt from taxes, thus a large part of the money get to be used in other purposes than the one for which it was saved. Therefore, the state is the one to consider all aspects when setting the rules, because appropriate regulations for solving certain specific objectives for the period where they were established can have perverted long term effects.
The European accession determines a direct interest for the issue of private pension portability, young generations, as underlined by Violeta CIUREL, proving to have much more mobility. According to Ovidiu TIBULEAC, a lawyer of the BOSTINA& Associates lawyer’s firm, legally, both the provisions of Law no. 411/2004, and of Law no. 204/2006 apply to Romanians who work temporarily abroad. Sufficiently numerous, made up mainly of young persons, this category of potential customers is much more interesting for the private pension operators. As for the potential practical solutions, the participants to the PRIVATE PENSIONS DAY listened to a presentation, before its actual launch in Brussels, of the European draft for the European Financial Services Round Table, with regard to a Pan-European pension Plan meant to facilitate the cross-border functioning of private pensions from Pillar III. A viable alternative, already tested in the field, the solution proposed by the German group ALLIANZ, Allianz European Pension (AEP), was presented by Crinu ANDANUT, MD. Applied first in France, Italy and Germany, with a perspective of expansion towards the New Europe countries, AEP implies the use of a local operator, acting according to the local legislation, a local product, using the standardized contractual relations at the level of the ALLIANZ group, and a common asset management policy. Considered to be a corporate pension solution adapted to the requirements for the future, AEP provides various advantages both to the employers and the employees, especially when they belong to multinational companies.
Romania: watching the calendar
In the opening of the second part, Bram BOON, President of APAPR and CEO, ING Life Insurance, summarized some of the most important concerns of the operators. If for Pillar III only few technical details remain to be clarified, in the case of Pillar II implementation we have several serious reasons for concern, among which the problem of the collection system, still unsolved and especially the one less discussed, but equally important, namely the system of validation for the subscription to the pension funds. In reply to this, Ion GIURESCU, Vice-President of CSSPP, mentioned that there is already a project under development with regard to building the collection system, a project that still requires some corrections, which means that, although the time pressure is high, there are high chances that the system is put in place in due time and functions properly. Moreover, the official from CSSPP wanted to mention that, from the supervisory authority’s point of view, the proper functioning of the system is vital because the major dysfunctions it can generate might reduce the population’s confidence in the whole structure of the private pensions.
Briefly summarizing everything that happened over the past year, Mircea OANCEA, President of CSSPP, noted that Although the supervisory authority reached its objectives regarding the issuing of the secondary legislation in due time so as to observe the announced implementation calendar, the regulation process is far from being concluded, and in the future the necessary norms must be adopted in order to clarify the operation regime of the private pension market, as well as to assess the effects that the application of the regulations issued have in practice and to operate the necessary corrections. In addition, the agenda for 2008 should also contain the drafting of the legislation on payment methods and procedures for private pensions.
Given the extremely dynamic present and such a rich perspective ahead, the activity on the private pension market does not leave much room for reflection. However, the essence of the huge responsibility on the shoulders of all entities involved in its beginning resides precisely in fulfilling these perspectives and encourages a permanent evaluation of the road traveled and of the future stages. We witness the birth of an extremely competitive financial market, stated Mircea OANCEA, and I am persuaded that in few years time, with the lowering of the bank interest rates and the slowing down of the real estate boom, private pensions will become a saving instrument in the population’s preferences top. The success of this market shall trigger material changes in all related fields - banking, capital market etc. - and will generate a major economic and social impetus. Let’s not overlook the high volume of jobs that this market will generate, the new professions created etc. Therefore, the concrete details of the present are important especially through the angle of future implications. The professionals present at the PRIVATE PENSIONS DAY carried a dialogue with the representatives of the supervisory authority, as well as with the specialists from related fields in a successful attempt to identify the right solutions for several aspects of the practical activity.
IT&C - a must-have component
The IT solutions must represent the spine of the pension system, stated Crinu ANDANUT, the event’s moderator, announcing the Conference’s section focused on this topic. The administration of pension funds, the management of financial flows on the market or the supervision are activities that, in the absence of a proper IT system, would be unconceivable. The experience of certain countries that already implemented for the private pension system proved that constructive, well-designed solution almost failed when the IT support was not a proper one.
THE PRIVATE PENSIONS DAY offered the opportunity to establish a first contact with a series of dedicated IT solutions. Private pension funds administration and asset management represents the action field for the solutions proposed by FIMADIS, an important IT&C company from Hungary, specialized in technical solutions for the financial and banking system, and by SOFTWIN. If the Hungarian specialists are proudly presenting turn-key solutions for which they provide full support, going from individual accounts administration to reports issued for the supervisory bodies, the presentation delivered by Daniela FLOREA, CEO, EXPERIAN Geo Strategies, introduced a completely new system of geo-demographic segmentation that ranks all 21.6 million inhabitants of Romania into 45 distinct types of consumers, grouped into 10 classes, a unique instrument in Central and Eastern Europe, thus placing the selling activity in private pensions into a totally new perspective.
Obviously, the topic was too complex to be talked out in just one day of debates. However, it is beyond any doubt that the hours of discussions and presentations brought an important plus of information and offered the foundation for new partnerships, as well as many clarifications. Crinu ANDANUT: It is very important to create a synergy of efforts that ensures for this market a start as we want it, at full speed and without hesitations, so as to send a positive image to the future participants in the system. In this approach, the exchange of experience and the dialogue represent some of the most important ingredients of the success.
