Romania, the year 2050 - two working people are paying for every one pensioner and without compulsory reform of private pensions, a payment into pension funds crisis will unfold.
Romania, the year 2050 - two working people are paying for every one pensioner and without compulsory reform of private pensions, a payment into pension funds crisis will unfold.
According to estimates made by Eurostat, the European Commission's statistics department, the population of Romania will fall by 21% by the year 2050. This fall is due to several factors, such as: a drop in the birth rate, increased level of emigration (according to some unofficial sources, over 2 million Romanians currently reside overseas) and the rise in life expectancy (an average lifespan is estimated at up to 75.5 years for women and 68.2 years for men).
The effect of these factors will result in an ageing population and a decline in terms of numbers. The starkest effects will be seen in the level of the dependency rate* which will show an astonishing rise from 21.1% in 2005 (approximately one pensioner to every five people aged between 15-64) to 51.1% (one pensioner to every two people aged between 15-64) in 2050.
We should point out that it is generally accepted that public pension schemes (pay as you go) are susceptible to demographic changes. Over the last 50 years we have witnessed an ageing of the Romanian population, a fact reflected in the preponderance of those in the population aged over 65 compared to those aged between 15-64. This phenomenon will also manifest itself in the future, going hand in hand with the global trend in rising rates of life expectancy.
What this means in this case is that the number of those contributing to the public pension scheme will decline, whilst the number of pensioners will grow.
These are only a few of the motivating factors on which the decision to reform the pensions system in Romania was based. In the near future, the responsibility for pensioners' standard of living will not lie solely with the state but will also lie with the individual.
Aviva is proposing to support the Romanians in saving for their retirement and is announcing its submission to the CSSPP of a request for authorisation to set up as a private pensions company (Pillar II), in accordance with Law 411/2004, making it one of the first companies in Romania to take this step.
Aviva has taken this step in order to demonstrate its commitment to the Romanians even if the legal framework is not yet perfect. There are several aspects of the legislation which need to be adjusted, such as the level of contributions and the financing of the companies administering these pension funds.
"Aviva will invest up to 100 million euros in a new pensions company. We will use all the expertise that we have gained on markets across the world to offer the Romanians security and a growth in retirement income. With thorough financial planning, every individual can have a decent pension, contributing with accessible amounts to a private pension plan.
"Aviva will have at its disposal a sales team of over 20,000 marketing agents who will assist the Romanians in understanding pensions products and the way in which they can meet their specific needs," said Shah Rouf, CEO of Aviva Life Insurance.
-ends-
For further information:
Giliola Ignat
Telephone: 203 83 73
Notes to editors:
About Aviva
Aviva Life Insurance is a part of the Aviva group, the largest provider of insurance in Great Britain and one of the first two life insurance companies to have been authorised by the Oversight Committee for the System of Private Pensions (CSSPP) as an administrator of optional pension scheme funds.
The Aviva group is the number one for private pensions and life insurance policies in Europe. Aviva is the market leader on the markets in which it operates. In Poland, the pensions fund administered by Aviva has been named the highest performing in Central and Eastern Europe. The group administers 535 billion euros' worth of assets*, representing the money of over 40 million clients worldwide.
In Romania, Aviva has over 400,000 clients and agents and development centres in 19 towns.
* The dependency rate reflects the relationship between the number of those in paid employment and the number of pensioners. In other words, this ratio shows how many people in paid employment are contributing to the budget of a pensioner. The downward trend in the dependency rate is due to those taking early retirement. Since 1996, more than 150,000 people have taken early retirement compared with the normal number from the demographic viewpoint.