Pension system: alternatives and compromises

CRPE Policy Brief 25: Alternatives and compromises in the Romanian pension system for the next 20 years

Authors: Victor Giosan, Ciprian Ciucu

PhotoEven though in the short run Romania cleared out the danger of the pension system collapse, on medium and long term, its sustainability is still questioned. Amid a stable employment rate and taking into consideration the population aging phenomenon and the demographic involution that is expected to be catastrophic, the pension system will not be able to offer adequate social protection to future pensioners and will become a millstone around economy’s neck (having negative impact on the investments in the productive sectors and increasing the taxes).

In this context, the Resource Centre for Public Participation – CeRe, together with the Romanian Centre for European Policies (CRPE), held a first discussion of a long series of debates, on the occasion of the launch of the study Alternatives and compromises in the Romanian pension system for the next 20 years[1], written by Victor Giosan, CRPE affiliated expert.

The purpose of the debate was to bring into question, in a first attempt to resuscitate the public interest and within a broader analysis, the sustainability of the pension system with a medium to long-term time horizon.  Around 2030, the pension system will reach its limits and the state will not be able to provide pensions adequate to people’s expectations, in the absence of changes supposed to intervene in the current demographic and economic dynamics. If the percentage of contributions remains constant and the demographic pyramid inverted (the basis, made of beneficiaries – up and the top, made of contributors – down), thepay as you go pension fund (PAYG)[2] will automatically go into deficit.

The discussion was opened by Mrs Mariana Câmpeanu, Romanian Minister of Labour, who emphasized the importance of such a study, balanced and with realistic proposals, weighing the principles of equity and sustainability. The event was attended by representatives of political parties and the National House of Pensions, private and public pension systems experts, members of NGOs working in the field and academics.

More information on the project here.

Donor: The project is co-financed by a grant from Switzerland, through the Swiss Contribution to the enlarged European Union.

[1] The study is available only in Romanian.

[2] Based on intergenerational solidarity