Average return of €11 in 17 months on mandatory private pensions

According to data published by the Romanian Pension Funds’ Association (APAPR), Pillar II pension funds registered an average annualized return of 15 percent in the 17 months since launch, bringing a real gain of 9.70 percent weighted with the inflation rate in the analyzed period, of 4.84 percent.

APAPR data indicates that mandatory private pension funds attracted some 4.84 million participants by the end of the first nine months of this year. The net assets administered on Pillar II amounted to nearly RON 1.996 billion (€475 million).

“One must consider the amounts on which the returns obtained by the pension funds are applied, because the average annual contribution is €100, one of the lowest in the world. I believe that as of 2010 the contribution of the gross salary of participants will amount to 2.5 percent,” said Mihai Coca-Cozma, General Manager of AIG Fond de Pensii.

In the past year, mandatory private pension funds posted returns higher than all fixed-income financial instruments, in which they invested 90-95 percent of their assets, as the rest of their portfolios were invested in variable earning shares.

“I believe that pension funds are waiting for the end of the crisis to invest more on the stock exchange,” Ioan Vreme, General Manager of Generali Fonduri de Pensii, said.

According to APAPR, a Pillar II participant with average contributions of RON 540 (some €126) gained RON 88.1 (€20.6) from investments in the May 2008-September 2009 period, of which the administration fee retained by funds is RON 38.2 (€8.9). Thus, the net profit for each participant since the launch of the mandatory private pension system is RON 49.8 (€11.6).