Major lenders fight over private pensions

The rush of banks to enter the private pension system is explained by the fact that the August-November 2007 date for employees under the age of 35 to choose a pension fund is drawing closer.

It will be difficult for companies who miss the start of the joining period to make up for lost money, time and customers. The reason is simple: all employees will be obliged by legislation to choose pension funds.  Interamerican insurance company officials estimate that there will be 2.8 million participants in mandatory pension funds in 2007, and their number is expected to rise to 4.5 million in the next ten years.

The President of the Surveillance Commission of the Private Pension System (CSSPP), Mircea Oancea, told Business Standard that BRD-Groupe Société Générale has applied for authorization of its own company to administer a private pension fund.

Thus, the subsidiary of the French group becomes the second-largest lender in Romania, following BCR, which announced at the end of May 2007 its intention to enter the mandatory private pension market (pillar two). Mother companies, Erste for BCR and Société Générale for BRD, strongly support their subsidiaries.

BCR, market leader on the banking sector, announced its intention to enter the mandatory private pension market in mid-May. The BCR Asigurari de Viata insurance company has already been authorized to operate as a voluntary private pension fund administrator.

Banca Transilvania and the second-largest Dutch insurance company, AEGON, have filed an application for the authorization of the BT Aegon Pensii Private company, which will operate on the second pillar. The Banca Transilvania financial group already includes the BT Asigurari insurance company.

The third most important lender on the Romanian market, Raiffeisen, will administer a private voluntary pension fund through its Raiffeisen Asset Management (RAM) division.

Romania is the last ex-communist bloc country to introduce the private pension fund system. Statistics indicate that the public pension system is close to collapse. In 1989, Romania had 8 million employees and only 2.1 million retirees. Today, the situation is critical, with 4.5 million employees who support 6 million retired persons.  

In Bulgaria, private pension fund assets topped €700 million by the end of the third quarter of 2006, nearly 17 years after the pension reform was launched.

pensioners
2.8 million participants in mandatory pension funds in 2007, and their number is expected to rise to 4.5 million in the next ten years