Interviews with plus and minus

Joi, 09 Februarie 2012

Informing the public is still no. 1 priority

Crinu ANDANUT
President of APAPR
General Manager ALLIANZ-TIRIAC Pensii Private

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the positive returns of the private pensions funds from 2nd Pillar in Romania, while the European and world pension funds were in the red because of the financial crisis;
a number of over 575,000 new participants to the system, in the first year, by continuous enrolling;
strengthening APAPR, that has now become a partner of discussion for the authorities and served the communication, cooperation and technical development interests of the private pensions industry, with the participants to the system as beneficiaries.

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freezing the contributions to 2% in the 2nd Pillar this year;
changing the accounting rules applicable to administrators, in disagreement with the international accounting standards and the best practices in the field;
maintaining a low level of information and interest in the 2nd Pillar among young people, as seen during the continuous enrolling process in the following ratio: 10% participants included by own signature – 90% participants included after the monthly random distribution.

Contrary to many beliefs, neither the law on the guarantee fund, nor the law on the private pensions pay out are a priority for 2009. At present, the real zero priority is a national campaign for comprehensive and accurate information on private pensions, as well as on the state pension system. A national information campaign whereby authorities help the general public to better understand the system and build the confidence in the very much needed reform of the pension system.

We hope to see this campaign become a reality at some point – although, to be honest, I don’t see the authorities designating this objective as a priority anytime this year.

Emilia BUNEA
CEO
ING Fond de Pensii

The Guarantee Fund must only be seen as a last resort solution

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the enrolment at a higher than expected level for the optional age bracket 36–45, an extraordinary vote of confidence for the private pensions system;
exceptional return on investments, given the crisis and compared to the yield of other pension or investments funds from Europe;
good organization of CNPAS (National House of Pensions and Social Security) that avoided major errors, such as the ones caused by the Polish counterpart at the beginning of private pensions system in Poland.

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failure to meet the initial calendar regarding the contribution percentage;
the very high percentage of accounts without contributions, accompanied by too little information on the causes thereof;
amendment of the accounting rules on acquisition expenses.

The final form of the law on the guarantee fund can have a major impact both on the administrators’ business plans (again), and on the risk management philosophy that the private pensions market will use. I think the guarantee fund must be considered as a last resort solution (and sized accordingly) and administrators should build enough “defence lines” on their own field (by calculating the correct provisions and by maintaining a minimum solvency rate) so that, even in extreme case scenarios, they cover with a very high probability all the risks they undertake and, consequently, the possibility of throwing themselves to the “market’s mercy” (i.e. the guarantee fund) be very low.

All economic and fiscal measures will reflect on the 2nd Pillar

Mihai COCA-COZMA
CEO
AIG Fond de Pensii

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completing the secondary legislation on time;
starting the collecting phase on time;
APAPR’s involvement, participation, help and know-how input to the market’s development.

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the amendment of the final evaluation procedure, as well as the completely opaque way of conducting the final validations;
the secondary legislation’s constant changing and deviation from the primary legislation, together with the instructions sent through notifications;
failure to observe the legislation on gradual increase of the contribution.

Priorities relate to streamlining the operation of the 2nd Pillar, either by reducing the administrators’ expenses, or by creating additional sources:

one year from the first collected amounts, the Participants’ Registry should be cleaned up by removing the members with no contributions and by keeping them in a buffer-registry for a potential subsequent activation; the administration costs of CNPAS, CSSPP and administrators will be reduced; also, the reporting of the empty accounts in the media will be much more encouraging;
the system’s four guarantees should be re-discussed, as they are inconsistent with each other and cause an extraordinarily prudential investment policy;
protecting, with a specific, simple and strictly regulated insurance, the families of participants who died or became totally and permanently disabled and who, due to the very short contribution time, have not accumulated a sufficiently high asset. The 2nd Pillar will be the financial system to fully experience the volatility of the Romanian economy’s evolution. Absolutely all economic and fiscal measures taken and/or to be taken will deliver their real effect – positive or negative -, through a multiplied result, in the 2nd Pillar funds, especially in each participant’s individual account.

Simona Mihaela DITESCU
CEO
BCR Fond de Pensii

The implementation of the multi-fund system should be on the “short list” of priorities

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the money collection and transfer were conducted as expected;
active legislative support;
prudent investments, which yielded positive returns (in the current economic context).

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the freezing of contributions;
recording directly as an expense item the costs with the agents’ commissions;
the lack of a market share limitation system, both during the initial enrolling campaign, and during the continuous enrolling campaign. As for the continuous enrolling, I specifically talk about the random distribution system based on the market share obtained during the campaign.

Going back to the initial contribution calendar and recovering the stagnation period are priorities of the private pensions system. Then, I think sales should be boosted by creating a random distribution system in line with the current sales volume. I would also add the implementation of a multi-fund system to the “short list” of priorities.

At the moment, the priority is rather connected to the way we collaborate on this market

Besim JAWAD
CEO
EUREKO Fond de Pensii

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the success of the enrolling campaign, conducted over a very short period, and especially the unexpectedly numerous participation of persons for which the enrolling was optional; I would particularly point out here the effort made by CSSPP to make the entire process possible;
the very good operation of the collection system which, unlike the experiences in other countries, did not cause any notable difficulties in Romania;
the first year’s positive result, which proved the system is fully functional, even though various issues had to be clarified along the way.

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freezing the contributions for 2009; amendment of the accounting rules;
the form of the first draft for the law on the guarantee fund which, if adopted, will make this business completely unprofitable, our shareholders being faced with the impossibility to have a return on their investment and to get a profit.

There are still many technical issues to be solved or corrected, but I don’t think they are really particularly urgent. In my opinion, the priority now is rather connected to how we collaborate on this market.

For instance, we should bring more transparency to the processesconducted at CNPAS, that are enrolling and collecting related. In many ways, they are still packed in a “black box” from our point of view, the market operators. Then, it would be good to keep in mind, when setting rules, the objective to meet. The procedure of sending the annual information letters is a good example in this respect. The request for individual slips created a lot of additional costs and it did not at all improve the chance that participants receive this letters.

Besides, it would be great if the norm on transfer was amended so as to minimize the risk of participants being forced to transfer from one fund to another against their own interest, as well as the risk of fraudulent transfers.

There are also other aspects that must be regulated or areas where norms need to be amended, such as: private pensions pay out or issues related to solvency requirements and technical provisions, but these are things that can be settled over time. Most importantly, I believe we should not forget that private pensions administrators are actually financing the reform. These companies make no profit at the moment, and they won’t make any profit in the near future either. If their perspectives of conducting a more or less profitable business will diminish further, they might not want this business anymore.

Marius RATIU
CEO
AEGON Fond de Pensii

The most important thing is legislative stability

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transferring the first contributions within the deadline set by the law;
centralized collection and transfer of the contributions, without major problems;
entry into force of the new investment norm.

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freezing the contributions at 2% for 2009;
the amendments to the accounting provisions;
non-prioritization of the legislative amendments/additions/adjustments, depending on their relevance.

As much as we tried to learn from what was implemented in countries with more experience in the 2nd Pillar, it is obvious that a good operation of the system cannot be defined in a relatively short period of time. Even though there are still aspects that need and can be corrected, I believe the priority should be the stability of the legislative system. Although things are more or less perfect, it is preferable that, today and tomorrow, they stay the same.

The Romanian citizens proved they trusted the system

Cristina NITESCU
CEO
OMNIASIG Pensii

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the high number of participants, beyond all expectations;
the significant share of individuals over 35 years of age, which proves their confidence in the system;
the higher than expected return of the funds, considering the economic crisis and the evolution of the capital markets.

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freezing the contributions;
legislative instability.

In my opinion, the absolute priority is that of going back to the initial contribution calendar.

Shah ROUF
CEO
Aviva Romania

I am glad to see that many of the initial shortcomings are corrected

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What is important, and we are glad to see this has already happened, is that good things come to correct the shortcomings we faced in the first months: the quality of the CNPAS database is improving every day (compared to what happened in the initial stage), the contributions started to be paid on time (although initially they were often stopped).

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I think the most disarming aspects concern the freezing of the contributions and the multiple legislative changes. We hope that future regulations will mange to right the negative aspects we are now facing; recently, we noticed the authorities’ active involvement, which strongly compensates the frequent legislative changes in the field.

The no. 1 priority relates to the stability of the legislative and political environment. From our perspective, a consistent approach of the “mandatory private pensions” topic among the authorities will boost the confidence level, both for customers, and especially for investors, offering them the possibility to take advantage of the opportunities provided by the Romanian business environment.

The public’s interest for private pensions must be maintained through correct and constant information

Ioan VREME
CEO
GENERALI Fonduri de Pensii

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The positive part is covered by the market’s positive results, during a crisis, and this is due to the fact that all administrators are part of serious and stable international groups. At the top of the optimistic pyramid, I would place the fact that Romania has highly skilled specialistsand it can do things better than other countries.

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The ranking of the negative parts starts with the 3rd place: the participants’ lack of interest increased over time. This was due to the 2nd negative element: failure to earmark resources for a coherent and constant information. Probably all was based on a negative philosophy and approach, specific to the Balkans: This, for sure, is a scam.

The top priority is a very efficient collaboration between the operators and the supervisory body, because the legislative aspects must be brought closer to the reality of the crisis and the experience we gained in one year. I believe that only our concerted actions can help us prove that the system is improving, to serve the participants’ interest.