Radu Crăciun, APAPR: "We are condemned to find other channels of financing the economy, apart from the stock market"

The assets of mandatory private pension funds in our country will double in the next five years, so administrators will be forced to look for other investment areas outside the capital market, Radu Crăciun, the president of the Association for Privately Administered Pensions in Romania, said last week (APAPR), on the occasion of a conference organized by the Association of Financial-Banking Analysts from Romania (AAFBR).

Radu Crăciun said: "Private pension systems in OECD countries are extremely diverse. Pillar II from us is characteristic especially of Central and Eastern Europe, in countries such as Croatia, Bulgaria, partially in Poland and to some extent in Latin America. In Western Europe, the most popular system is that of occupational pensions, which is also a system that involves automatic or semi-automatic enrollment, but which works, mainly, through a deductibility system that means that, in this case, companies be the ones who pay. Not by chance, in the recent meetings I had with the OECD delegation in Romania, which wanted to understand more about private pensions, it was very interested in occupational pensions. However, occupational pensions in Romania have existed in the law for about three years, but until now there has been no legislative change that would give a fiscal stimulus at least of the magnitude of Pillar III. It is a practically dead system for now, because there is no fiscal incentive for Pillar IV. As a result, no one has been interested in making such a fund, despite the fact that it has some very interesting virtues from the point of view of employers, and despite the fact that, in my opinion, it could be a very elegant solution to the special pension system , this time on a contribution basis. Therefore, I expect that entry into the OECD will stimulate the area of occupational pensions".

The President of APAPR added: "From the point of view of size, the private pension system is judged in relative terms, i.e. compared to the economy of a country - what percentage of GDP do private pension assets represent. In the OECD, the average is approximately 100%, while in Romania the ratio is 8%. Therefore, we still have a long way to go."

According to his rule, in the next five years, assuming that the private pension system remains intact, the assets of the Pilon II pension funds in Romania will increase by approximately 25-30 billion euros, which is about how much has been collected in 16 years.

"Therefore, I think there is more and more domestic capital, thanks to growing private pension funds. The problem is the channels through which we make this domestic capital reach the economy. But at this rate of growth, i.e. a doubling of assets in five years, with the best of intentions, the stock market will not be able to cope with the inflow of capital. And then we are condemned to find other channels of financing the economy besides the stock market. One of the channels is that of private equity funds, another could be represented by infrastructure funds, etc. It is an approach that must exist because it is a shame that all this money is not invested in Romania and migrates abroad, because we will have to invest it somewhere", stated Radu Crăciun.

According to the president of APAPR, the private pension funds in our country are among the most "nationalist", having a low share of investments abroad compared to other pension funds in the OECD. "In the OECD, the average investment abroad is somewhere between 50-60% with maximums of 80-90 in the Baltic countries. In Romania, the share of investments abroad is only 9%. We have this capital and the question is how we use it better", said Radu Crăciun.