The Romanian government has adopted an emergency ordinance covering a number of pension reforms, in what has been highlighted as an "important step" towards joining the Organization for Economic Co-operation and Development (OECD).

The act adopted by the government aims to amend the legislative framework governing the private pension markets, as the government works to align the private pension system with the highest international standards.

This includes reforms designed to make investment limits more flexible, according to OECD recommendations, and increase the options for pension funds to invest in assets traded on regulated and supervised markets in OECD member countries.

In particular, the reforms include an amendment of the provisions relating to investments, namely the creation of the possibility of investing in assets issued/traded in states adhering to the liberalization codes and the flexibility of investment limits, according to OECD recommendations.

This is intended to help mobilise investments to finance growth and innovation, while both the flexibility of investments and the diversification of the investment area are set to have a "stimulating" impact on the development of capital markets.

Under the changes, administrators of privately managed pension funds (Pillar II) and voluntary pension funds (Pillar III) will also be able to allocate up to 10 per cent, respectively 15 per cent of assets in participation titles issued by collective investment undertakings in transferable securities from Romania or from other countries.

In addition to this, the changes will offer savers the option to choose their pension fund according to the desired level of risk and considering the implementation of strategies through which the investment portfolio is adapted according to the participant's age.

Alongside this, the emergency ordinance aims to simplify the conditions for access to voluntary pensions by eliminating the requirement for a minimum number of contributions.

The reforms also look to strengthen the supervisory capacity of the Romanian Financial Supervisory Authority (ASF), in order to protect the interests of participants and market stability.

In addition to helping raise standards and effectively protect the interests of taxpayers, the adoption of the reforms is expected to help "significantly" in the push to join the OECD, a major objective of Romanian foreign policy.

Indeed, the ASF highlighted the emergency ordinance as an "important step" towards achieving the strategic objective of accession to the OECD, assumed by the current government program.

"The adoption of this legislative project marks a milestone for the evolution of the private pension system in Romania and for our path towards OECD accession," ASF president, Alexandru Petrescu, said.

"The recommendations formulated by international experts reflect a rigorous assessment of the progress made so far, but also of the necessary steps we need to take in the coming period.

"We are ready to strengthen risk-based supervision and support a modern, flexible and transparent regulatory framework, for the benefit of all participants in private pension funds."

The reforms were put forward following an assessment of Romania's contribution to the accession process, carried out by the OECD Working Group on Private Pensions, during the meeting of June 11, 2024.

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