THE EVOLUTION OF ROMANIAN PUBLIC PENSION SYSTEM

Romania's population is decreasing and ageing, "The majority of Romanians are entitled to a public pension that represents 30 - 35% of their last salary, at most" are some of the headlines we can often read in the Romanian press. These problems haven't been addressed properly by policy makers and, as a result, the standard of living is submediocre for most of the pensioners. However, as of January 1st, 2008, private pensions became mandatory for employees under 35 years of age (the so-called second pillar). Although several years late compared to other Central European countries, the Romanian authorities' decision to implement a mandatory second pillar is welcome and will definitely contribute to higher pensions in the future. We analyze hereinafter the Romanian public pension system. We explain the rationale for introducing a mandatory second pillar by stressing the flaws of the first-pillar pension system.