KPMG: Pensioner-to-worker ratio at 1.74 in 2050, private pension a must due to falling old-age support rate
Romania's pensioner-to-worker ratio will reach 1.74 in 2050, in a surge from 0.3 in 1990, shows a KPMG survey presented on Thursday at a press conference by Tudor Grecu, KPMG audit & assurance partner.
"In Q1 2018 we worked out a survey that extensively deals with the importance and benefits of life insurance and private pension schemes to the society and the individual. Speaking of pension Pillar II, the survey shows that such a system is a necessity. More precisely, demographics is the essential element that results in the need for such a pension system. Such demographics are not specific to Romania, they apply to the entire Europe. If we look at the dynamics of Romania's population since 1990 to date and at forecasts for the coming years we see the median age was 33 in 1990, it is 41 today, and will be 47 in 2050. This puts a burden on the redistribution system, on what we call Pillar I. At any time there's a dependence of the individuals who collect pension on those who work and support the system. Whereas in 1990 the ratio was 0.3, meaning that one worker had to support the retirement pay of 0.3 pensioners, in 2050 the ratio will be 1.74. This shows an increase in the dependence degree and the need for such a pension system," Grecu said.
According to the KPMG official, whereas in Europe the retirement income target is no less than 70 percent of the last wage, in Romania this percentage is 52 (with the current Pillar II contribution of 3.75 percent accounting for 15 percent of the last wage).
"The moment of retirement means you will collect your first pension after your last salary. In Europe, the target ratio is 70 percent, that is the pension should not be less than 70 percent of the last salary. In Romania, someone who began working in 2008 and who collects an average wage till retirement in 2040 will have 37 percent of his last wage covered from Pillar I, while Pillar II - for the current contribution of 3.75 percent - will account for 15 percent. Assuming a contribution of 6 percent to Pillar II, the percentage will be 20. As a conclusion, the major message is that on the one hand, Pillar II is a necessity, and on the other hand, it is a successful phenomenon that must be continued to the effect it has been designed for in 2008," said the KPMG representative. AGERPRES (RO - author: Daniel Badea, editor: Andreea Marinescu; EN - author: Simona Klodnischi, editor: Simona Iacob)