Romania : social protection sector pensions

Although Romania has undertaken many necessary and difficult reforms to public pensions to contain the fiscal cost of ageing, much more remains to be done. Replacement rates are low and falling to a degree that undermines workers' willingness to participate in the state pension plan, particularly at contribution rates that are among the highest in the region. The overarching objective of pension policy in the years ahead will be to establish a financially sound and sustainable pension system that provides adequate and secure benefits at a competitive cost to households. To meet this objective, the Government should (i) accelerate parametric reforms of public pensions; (ii) lower the economic distortions imposed by contribution rates; (iii) update and continuously monitor estimates of transitions costs of structural reforms; and (iv) establish the institutional, administrative and regulatory infrastructure required for the safe and competitive provision of contractual savings. This note summarizes the findings and conclusions from the World Bank's most recent analytical work on pensions, as an input to the Bank's program of support to Romania's social protection sector in the next three years.