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Pillar II pension funds' 2020 average rate of return at 6.19 pct, threefold inflation rate

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Mandatory privately-managed pension funds (Pillar II) achieved in 2020 an average rate of return of 6.19 percent, three times higher than last year's inflation rate, president of the Association of Romania's Privately-managed Pension Funds (APAPR) Radu Craciun said on Monday.

He pointed out that, in monetary terms, Pillar II funds generated in 2020 an exclusive net gain of 900 million euros net of fees.

"The average annualized return from the beginning of the system until the end of 2020 was 8.2 percent, whereas the average inflation during this period was about 3 percent. Overall, the net gain for the contributors to Pillar II funds was 3.5 billion euros, investment return. (...) If we look at the only year in which private pension funds did not outperform inflation, we understand that the only major risk for the privately managed pension funds is the political risk, because 2018 was a very special year from this point of view, a year in which the political risk for the existence of private Pillar II funds suddenly soared. That was the only year when Pillar II private pension funds didn't defeat inflation because of the reaction of the financial markets to the decision variants that were rumored about," Radu Craciun told a news conference.

According to him, Pillar II currently manages net assets worth over 75 billion lei (15.4 billion euros) on behalf of 7.6 million contributors and the funds have already made payments of 397 million lei to 46,000 beneficiaries (contributors and heirs thereof). At this moment, more than one million Romanians (ie 1 in 7) have accumulated more than 20,000 lei in their personal account under Pillar II.

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