Time of private pensions. Economic analysis by Info-Prim Neo

The initiative to create private pension funds has been put forward some time ago, but the intentions remained only declarative. At the same time, the problem of pensions turns from a social into an economic one and has a direct impact on the economic development. The demographic situation and a possible crisis in the pension system hasten the creation of pension funds. The population becomes older, the number of pensioners increases and the number of the employed decreases, (according to the National Bureau of Statistics, the population fell by 71,500 during 2005-2007), so that the state social insurance system is subjected to growing pressure. The official statistics show that the minimum subsistence level grows at a higher rate than the average pension. The average pension paid by the state in 2007 made up 29% of the average salary, but now it makes up 27%. Under such conditions, the non-state pension fund could help improve the incomes of pensioners. Two events that happened last week could accelerate the development of an area that lags behind. The legal stipulations that came into force on October 1 empower the National Commission on the Financial Market to issue, suspend and withdraw the licenses allowing to administer the assets of non-state pension funds. The pension funds will be stricter supervised and the money attracted from clients will be better protected. One day earlier, the company “Victoria Asigurari” launched the first pension fund, which will start work on January 1, 2009, after a certain number of contracts are signed, mainly with corporate clients. Though the creation of private pension funds becomes an acute necessity, Moldova lagging behind its neighbors, specialists and experts in the field are yet skeptical about the immediate prospects of these funds. Economist Veaceslav Ionita considers that the non-state pension funds could be broadly set up in Moldova only in five years. The administration of the first pension fund, which offers attractive conditions, plans to attract 2,000 clients in the first year, mainly corporate clients. Though, it says it could attract much more clients if working intensely, given the existing 40,000 potential clients. Those that intend to set up pension funds seem very precautious. The creation of another 3-4 pension funds has been discussed, in some cases for a long time, but they have not been launched yet. Some players say that it is too early to launch a pension fund, while others wait for the financial market to get stable as they are not sure that the Moldovan economy will remain untouched by the external shock wave, even if it is not directly affected by the external crisis. Certain stipulations of the law on private pension funds adopted in 1999 are outdated. After the National Commission on the Financial Market began to regulate the activity of the pension funds on October 1, it can forcefully intervene so as the old laws are adjusted to the new realities, first of all, in order to improve the situation of the fund and depositor, specialists say. The rise in the population’s incomes will count a lot in the development of the pension funds, in particular the way in which the funds will manage to convince the population to deposit their money. Only an aggressive marketing policy pursued by the insurance companies during the past few years has led to a considerable increase in the premiums for life insurance. In the first half of 2007, the rise was 45.9%. But despite the growth, the premiums for life insurance make up only 5% of the total insurance premiums and slightly over 10% in private individuals’ insurance. The situation can perpetuate itself in the area of pension funds, especially until the services provided by these are optional and not mandatory, as they could be in two-three years. Bit, in order to have a balanced market, both the offer and the supply are important.