BUCHAREST (Reuters) -Romania’s Constitutional Court struck down on Tuesday a bill regulating withdrawals from the private pension system, complicating Bucharest’s plans to join the Organisation for Economic Co-operation and Development (OECD) next year.
The coalition government hopes that membership of the OECD, a club of wealthy nations, will attract more investment and reassure markets that the economy is on the right track despite Romania having the largest budget deficit in the European Union.
The bill – a requirement for OECD membership – would allow Romanians to withdraw a third of their private pension funds on retirement and get the rest in tranches for up to eight years.
It was challenged in court on grounds that it interfered with private property rights.
The court said the 30% initial withdrawal cap was not an issue but that an exemption in the bill for cancer patients was discriminatory. The government said the ruling validated the bill, adding it would be revised in line with the court’s objections.
Romanians under a certain age have had to contribute to private pension schemes since 2008 in addition to state pension contributions. The seven private pension funds are now the largest institutional investors on the Bucharest Stock Exchange.
Those funds held assets worth 170.8 billion lei ($38.72 billion) at the end of June, up 19% on the year, data from Romania’s financial supervision authority showed.
Fund managers will face large withdrawals from 2030, when just under 2 million people – a 10th of the population – born under a communist-era abortion ban will reach retirement age, increasing the burden on the pay-as-you-go state pension system.
The bill struck down by the court was intended to provide greater predictability for fund managers.
Romanians are currently allowed to withdraw the entirety of their private pension assets as a lump sum when they reach 65.
($1 = 4.4116 lei)
(Reporting by Luiza Ilie; editing by Gareth Jones)
