ROMANIA - The Romanian government has approved a draft law to reform state pensions in a bid to reduce the pressure pensions exert on its national budget.
The law - which would come into effect as of January 2011 after approval by the parliament - will introduce a defined contribution (DC) system, increase the retirement age for certain categories of the public sector and clamp down on "abuses".
Prime minister Emil Boc said: "We need a new pension law in Romania, able to ensure on the one hand the average and long term backing of this system, and to ensure today's contributors to the pension system that they will receive a pension when they reach the retirement age."
Boc said in 2009 the state paid an additional €1.5bn (US$2bn) above what was expected to shore up pensions, and that amount is expected to increase.
The law will introduce a DC system for future pension calculations. He said: "The enforcement of contributiveness principle means removal of current privileges and discriminations. The savings made from the recalculation range between €500m and €800m." He added the overwhelming majority of pensions in payment will not go down.
The retirement age for employees in the defence, police and national safety sector will increase by five years to 60 by 2030.
From 2001 to 2009, the number of people receiving invalidity pensions grew from 600,000 to 900,000. Boc said: "There has been a 50% increase over this period, due to the fact that the current system allows some individuals to benefit in a fraudulent way of these invalidity pensions, although medical conditions do not justify this type of retirement. Our willingness is to stop abuses and aid those who really need this invalidity pension."
He said the law would also introduce a mechanism to better regulate the system of anticipated retirements, which grew by 115,000 cases in 2009 alone.
The bulk of pensions reforms follow a number of talks with the International Monetary Fund aimed at agreeing a number of measures to shore up Romanian public finances and receive a loan from the Washington based institution.
At the end of January, the IMF staff agreed on lending the country €2.3bn. The approval of this loan will be discussed by the IMF board at its upcoming meeting in mid-February.
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