Romanian Pension Reform

A] Prelude

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B] The Issue

Facing unprecedented pressure on the pension system – due to a communist-era abortion ban – Romania's government has decided to limit withdrawals from private pension savings.

The Romanian government adopted a draft law that limits retirees to withdrawing only 30 per cent of their private pension savings as a lump sum upon retirement. The remaining balance will be distributed in monthly installments over a maximum period of eight years.

C] The Details

This contrasts with the current system, which allows retirees to withdraw the total amount of their private pension savings at once when they reach the retirement age of 65. The draft law must now be approved by MPs, but observers believe this is a formality and adoption is inevitable.

Currently, more than eight million Romanians contribute to the country’s seven privately managed pension funds. According to official figures, these funds held assets totaling 166 billion lei (around 35.3 billion euros).

The issue has sparked intense public debate in recent weeks, with both citizens and financial experts voicing strong objections. Critics argue that the measure reduces individual freedom of choice and undermines trust in the private pension system. Many fear that limiting access to savings will leave retirees with insufficient flexibility to cover major expenses at the start of retirement, such as healthcare costs or debt repayments.

D] Policy

However, the centre-right government of Prime Minister Ilie Bolojan stood firm on the decision, saying it addresses longstanding problems with the system, and is responding to demographic trends.

Romania anticipates a record increase in retirements starting in 2030. Bolojan explained that staggering withdrawals over a longer period of time of at least eight years – reflecting the country’s average life expectancy—would prevent sudden large withdrawals that could destabilise the private pension funds.

”I assure that the government does not use pension contributions for other purposes and that these changes would ensure the sustainability of the pension system amid rising retirements,” he told a live TV debate on Tuesday.

E] Experts Opinion

Pension experts said the new law is a requirement under Romania’s accession path to the Organisation for Economic Cooperation and Development (OECD).

“Romania’s accession to the OECD in 2026, which is one of our priorities, represents a genuine opportunity for reforms built on best practices and international standards,” said Alexandru Petrescu, president of the Financial Supervisory Authority (ASF).

Petrescu said the new law is intended to strengthen the stability of the private pension system by offering fund managers greater predictability. Pension assets will continue to be invested even during the payout phase, though they will be allocated primarily to low-risk fixed-income instruments in order to reinforce stability and protect retirees’ incomes, he noted.

F] Restructure of 2008

Romania’s private pension system was fundamentally restructured in 2008, when the country moved away from its communist-era model and introduced mandatory contributions for workers under the age of 35 into privately managed pension funds, in addition to their state pensions.

G] Finally

The importance of private pensions is expected to grow significantly after 2030, when approximately two million people – about 12 percent of the population – born during the communist-era abortion ban will reach retirement age.

This demographic shift is projected to place even greater pressure on the state’s pay-as-you-go pension scheme, making private savings an essential supplement for future retirees.