How can you invest in your future through pillar I, II and III of pension

If you haven’t already thought about your future pension, we understand you. You are young and until then you have many years of work. But did you know that the pension can be a long -term savings system that will allow you to live? But what can you «retreat» just before the legal age in Romania?

Before answering these questions, we must have a clear classification of the types of pension available in Romania. As a result, we continue to detail what they are, but also what are the advantages and disadvantages of each.

In Romania, the compulsory pension by law is divided into 2 categories: pillar I and pillar II. In addition, there is also a third 100%private variant, called optional pension or pillar III.

1. Pillar pension – Advantages and disadvantages

The first pension pillar, that is, the classical pension, is a system based on what is called «solidarity between generations». In particular, for the first pension pillar you contribute monthly by the salary or other forms of income collection (PFA, srl, etc.); In the case of employees, the monthly contribution is 25%, of which 21.25% of the gross salary.

Of course, the amount you will receive as a pension depends on the total contribution to the pillar I, but you must keep in mind that the legislative framework can be changed. Therefore, the conditions for the concession, the amount you will receive, but also the retirement conditions depend on the country’s legislation. And since so far we have witnessed changes, there is the possibility of changing the conditions for the granting of the pension.

What most people don’t know is that The state does not keep this money for when you reach the pension but pay your contribution to the pensions of the beneficiaries today. And when you arrive at the right age, Those active in the field of work at that moment will pay you your pension.

To benefit from the pension provided by the State, it is necessary to satisfy 2 conditions:

1. Minimum age. For women, the age of the minimum pension is 63 and for men 65
2. Minimum number of years in the field of work, with legal forms of course. It must have contributed for a minimum of 15 years to the first pillar of pensions.

The advantage of the first pension pillar is that you will have an insured income when he meets retirement conditions. Unfortunately, the United Nations statistics show an increase in the aging of the population in Romania, estimating that in 2100 the average age will be 48 years old. This means that the active population will be reduced and future pensions can be put under uncertainty.

Find all the details on pillar I and on pillar II of pension in law no. 263/2010 or on the National House of Public Pensions website.

2. Pilastro II of the pension – Advantages and disadvantages

Pillar II of pension, also called e Compulsory private pensionIt was established in 2008. Awarding a percentage of your total contribution to a second pillar compared to the classic one, managed by a private company.

You pay nothing more for the second pension pillar, but out of total 25% of CAS is assigned 3.75% of the gross salary, in the case of employees.

The difference between pillar I and pillar II of the pension can be seen not only in the percentages assigned for each, but also when it comes to those who manage your money. In the case of Pillar II, If you did not choose a private company in 2007, you were assigned one by one.

To find out which company manages the compulsory private pension, it is possible to complete the request available on the financial surveillance authority (click on the link previously) and the administrator of the Fund will contact you.

Another big difference is the fact that Pillar tells you exactly What amount you will receive at the time of the pension. This money is granted in the same conditions as the pillar i (age AND seniority in work), but you will always be able to see what amount you have in your account.

In addition, pillar II of the pension can also be influenced by legislative changes. For example, the percentage of contributions can change or the pillar II can be combined with the pillar I.

The great advantage is that you will not depend on the people active in the field of work when you are retired, but you will receive exactly from the pillar while you will contribute to your account. Therefore, through the obligation to contribute as long as you work with legal forms, you ensure that you invest in your future, retired.

3

Pension pillar of pension refers to 100% of private pensions. In particular, it is a personal fund that you can open in a private company and contribute to a certain period and a certain amount.

Nicknamed pillar III pension, the optional pension depends entirely on you. This is calculated on the basis of what you want to achieve and for how long, in combination with the conditions of the private administrator. I consider it an investment of your long term.

The optional pension can even allow to «withdraw» before the mandatory conditions of the state. If you think you have saved enough money in your private account, you can use them to open your business or for anything else you want.