9 million Romanians, affected by the reductions in pensions. What, in fact, is the connection between war and Pillar II
The corrections of a few percentage points in the value of assets in pillar 2 and pillar 3 pensions in recent weeks were not mainly caused by the war in Iran, but by rising interest rates on government securities. George Moț, founder of aboutpensiiprivate.ro, explains the safety mechanisms of the system and why, in the long term, private pensions remain a solid savings tool.
PHOTO: Archive
Almost 9 million Romanians have money in private pension funds, and the decreases recorded in recent weeks have caused concern. The tense geopolitical context, marked by the military escalation in the Middle East, amplified this anxiety.
The reality, experts say, is more nuanced. The corrections, which began before the outbreak of the conflict, are part of the normal dynamics of the financial markets. Moreover, the private pension system in Romania has several layers of protection that make it practically impossible to lose the entire savings.
How Romanians' money is invested
Before we understand what has happened in recent weeks, it is useful to know where the money from the pension funds is actually being placed. George Moț, founder of the aboutpensiiprivate.ro platform, explains the structure of the portfolio.
“Both Pillar II and Pillar III have similar portfolio structures. This means that they place the money in a similar way. Most of the investments, we are talking about the data from February, the most recent, namely 145 billion lei, i.e. 64% of the pension funds' assets, are invested in state securities. The second largest investment is in the stock market, in shares, mainly on the Romanian Stock Exchange. Here we are talking about almost 62 billion lei, i.e. 27% from the portfolio. There are also investments in other assets, such as municipal or corporate bonds. There are also amounts in deposits, but these are limited. So most of the investments are made in government securities”explained George Moț.
This structure is the key to understanding why the correction occurred and also why it is temporary.
Why assets have declined. The war in Iran is only partially responsible
Many pension fund participants equated the recent declines with the military conflict in the Middle East.
“Actually, the drop started before the Iran war. It's more of a coincidence. The correction started a week or two before and it was caused by rising interest rates on government bonds. As interest rates go up, the value of government bonds goes down. And in our case, about 64% of assets are invested in such instruments. So when interest rates went up, so did this correction in asset values. As interest rates go down, we'll go back into positive territory. These developments are not something to be afraid of. If we look at the first two months of the year, January and February, the profit already exceeds 13 billion lei, both for Pillar II and for Pillar III.” said the founder of aboutpensiiprivate.ro.
The mechanism is a classic one in finance. Bond prices and interest rates move in opposite directions. When interest rates rise, bonds already issued, including government securities held by pension funds, become less attractive compared to new issues and, as a result, their market value falls. When interest rates fall, the process reverses.
Historical returns in 2025
The current correction must also be seen in the context of the recent performance of pension funds, which has been remarkable.
“2025 was the best year: the profit exceeded 32 billion lei. Returns vary from one fund to another, but the official rate of return for the last five years was between 6.45% and 9.58%. However, if we look at the return of the last year, being an exceptional year, we are talking about much higher values: between 17.52% and 27.14% for Pillar II and Pillar III”. stated Moç.
These figures place private pension funds in Romania among the best performing long-term savings instruments available to the population. A correction of a few percent, in the context of annual returns of more than 17%, is not a real cause for concern for participants who are not on the verge of retirement.
Why you can't lose the money from Pillar II
Beyond performance, the private pension system in Romania also has a well-defined safety architecture, which many participants are not aware of. Moț details the mechanisms that protect the nine million Romanians with accounts in Pillar II:
The private pension, the lifeline for future generations. Analysis of a system on the verge of collapse
“In principle, the private pension system has many safety mechanisms. First of all, if we refer to Pillar II, not only can you not lose the money invested, but you also cannot withdraw less than you contributed. There is a guarantee that ensures you, as a participant, that you will not withdraw less money than you contributed. This guarantee is offered, voluntarily, also by some Pillar III funds, three out of ten funds offer such protection”. said Moç.
Beyond the capital guarantee, there is a second layer of protection, that of asset segregation, which is less known to the general public.
“Another safety mechanism is asset segregation. This means that the assets of the manager, the company that manages the investments, are separated from the assets of the participants. This separation ensures that even if the manager has financial problems, money from the pension fund cannot be used to cover them. Thus, the manager can go bankrupt, but the pension fund cannot. If a manager goes bankrupt, he is replaced by another manager, who takes over the management of the assets. The money of the participants remains safe.” explained the founder of desprepensiiprivate.ro.
Oversight of the system is ensured at two levels: the Depository, which verifies the separation of accounts and assets, and the Financial Supervisory Authority, which annually audits all administrators and private pension funds.
What if the market goes down and the warranty needs to be activated
A legitimate question is how the capital guarantee works in practice when markets fall significantly. Moţ explains the chain of protection:
“Even if an unforeseen situation occurs and the market falls, there are protections. First of all, each administrator must put money aside to cover possible losses, it is called a technical provision. In addition, if this money is not enough, there is the Guarantee Fund, which covers the difference. So there are multiple safety mechanisms in the private pension system. It is a sensitive area, we are talking about the financial future of approximately nine million Romanians, and that is precisely why these protections exist”. said Moç.
Basically, for a Pillar II participant to lose money, the administrator, the technical provision and the Guarantee Fund would have to fail simultaneously. A theoretical scenario, not a realistic one.
Pillar II and Pillar III: What you can control and what you can't
One aspect that many participants are not aware of is the fundamental difference in flexibility between the two types of private pensions. In the case of Pillar II, the contribution and the period are fixed, established by law. Pillar III offers considerably more freedom, which Moț recommends to those who want to supplement their retirement income:
Contribution to Pillar 2 of private pensions could increase to 6%
“In the case of Pillar II, you have no freedom of choice either on the amount or on the period. The contribution is set at 4.75% of the gross salary and is linked to the period in which you are employed. On the other hand, Pillar III offers you flexibility: you can contribute additionally, up to 15% of the gross salary, and you choose the period yourself. You can withdraw the money from the age of 60, but you are not obliged. You can continue to save until 65, 70 years or as long as you deem necessary”Moç said.
Time matters more than amount
Perhaps the most important message that Moç conveys to those thinking about retirement has nothing to do with momentary dips, but with the fundamental logic of saving for the long term.
“The most relevant question is not necessarily the amount, but the period. When we invest for the long term, time has a greater impact than the amount invested. More important than how much you save each month is how long you save. The earlier you start, the bigger your pension will be. Obviously, the amount also matters, but time is essential”concluded the founder of desprepensiiprivate.ro.
In other words, those who started contributing early and have a long investment horizon have every reason to remain calm. The private pension system, with all its safeguards, is built precisely to withstand the inevitable fluctuations of the financial markets.
