Interview with Crinu ANDANUT, PhD, Chairman of APAPR
Crinu ANDANUT, CEO of ALLIANZ-TIRIAC Private Pensions, is also the
Chiarman of APAPR, the Romanian pension funds' association. Find out
his vision of the Romanian private pensions market in this interview:
Crinu ANDANUT, PhD Chairman, APAPR - The Romanian Association of Private Pension Administrators
PRIMM: We celebrate one year since the launch of mandatory private pensions in Romania. What do you think of the results so far?
Crinu ANDANUT, PhD: To us, the operators, this year has been the YEAR OF TRUTH as we got down to business and we had to convince Romanians of the urgent need to change their mentality, namely to make everyone responsible for their own future, in line with the European culture of personal attitude. On a more technical level, this year meant a huge effort, where we had to provide the logistics and distribution capacities for this new pension saving product in a very short time of merely four months. In this respect, the key to our success was organising skills and team work.
The competition on the market was tough. A competitive market is not a graceful ballet stage. It all comes down to competition between professionals that have targets, ambitions, business plans, but it is important that we managed to communicate, maybe even better than the operators from other markets, that we engaged in a professional dialogue, replacing conflicts with sharing views and ideas. In general, even if not all actions were fair-play, few however went beyond normal boundaries. Maybe this is also due to the fact that the Romanian economy is maturing, European realities got closer to us, and the Romanian "jungle" of endless freedom has become more civilised. Moreover, I have to particularly point out that the institution having regulated and started the whole system, The Private Pension System Supervisory Commission (PPSSC) took great actions and did an amazing job in this first stage.
Finally, as a funny comment, we are surprised to see a variation between the target figures announced at the beginning of the race and the real results achieved by many of the operators. It has been an extraordinary game, a game of image most of all, a professional game. Some used figures to manipulate the market by announcing highly ambitious plans, others were more reserved and stayed between reasonable limits. I watched this show closely and I think I knew what stand I had to take. Therefore, I can say that ALLIANZ-TIRIAC achieved and even topped its initial targets without letting the public down and confirming once more the seriousness and balance that ALLIANZ is all about. Of course, higher ambitions are on the map, too.
PRIMM: What could you say about the development of the voluntary pension market and what are your forecasts for the near future?
C.A., PhD: I think all channels overreacted with their forecasts. I even asked myself often on what grounds they were made. Romania is "a country lacking statistics", so, even in the case of mandatory pensions, the total size of the targeted market was a "mystery" before the end of the campaign. Only now can we see how much of this market is real and how much of it exists only on paper. Real figures were used less than "image-gaining" figures and, consequently, the entire forecasting trend was exaggerated. This goes for optional pensions as well and that is why the people are under the impression that Pillar 3 didn't bring in the expected results over this period.
In my opinion, we should be more cautious with forecasting and intervene by means of market-stimulating technical measures: deductibility, transfer adjustment, and other measures supporting the market and that are already being considered by the private pensions authority. I think that the pension market will grow slowly. I am repeating what I've always been saying: 2008 is not the year of pensions because mentalities don't change that fast in the Romanian economy. A lot of hard work is needed in terms of education, some issues need to be discussed and re-discussed to exhaustion before the economy and its players can really see private pensions as a useful tool. Individuals still show a very strong consumer tendency and no saving culture at all, plus people's incomes are not high enough yet.
As a conclusion, this market will develop only with a lot patience and hard work. It is enough to have a look at the life insurance market showing clearly that, after ten years of running, Romania is still one of the most under-insured countries.
PRIMM: The "moment of truth" is getting closer as in 2009 the first official results regarding the returns of pension funds will be published. In this respect, what could you tell us about the main goals of private pension administrators for the next period?
C.A., PhD: Many things still need to be done. We need to finish up a system that was launched "at full speed" and that still contains many things that need changing, adjusting to reality, regulating. In this area, any decision you make today will have irreversible effects in tens of years and that is why a lot of carefulness is required. For example, the average contributions could be improved on both pillars. It is obvious that we have the smallest contributions to mandatory pension schemes of all Central and Eastern European countries. This means troubles for future retirees who will have a smaller accrual of retirement benefits than those from other countries. In 15 - 20 years, new comparisons will be made that will not be in favour of Romania.
In addition, it is a well-proven fact that deductibility provided for the optional pension system is the decisive factor as to the size of contributions. With an average contribution of 200 euros/year, we can't expect great yields leading to a decent pension and I am afraid that overrated expectations are being generated about the optional pension system yields. Fortunately, there is some hope that things will change for the better.
As far as the returns are concerned, of course we could work them out, but it would be unpractical and it wouldn't give us a taste of the pension system. Only in about five years, will we see significant results. Unfortunately, the market turns us into opportunists and makes us run away from long-term investment. On the other hand, given the current circumstances, where the equity market has taken a downfall, we should be more flexible in dealing out different types of financial instruments, even if our prospects set some limits regarding the make-up of the investment portfolio. The investment make-up was thought for the long run and in such a time, like the current crisis, we need to be very careful or otherwise we could end up consciously losing money.
PRIMM: What do you think about the relationship with the supervisory authority so far? Could the restructuring of pension companies' association contribute to a better dialogue between the market authority and operators?
C.A., PhD: The Association is increasingly more active and present on the pension market. I was appointed Chairman at the end of Bram BOON's term and I am happy to get all this trust from my colleagues. It is a difficult task at hand because I, as an operator, need to represent the interests of all operators, big or small. It is a matter of principle.
Our goal is to build up our image and become a real dialogue partner on the market. To this purpose, we have taken big steps forward in our relationship with the Commission. The market authority consults us about every legal and regulation matter. This is great because both, we and the Commission, are rookies as no one can say that Romania has a history in this field, and the experience of our parent companies can be very important and useful.
Our association plans a different approach to the dialogue between market players. We have to represent the interests of all and that is why the Association is the perfect environment for sharing ideas as well as arguments so that this market can grow fast, give future a chance, and prevent through dialogue any problems that might arise and could affect the interests of pension scheme contributors.
I am glad to say that our dialogue with the Commission has hugely improved. Both I and my colleagues are very pleased. Of course, we can't talk about a "friendship" or a general consensus, because, in the end, we take completely different stands, but it is important that we communicate well. The Commission needs to strengthen law application, and we, the operators, are here to win the clients' trust... in other words, in the end, our interests come together to the benefit of market growth and stability. Consequently, I can honestly say that there are no problems as to building the pension system on very solid ground.