Public institutions should contribute to the voluntary private pensions (pillar III) system on behalf of their employees in order to motivate workers and curb pressures on the public pensions system, suggests a survey conducted by the Friedrich Ebert Stiftung Foundation.

The survey reveals that the move would have two major benefits: it would secure incomes after public sector employees' retirement (curbing pressures on the public pensions system) and would stimulate public employees at work. The main negative impact, however, would be an increase in public expenditures.

By law, any employer (including public institutions) can contribute to a voluntary pension fund on behalf of its employees, thus adding to the wage benefits package.

The net incomes of employees are not affected as employers make the respective contributions on their own account. Under law, the decision to join such a system rests with the individual, as employees cannot be forced into accepting voluntary pensions offered by employers.

For the time being, authorities have shown no intention of supplementing the benefits package of public sector workers. Besides the above-quoted survey, representatives of the private pensions market also support the initiative.

Mihai Seitan, a partnerships manager with FinCoP private pensions broker, says the state's offering voluntary pensions to public sector employees would be a natural step. Seitan is a former chairman of the National Pensions Office (CNPAS) and one of the architects of Romania's private pension system.

Practically, voluntary pensions are a common extra-wage benefit meant to secure employees' loyalty, explains Seitan.

In addition, voluntary pensions have a modest fiscal incentive attached, with contributions to these funds being income tax exempt (for employees), or profit tax exempt (for employers) within the 200-euro limit per year for each. At present, the number of public sector employees exceeds one million, and the payment of voluntary pension contributions by the public institutions they work for would significantly boost the market. The first clients involved in the voluntary pension system started contributing in the summer, with the market still continuing to take shape. At present, the total number of contributors to voluntary private pension funds revolves around 16,700.

According to the estimates by companies on the market, the number of clients for these products could revolve around several hundreds of thousands next year. The sale of voluntary pensions will depend on companies successfully persuading their employees to sign up for these schemes in 2008.