Lesson 4 of 5 · 5 min read
The pension pillars 1, 2 and 3, explained
Romania's pension system has three “pillars”, with different rules. See what each one means for your money.
Pillar 1: the state pension
Pillar 1 is the classic public system, of the “redistributive” type: contributions from today's employees pay for today's pensioners, run by the state through the public pension system.
Pillar 2: compulsory, privately managed
Pillar 2 is compulsory for certain categories of employees (depending on age, under the law), with part of the social insurance contribution directed to a privately managed pension fund, with an individual account. Unlike Pillar 1, money in Pillar 2 is, in principle, assigned to your personal account.
Pillar 3: optional
Pillar 3 is entirely optional: anyone can make extra contributions to a voluntary pension fund, often with tax benefits attached (deductions, within the limits set by law, for both your own contribution and the one paid by your employer). It is an additional long-term savings instrument for retirement, on top of Pillars 1 and 2.
Legal note
The exact rules (age thresholds, percentages, tax benefits) can change through legislation. Check the current information on the ASF website or with your pension administrator.
In short
- Pillar 1 = the classic, redistributive state pension.
- Pillar 2 = compulsory (for certain categories), privately managed, individual account.
- Pillar 3 = optional, with possible tax benefits, extra savings for retirement.