THE PENSION FORMULA IN ROMANIA – INEFFICIENCIES AND POSSIBLE SOLUTIONS

Bogdan Dumitrescu and Andreea Elena Draghia
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Andreea Elena Draghia: The Faculty of Finance and Banking, Bucharest University of Economic Studies, Bucharest, Romania.

Studii Financiare (Financial Studies), 2019, vol. 23, issue 2, 61-74

Abstract: The introduction of the correction index in the mechanism of determining pension benefits in Romania in 2013 has led to an inefficient formula which generates differences between the incomes received by pensioners with the same level of contributions depending of the year of retirement. This paper reveals the mechanism through which these inefficiencies are generated, their consequences and analyzes the formula proposed by a new pension law against this issue. We conclude that the new formula has the potential to solve this problem, but with a relevant budgetary cost and emphasize the challenge between balancing the costs generated by the change of the formula and the objective of increasing the value of the pension point, while dealing with the sustainability of public finances.

Keywords: public pensions; inequity; Romania (search for similar items in EconPapers)
JEL-codes: H55 J11 J26 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:vls:finstu:v:23:y:2019:i:2:p:61-74

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