Question 1

When do you become insured in the Romanian pension system?

Accepted Answer

The simple answer here is that you become insured - mandatorily - when you start working, either for an employer, or on your own, as a freelancer. Basically, a part of your gross income must be paid to the Romanian state pension system, a contribution also known as the mandatory contribution to the social insurance fund (in Romanian: Contribuția de Asigurări Sociale, or simply CAS).

Currently, according to the provisions of the Romanian Tax Code, the pension contribution rate is 25% of the gross monthly salary, and is being withheld by your employer, if you generate income as an employee (this includes not only the salary, but also other income provided by the employer as appropriate, such as, for example, any monthly allowances). You also have an obligation to pay this contribution (in certain conditions) if you earn income independently, as a freelancer (self-employed individual).

There are also certain special situations for atypical working conditions, in which case, in addition to the above percentage due by the individual who earns the taxable income, the employer (we speak of these exceptions only in the case of employees) must pay an additional contribution, according to Law no. 263/2010 on the Romanian unitary public pension system.

We will not go into more detail here. For the moment it is enough to mention that these exceptions apply if we are talking about special or exceptional working conditions, where the additional share can reach a percentage of up to 8% of the gross income, considered as a basis for calculation.

Question 2

Can I pay my pension contribution if I am not an employee?

Accepted Answer

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Yes, there are certain situations in which an individual can pay the contribution without being an employee.

The first occurs in the case of those who obtain, independently (as freelancers), certain types of income. Let's say you get income from an independent activity or from the transfer of intellectual property rights. In this case, you are obliged to pay the pension contribution only if the level of income you earn during a year exceeds a certain threshold. Which, according to the Romanian Tax Code, represents the equivalent of 12 minimum gross national salaries, obtained during one year. More exactly, that is at least 27,600 lei for the year 2021.

The second situation, a little atypical we could say, appears in all other cases. That is, if you do not fall into the above situations (of generating income from employment or freelancing activities), you can insure yourself voluntarily in the Romanian state pension system, as per the provisions of Law no. 263/2010. Specifically, Art. 6 (2) of this law establishes that:

"any person may be insured in the public pension system on the basis of a social insurance contract, in order to obtain the old-age pension and, as the case may be, in order to supplement the insured income used to calculate this category of pension".

The paragraph refers strictly to voluntary pension insurance, because the previous paragraph within the same article already establishes who are the persons obliged to insure in the Romanian pension system.

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Question 3

How does the Romanian pension system work?

Accepted Answer

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Now that you know when you are required to become insured in the Romanian pension system, or the situations in which you can become a taxpayer and beneficiary of the pension system, it would probably help you to learn a few things about how it works.

The Romanian pension system is structured, in essence, on two levels (or pillars, a term you have probably heard before). There is also a third pillar, but this is the private system, and the contribution to it is completely optional. The most important are the first two - the public one (Pillar I) and the mandatory one which is managed privately (Pillar II). Yes, you read that right, in addition to the state public system, the law also requires you to be insured in the private pension system. But that doesn't change the amount you have to pay as pension contribution from your income.

Thus, according to Law no. 263/2010, “the contribution to the privately managed pension fund, which is part of the social insurance contribution provided for individuals who are employees, or for whom there is an obligation to pay the social insurance contribution, is transferred by the Romanian National House of Public Pensions to the privately managed pension funds”.

In conclusion, the share you have to pay as contributor for your pension insurance remains the same. Moreover, the procedure that must be followed for the distribution of a part of the contribution paid to a privately managed pension fund concerns only the National House of Public Pensions, and not the individual paying the contribution.

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Question 4

When can I retire?

Accepted Answer

Although (part of) the logic of paying the pension contribution is to ensure a system based on the principle of social solidarity for currently retired persons (in other words, the money you pay now is used to pay the pensions of those currently benefitting of pension rights), the main reason you pay the pension contribution is that you can benefit later from pension payments.

But, to benefit of it, in addition to the standard retirement age, you must meet one criterion: to have contributed for a minimum period of 15 years in the Romanian public pension system. But it is important to remember that the full contribution period means 35 years for men, respectively 31 years and 7 months for women who retire between May and July 2021. If they retire between September and November 2021, the full contribution period for women go up to 31 years and 8 months.

Question 5

I did not contribute enough to have a full contribution period. Do I have to contribute until I meet the minimum period, or are there alternatives?

Accepted Answer

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There is an alternative. It is a mechanism introduced at the end of last year (2020), by Emergency Ordinance no. 163/2020, and which allows the non-pensioners to "buy" their seniority in work, between 21 September 2020 and 31 August 2023 (since after 31 August 2023 a new pension law should enter into force, which will continue to provide for this option, in a similar way).

But the period actually bought cannot exceed 6 years (which do not necessarily have to be consecutive), so it is not a mechanism that can match everyone's desires, regardless of the income they would be willing to use to buy seniority. In this regard, the interested persons may, between the dates mentioned above, conclude a voluntary insurance contract with the Romanian Territorial Pension House.

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Question 6

If I do not receive a pension, am I entitled to any type of social assistance?

Accepted Answer

Theoretically, according to the provisions of Law no. 416/2001 on the guaranteed minimum income, with subsequent amendments and completions, families and single persons have the right to access a guaranteed minimum income as a form of social assistance from the Romanian state.

According to the same law, when establishing the right to benefit pf social assistance for a family or, as the case may be, for a single person, all the types of income that each member of the family derives must be taken into account. This includes any income generated from state social insurance rights, unemployment benefits, legal maintenance obligations, allowances, or other types of state aid.

More details on the form of social assistance to which you are entitled and the applicable conditions can be requested from any territorial General Directorate of Social Assistance and Child Protection.

Tag: Social security coverage for employees

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Explaining the Romanian pension system – frequently asked questions

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