In April 2017, Romania’s financial regulator slaps heavy sanctions on NN for spreading rumors about pension fund nationalization. So, the simple fact of spreading such information led to a severe sanction.

The correctness of this decision was debated and many believe that this decision led to Romania’s financial regulator director being replaced by the Parliament.

This is a great indicator that many Romanians see private pension fund nationalization as an abomination and politicians quickly denied such discussions (to avoid popularity loss).

However, Hungary actually did this several years ago.

On December 13, 2010, National Assembly representatives from the Fidesz–Christian Democratic People’s Party governing alliance passed the Pension Reform and Debt Reduction Fund Law that permanently transferred mandatory private pension-fund contributions to the state unless employees indicated by January 31, 2011 that they wished to continue making payments to the funds.

This article illustrated some reactions to these measures:

Economists and investors were alarmed at the Hungarian move, but the government softened the impact. It said savers could choose to stay in the private funds, although the mandatory contributions would not go to them.

The protesters say they do not trust the government to pay out the full amount when they retire and fear the money will just disappear into the budget.

Question: Why would a Government make such an unpopular decision (to nationalize private pensions funds)?

  • Because they want the money?
    – jamesqf
    Jun 22, 2017 at 18:37
  • @jamesqf - yes, pension funds are quick money. But, private pension funds are seen by many as an extension of private property. So, it feels like stealing. A minor increase of some taxes would be a more subtle way to get money for the budget in a way with less impact for popularity.
    – Alexei
    Jun 22, 2017 at 20:31
  • I suggest you make it more clear what NN is... Also, since the guy who fined the (NN) company spreading the nationalization rumours was fired that suggests that the Romanian parliament was perhaps entertaining the idea of nationalization (rather than the other way around, as you concluded). May 2, 2019 at 17:28

1 Answer 1

  1. Cynically, pension funds have money. Governments like money. At worst, corrupt politicians can line their own pockets. At best, they can use the money to buy the many wonderful things governments like to purchase: food for the poor; tanks for protection; infrastructure for jobs.

  2. More nobly, the government could be concerned about the private funds' ability to pay out in the future. The government may even be on the hook to guarantee the payouts.

  3. Influence. The private funds own investments in many private companies. This gives them a degree of control over those companies. If the government nationalizes that control, it has even more influence over the now undivided assets than the separate funds did.

    This also gives some of the reason why people outside government oppose this. Beyond parochial interests (which may be sufficient in and of themselves), some people think that it is actively bad to consolidate control like this. Of course, it can be difficult to tell who sincerely holds beliefs like that versus who has parochial interests.

  4. There are three options with pension funds. The government can just use the funds for something other than the intended purpose, as they don't have to pay it out until much later. By the time anyone notices that there's no money, those politicians are long gone. Or it can leverage the funds such that the money gives the government influence over private companies. Or it can loan the money to the government, which can use it for whatever. The United States does that with Social Security.

  • 1
    You missed out: the profits for managing that money (fees) now go from private individuals to asset manager companies. The government would have an option to subcontract to asset manager companies THEY like (hint: whoever buys them off or doesn't tick them off).
    – user4012
    Jun 22, 2017 at 19:12
  • 4
    Pension funds have money. Governments like money thats it... no other reason necessary. Though actually one thing a government can do is loan itself the money from those funds... then let politicians later worry about paying it back. That is what actually happed to Social Security and Illinois State Pension Funds Jun 22, 2017 at 19:58
  • 4
    @Sjoerd but private companies may use the funds for something other than the intended purpose as well. Before someone raises red flag, the CEO will be in Ecuador or South Africa.
    – user14448
    Jun 23, 2017 at 7:27
  • 1
    @9ilsdx9rvj0lo Politicians who do this, don't even have to flee. With thanks to those who didn't contribute to the fund but benefited from looting it.
    – Sjoerd
    Jun 23, 2017 at 13:43
  • 1
    @9ilsdx9rvj0lo - in practice, that happens... almost never (Madoff was the only one big case in the entire western world I am aware of; and he was pretty small scale compred to total assets under management). Pension asset managements is regulated up the wazoo and very very very thoroughly checked.
    – user4012
    Jun 23, 2017 at 14:29

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