Romania's Pension System: The Weight of the Past

Abstract

In Romania before 1989, as elsewhere in the Soviet world, retirement support was one of the few rewards that the regime offered its citizens. Retirement provisions were based exclusively transfers, through the State, from the current working population to the pensioners. Technically, the system was a Pay As You Go System. The difference was that retirement provisions, like every other facet of the economy, were planned. Workers did not choose, but were told, when to retire. Early retirment was not envisioned. Sick live was strictly controlled and limited. There was no unemployment, and the penalties for any enterprise which evaded payments to the system were prohibitive (The State Bank was simply prohibited from paying wages until wage taxes had been paid). Transfers in cash and kind to the pensioners were strictly limited to the resources available.