Romania’s private pension system enters a key stage of maturity with the adoption of Law No. 2/2025, a legislative act that, for the first time, establishes a clear framework for how private pensions are paid out. Although the law was published in 2025, the effective application of the new rules will begin on 5 January 2027, giving participants time for information and financial planning.
The right to an initial withdrawal of up to 30%
The main novelty introduced by the law is the possibility for participants in private pension funds – Pillar II (mandatory), Pillar III (voluntary) and Pillar IV (occupational) – to request a one-off initial payment of up to 30% of their accumulated personal assets.
This option applies separately to each pension account held and can be exercised only once, before the start of monthly pension payments. After receiving the initial amount, the participant may opt for:
- a life annuity, paid for the entire lifetime; or
- a programmed withdrawal pension, paid over a fixed period.
An important aspect is that the final version of the law does not provide exceptions for certain categories of participants, including persons diagnosed with oncological diseases. Such a provision existed in the initial draft but was declared unconstitutional by the Constitutional Court and therefore removed from the final version.
Tax differences between lump-sum withdrawal and monthly pension
The choice of payment method has significant tax implications.
In the case of a one-off withdrawal of up to 30%, the amount is subject to:
- 10% health insurance contribution (CASS);
- capital gains tax on the portion exceeding the threshold of 3,000 lei.
Overall, the tax burden reaches, on average, 12–13% of the withdrawn amount, while offering the advantage of rapid access to a substantial sum of capital.
By contrast, payment in the form of a monthly pension may benefit from a much more favorable tax regime. If the monthly installment is below 3,000 lei, it is fully exempt from income tax and CASS. In addition, the amounts remaining in the account continue to be invested by the administrator, generating additional returns. This option ensures stable and predictable income with a reduced or even zero tax burden.
Expansion of providers and strengthened participant protection
Law No. 2/2025 significantly expands the range of entities allowed to provide private pension payments. In addition to traditional administrators, the following may operate:
- life insurance companies and investment management companies;
- joint-stock companies established under Romanian law;
- authorized entities from the EU, EEA or OECD member states.
To protect participants’ interests, the law introduces strict rules on civil, administrative and criminal liability for providers, custodians and auditors, ensuring sanctions and compensation for any damage caused by improper administration.