Bulgaria's Private Pension Funds Have Accumulated BGN 8 B

Domestic | January 9, 2015, Friday // 15:59|  views

Pensioners queue in front of a post office in Sofia, Bulgaria. Photo: BGNES/EPA

At present the private insurance funds in Bulgaria have accumulated around BGN 8 B, the system is stable and there is good legislative regulation.

According to Nikolay Marev, executive director of a pension insurance company, the pension reform initiated by Bulgaria's main ruling party GERB is not sustainable in the long term, as the country undertakes a greater commitment with it, money.bg reports him as saying.

Marev explains that Bulgaria is experiencing a demographic crisis, as currently the pensions of 76 retired individuals are being provided by the contributions of 100 insured persons.

According to projections of the National Social Security Institute (NOI), the pensions of 109 retired individuals will be provided by the contributions of 100 insured persons in 2060.

Marev expressed his concern that there will be no enough insured persons to pay the pension contributions in the future.

He assured that there was no risk for private pension insurance funds to go bankrupt.

Marev presented several arguments through which he pointed to the benefits of making contributions to private funds rather than to NOI, the availability of personal account being one of them.

The fact that contributions are invested and multiply as well as their property to be inherited in the event of death are other advantages.

Furthermore, the second pension complements the main one with around 20 %.

According to Marev, the speedy pension reform aims to take away the private contributions of people.

He gave Hungary as an example, where such a development took place four years ago, which resulted in the disappearance of EUR 10 billion.

Bulgaria's main ruling party Citizens for European Development of Bulgaria (GERB) proposed several controversial changes to pension insurance, which were adopted by Parliament before Christmas.

However following disagreement between the partners of the ruling coalition, new discussions are expected to take place.

According to one of them, those entering the labour market for the first time will have the right to choose whether to make contributions to NOI or private pension funds.

If one chooses to make contributions to NOI then it will not be possible to switch to a private fund, while this change is possible if contributions are made to a universal pension fund.

Another proposal envisaged that those born after 1959 who already have opted to make their contributions to a private pension fund will have to reaffirm their choice within a short period of time, otherwise their contributions will be automatically transferred to the solidarity fund of NOI.

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Tags: Bulgaria, pension, reform, insurance, contribution, NOI, private fund, GERB


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