site.btaParliament Adopts in Principle Key Elements of Government-proposed Pension Reform

Parliament Adopts in Principle Key Elements of Government-proposed Pension Reform

Sofia, July 2 (BTA) - In a 115-35 vote with 19 abstentions
Parliament Thursday adopted a differentiated gradual increase of
the retirement age and contributory income for category three
labour until reaching the age of 65 years for men and women in
2037, after which an automatic mechanism will be introduced for
increasing the retirement age taking into account the life
expectancy. In a day-long sitting, the MPs debated and passed on
first reading amendments to the Social Insurance Code tabled by
the Government.

During the debate Deputy Prime Minister and Labour and Social
Policy Minister Ivailo Kalfin warned that the absence of changes
will bring about even harder results in ten year's time, cause
a catastrophe with pensions and render meaningless the
solidarity model.

According to the provisions, the requisite contributory service
for retirement in third category labour is to reach 37 years for
women and 40 years for men (now it is 38 years) in 2037.

The pension fund contributory payment increases by one
percentage point as of January 1, 2017, and by one per cent more
as of January 1, 2018, in a bid to ensure greater independence
of the pension system from the national budget.

At the same time, the planned increase of the contributory
payment for a universal pension fund to 7 per cent from 5 per
cent as of January 1, 2017, was scrapped.

The bill settles permanently the entitlement to retirement of
teachers and retains the teachers pension fund.

A pensionable age of 52 years and ten months is introduced as of
January 1, 2016 for the Defence and Security sector. The
retirement age is suggested to increase gradually until reaching
55 years for service people, civil servants under the Interior
Ministry Act, and 45 years for parachutists, divers, etc.

Parliament resolved to lift the so-called pension cap as of
January 1, 2019.

The provisions settle the free choice for compulsory insurance
for an additional pension in a universal pension fund or for
only a life-long pension in the public social insurance.

The amendments' sponsor says the results of the long-term
forecast prove that the pension system will have a deficit
during the entire period from 2015 to 2027. The strongest
positive effect on the balance of public social insurance comes
from the increase of social insurance contributions and the
limitation on the opportunities for early retirement,
particularly of people working in the defence and security
sector.

Addressing the National Assembly, Minister Kalfin stressed the
importance of keeping the pension system permanent, expert,
sustainable and non-political. "The package of around 20
proposals by the Government is supported for the first time both
by trade unions and employers, which should be a sign for the
MPs how balanced this version is," he added. According to him,
the Cabinet's bill guarantees an increase of new pensions by
around 40 per cent within several years.

Parliamentary Labour, Social and Demographic Policy Committee
Chair Hassan Ademov (Movement for Rights and Freedoms) said that
for the proposed measures to be sustainable, political
agreement is very important, and at present it is particularly
fragile even within the four political forces of the ruling
majority. From a social point of view, the gradual increase of
the retirement age is bearable, he noted. Ademov added that his
party sees serious domestic and external investments, increased
incomes and revenues in the insurance system as a solution to
the problems.

The Reformist Bloc (RF) opposed the increase of social insurance
contributions but voted in favour of the Government's bill.
Dimiter Bayraktavor (RF) said that no other EU country has a tax
insurance burden higher than 70 per cent. Buffers have to be
sought, he added. According to him, it is unrealistic to expect
a 40 per cent increase of pensions in the following years,
because the insurance income and the average salary in Bulgaria
are decreasing.

Socialist MPs Kornelia Ninova and Yanaki Stoilov said their
parliamentary group cannot support the Government's bill because
it does not meet the expectations of present and future
pensioners.