site.btaExperts Discuss State of Pension System and Whether Three-Pillar Model Has Alternative

The state of the Bulgarian pension insurance system and ways to make it more effective were discussed by experts, MPs, representatives of public institutions and businesspeople earlier in the outgoing week. The discussion was organized by the Bulgarian Industrial Association (BIA).

Deputy Labour and Social Policy Minister Dessislava Stoyanova said that, although pensions in Bulgaria are adjusted annually by the so-called golden Swiss rule (i. e. by 50% of the previous year's inflation and by 50% of the growth of the average contributory income), they remain low unlike in other EU member states. She said the matter figures on the incumbents' governance programme.

BIA Managing Board Chair Dobri Mitrev pointed to a lack of systematic work to address pension system issues. The last few years, he said, have seen populist approaches and piecemeal solutions.

Stanislav Dimitrov, who heads the Finance and Insurance Department at VUZF University in Sofia, stressed that the three pillars of pension insurance should be viewed as part of a single system. He called for a clearer focus on young people, who need to be told why pension insurance is important.

People should be encouraged to invest in their own future, BIA Deputy Chair Maria Mincheva said, expressing the position of her association. She reiterated BIA's support for the three-pillar system.

The system was also supported by Bulgarian Chamber of Commerce and Industry President Tsvetan Simeonov.

Evelina Miltenova, who chairs the Board of Directors of the Bulgarian Association of Supplementary Pension Security Companies, said that the substitution rate (the pension as a percentage of the income before retirement), provided by universal pension funds, can be expected to reach 15-20% if the client has a full 40-year pension insurance period and has regularly paid all her/his insurance contributions. Miltenova called for an increase of the supplementary compulsory pension insurance contribution to 10%.

Confederation of Independent Trade Unions in Bulgaria President Plamen Dimitrov and Podkrepa Confederation of Labour President Dimitar Manolov also spoke in favour of the existing system, but said it should develop further. Pensions should be adjusted adequately, Dimitrov said.

National Assembly Labour and Social Policy Committee Chair Denitsa Sacheva sees no alternative to the three-pillar model. She noted that second-pillar pensions began to be paid just two years ago. Sacheva pointed to the need for strategic documents which set common goals for institutions and society, with clear social dimensions, as well as action plans which are secured financially.

Albena Velikova of the Bulgarian Labour Law and Social Security Association gave a presentation in which she said that, to function effectively, a pension system should be organized in a way that provides a steady, predictable and decent source of pension income for every participant.

The discussion also looked at work after retirement. Some speakers laid emphasis on the demographic crisis. There were comments about undeclared employment as well.

The meeting started with a minute of silence for the late labour and social policy minister Ivan Neykov.