Business is against the ideas of nationalizing the personal accounts of the second pension.
Redirecting the funds to the first pillar will not fill the deficit in it, national and industry organizations write to the parties. Business has declared itself against the proposals in the budget to nationalize the proceeds from the personal accounts in the second pillar of the pension system. Rescheduling the funds to the first pillar would not fill the deficit in it, national and industry organizations warn in a statement defending the interests of 4.5 million insured persons. It was sent to the parties in the 51st National Assembly and was signed by the Bulgarian Association of Supplementary Pension Insurance Companies (BADDPO), the Bulgarian Industrial Capital Association (BICA), the Bulgarian Industrial Chamber (BIA), the Bulgarian Association of Management Companies (BAUD), the Bulgarian Association of Licensed Investment Intermediaries (BALIP), the Bulgarian Association for Equity and Venture Investment and the Bulgarian Entrepreneurial Association.
The industry reminds that the funds in personal accounts are inherited and their closure would harm the heirs of the insured persons. Also, the proposed change in an anti-market way will deprive citizens of the opportunity to choose how and where to insure themselves - in the private pension company of their choice or in the state social security with the full amount of their insurance contribution. And currently there is a legal possibility for pension insurance companies, as they compete with each other, to be competed with by the National Social Security Institute, but this is permissible only in conditions of voluntariness, with the right of choice of consumers reserved, national and industry organizations write to politicians. The opinion also reminds of the successfully passed OECD review, the established security and reliability of pension companies, which achieved positive average profitability for the entire period of the introduction of the three-pillar model.
"The second pillar is an integral part of the model and was created precisely to mitigate the deficits in the solidarity first pillar, whose financial condition continues to deteriorate, especially in Bulgaria. The deficit is becoming chronic and increasing, while at the same time the state transfer is increasing dramatically by over 11 billion leva to pay the growing pensions from the first pillar. The redirection of insurance contributions in the amount of 2.7 billion leva will not solve the problem of the deepening imbalance in the revenue-expenditure part of the pension system and even if it reduces the growing deficit temporarily, in the long term it will deepen the problem," the industry's position says. And it is recalled that pension companies are the most controlled and transparent business, as they report their transactions to the Financial Supervision Commission every day and also publish the values of the funds' shares on their websites. The proposed change will negatively affect both the persons insured in the pension funds, as well as the capital market, its investors and the state. As of the end of the third quarter of 2024, the investments of supplementary mandatory pension insurance funds (SMPS) in Bulgarian financial instruments amounted to a total of BGN 5,292,584,594.97, of which BGN 2,341,019,249.25 in government securities, BGN 880,353,198.85 in corporate bonds, BGN 1,297,360,739.42 in shares, BGN 754,976,550.35 in mutual funds and BGN 18,874,857.10 in alternative investment funds. "The danger of " fire " is real sale "monetization and/or restructuring of pension fund portfolios - on the one hand, to implement the political decision and, on the other, to meet the quantitative regulatory requirements. The "price" or the final effect of the implementation of such a measure is borne directly by the insured persons in the pension funds, who, under the current legislation, significantly bear the investment risk, as well as by the state in terms of the obligations assumed," the opinion says.
In 2024, the long process of analysis of the system and its stability by the Economic and Social Council (ESS) was completed, whose report gave a positive assessment of the state of the three-pillar model. ESC, as well as OECD, made recommendations for its improvement by introducing a multi-fund model that follows the life cycle of the insured persons and allows for the stable achievement of higher profitability. Considering that Bulgaria strives to become a member of the eurozone and a full member of the OECD, no action should be taken, which discredit the existing model. The business is reminiscent of the negative example of Hungary, which was the only one in the EU to discontinue insurance in the second pillar of the pension system.
See the full text of the opinion here .
