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For the first time in a report to describe the profitability of private pension funds over 17 years
Instead of multiplying the contribution money, private funds have reduced it: 100 BGN, paid in 2002, can now buy goods for only 84 BGN.
Companies must announce in advance how much money they will bring
Transferring to a state pension until the last minute will solve the problem, companies say
SINCEthe second pension system, by which all Bulgarian citizens born after the end of 1959 are insured, is a failure. This is stated in a report on the state of pension systems in Europe by the BetterFinance Institute of the European Federation of Investors and Consumers of Financial Services.
The author of the Bulgarian part of the report on pension systems in the EU is financier Lyubomir Hristov, who has opposed the current pension system for years. It has been in force since 2002 and consists of 3 pillars: mandatory insurance with the National Social Security Institute, additional mandatory for those born after 1959 in private pension funds, and the possibility of other voluntary insurance for a third private pension.
Long-term real returns are essential for pension funds to be able to pay pensions to their depositors. However, no information on this performance is published of Bulgarian private pension funds, criticizes the BetterFinance report. According to the data in the document for the period 2002-2019, universal pension funds, in which more than 3 million Bulgarians are listed, have a negative real return of 0.91%.
This means that every 100 BGN paid a second pension in 2002, in 2019 they can buy goods for 84 BGN, explains Lyubomir Hristov in his additional post.
Bulgarians
funds for the second
they have a pension
the lowest
real profitability
in Europe,
shows the analysis of the European federation (see table). Except in Bulgaria, savings for a second pension have a negative real return only in Slovakia and Latvia.
Pension fund investments are subject to strict regulation and their profitability cannot be compared with other instruments, but the Association of Supplementary Pension Insurance Companies is responsible for its position on Hristov’s claims.
In order to have a good amount of his second pension, the insured must receive a return higher than the growth of the average insurance income for the period, according to the report of the European federation. In contrast, long-term profitability is poor and the true three-pillar pension system fails the insured, reads one of the conclusions.
The document explicitly states that
medium size
of the state
pensions are about
the line of
poverty,
and for people insured for a second pension in a fund, NSSI payments will be cut.
Universal funds and
paid for them
second pension
Really
reduce income
from the future
retired,
As in Bulgaria, the amount of two pensions will be less than just the state insurance pension, the report concludes.
According to the current texts of the Social Security Code, the state pension of those born after 1959 will be reduced by more than 20%, in proportion to the part of their insurance, which is deposited in their personal accounts in private funds instead of the NSSI. However, pension companies are fighting for change, for the reduction to be individual and for the former to receive a second pension in 2021, the reduction from the state will be no more than 7 percent. (What solution does the government propose – see below)
The reason is that to be the first with a second pension next year falls on about 200 thousand women who do not have private insurance in the 40 years of service, but only 20. In addition, women enjoy different rights in the NSSI and private funds during maternity. These years in the state insurance system are considered seniority, but at the same time in private funds no contributions are paid for the maternity period.
In order not to end up in a situation where two pensions are less than one, the European federation offers
two steps to
reform of
the pension
system
in bulgaria
First, from early 2022, all mandatory social security contributions must be made only at the state NSSI.
The more than 3 million workers who are already insured in private funds should have the opportunity to redirect their money accumulated so far in private funds to the Silver Fund. This will prevent a reduction in the NSSI pension in the future. However, this option shouldn’t exist for more than 24 months, BetterFinance recommends.
Actually and at the moment there is the possibility of insurance only in the National Institute of Social Security. And the term to transfer accounts is up to 5 years before reaching retirement age. However, according to data from the insurance institute, as of November 2019 only 37,000 people have transferred their accounts, which is 1.5% of those insured in universal pension funds.
The second step in reforming the system should be a change in the regulations for investments by private pension funds, the report recommends.
Private funds must have return markers to take into account what they have done in a period of one year, 3 years, 7 years and 10 years. These previously announced goals will allow people to choose their retirement products.
In addition, private funds must offer investment options to their clients: more risk and higher returns or less risk and lower returns. You need and
To be shattered
the oligopoly of
pension
money
and allowing banks, insurance companies and financial intermediaries to manage “pension accounts,” the report recommends.
These are the so-called multifunds, which have been debated for at least 10 years, but have never been allowed, recalled the association of pension companies. They also support the introduction of multifunds. Also, it should be possible to transfer to the NSSI of your choice until the very last moment before retirement, private companies insist.
They also want additional regulation on the payment phase of second pensions.
They give up to 6 months to 200,000 women to exchange private funds for state
Next year, the minimum may reach BGN 300 and the maximum limit may be BGN 1,400.
200,000 women will receive an extraordinary grace period of between 3 and 6 months to transfer their money from private pension funds to the National Institute of Social Security. This is one of the proposals for changes to the Social Security Code, which will be discussed by experts from the Ministry of Social Affairs, the FSC, private funds, companies and unions at the end of the year.
In this way, these first pensioners with a second pension, who have lost five years to transfer to the National Institute of Social Security, will have the opportunity to do so, explained the Minister of Social Affairs Denitsa Sacheva.
The first 17,000 women with a second pension will retire in the second half of 2021, and only about 1,800 of them will pass their money to state social security. About 200,000 women were born between 1960 and 1964, the so-called first cohort that still has accounts in private funds. Preliminary calculations show that their second pensions will be very low and in reality their two pensions will be smaller than if they took just one from the NSSI.
A reduction in the reduction rate of state pensions will also be discussed if individuals choose to receive two. It is currently 20%. According to Sacheva, there was enough time until the ordinary elections to accept the necessary changes.
The minimum pension at BGN 300 and the cap at BGN 1,400 next year is one of the options to increase pensions that the government is analyzing. This CITUB proposal is related to the link to insurance income. Now the minimum pension is BGN 250, while the maximum is BGN 1200.
“Currently, the calculations are being done with different options.
Our wish
is to support
all bulgarian
retired,
at the same time, however, to maintain the solidarity and fair model of the pension system. The options are different and the most favorable can be the minimum pension to become 300 BGN and the maximum, 1,400 BGN ”, explained Sacheva. Under this scheme, the maximum insurance income must be increased, because the ceiling is nailed to 40%. If this option is adopted, around 9,000 people will be limited by the pension ceiling.
The BGN 50 bonus can be paid up to March, confirmed the information from “24 Chasa”. Prime Minister Boyko Borissov has already announced that he will relent while there is a pandemic. “My expectations are that this continues in the first quarter of 2021,” explained the Minister of Social Affairs. The reason is that according to statistics
on average
separated by approximately
BGN 56 per month
for drugs
and so the elderly will be supported during the most difficult months.
The other options to increase pensions that are being discussed are only lifting the weight of the seniority index, which is now 1.2%. Increasing it to 1.3% will lead to a 10% increase in pensions, according to CITUB estimates.
The other option is to update the pensions with the 2015 income. This will raise the money for 1.1 million retirees, but you will not receive a penny of increase yet.
The last option is
pensions yes
grow in
The Golden
Swiss
rule, but with
inflated percentage
According to experts, as of July 1 next year, it should raise pensions by 4.8 percent. Regardless of which option is chosen, the increase under the Swiss rule will continue, Sacheva explained.
Various estimates are being prepared for an increase from January 1 or July 1, 2021. However, this will further burden NSSI’s budget, as the accounts show that the price is between 1.2 and 3.8 billion leva. .
Next year, the minimum wage will be 650 BGN, but it has not yet been decided whether all salaries in the budget sector will be increased by 10%. However, its increase in the municipalities was discussed. This year, officials from 28 departments have already received a 30% increase due to the coronavirus.
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