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The battle for the future of the second pillar of the pension system has entered a new stage: personal attacks. The pension funds have filed a formal complaint with the Financial Supervision Commission (FSC), demanding that the state punish its biggest public critic, financier Lyubomir Hristov. The FSC subsequently announced that the pension fund association had sent signals to other competent authorities to “Publications in the media on the financial stability of the pension system in the Republic of Bulgaria”.
“We definitely do not accept Lyubomir Hristov’s publications and we have already taken action before the competent state authorities. We are also observing other people who speak very cruelly and insultingly against pension funds. Patience and silence are over.” Evelina Miltenova, president of the pension association, told Mediapool.
What is the problem?
The Bulgarian Association of Supplementary Pension Insurance Companies (BADDPO) is angered by a series of articles by Hristov on his own blog, in which he claims that the second pillar has failed and should be closed.
The funds are particularly irritated by a report by the European non-governmental organization for the protection of consumers of financial services Better Finance, written in the part for Bulgaria by Lyubomir Hristov. On Tuesday, the pension association circulated a letter to the media on behalf of Pensions Europe, alleging that the Better Finance report was based on incorrect data and drew the wrong conclusions. The report states that the real long-term return on pension savings in Bulgaria is very low.
Why are the funds at war with Lyubomir Hristov?
The financier Lyubomir Hristov worked and taught in the United States for many years. Between 1990 and 1994 he was a member of the Board of BNB, after which he became the representative of Bulgaria at the World Bank. In 2011 he was nominated as a vice presidential candidate for Meglena Kuneva.
Hristov is the biggest public critic of the second pillar of the pension system, warning about 5 years ago about the problem “two pensions will be less than one”. Then their accounts showed that over the next several decades, people who receive two pensions after September 2021 (from the second pillar and from the NSSI) will receive a total less than the pension they would receive under the NSSI formula.
Later, his conclusions turned out to be correct. The state also found that when it begins to distribute pensions, from September 2021, the second pillar will not work as planned in the reform from 2000 to 2002. Therefore, on the initiative of former Finance Minister Vladislav Goranov in 2015 , the opportunity law was drafted for people to transfer their private fund accounts to the National Institute of Social Security and thus receive better pensions.
After that, the former Minister of Social Affairs Biser Petkov for the first time publicly presented data that the pensions of the second pillar will be very low: 30-50 BGN per month, and the funds accumulated in the accounts will not be enough for a life pension in the massive case. On Monday, the incumbent Minister of Social Affairs Denitsa Sacheva said the estimates were a second pension of BGN 20-35 in the massive case.
All these calculations have intensified criticism of private pension funds, which continue to explain that the attacks against them are unfair and based on distorted statistics. During their last public appearance, the funds announced that during the last 10 years the average annual profitability (of UPF) was 3.16%.
In its complaint to the FSC, the Association of Pension Funds wants the supervision to verify the activities of Lyubomir Hristov, as well as whether he has the right to provide financial advice, since nowhere in the Mercantile Register is the president of the Institute of Advisors to be found Certified Financial.
BADDPO: Articles are skewed
“The aforementioned articles by the author (listed in the complaint, b. R.) contain not only tendentiously presented data, which are considered to be” convenient “for the author’s thesis, but almost every one of these publications culminates in Appeals such as: “Those who want a supplemental pension flee pension funds, save more and invest independently in a globally diversified portfolio suitable for them with low fees and a low investment threshold. It is easy. If you don’t know how, ask: [email protected] – in the article of 05.10.2020; or “It runs faster than the liars and scammers gathered at BADDPO. It’s easy – with a request sent to the NRA” – in the article of 07.12.2020, “he writes private funds.
They believe that Lyubomir Hristov uses their articles to “recruit potential clients for financial advice”, which is regulated by the FSC and requires registration in the relevant registries.
The pension funds want a detailed inspection of the activities of Hristov and the Institute of Certified Financial Advisors. “In the event that the actions of these people do not constitute a crime, but they realize the composition of administrative offenses, the corresponding administrative sanctions must be imposed, and if constitutive acts are established, inform us, as well as the public in an appropriate manner , in order to prevent the possibility of citizens encountering people making unregulated financial and investment inquiries, “writes the pension association. Wants” decisive action “from FSC to” strengthen “public confidence in the model pension.
Lyubomir Hristov: I’m ready for a public debate
“So far the association has not shown which of my claims is wrong and why. They show their alternative results based on calculations that cannot be traced,” Lyubomir Hristov told Mediapool. He said that he was willing to appear in a debate with representatives of the association, in which to unravel all his allegations “one by one”. “If I make a mistake, I will announce it publicly and sprinkle my head with ashes,” Hristov said.
The financier noted that neither he nor members of the Institute of Certified Financial Advisors engage in FSC-regulated consulting activities. Hristov explained that he is not on record as the institute’s president because he has not been a member since April 4 of this year.
FSC: We will disclose what is happening with the complaint
In response to Mediapool’s question about the progress of the pension fund complaint, the Financial Supervision Commission responded that it had taken the necessary measures to carry out the relevant inspections and, in the event of violations of current legislation, it would apply the supervisory measures relevant.
Furthermore, the Bulgarian Association of Supplementary Pension Insurance Companies (BADDPO) has sent a signal to other competent authorities to carry out an inspection in relation to publications in the media on the financial stability of the pension system in Bulgaria, to what the Financial Supervision Commission cooperates within its powers ”, the supervision also pointed out.
It is not clear which media publications are involved. In recent months, however, the case of the president of the Bulgarian Pharmaceutical Union, Professor Asena Serbezova, accused by the prosecution of causing panic by warning about the risk of drug shortages during the epidemic has been highlighted.
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