BULGARIA - DSK-Rodina has become the second pension provider to receive a licence to offer occupational pension funds under the Bulgarian third pillar.

Bulgarian pension providers have been allowed to offer third-pillar funds which are compliant with the European Union's pension fund directive IORP since January.

Occupational pension arrangements under the third pillar existed previously as the official third pillar in Bulgaria was created in 1994, however changes in the law were necessary to fulfil EU regulations.

"Under the new law, pension providers from other EU member states can now offer their services in Bulgaria and Bulgarian providers can offer their services abroad," Stanislav Dimitrov, chief executive officer of DSK-Rodina, explained to IPE.

His own company, a subsidiary of the Hungarian banking group OTP, may be looking to go cross-border in the future.

"Because we have quite an international exposure via our parent group which owns the largest pension fund in Hungary and has set up funds in Romania, employers in other EU member states might be interested in appointing us to manage their pension assets," Dimitrov noted.

So far, DSK-Rodina and Allianz, one of the largest pension providers in Bulgaria, have been granted licences by the country's Financial Supervisory Commission. The remaining seven providers have yet to file for a licence.

"In order for an occupational pension scheme to be set up, there has to be an agreement between the employer and employees," Dimitrov said.

"So the development of these new pension arrangements depends mainly on the interest among employers," he added.

Employees' contributions to voluntary occupational pension funds are exempt from the need to pay compulsory social security contributions and tax as long as the contributions are less than 10% of the taxable income. Employers can reduce their taxable expenditure by paying up to €30 in monthly contributions to the voluntary occupational funds for an employee.

At the same time, however, employees can take out the payments they made to the fund at any time.

Under current Bulgarian pension arrangements, employers also contribute to so-called 'universal' funds which have been mandatory since the year 2000 for all people born after December 1959.

The government also set up in previous years 'professional' funds for people working under difficult conditions, such as miners or pilots who retire earlier than other workers. The professional fund pays out in the period between early retirement and the statutory retirement age.

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