Bulgarian finance minister Vladislav Goranov has done a U-turn on a common asset payout pool for second-pillar pension fund retirees by dropping it from his ministry’s recent proposed amendments to the Social Insurance Code (SIC).
The minister, however, is not backing down quietly.
In statements made at a press conference at the end of May and published on the Finance Ministry’s website, Goranov said that, during the consultation period, “he had observed a wrong interpretation of the legislation proposed in connection with the payment of second-pillar pensions”, adding that the “nationalisation” of pension fund resources was never discussed in the ministry’s proposal.
“The attempt to arouse fear among the Bulgarian citizens and to discuss the topic with some arguments whether the private property is protected makes us believe that, behind these motives, there is some other goal of those who are against the amendments to the law,” he said.
Goranov was also dismissive about the Supreme Administrative Court’s decision on 27 May to refer the 2015 changes to the SIC to the Constitutional Court over the issue of the rights of the insured members to choose between the second and first pillars.
The Supreme Administrative Court ruling, which is not subject to appeal, was admitted as a case by the Constitutional Court on 1 June.
Goranov claimed the Supreme Administrative Court “displayed ignorance” of the pension system structure and that he “did not find any contradiction with the Constitution, as the right to choose is at the root of people’s freedoms”.
While the Finance Ministry may have removed the most controversial proposed amendment, the other changes still stand and are set to be presented to Parliament before the completion of the asset quality review.
These include changes to current asset regulations such as, in the case of second-pillar funds, permitting investments in sovereign bonds without credit ratings (up to 20% of the portfolio), international financial institutions (10%) and IPOs (1%).
The limit on REITs doubles to 10%, while direct investment in real estate, currently limited to 5%, will be prohibited altogether because of the inherent risks in this class.
The government, however – as the Bulgarian Association of Supplementary Pension Security Companies (BASPSC) has pointed out – has once again ignored its call to introduce multi-funds to mitigate risks for older fund members.
The BASPSC has also taken issue with the proposed expanded role of the Financial Supervision Commission (FSC), the sector’s regulator.
It has objected to the proposed requirement for pension fund companies that want to offer pension payouts to be re-licensed, a condition not applied to life insurance companies that enter this field.
According to the FSC, as of the end of March, the second-pillar universal and professional funds had a collective membership of 3.8m and net assets of BGN8.7bn (€4.4bn).
The respective figures for the third pillar were 605,705 and BGN851m.