Bulgaria’s pensions sector is up in arms following a set of draft amendments to the Social Insurance Code (SIC) published by the finance ministry on its website.
While many of the suggestions are uncontroversial, covering long-standing issues such as investment by funds in related parties, the ministry dropped a bombshell by proposing a common payout asset pool for second-pillar fund retirees that would prevent them from passing their savings on to their heirs.
Both the Bulgarian Association of Supplementary Pension Security Companies (BASPSC) and the Bulgarian Industrial Association-Union of the Bulgarian Business (BIA) have published strongly worded objections to the minister’s proposals.
Both have objected to the continuing piecemeal amendments to the SIC – 45 times since 2010 and 117 times since its implementation – which make it among the most altered pieces of Bulgarian legislation.
These changes, notes the BASPSC, show the lack of an overall concept of pensions protection, have created instability in the pensions industry, including discouraging investors, and generated uncertainty and insecurity for insured members.
The pensions association’s statement says it is ready to offer various types of payout mechanisms, including variable and guaranteed rates, and lump-sum pensions.
But it insists the final decision should be up to individual members, as was the case in 2015, when members were allowed to switch between the first and second pillars.
The BIA added that the common payout pool proposal renders the concept of personal pensions savings meaningless.
It called for the draft to be tabled before the National Council for Tripartite Cooperation, the governmental, trade union and employers’ organisation advisory council.
The objectors are also furious about the way the draft was slid into the legislative agenda.
It was published late on Friday, 22 April, with a three-week consultation period that covered weekends and the Orthodox Easter public holidays, with even relevant ministers unaware until then of the document.
This, they claim, is reminiscent of the government’s rushing through controversial changes to the pensions system in 2014, shortly before Christmas.
The objectors have called for any discussions, let alone decisions, to postponed until after the asset quality reviews and stress tests of the pensions sector have been completed.
The remit of the reviews in any case overlaps with the finance ministry’s proposals on issues such as investments and risk management.
The reviews themselves were recently postponed until July, and will not be completed until December.
Yesterday, Bulgaria’s Financial Supervision Commission published a list of eight approved independent external reviewers for the pensions sector.