The Bulgarian law on third pillar pensions reform is due for its second reading early this year in Parliament. But there are some questions as to whether this will be able to proceed, due to changes that have been introduced between the two stages.
Nicolai Slavchev of the Bulgaria Voluntary Pension Fund in Sofia says that there were major changes included.
Some lawyers say that it is impossible to have such major changes introduced at the second reading, but others say there have been precedents and these changes can be made."
In his view, the changes are very important as they include requirements on the segregation of assets and custodianship. "There is no such concept as trust law in Bulgaria. What happened was that in the first draft a pension arrangement was not envisaged as a separate entity from the sponsor." This proposal enables a fund to be legally separate from the company.
The custody proposal is to counter having one bank handling all the assets and custody. "Funds will be able to choose their own custodians as a result," says Slavchev.
It has been been possible to arrange third pillar pensions since 1994 and the proposed law is something of a consolidating measure "putting everything into one law". It is designed to remove uncertainties about schemes, permits and so on, he adds. he hopes the law will be passed later this year.
The pensions can be arranged through companies, but each individual has their own retirement account into which contributions are placed. "In the period since 1994, it is reckoned that these pension plans now cover 10 to 15% of the working population. The problem is that with low incomes and inflation, people do not have the money to save.
Moves are afoot to examine what should be provided at the second pillar occupational level and a pensions working party is looking at the issues."