31.05.2016

The standard debate with the stakeholders on the proposed amendments to the Code is pending

"After a number of consultations, I decided to withdraw the topic of the legal basis at the stage of payment of a second pension from the draft amendments to the Social Insurance Code as proposed by the Ministry of Finance", the Minister of Finance Vladislav Goranov said at a press conference held today at the Ministry of Finance. The Finance Minister said that in the period of public consultations he had observed a wrong interpretation of the legislation proposed in connection with the payment of the second pillar pensions. He gave an example that the topic of ‘nationalisation' of pension fund resources was not commented anywhere in the proposal of the Ministry of Finance. "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", Minister Goranov said.

Minister Goranov proposes that the social partners in the person of the trade unions as the only legitimate representatives of the insured persons discuss and outline the best solution to this problem together with some experts from the Financial Supervision Commission and from the businesses. The Minister expects it to be complaint with the philosophy behind the three-pillar model of our pension system and with all the objective concerns that could arise at the stage of payment. The Finance Minister added that the Ministry of Finance could participate with some expertise in such a debate for which the leading institution could be the Ministry of Labour and Social Policy, according to the Minister.

He said that back in 1999, when the philosophy of the current three-pillar model of the pension system was established, the amount of the Public Social Insurance pensions of the persons born after 31 December 1959 had been planned to be decreased by the ratio between the second pillar contribution and the overall contribution to the Public Pension Fund. In this way, the Public Social Insurance pension of every person born after 1960 who has chosen to insure himself/herself in the Public Social Insurance and for a supplementary pension with universal pension fund would decrease by 28 %, other things being equal. "The philosophy behind the model is to make them competitive and the second pillar is expected to be managed and to generate such an yield so as to guarantee a pension not lower than the one they would receive, if they insured in the first pillar only", Minister Goranov explained. According to him, the options for advance fund drawing are good from the point of view of ensuring the right to ownership and disposal of property but they also conceal some risks: "if someone is tempted to draw their amount accrued with a universal pension fund, they will then have to remain with a very low Public Social Insurance pension for life, i.e. a risk that is not talked about loudly but should not be neglected", Minister Goranov backed himself with arguments.

Mr. Vladislav Goranov presented the other two main directions in the draft amendments to the Social Insurance Code, i.e. some requirements to the activity of pension insurance funds and changes in the investment policy, a synopsis of which one can see here, and a comparative table of second-pillar investment limitations - here. 

The Finance Minister also announced that he would have an active dialogue with the social partners and with some business representatives with whom he was to specify the new additional requirements for the management of pension insurance companies and the commitments of insured persons so as to improve the quality of their corporate governance by analogy with the other sectors in the state financial system, i.e. bank and insurance. "The purpose is to guarantee to the Bulgarian citizens that the billions in those funds will be managed so well that there will be sufficient resources for them to receive at the stage of payment of pensions", Mr. Goranov said.

Asked about the decision of the Supreme Administrative Court to refer to the Constitutional Court the 2015 amendments to the Social Insurance Code in connection with the right of insured persons to choose, Minister Goranov said that reasons of 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. "If it is anti-constitutional to choose which model to insure yourself in, then I have a wrong understanding of the Constitution", the Finance Minister added.