Recent development of the Bulgarian pension system

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1 Recent development of the Bulgarian pension system Petya Malakova Head of Social Security Unit, Ministry of Labour and Social Policy of the Republic of Bulgaria

2 History of Bulgarian social insurance system First laws: Law on the invalidity pensions for military service of the Bulgarians who were injured during the Liberation of the country in (adopted in 1886) Teacher Pensions Act (adopted in 1888) Law on Pensions and Temporary Benefits of Priests (adopted in 1888) Law on Pension Insurance of Military and Military Department Officials Law on Civil Servants Pensions Act of 1957 and Title III of the Labor Code of 1951 Social Insurance Code (adopted in 2000)

3 Social Insurance Code State Social Insurance (first pillar) - general disease, accident at work, occupational disease, maternity, unemployment, old age and death Supplementary compulsory pension insurance (second pillar) Universal Pension Fund - for those born after ; Professional Pension Fund - for workers working under arduous and unhealthy conditions Supplementary voluntary pension insurance (third pillar) - for all persons over the age of 16, regardless of whether they work or not. Additional voluntary unemployment or professional qualification insurance

4 State Social Insurance (first pillar) Pensions: Old-age pension (pension for periods of insurance and age) Survivor s pension to children, wife and parents (under certain conditions) Invalidity pension it is granted to persons with permanently reduced working capacity of 50% or more. The right is acquired if the person is insured for invalidity due to general disease and/or accident at work or occupational disease

5 State Social Insurance (first pillar) Pensions not related to work: Military Invalidity Pensions; Civil Invalidity Pensions; Social Old-age Pensions; Social Invalidity Pensions; Personal Pensions.

6 The amendments in the Bulgarian pension system from July 28, 2015 Changes leading to an increase in income in the social security system, which will lead to a decrease of the dependence of the system on the state budget Changes leading to cost optimization in the social security system by introducing tighter and fairer conditions for access to pensions. Changes related to improving the pensions adequacy Changes related to improving the three-pillar pension model

7 Changes leading to an increase in income in the social security system An increase of the amount of the social security contribution to the "Pensions Fund" by 2.0 p.p. as the increase was: by one p.p. for 2017 and by one p.p. for 2018.

8 Changes leading to cost optimization in the social security system Annual gradual increase in the retirement age for men and women: By 2 months to 2029 and 3 months to 2037 for women By 2 months in 2016 and 2017 and 1 month to 2037 for men. Women and men will have the same retirement age in 2037 (at 65) An automatic mechanism for increasing the retirement age will be introduced after 2037 The required periods of insurance are also increased by 2 months each year until reaching 40 years for men and 37 years for women in 2027.

9 Changes leading to cost optimization in the social security system General conditions for retirement in 2018 Men: Age: 64 years and 1 month Period of insurance: 38 years and 6 months Women: Age: 61 years and 2 months Period of insurance: 35 years and 6 months

10 Changes leading to cost optimization in the social security system Annual increase in the teachers retirement age until reaching 62 years: By 2 months to 2029 and by 3 months to 2037 for women By 2 months to 2017 and by 1 month to 2029 for men. The required periods of insurance as teachers remains 25 years and 8 month for women and 30 years and 8 months for men. Annual increase by 4 months for women and 2 months for men in the retirement age of the workers for first and second category of labour: For the workers from first category of labour the retirement age is rising up to age 55 for both men and women and it will be reached in 2037 for women and in 2029 for men. For the workers from second category of labour, the retirement age will be 60 years for both men and women and will be reached in 2037 for women and in 2029 for men.

11 Changes leading to cost optimization in the social security system Introduction of a minimum retirement age for military servants and civil servants of the Ministry of Internal Affairs and other special agencies 52 years and 10 months for 2016 its annual gradual increase is by 2 months until reaching the age of 55. A possibility for acquiring the right to an old age pension is introduced for the persons who have up to 12 months until reaching retirement age, but who have acquired the required length of service, i.e. who have significant contribution to the system. The pension shall be lifetime reduced by 0.4 percent for each month lack of age

12 Changes related to improving the pensions adequacy Gradually increase of accrual rate in pension formula from 1.1 to 1.5 percent for newly granted pensions as well as for these that have already been granted; As of January 1, 2019 the maximum amount of the received pensions (so called ceiling of the pensions ) shall be abolished for the newly granted (after this date) pensions. As regard the pensions granted to December 31, 2018 the ceiling shall be increased from 35 to 40% of the maximum contributory (insurable) income.

13 Changes related to improving the three-pillar pension model An opportunity to the members of universal pension funds (second pillar) to shift their individual privately managed savings to the public, first pillar pension fund This decision is reversible The final choice should be made not later than five years before the retirement age under general conditions Same opportunity is provisioned for the professional pension fund (workers working under arduous and unhealthy conditions). This is one-off option (irreversible).

14 Current reforms in the pension system We are currently developing changes in the Social Insurance Code regarding the phase of payment of pensions from the Supplementary compulsory pension insurance (second pillar).

15 Thank you for your attention! Petya Malakova, Head of Social Security Unit, Ministry of Labour and Social Policy of the Republic of Bulgaria

REPUBLIC OF BULGARIA. Country fiche on pension projections

REPUBLIC OF BULGARIA. Country fiche on pension projections REPUBLIC OF BULGARIA Country fiche on pension projections Sofia, November 2017 Contents 1 Overview of the pension system... 3 1.1 Description... 3 1.1.1 The public system of mandatory pension insurance