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Pension reforms in Bulgaria - background summary

Bulgaria has a three-pillar pension system, with a mandatory state pillar, a mandatory funded pillar and a voluntary third pillar. The first step was taken in 1995 with the introduction of voluntary private pensions. From 2000 onwards, the parameters for the first pillar were reformed; in the same year, a mandatory second pillar system was introduced for workers in hazardous occupations. It was followed in 2002 by a mandatory second pillar for all employees, born after 31 December 1959. In 2006, Bulgaria decided to establish a reserve fund to support the financial stability of the first pillar system, financed by proceeds from privatisation and 50% of any general budget surplus. On 1 January 2007, a fourth pension pillar started operating that comprises voluntary occupational pensions and is similar to those in Western countries. At the same time, some private pension funds, which offer additional voluntary insurance for pensions started to operate in the country since 1992-1993.

Pension reforms in Bulgaria

  • The pensions system has undergone a number of reforms over the years. The changes are aimed at raising the retirement age and trying to ensure better pension provisions. On 28 July 2015, the National Assembly adopted important changes to the Social Security Code.
  • According to a recent EPSN report, the first change was a 2 percentage point increase in social security contributions - 1 point from the beginning of 2017 and 1 point from the beginning of 2018. Such a mild increase was recommended in a 2013 report by the World Bank. There is no new increase of the social insurance contribution for pensions since the beginning of 2019.
  • The second change in the amended Social Security Code consists of raising the retirement age. In 2015, the retirement age for men in Bulgaria was 63 years and 10 months; for women it was 60 years and 10 months. In 2017, it was raised gradually for both men and women to finally reach the target of 65 years by 2029 for men and by 2037 for women. For men, the retirement age began to increase by 2 months in 2017 and by 1 month in every subsequent year. For women, the retirement age began to increase at a faster pace – by 2 months each year from 2017 until 2029 and by 3 months each year from 2030 to 2037. The required length of service / contribution period (which was in 2015 38 years and 2 months for men and 35 years and 2 months for women) began also to increase gradually for both genders, by 2 months each year staring from 2017 until it reaches 37 years for women and 40 years for men.
  • At the same time, there are many employees, who can retire earlier, even with shorter periods of service, on the base of the quality of their working conditions (for example, miners, part of workers in metallurgy, employees in the civil aviation etc.). This early retirement applies also to employees in military services, police, security services, supervisors in prisons and others.
  • Finally, a third important change and the most controversial one consists of the possibility for people who have insurance contributions, based both on the first and the second pillar of the pension system, to make multiple shifts between their savings. Those who have paid insurance contributions for the second pillar in a private pension fund can choose to transfer their pension savings from that fund to the national pension fund (which is state-owned) and continue to pay the amount of the two contributions into the national pension fund. It is also possible to shift funds back.
  • The social partners were closely involved in these pension reforms and the discussions concerning the preparation of the reform, which preceded them. In early 2012 the social partners prepared common proposals to the government related to the stabilisation of the pension system. At the end of 2014, there was some tension between employers, trade unions and public administration concerning discussions in the National Council for Tripartite Cooperation some labour and social issues, including the issues of social insurance and pension reform.

 (update March 2019)