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Pension reforms in Bulgaria - background summary

An overview of pension reforms in Bulgaria since 2000.

Characteristics of the Bulgarian pension system

  • 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. In 2006, Bulgaria decided to establish a reserve fund to support the financial stability of the first pillar system, which has not yet started operating and will be 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.

Pension reform in Bulgaria

  • The Bulgarian pensions system has undergone a number of reforms in recent years. The changes are aimed at raising the retirement age and trying to ensure better pension provision. On 28 July 2015, the Bulgarian 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 report by the World Bank (Doemland et al: 2013).
  • The second change in the amended Social Security Code consists of raising the retirement age. In 2015, the pensionable age for men in Bulgaria was 63 years and 10 months; for women it was 60 years and 10 months. From 2017, it will be 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, pensionable age will increase by 2 months in 2017 and by 1 month in every subsequent year. For women, it will 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 contribution period (currently 38 years and 2 months for men and 35 years and 2 months for women) will also 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.
  • Finally, a third important change and the most controversial one consists in the possibility for the insured person to make multiple shifts between the first and second pillars of the pension system. Those who are insured in a private pension fund can choose to transfer their funds from that fund to the state pension fund and continue to pay the sum of the two contributions into the state pension fund. It is also possible to shift funds back.
  • The social partners were closely involved in these pension reforms and the discussions that preceded them. In early 2012 the social partners developed common proposals to the government related to the stabilisation of the pension system. At the end of 2014, there was tension between employers, trade unions and public administration about the functioning of the National Council for Tripartite Cooperation, referring among others to the pension reform.
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