Svetla Nestorova: Incentives are needed for employers to additionally provide their employees with a third pension

"The state should encourage employers to pay social security contributions to employees for a third pension through the Voluntary Pension Fund. Tax breaks are a basic mechanism to stimulate employers to contribute to higher incomes for people after retirement, and in Bulgaria they have not been changed for 20 years," said Svetla Nestorova, Chairperson of the Management Board of PAC Doverie, during the presentation of the report on the current pension system and proposals for its improvement to the Economic and Social Council (ESS).

"Since the employers' relief for food vouchers is 200 leva, perhaps the relief for insurance in the Voluntary Pension Fund should be at least that much, because it is in the third pillar that funds for really high pensions can be accumulated," Nestorova pointed out. 

She also recalled that the reports of the Organization for Economic Cooperation and Development (OECD) and the Economic and Social Council (ESC) contain specific recommendations to eliminate the deliberately created "competition" between the first and second pillars, which currently works to the detriment of insured persons. A key element of this should be to give people the opportunity to choose precisely at the moment of retirement whether to transfer entirely to the first pillar or to receive two pensions, because only at the end of their working life do they have accurate and complete information about the amount of their pension and the amount of funds accumulated in the second pillar. Another such problem is the so-called "reduction coefficient" of their pension from the Social Insurance Institution, which currently does not take into account the rights they have acquired from the participation of the State as a third insurer and in fact unfairly punishes citizens who choose to have a second pension.

According to her, the idea of ​​the three-pillar model is to work in harmony, with the main goal being to provide a good replacement income and this model has no reasonable alternative.

“All countries that have made compromises with the second pillar in the past are now returning to funded pension schemes because this is the only rational solution”, Nestorova is categorical. 

“People should not live in fear for their future, but be confident that they will have a dignified old age”, said Denitsa Sacheva, Chair of the Committee on Labor and Social Policy in the National Assembly, on the occasion of the ESC report. 

She added that it is time to also emphasize financial literacy, which should start in school and continue throughout life.

Dr. Hasan Ademov, former Minister of Social Affairs and current member of the Budget and Finance Committee in the National Assembly, added that the pension system has become a universal donor for many sectors over the years, and that is why we are now seeing a deficit of 11 billion BGN. According to him, the three-pillar model is yielding results, but the shortcomings are the result of political decisions. Dr. Ademov is also of the opinion that the multi-fund reform will be useful because it will finally link the life cycle with the possibility of choosing how people's funds are managed.