STATE AND TRENDS FOR DEVELOPMENT OF THE PENSION SYSTEM IN BULGARIA

Abstract

The development of the pension insurance sector in Bulgaria has been extremely dynamic in recent years. The assets of pension funds have grown significantly and, accordingly, the responsibilities for their management have increased many times over. With the implemented pension reform in Bulgaria, a three-pillar insurance model was introduced and to the first pillar, operating on a cost-covering principle, were added a second and a third pillar, which operate on a capital-accumulating principle. In this paper we will try to present and examine in detail the state of pension reform in Bulgaria, its trends and opportunities for development. The main problem of the Bulgarian pension system at the moment is the extremely low ratio between workers and pensioners. The growth of average incomes is not able to compensate for the low dependency ratio and this predetermines the low return for people of retirement age. In demographic terms, population aging is an irreversible process and therefore the response to this challenge must be directed not just to mechanical change of key demographic indicators, but to the implementation and development of an integrated policy to mobilize and make full use of available human resources and targeted investing in improving the quality of human capital. It is necessary to limit the opportunities for early retirement and approach the retirement age between the different categories of work. Social and disability pensions are also in dire need of reform. A major change that should be a priority in future reforms is the gradual transition from a cost-covering system to a personal savings model that will improve incentives to pay social security contributions. The overall changes in the pension system must lead to greater independence of the pension system, more transparency, greater freedom of choice in the way of pension insurance, financial sustainability of the system and an adequate level of pensions to ensure a normal standard of living for retirees.