The Bulgarian business sector has sent a warning to society about the quasi-nationalization of private pension contributions as proposed by the Revival political party. The pro-Russian party’s idea is to redirect the 5-percent contribution for private pension companies to the National Social Security Institute, and it is likely that the assets accumulated in the funds over the past nearly 25 years will also be affected.
This is clear from a statement sent to the media in connection with a proposal for legal amendments.
Such a change is a de facto quasi-nationalization of personal funds because these personal contributions are private pension savings,“ the business organizations explain in their statement.
Among them are the Bulgarian Association of Supplementary Pension Insurance Companies (BADDPO), the Bulgarian Industrial Chamber (BIA) and the Association of Industrial Capital in Bulgaria (BICA).
What is the risk stemming from Revival’s proposal?
In the declaration, the private sector cites proposals for changes to the Social Security Code (SSC) submitted by MP Viktor Papazov (Revival). He has been a fierce critic of private pension insurance for years and claims that it should be closed as part of the mandatory pension system.
The idea is that the entire pension contribution of employees (19.8% of income for the third category of labor) will go to the Pension Fund of the State Social Insurance (SSI). Proposed calculations, which are extremely illogical, suggest that the quasi-nationalization of pensions would provide the budget of the National Social Insurance with an additional amount of nearly 1.5 billion euros.
Currently, 5 percentage points of the social security contributions of workers born after December 31, 1959, go to the so-called second pillar of the pension system, also known as private pension funds.
The insurance contributions to private pension funds turn insured people into losers and reduce their expected pension income,“ Papazov states in his reasoning.
However, BADDPO criticized the idea.
They are proposing a total closure of the second pillar so that this 5-percent contribution would go to the National Social Security Institute,“ said Evelina Miltenova, the chairwoman of the BADDPO, in a comment for Economic.bg.
She explained that it is not clear where these calculations for 1.5 billion euros in revenue come from.
This is the 3rd or 4th time that it is being proposed, but if it is accepted, the money will be lost in the deficit of the State Social Insurance,“ believes Miltenova.
She added that currently, 5.5 billion euros are transferred annually from the state budget to fill the deficit of the National Social Security Fund for pensions. According to calculations proposed by the businesses, the „seizure“ of contributions will have some effect in reducing the deficit in the Social Security Fund in the first year, but after that, it will start to grow again due to demographic processes.
The future of private pension funds
Asked what will happen to the pension funds’ assets, Miltenova said that „there is a big question mark.“
There is no regulated way of siphoning off money from these funds. Pension funds are separate legal entities, and it is regulated what can go in them (fees and contributions) and go out (pension payments),“ Daniela Petkova, a pension expert and former chairwoman of BADDPO, told Economic.bg.
According to her, „it is not clear what exactly that party (Revival) is proposing“ and „there are no arguments“ for either confiscating the contributions or the assets of the companies.
It’s about stopping contributions, but this is not nationalization, because it’s money that is not yet owned by the socially insured. There are other arguments against such a change. There is no chance of terminating the activities of the second pension pillar – it will create big problems,“ said Petkova.
Miltenova outlined another, darker scenario, in which the Bulgarian Stock Exchange (BSE) would also have to close since the largest investors there are the private pension companies.
Can the deficit in the National Social Security Fund be filled?
Businesses believe that transferring funds entirely to the SSI system will harm workers, and the proposed changes are „totally unacceptable.“
They add that even if this is done, the new revenues will not erase the deficit of 5.5 billion euros present in state social security, and in the long term will deepen the problem.
Pension heirs could suffer
In fact, if these proposals are adopted by parliament, future generations will also suffer. The reason is that the change will also affect all those standing to receive pensions from the Universal Pension Funds, who are currently working and submitting mandatory contributions in their private pension accounts.
„The heirs of the 4.5 million insured persons (ed. note – the number of all insured persons in the second pillar) will be harmed by such a change since the funds accumulated in the second pillar funds can be inherited (ed. note – upon the death of the insured person),“ says BADDPO.
Translated by Tzvetozar Vincent Iolov
Източник: Economic.bg
