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The government is reforming the system in such a way that UPF members will have to choose whether to continue their parallel participation in a pension fund or to participate only in the public system and transfer all accumulated assets into the public pay-as-you-go system. Pension contributions which are currently channeled to the Universal pension funds will be paid into the public system. Accumulated pension savings in the individual accounts of the members will also be transferred to the public system.
Bulgaria’s public pension system does not have individual accounts, and thus the transferred funds would be swallowed up in the PAYG system. Employees joining the labor force after 1 January 2015 will have the opportunity to decide whether to participate in a pension fund within the first year of their employment. Once the decision made, it is irreversible. If an employee does not exercise this right to choose, he or she will enter the public PAYG system without an option to change the decision later. This reform in Bulgaria is remarkable, as employees are made to choose between two systems of retirement provision that are non-comparable by nature: a PAYG and a fully-funded system.
Joanne Segars, Chair of PensionsEurope said: “This pension reform clearly undermines the role of funded pension schemes in the pension system and the economy. Bulgaria faces severe demographic challenges. Those challenges cannot be overcome alone by the pay-as-you-go pensions and public finances on the long run. The EU pension policy from the Lisbon strategy until the White Paper on pensions has for more than a decade recognized the importance of funded occupational pensions in providing adequate and sustainable pensions. We very much support this goal. As the leading voice for the workplace based pensions in Europe, we are convinced that efficient multi-pillar pension systems are a key element in order to provide good, adequate and sustainable pensions for the people in Europe. We need more funded pensions, not less.”