By Albena Alexieva, INSURANCE.BG. We should not alter the structure, philosophy and the major principles of the Bulgarian pension model, asserted PhD Nikola Abadjiev, Chairman of the Bulgarian Association of Supplementary Pension Security Companies.
Mr. Abadjiev, at the beginning of the year aroused discussions on the so called company pension funds or schemes. The Ministry of Labour and Social Policy suggested that a work group discuss the introduction of these schemes in the country. Would you tell us something more in that relation? Is there any unified model of such funds in Europe or it varies between different states and how would the introduction of such model influence the Bulgarian pension system?
I wouldn’t say there is a unified model of the so called company pension funds. There is though a directive by the European Union on the use of such schemes which we have to abide by. The
directive has evolved from the experience oft the Western states, to be more precise, the present EU member states, which have been using company pension schemes for 20 or 30 years now. With regard
to our responsibilities arousing from Bulgaria’s EU accession, we have to apply the European legislation to our pension insurance system and this is where the issue of the introduction of company
pension schemes emerges. I would like to stress that Bulgaria is by no way forced to adopt the aforementioned schemes or to establish and enforce a new pension mode. EU consultants demand that we
meet only particular requirements under the directive. In my point of view, we should not apply company pension funds in the way they are functioning in Europe because that would not suit the
Bulgarian pension system. You will probably ask me why? My opinion results from the condition of Bulgarian companies, on the one hand, and to the fact that we ourselves have a more up-to-date and
well functioning pension model, on the other hand. Present company pension funds in the Western countries are in the vast majority of cases based on the so called defined pensions (preliminary
determined pensions). These schemes do not support individual accounts, capital is accrued in employer’s account and is in fact at their disposal, insured persons’ rights are dependent on the
employer’s good faith and presently many European company pension funds encounter problems with the transfer of the rights of the insured. Many EU member states have initiated reforms in their
pension insurance systems going the same path we have gone through – they are establishing institutions for management of the pension funds (such as our pension insurance companies), introducing
defined contributions schemes, stirring up discussions on the transfer of rights of the insured. Voluntary pension insurance funds presently operating in Bulgaria surpass in quality the Western
pension schemes. Bulgarian pension funds are based on the defined contributions principle (defined contributions and pension determined by the capital accrued in the individual account). Within our
funds there are individual accounts which are owned only by the insured person and nobody can question that, insured persons’ rights are entirely protected, notwithstanding whether the company
would go bankrupt or the insured person would move to another company. A daily supervision over the pension funds is also exercised.
All that is being just introduced in some European states and we should ask ourselves why would we introduce something that is in fact out of date? The Bulgarian pension model is highly estimated
not only by international finance institutions, such as the World Bank and the International Monetary Fund, but also by international pension funds.
In conclusion, we should not take on the subservient stance to blindly and not sparing enough thought enforce the Euro directives, moreover as we have considerable experience in the sphere.
Recently, I met with Schabba Naggi, Chairman of the Hungarian Association of Pension Funds. Hungary has passed a law, allowing the operation of company pension schemes but also allowing the
companies being branch companies of big West European companies to pay contributions to their employees in company pension funds of the mother company, provided there are such funds and the
employers themselves are willing to adopt such a scheme. Furthermore, Hungarian legislators have protected the existing pension model and employers may choose how to pay contributions -in company
pension funds or in Hungarian pension funds. Until now there have been no demands on paying contributions to the foreign companies’ funds. In fact, Hungary’s accession to the EU and the adoption of
the aforementioned law have not affected the pension model in the country. This is what, in my opinion, we should do too.
In that case, what are the grounds of the suggestion made by the Ministry of Labour and Social Policy?
The Ministry has not yet formed a firm standpoint; we are still drawing on the experience of Hungary, Poland, Spain and some other countries. The Ministry of Labour and Social Policy considers too,
that the European legislation should be applied without exerting pressure into the existing pension model. Our pension model has maintained steady pace in the last 10 years and we have not
encountered any significant problems up till now.
What is the attitude of Bulgarian companies having branch companies abroad towards having the same rights as foreign companies?
That should be regulated by the law.
The Finance Supervision Commission adopted at second reading the amendments to the Social Security Code in the sphere of investments. How would you comment on that?
The Commission has arrived at sound decisions which would boost the activities in that sphere.
What plans do you have for future discussions?
Another forthcoming issue is the introduction of the multifunds into the voluntary pension insurance – offering of investment portfolios with varying risk level. Another work group with the Finance
Supervision Commission is inquiring into the issue. The main objective is that investment portfolios with varying risk level be offered by voluntary pension funds and the insured have the option to
choose between different portfolios.
