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ANTI-CRISIS PENSION POLICY MEASURES IN BULGARIA Valentina Dinkova

ANTI-CRISIS PENSION POLICY MEASURES IN BULGARIA Valentina Dinkova Financial Supervision Commission Bulgaria Brussels , 07/05/ 200 9. DEMOGRAPHICS AND MACROECONOMICS. Data from 2008 or latest available year 1 EUR = 1.95583 BGN (exchange rate pegged to EUR under currency board)

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ANTI-CRISIS PENSION POLICY MEASURES IN BULGARIA Valentina Dinkova

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  1. ANTI-CRISIS PENSION POLICY MEASURES IN BULGARIA Valentina Dinkova Financial Supervision Commission Bulgaria Brussels, 07/05/2009

  2. DEMOGRAPHICS AND MACROECONOMICS Data from 2008 or latest available year 1 EUR = 1.95583 BGN (exchange rate pegged to EUR under currency board) [1] Ratio of over 65-year-olds to the labour force 2

  3. CONTENTS • General information about the pension insurance in Bulgaria • Steps taken in the situation of a financial crisis • Expected outcomes 3

  4. GENERAL INFORMATION • Three-pillar Model – since 2000 • IPillar - mandatory pay-as-you-go system; • ІІ Pillar - mandatory supplementary DC schemes: Universal Pension Funds (UPF) Professional Pension Funds (PPF) • ІІІ Pillar -voluntary supplementary DC schemes: Voluntary Pension Funds (VPF) Voluntary Pension Funds with occupational schemes(VPFOS) • Total members (000s) 3 643.8* • Net assets (EUR mln) 1 175.5 4 *One person can be insured in more than one type of pension fund

  5. DYNAMICS OF THE SUPPLEMENTARY PENSION FUNDS’NET ASSETS(IN THOUSANDS EUR) 5

  6. AVERAGE RATE OF RETURN OF THE SUPPLEMENTARY PENSION FUNDS FOR A 24-MONTH PERIOD ON AN ANNUAL BASIS 6

  7. ANTI-CRISIS ACTION PLAN • On State level • On financial supervisory authorities level • On pension insurance companies level 7

  8. SUPERVISORY STEPS TAKEN IN THE CRISIS SITUATION • Improved coordination • Increased monitoring • Improved design of the pension system • Improved governance and risk management of the pension funds • Disclosure and communication • Improved financial education 8

  9. INTRODUCTION OF THE BEST PRACTICES RELATED TO SUPPLEMENTARY PENSION INSURANCE IN THE NATIONAL LEGISLATION • The draft Law of amendment of the Social Insurance Code (April 2009): - improvement of the corporate governance; - improvement of the investment regulations; - introduction of different investment portfolios in the voluntary pension insurance; - decrease in the fees and the deductions, charged by the pension companies; - informing of the insured persons; - improvement of the supervision on the supplementary pension insurance. 9

  10. EXPECTED OUTCOMES FROM THE PROPOSED AMENDMENTS • Consolidation of the pension insurance companies’ management structures and capacity and increase of the level of corporate governance • Increased opportunities for investment choice of the persons insured in the voluntary pension funds • Increase of the money in the individual accounts with more than 9% at the end of the insurance from the reduction of the fees and deductions in the Supplementary Mandatory Pension Insurance 10

  11. STEPS TAKEN BY THE PENSION INSURANCE COMPANIES • Increased competence of the employees, directly engaged in pension funds’ investments and risk management; • Improvement of the risk management activity and the control over investment activity and risk; • Re-structuring of the pension funds’ portfolios for decrease of the portfolios’ risks 11

  12. STRUCTURE OF SPFs' INVESTMENT PORTFOLIO 12

  13. THANK YOU FOR YOUR ATTENTION!

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