Risks and Opportunities for the Supplementary Compulsory Pension Funds in Bulgaria

Supplementary compulsory pension funds have been operating for more than 10 years in Bulgaria. For the time being some of the risks facing the insured individuals came into surface. These financial institutions should start paying benefits in the near future to those individuals insured for early retirement and/or for an additional pension. That’s why it is necessary to analyze the risks insured individuals could face and to distinguish between the upcoming reality and the myths surrounding pension funds in Bulgaria. Òhe current article discusses some of the dangers concerning insured persons, demonstrates the investment results of the Bulgarian pension companies for the period 2002 – 2013 and proposes some recommendations for possible changes into the current normative rules, whose aim is to make the system more efficient than it is now. The aging of the population both in Bulgaria and in most of the countries in Europe makes necessary the implementation of reforms within the pay-as-you-go pension systems. At the same time the establishment of non-effective funded pillars could raise and not mitigate the future risks. There is one additional detrimental factor that should be taken into account within this complicated process – the significant increase of the public debt that accompanies the started transformation in most of the countries. This tempts the governments to use the assets of the pension funds for some short term rather than long term ends. The reversal of pension reforms in countries like Hungary and Poland makes it crucial to assess carefully the pro and cons of the pension fund activity by now and the factors that could trigger such processes in Bulgaria as well.