Bulgaria has once again postponed a decision on the pension system

Bulgaria will start 2026 – the first year of its membership in the eurozone – with an old but extended budget. This extension, in principle, is solely intended to ensure the normal functioning of the state under the old Budget Act. But politicians have once again managed to surprise with their populism, pushing through this extension law and raising the salaries of the state administration by about 5% – something that both the government and employer organisations have deemed illegal.

But this year, too, they failed to even begin something much more important and increasingly urgent – work on reforming the pension system.

One of the big problems that will have to be solved, as this problem is already big and will grow even more in the coming periods, is pension insurance, on which millions of people depend," commented Lyubomir Datsov, a financier from the Fiscal Council, to Economic.bg.

He explained that, purely mathematically, the first pillar of the pension system—where state pensions are paid by the National Social Security Institute (NOI)—has no future. The reason lies in the demographic processes of an aging population, few workers, and low birth rates. "Whatever policy you pursue (in the first pillar), you can only make things worse," Datsov commented.

For me, the second and third pillars are the future of the system," the economist added.

Multi-funds in Bulgaria

One opportunity for the development of the second and third pensions we receive from pension insurance companies is the introduction of a multi-fund system in Bulgaria. It will allow savings in private companies to be invested in a way that is consistent with the employment horizon of the insured and their risk tolerance, which in turn will allow for the accumulation of more funds in individual accounts.

The draft law on multi-funds was ready back in the summer, but the Ministry of Finance (MF) only published it for public discussion last week. It became clear that three types of investment profiles are being proposed:

• Dynamic – where the maximum allowable amount of investments in variable-income financial instruments (as a % of assets) is up to 90%;
• Balanced – up to 55% share;
• Conservative – up to 25% share.

The introduction is expected to take place in 2027.

Separately, it was envisaged that by November the outgoing government would prepare a Roadmap for improving the pension system.

The task was assigned to six institutions – including the finance and social ministries, the National Social Security Institute, the Financial Supervision Commission, and others – for six months.

However, as Economic.bg wrote, the document never appeared, and after spending the last few months explaining that there would be no reforms to the system, in early December, Minister of Labor and Social Policy Borislav Gutsanov surprisingly promised reform of the pension system next year, when the analysis with decisions on pensions is expected to be ready (despite the existence of many others – see the link below).

It is unclear who will undertake these reforms in one of the most conservative systems following the resignation of Prime Minister Rosen Zhelyazkov.

Translated with DeepL.