The pension system is on the verge of becoming critically dependent on the state budget

Given current trends in Bulgaria, the country’s pension system may soon begin to be financed primarily from the budget rather than from social security contributions. This was stated by Prof. Bogomil Manov, a member of the Fiscal Council, as quoted by the Focus news agency.

He explained that when the three-pillar pension model was introduced around 2000, the expectation was that by 2030, pension income would reach between 45 and 55 percent of the final salary. According to him, however, these targets will not be met.

It’s been 26 years since the reform began, but 26 years can easily turn into nearly 30 years in just a few more years. Things didn’t turn out at all the way they were originally planned,” he added.

In his view, the main problem lies in the first pillar of the pension system, which relies increasingly on transfers from the state budget rather than on social security contributions. He noted that about 43% of pension funds now come from state subsidies rather than from workers’ social security contributions.

If this trend continues, it won’t be long before the pension system is financed primarily from the state budget rather than from social security contributions,” the expert warned.

Last week, Manov warned in his analysis that the current model of the Bulgarian pension system encourages the concealment of income and the non-payment of required social security contributions. In it, he noted that the system faces “serious challenges stemming from the weakened link between social security contributions and pension amounts, the existence of minimum pensions that undermine the contributory principle, and the unfavorable demographic structure.”

This weakens the incentives to declare actual income, encourages the evasion of social security contributions, and increases the system’s dependence on the state budget,” the professor wrote at the time.

Translated with DeepL.