Банкеръ Weekly



No bricks should be removed from the foundation of Bulgaria's pension model which has at least 50 years ahead, Deputy Minister of Labour and Social Policy Goran Bankov said a week ago. Finally, the social ministry announced a firm opinion in the debates about the mere points pension system in the country. Comments have been circulating in public for the second year now about the possibility for people to retire as soon as they collect the points needed for retirement, regardless of their age. For 2006, in order to retire men should be 63 years old (with the sum of age and length of experience making 100) and women should be 58.5 years old (92 points).
The unconditional points system is an extremely expensive initiative, the National Social Security Institute (NSSI) Director Yordan Hristoskov commented. This is also proven by the results from an exemplary sociological survey ordered by the institute. It was conducted by Sofia Consulting Group among people at preretirement age and those allowed to retire who haven't done so yet - aged between 50 and 65 years. The survey corresponds to the Government's program which stipulates that flexible elements be created in 2006 in the reporting of the country's economic and social growth.
If retirement age is cancelled and the length of service remains the only component, more than 40,000 people will immediately queue up in the NSSI for a pension, Hristoskov said. However, additional BGN75MN a year will be needed for this purpose. In a few years, the expenses of the institute will grow cumulatively by some BGN700MN, because the number of candidates will grow and they will receive pensions longer while not paying social security instalments.
The survey also shows that over 60% of the inquired people have no interruption of their security length of service. More than a half of the asked between 50 and 65 years say they have not felt the labour market shakings in the years of transition. A conclusion can be made that people prefer to work even after they have reached the age for retirement. The main reason for their unwillingness to retire early is the fear that their income will go down. Thirty-five per cent of the inquired feel they are able to keep working. Forty-five per cent of the inquired up to 65 years old say they are more willing to work than stop their activities, and 52% would seek additional income in case of early retirement.
More than 50% of the participants in the inquiry say they are willing to retire, but they also admit they will work in the grey sector of the economy. They would thus bring additional losses to the public security sector.
Moreover, the survey shows that people are not quite aware of the possibility they have to buy five years of security length. From the beginning of 2006 until the end of May just 3,000 people have paid BGN50.60 for each month of standing they need in order to retire. Because of the high price of this extra service and the low solvency other measures obviously need to be sought, such as a longer period for payment of the service bought.
Currently, the Ministry of Labour and the NSSI are preparing an amendment to the legislation that will further encourage old people not to leave their work. The pension of those who keep working after they reach the required age may be calculated with a higher ratio for the additional length of service.

The Government approved a bill on the state fund insuring stability of the public pension system. The fund will accumulate half of the privatisation revenues as well as 10% of the budget surplus. The resources will be part of the fisc reserve of the country and will not be used in the next ten years. In the meantime, experts from the social and the financial ministries, NSSI, employers and unions are already working on a project according to which part of the concession revenues will enter the so called silver fund, too.
The accumulated money will only serve to cover the deficit in the public security budget so that the effects from advanced age of the population, low birth rate and emigration can be avoided.

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