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The Second Pension Is the First Concern of Those Who Deny It


The average annual return on our money in private funds is 2.84 percent


Every single person coming to our country from abroad is recognized as an expert. If, for example, it is linked to a European institute, such as Better finance*, it means that better financiers work there. These better financiers also do better analysis.  One of these experts is Lyubomir Hristov (former chief economist of the BNB, later adviser to the executive director of the World Bank) and now - a natural enemy of private pension schemes and a flagship of state old-age insurance.

The fully crystallized result of Hristov's accounts is that every BGN 100 paid in 2002 to a private pension fund in Bulgaria has melted down to BGN 84 purchasing power at the end of 2019.

It's not the first time, however, that his analysis has scandalized the public with accounts parallel to the straight line drawn by the state – to shake up the second pension pillar. This has already been done traditionally by attacking the profitability of the private pension funds and pointing to one of the reasons – the "huge" fees for managing our money.

It should be noted that the report comes out shortly before the day when the first Bulgarians will start receiving pensions from both the National Social Security Institute and a private fund. Nikolay Vassilev, former Deputy Prime Minister, a man on a first-name basis with the investment activity, reacted to Hristov's exotic accounts.


I remember the wise words of Bridget Charnotta, Director of the European Commission at the time of our accession to the EU: "There is no such thing as an independent expert. Now some "experts" comment on the successive analyses of how unsuccessful private pension funds have been. And that it will be better for a greedy government to get hold of the billions saved by the citizens and waste them before the next elections”, Vassilev commented. I am astonished that only the voices of critics have been heard - of people who have found a cause in the defeat of private pension funds. They, on the other hand, have their own association, as well as a huge intellectual capacity of financiers and economists and have traditionally failed to explain their position in a comprehensible to the millions of people language.
Thus, the audience sticks to the cliché: "I did not understand anything from the numbers, but obviously the second pension is a failure and it is best to chase rainbows in the National Social Security Institute," Vassilev is convinced.

These apparently incorrect accounts were completely rejected by Nikolay Marev - member of the management board of the Association of Supplementary Pension Insurance Companies, and by the Chairman of the Association of Industrial Capital in Bulgaria Vasil Velev. First of all, according to Marev Better finance* was not a European agency, but a non-governmental organisation that was financed with European money and had nothing in common with the European Commission or any of the European supervisory authorities.

Marev's second finding is that "Better finance's calculations are manipulative and false. No methodology is announced of", Marev explained, adding that the author of the report on Bulgaria, LyubomirChristov, did not use any credible sources, but just quoted his own words.

What are the real numbers, according to the private funds?

The data of both the Association of Supplementary Pension Insurance Companies and the Financial Supervision Commission show that every BGN 100 paid in 2002, is nominally BGN 208.50 as of June 30, 2020.

"You can see that the funds are getting double," Marev said.

At the same time, however, if we subtract inflation from BGN 208, BGN, then BGN 116.91 remain. It’s a much smaller amount, but still reporting profitability, not the other way around. Both sums were presented after all fees and commissions of the companies were offset.

"There is no such methodology around the world where real yields are calculated. No bank, no investment company will quote you a yield that is real after inflation. No bank or an investment company will present a yield that is real after inflation. "Net returns are always quoted after the fees of the company, the investment company or the bank," Marev added.


Even sharper in his assessment of the conclusions of Better finance and the author himself Lyubomir Hristov was the chairman of BICA Vasil Velev. According to him, this report was a huge manipulation, there were many lies in it, and the calculations were "harmful, dangerous and even punishable".

"Panic is brewing and conditions for nationalizing people's savings are being created," he added.

The Association of Pension Companies also presented a short sample of the profitability of the accounts of three separate groups as additional evidence in defense of its thesis - those with a minimum income, those with an average income and those with a maximum. The data thus presented show that if so far each person with a minimum income has invested in a private company BGN 3430, then, as of June, 30 2020 they have saved BGN 4029.

Anyone with an average income who has invested just over BGN 11,300 has now just over BGN 13,436. Those with maximum incomes have paid BGN 19,229 each and currently have over BGN 22,860.

"We have shown exactly how many the contributions are and how much funds are available in the lot.
The figures above show that a person with a minimum income has BGN 4,029 available, and his contributions were BGN 3,430. That is, the real yield above inflation and fees is 10% over the whole period. A person with an average insurance income has about BGN 13-14,000 available, of which BGN 11,000 are from contributions, and the rest is profitability. Those who are insured on the maximum insurance income have around BGN 23,000. The profitability there is also positive ", Nikolay Marev explained.

The BANKER decided to bring things to an end by calculating the average annual profitability of the investments in the second pension pillar. With BGN 100 invested in 2002, after the deduction of inflation and all expenses, the funds are BGN 116.91., which means an average annual yield for the period of about 2.84%. And if LyubomirChristov bothers to check, it is much more than the profitability of mutual funds, not to mention the banks that have been offering us the luxury of the negative real interest rates for years.

Better Finance * is the European Federation of Investors and Savers. Since 2012 it has been the successor to the organization of European shareholders, established in 1992 in Brussels to unite the associations of all individual investor organizations and associations of small shareholders on the territory of Europe.

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