Pension insurance system
Supplementary mandatory pension insurance
Pillar II – supplementary mandatory pension insurance was set up to provide a second pension in addition to the pension for the State Social Security.
The second pillar works through universal and/ or professional pension funds, which are set up and managed by private pension insurance companies. The insurance contributions are determined by law and are collected together with the insurance contributions for the state social security.
Who can be insured?
*These are employees who work in more unfavorable conditions or working environment, e.g. miners, divers, pilots, drivers in public transport, etc. All activities related to 1st and 2nd labour categories are described in detail in the “Ordinance for Categorization of Labour at Retirement” (last amended and supplemented, State Gazette, No 64, 2001).
Amount of contribution to universal pension fund for 2016:
Because the maximum insurable income at present is limited (BGN 2,600), the amount of the monthly contribution cannot exceed BGN 130, irrespective of our income at the time of insurance.
Amount of contribution to a professional pension fund for 2016 - entirely at the expense of the employer/ contracting entity:
The persons working in conditions of 1st and 2nd labour categories:
- Persons born before 01.01.1960 are insured only with a professional pension fund;
- Persons born after 31.12.1959 are insured in both professional and universal pension fund.
Switch from a universal pension fund to the state Fund “Pensions” and back<
Persons born after 31.12.1959 (according to the changes in the Social Security Code adopted in end of July, 2015) who are insured in a universal pension fund can choose to transfer their contribution to be deposited to the Fund “Pensions” (Fund “Pensions for persons according to article 69”*, respectively). The switch of insurance with a universal pension fund to the Fund “Pensions”, “Pensions for persons according to article 69”*, respectively, and back can be done many times but only at least one year has passed since the latest change of participation. The final choice should be made not later than 5 years before reaching retirement age according to article 68, line 1 of the Social Security Code, and if no pension for service length and age has been granted.
The persons who start their first job can choose to insure in a universal pension fund, to which their contributions for a second pension will be transferred, within three months after commencement of the obligation to insure. In case they do not choose a universal pension fund, they will be administratively assigned to one of the funds in the country, where their insurance contribution for a second pension will be deposited.
If the person decides to switch his/ her participation from the Fund “Pensions” (Fund “Pensions for persons according to article 69”*, respectively), the funds accumulated on the individual account of the person, insured with universal pension fund, are transferred to the “State Fund for Guaranteeing the Sustainability of the State Pension System” (the “Silver Fund”).
After the switch of insurance contribution of the insured to the Fund “Pension” of the State Social Security (“Pensions for persons according to article 69*”, respectively), the insurance contribution is increased by the amount, which has been transferred to the universal pension fund to that moment.
If the person decides to switch his/ her insurance from Fund “Pensions” of the State Social Security (from Fund “Pensions for persons according to article 69”*, respectively) to a universal pension fund, and there are amounts transferred to the Silver Fund, these amounts are transferred back to his/ her individual account with the preferred universal pension fund. In case of back transfer of funds from the Silver Fund to a universal pension fund, only the nominal amount of the funds is transferred, irrespective of the time of transfer and the size of the contributions the insured person has made in the meantime.
Option for a single-time transfer of funds of persons insured with a professional fund to Fund “Pensions” of the State Social Security.
Persons insured with a professional fund have the right to switch participation in a professional pension fund to Fund “Pensions” of the State Social Security once. In this case the insurance contribution is increased by the amount of the insurance contribution to the professional pension fund. The right can be exercised if the persons have not been granted a pension for service length or a professional pension for early retirement.
* For members of the armed forces according to the Republic of Bulgaria Defence and Armed Forces Act and for state officers according to Ministry of the Internal Affairs Act and the Implementation of Penal Sanctions Act and Law for Arrest and Investigation.
Each working person can insure only with one professional fund.
The contributions for supplementary mandatory pension insurance are transferred by the employer to the National Revenue Agency, which transfers the contributions to the fund, preferred by the insured. In case of unjustifiable delay of transfer of the insurance contributions, the Agency owes interest as specified by the law, which is accrued on the individual accounts of the insured.
The contributions to a professional pension fund are not subjected to taxes, and are considered operating expenses in compliance with the Corporate Income Tax Act.
Minimal yield in funds for supplementary mandatory pension insurance
According to the Social Security Code there are requirements for achieving minimal yield from investment of the fund assets.