Without initial discussion, assessment of effects or consensus the Ministry of Finance has proposed new changes in the Social Security Code. The aim is altering changes adopted a month ago that allowed people to choose whether they should make social security payments to a private fund or move fully their money to the National Social Security Institute. The changes came in force after a vote in parliament took place but caused harsh reactions from private funds and civic organizations. Ombudsman Konstantin Penchev said he would turn to the Constitutional Court of Bulgaria. Critics accused the government of trying to put a hand on the additional pension savings of citizens in order to fill in the budget gap of the National Social Security Institute. The changes were also criticized for creating a clash between the state social security fund and the private universal pension funds.

Startled by the reaction, the Ministry of Finance announced new changes a few days ago. Now transferring money from the Silver Fund of the NSSI to private funds is also possible, but in this case a coefficient on which the amount of your pension depends is reduced.

Here is more from former Minister of Labour and Social Policy Ivan Neykov:

“I don’t see the government giving up the intention of opposing the different pillars of the pension system, although experts say this is the worst option. We are already seeing the effects. Trust has declined and during the coming months an increase in the share of the gray economy in the sphere of social security will be seen.”

Mr. Neykov also added that the majority of self-insured people do not make payments until the final version of the changes becomes clear.

The new changes still put the state in a better position than the private funds. There are no reports that show people the benefit of keeping their money into the Silver Fund but moving away will make their pensions lower. Instead of having a choice between funds that provide different incomes, citizens are now offered that their money should stay in the state, Mr. Neykov says. The money in the Silver Fund is not part of the budget of the NSSI but stays in a deposit in the Bulgarian National Bank. This rejects claims that the government aimed to cope with the budget deficit of the National Social Security Institute at the expense of private funds.

Currently, the universal pension funds in Bulgaria have accumulated some 4 billion euro. The Silver Fund contains 1.5 billion euro. Mr. Neykov told us more about this fund:

“Latest data suggest that over the years inflation has been much higher than the interest rate on the respective deposit. The interest rate on deposits in BNB is very small because BNB is not a commercial bank.”

Instead of numbers and calculations, the government justifies the changes through ideology. Urgent problems that plague the pension system such as the NSSI budget deficit, early retirement and the extension of the retirement age, remain unresolved. Meanwhile, new problems continue to emerge.

English: Alexander Markov