Bulgaria’s pension system consists of (i) a first-pillar, earnings-related pay-as-you-go program, (ii) a second-pillar mandatory individual accounts, and (iii) a third-pillar voluntary individual accounts. Currently, nine pension insurance companies are licensed by the Financial Supervision Commission to administer the mandatory individual accounts.
On January 1, 2011 Bulgaria introduced major changes to the pension system in order to increase employer and employee contribution rates and provide for future increases in the retirement age and in the number of contribution years required for a full pension. According to the government, the measures are aimed at reducing the 2 billion leva (approximately US$ 1.3 billion) deficit in Bulgaria’s public pension system by 2016 and to ensure the system’s solvency until 2035.
According to the new law, the contribution rates for employers and employees rose by 1.8 % - from 8.9% to 10% of covered payroll for employers and from 7.1% to 7.8% of earnings for employees. For workers born before 1960, contributions are directed entirely to the first-pillar social insurance program, while contributions for workers born in or after 1960 are divided between the first-pillar and the second-pillar mandatory individual accounts. (Details on the percent allocated to each pillar are not yet available). According to the Ministry of Labor and Social Policy, the increase in contribution rates will reduce the budget deficit by 370 million leva (approximately US$249 million) in 2011.
In addition, starting January 1, 2012, the number of contribution years required for a full pension will gradually increase by 4 months a year for both men and women, from 37 years to 40 years (by 2020) for men and from 34 years to 37 years (by 2020) for women. The full retirement age will gradually increase by 6 months a year starting in 2021, from age 63 to age 65 for men (by 2024) and from age 60 to age 63 for women (by 2026).
Article with courtesy of Social Security Online
Sources:Social Security Programs Throughout the World: Europe 2010; "Bulgaria Raises Pension Contributions to Cover Budget Deficit," Global Pensions, October 20, 2010; "Bulgaria Hikes Pension Contribution Payments in 2011," Reuters News, October 20, 2010; "Bulgarian Parliament Approves Pension Reforms," Reuters News, December 11, 2010; "New Retirement Requirements Enforced in Bulgaria," Sofia News Agency, January 1, 2011.