Developments and trends in fully funded pensions in bulgaria
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Developments and Trends in Fully - Funded Pensions in Bulgaria. Bisser Petkov – Deputy Chairperson of FSC, Head of Social Insurance Supervision Department. The Bulgarian Pension Model : learning from international experience and indigenous solutions

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Developments and trends in fully funded pensions in bulgaria

Developments and Trends in Fully-Funded Pensions in Bulgaria

Bisser Petkov – Deputy Chairperson of FSC, Head of Social Insurance Supervision Department

New Investment Challenges in Pension Insurance, 15.04.2004


Contents

The Bulgarian Pension Model: learning from international experience and indigenous solutions

Key indicators of the current situation and development of the pension market in Bulgaria

Investment return of pension funds

Contents


Developing fully funded pensions in bulgaria major steps

1994 – voluntary fully-funded pension based on individual account accumulations emerged

1999 – regulating this type of pensions by legislation (adoption of SVPIA and MSIC)

2000 – Establishing SISA and licensing the first pension companies - Beginning of membership in occupational pension funds

2002 – universal pension funds started operating

2003 – merging supervisors in the non-banking financial sector – establishing FSC - Consolidating the reform (adopting SI Code)

Developing Fully-funded Pensions in Bulgaria (major steps)


Essential features of the implemented pension reform

  • Regulating and strengthening the voluntary pension provision system (IIIrd pillar)

  • Reforming the existing pension system (Ist pillar – mandatory pay-as-you-go system)

  • Transferring part of the mandatory pension contributions to the system of occupational and universal pension funds (IInd pillar)

Essential Features of the Implemented Pension Reform

New Investment Challenges in Pension Insurance, 15.04.2004


Core characteristics of the bulgarian pension model

  • Security through diversity and competition: three-pillar pension model

  • Reforming the public social insurance systemadministered by the NSSI (first pillar)

  • Supplementary mandatory pension insurance (second pillar)

    • Mandatory participation

    • Defined contributions accumulated in individual accounts

    • Open-end funds (occupational and universal) managed by private pension companies (PICs)

    • Centralized collection process administered by the NSSI

  • Supplementary voluntary pension provision (third pillar)

  • Public control over the operations of PICs (Consultative and Trustee Boards)

  • Government supervision over supplementary pension provision (SISA FSC)

Core Characteristics of the Bulgarian Pension Model

New Investment Challenges in Pension Insurance, 15.04.2004


Developments and trends in fully funded pensions in bulgaria

Bulgarian Pension Model

I PILLAR

Mandatory social insurance

PAYG system

NSSI

II PILLAR

Supplementary mandatory pension insurance

Fully-funded pension system with individual accounts

III PILLAR

Supplementary voluntary pension insurance

Fully-funded pension system with individual accounts

Voluntary pension funds – since –1994

Universal pension funds – mandatory participation of persons born after 31.12.1959

Occupational pension funds – for types of occupation requiring early retirement


Specific characteristics of the bulgarian pension model

  • Maintaining the key status of the mandatory PAYG system with defined benefits

  • Cautious and gradual approach towards the introduction of a fully-funded component managed by private companies through transfers from the PAYG to the fully-funded system (2% - 5%)

  • One PIC is allowed by law to manage 3 PFs

  • Mandatory participation of persons working in arduous labor conditions; eligibility for programmed withdrawal upon early retirement

Specific characteristics of the Bulgarian Pension Model

New Investment Challenges in Pension Insurance, 15.04.2004


Changing the system as we go

  • Increasing the minimum capital of the PIC required by law

  • Introducing daily asset valuation for the PFs and marinating the individual accounts in units following 01.07.2004

  • Additional regulatory guarantees for:

    • security of the pension assets

    • minimum return on the investments of the supplementary mandatory pension funds

Changing the System as We Go

New Investment Challenges in Pension Insurance, 15.04.2004


Development of the bulgarian pension market

2000 – Licensing 9 PICs

2001 – Berliniche Leben was terminated through voluntary liquidation

2003 – PIC Doverie acquired PIC Bulgaria

- Licensing a new company – “DZI – Pension Insurance”

2004 – eight licensed PICs, each managing three PFs (universal, occupational, voluntary)

Development of the Bulgarian Pension Market


Number of participants by type of pfs quarterly basis 2002 2003

Number of participants by type of PFs quarterly basis (2002 – 2003)


Pic market share by number of pf participants through dec 31 2003

PIC Market Share by Number of PF Participants (through Dec 31, 2003)

Doverie PIC

Allianz-Bulgaria PIC

Saglasie PIC

ING PIC

DSK - Rodina PIC

Lukoil Garant - Bulgaria PIC

Sila PIC

DZI - Pension insurance PIC


Net assets of pension funds 2002 2003

Net Assets of Pension Funds (2002 – 2003)


Market shares of pics by volume of assets under management through 31 12 2003

Market shares of PICs by volume of assets under management (through 31.12.2003)

Allianz-Bulgaria PIC

Doverie PIC

70,26

Saglasie PIC

Lukoil Garant - Bulgaria PIC

ING PIC

DSK - Rodina PIC

Sila PIC

DZI - Pension insurance PIC


Pf investments and yield

  • Regulatory investment limits

  • Actual investment portfolio structure

  • Return on the investments of the PFs

PF Investments and Yield

New Investment Challenges in Pension Insurance, 15.04.2004


Regulatory investment limits for voluntary pension funds through 31 12 2003

Regulatory Investment Limits for Voluntary Pension Funds (through 31.12.2003)


Regulatory investment limits for universal and occupational pfs through 31 12 2003

Regulatory Investment Limits for Universal and Occupational PFs (through 31.12.2003)


Upf investment portfolio structure through dec 31 2003

UPF Investment Portfolio Structure (through Dec 31, 2003)


Opf investment portfolio structure through dec 31 2003

OPF Investment Portfolio Structure (through Dec 31, 2003)


Vpf investment portfolio structure through dec 31 2003

VPF Investment Portfolio Structure (through Dec 31, 2003)


Pension funds and capital market development in bulgaria

Pension Funds and Capital Market Development in Bulgaria


Developments and trends in fully funded pensions in bulgaria

Investment Return of Supplementary Mandatory Pension Funds


Developments and trends in fully funded pensions in bulgaria

Investment Return of Supplementary Voluntary Pension Funds


Types of government debt instruments held by pfs through 31 12 2003

Types of government debt instruments held by PFs through 31.12.2003


Maturity structure of government securities held by pfs

Maturity Structure of Government Securities Held by PFs


Currency exposition of the pfs investment portfolio through 31 12 2003

Currency Exposition of the PFs’ Investment Portfolio through 31.12.2003


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