site.btaCITUB Backs Introduction of Multi-Funds in Pension Model, Podkrepa Says Time Is Not Right

The Confederation of Independent Trade Unions in Bulgaria (CITUB) supports the introduction of multi-funds into the country’s pension model, while the Podkrepa Confederation of Labour believes that now is not the right time for such a move. These positions were expressed by the leaderships of Bulgaria’s two largest trade unions during a meeting of the National Council for Tripartite Cooperation on Monday.

The Council discussed a bill amending and supplementing the Social Insurance Code, submitted by the outgoing Finance Minister. The amendments introduce a multi-fund model in the capital-funded pillars, aimed at creating sub-funds with different investment profiles and giving insured persons the option to decide whether their savings should be managed more dynamically to achieve higher returns, or whether they prefer a balanced or conservative approach.

CITUB President Plamen Dimitrov said the union supports the bill in large part. “We share the main principles and proposals,” Dimitrov said, adding, however, that “the devil is in the details”, and that additional measures are needed to complement the draft legislation.

Dimitrov described as positive the trend towards limiting and reducing deductions from each contribution and increasing the share and weight of investment-related return opportunities. The higher the return, the greater the benefits – both for the insured individual and for the pension company that has made the effort to achieve those results, he said.

CITUB also assessed positively the proposal to link the number of pensions from supplementary pension insurance to the minimum wage rather than to the minimum pension. Dimitrov welcomed higher requirements for professional staff and insurance intermediaries, but criticized the lack of an overall systemic vision for how changes should be implemented and how improvements to the capital-funded part of the pension system should be guaranteed.

Mandatory supplementary pension insurance does not, in practice, take place on the basis of informed choice, Dimitrov commented, stressing that there is a clear need for the bill to address this fundamental problem.

CITUB insists that the automatic allocation of pension funds be abolished. Dimitrov proposed that the Financial Supervision Commission create an electronic platform through which employers, one week before the expiry of the three-month period for choosing a fund, would inform newly hired employees about their options, with pension funds also having access to the platform. He also suggested that employers organize information days for new employees who have not chosen a fund. Dimitrov added that all pension companies work with insurance intermediaries – numbering in the thousands – and that requirements for them will be tightened.

According to Podkrepa Confederation of Labour President Dimitar Manolov, now is not the right time to discuss draft legislation of such importance with a 25-year horizon, which he said is the average period over which a pension system develops. “The bill has been submitted by an outgoing government and is to be considered by a parliament with a horizon of one to one and a half months, which is unfair to society,” Manolov said.

Manolov said he was extremely pleased to hear during the discussion arguments that he alone had been making 15 years ago, adding that “everything would have been fine if the second pillar had been voluntary”. “We are going to introduce multi-funds and force people into them without asking whether they want this or not, based on arbitrarily chosen parameters,” he commented. In his view, people want different things and behave differently at different stages of life, yet this draft legislation dictates that things will happen in a predetermined way.

Manolov also spoke out against the fees proposed in the bill to be charged by private pension funds. “What is this fee for, what does the private pension fund do, and what service does it provide?” he asked. He opposed the automatic allocation of pension funds, arguing that this should occur only in writing and with explicit consent.