site.btaParliament Votes Through Multi-fund Model in Supplementary Pension Insurance

The National Assembly on Thursday voted conclusively amendments to the Social Insurance Code to introduce a multi-fund model in supplementary pension insurance. According to the government, which submitted the proposal, the multi-fund model will allow insured individuals to choose how their pension savings are managed, taking into account different risk tolerances based on a life cycle stage.

By November 30 this year, the management bodies of pension insurance companies must establish sub-funds within the universal pension funds they manage.

The sub-funds will have different investment profiles - dynamic (for up to 50 years), balanced (after 50), and conservative (three years before retirement).

The National Assembly voted to replace the mechanism for guaranteeing minimum returns in the management of supplementary mandatory pension funds with a market-based indicator — a benchmark.

For the implementation of supplementary mandatory pension insurance and the management of pension funds and sub-funds, fees will be introduced, deducted from each insurance contribution, as well as an investment fee, calculated on the net asset value of a professional pension fund and its corresponding sub-fund within a universal pension fund, as well as on the income generated from asset management.

The amendments also improve the regulations for payment of funds to the heirs of deceased insured persons and pensioners by expanding the circle of eligible heirs.

The pension insurance company is required to maintain at all times a capital base equal to 2% of the net assets of the supplementary pension funds and the funds used for payments that it manages, but not less than the minimum required capital.

The MPs decided that a pension insurance company may invest the funds of a dynamic sub-fund only in debt securities issued or guaranteed by a member state, whose obligations constitute government debt, or by its central bank; by the European Central Bank or the European Investment Bank; or by a third country designated by a regulation of the Financial Supervision Commission (FSC), whose obligations constitute government debt, or by its central bank, provided that these securities are admitted to trading on a regulated market, a multilateral trading facility, or an organized trading system in a member state, or on an official stock exchange market or other organized market in a third country that operates regularly, is recognized, and publicly accessible.

Investments are also allowed in international financial organizations, in which case the securities must have an investment-grade credit rating; in money market instruments issued or guaranteed by a member state or its central bank; in the European Central Bank or European Investment Bank; and in bonds issued by a local government authority of a member state.

Investments may also be made in corporate bonds for financing of infrastructure projects, as well as in shares or units issued by collective investment undertakings based in a member state or a country designated by an FSC regulation, provided that these funds invest at least 80% of their assets in financial instruments for financing infrastructure projects.