site.btaUPDATED Continue the Change Threatens Protests over Possible Pension Contribution Changes

Continue the Change (CC) will call for protests if the government proposes redirecting half of the pension contributions for the second pension pillar to the National Social Security Institute (NSSI), party leader Assen Vassilev told reporters ahead of a meeting of Parliament's Budget and Finance Committee.

"If what the news media report is true - that 2.5 percentage points of pension contributions will be taken [from the private pension funds] and transferred to NSSI – this amounts to EUR 433 that each person next year would lose from their individual pension account, where the funds are registered in their name on the basis of their contributory income and can be inherited, and the money would instead go into the common state pension pool," said Vassilev.

In return, the government would apply only the so-called Swiss rule for pension indexation, without providing any additional increase in pensions, he said.

He said the proposed measure is "even more outrageous than an attempt made by the Rosen Zhelyazkov government last year". Zhelyazkov's Cabinet came down amid street protests against their budget plans.

"If they really decide to make the mistake of taking EUR 433 from every Bulgarian citizen, we will call for protests," Vassilev said.

The possibility that the government would propose cutting contributions to the second pension pillar by half, to 2.5%, and transferring the remaining 2.5% directly to the NSSI was also raised by Democratic Bulgaria MP Vladislav Panev. In a Facebook post, he described the reported proposal as "nationalization".

Vassilev also criticized the 33% increase in natural gas prices approved by the energy regulator on November 2, saying it would affect household and business costs and lead to higher prices across the economy at least until next summer.

The increase would most likely also affect district heating prices, he said, unless the government wanted to push state-owned gas supplier Bulgargaz or the Sofia heating utility company into bankruptcy. "It was impossible for the price of the raw material to rise by 30% while keeping the final price unchanged," he added.

How the Bulgarian mandatory pension system runs

Bulgaria's pension system has two mandatory pillars for people born after December 31, 1959. The first is the state-run pay-as-you-go system, administered by the National Social Security Institute, which pays pensions from current social security contributions and state budget transfers (to cover the shortfall). The second consists of privately managed universal pension funds, which collect 5% contributions by each insured person and puts them in individual accounts. These savings are invested and used to provide supplementary pensions, and the accounts are inheritable. Under the current system, the two contributions are paid simultaneously, giving eligible workers pension entitlements under both pillars. 

The proposed transfer of 2.5 percentage points would halve the contribution to private universal pension funds, from 5% to 2.5%, with the other 2.5 percentage points redirected to the state system. 

The authorities have not confirmed or denied the reports about the planned change.