26.04.2024

THE INTRODUCTION OF MULTI-FUNDS IN PENSION INSURANCE IS UNDER CONSIDERATION

It is believed that the introduction of a multi-fund system in pension insurance will bring a number of benefits, such as greater accumulations in individual accounts and correspondingly larger pensions. However, there is none. Why?

Multifunds are investment portfolios with a different risk profile - conservative, balanced or aggressive, within one pension fund. They differ in the share of stocks versus bonds in the investment portfolio. However, pension companies are currently limited in their investment policy.

"We manage to provide replacement income to our clients between 5-10%, but if we had multi-funds, this replacement income would have been higher, i.e. if people at a younger age had invested more dynamically, in more stocks , now they would have bigger accumulations," said Vladislav Rusev, CEO of a pension insurance company.

The multi-funds will reduce the pressure on the State Social Security and the ever-growing deficit in the first pillar of the pension system, supported by tax funds, the Financial Supervision Commission told BNT. The institution also points out that more flexible pension systems better minimize the risks of various crises in recent years.

"This deficit is the result of a rather serious deformation of the pension model, as a result of political decisions related to a very serious increase in the minimum pension for length of service and age," explained Prof. Lyudmila Vekova, lecturer at Plovdiv University "Paisiy Hilendarski".

"What we have seen in countries where there are multi-funds in a year, when here we realize an average of about 10% positive yield, multi-funds in other countries have realized 20 and more percent", said Vladislav Rusev, ch. executive director of a pension insurance company.

For various reasons, draft laws on the introduction of multi-funds in the past did not manage to reach their promulgation in the State Gazette.

"At the moment, the Association of Pension Companies together with the Commission for Financial Supervision is once again preparing a concept for the introduction of multi-funds," Rusev added.

At the earliest in the middle of the year, there will be a ready proposal that must be recognized by the executive power in order to be directed to the National Assembly. In the meantime, the official report of the Organization for Economic Co-operation and Development is expected to support the reform.