25.05.2022

THE MONEY FOR A SECOND PENSION BURNS

The money for a second pension is melting. The reason for this is not only high inflation, but also the decline in stock market indices around the world. As a result, most Bulgarian pension funds have a negative return on managing the money of those insured for a second pension, writes the newspaper "Trud", referring to its calculations based on data from the Financial Supervision Commission.

The negative results of the funds have been particularly pronounced since the beginning of the year. For the period from the end of last year to May 20, the losses from the investment of the money for the second pension range between 1% and 10% in the various pension funds. For a period of one year, from May 20, 2021 to May 20, 2022, most pension funds also have a negative return, with losses of up to 7.5% of old-age money. But there are some funds that during this period still have a positive result from their activities.

The reason for this collapse is the decline in stock market indices around the world. Bulgarian pension funds invest a significant part of the money of the insured for a second pension in shares of companies traded on stock exchanges. When the prices of these shares fall, people's money for antiques decreases. In one year, the US stock index Dow Jones fell 9.1%, and from the beginning of the year to May 20 the decline was nearly 14%. The S&P 500 index has fallen by 7% for the year and by 18% since the beginning of the year. The main DAX index on the Frankfurt Stock Exchange for the year fell by about 8.9%, and since the beginning of the year by 11.5%.

All this directly affects the return on investment of antique money managed by Bulgarian pension funds. The funds that the funds hold on deposits in banks are small, as interest rates are around zero. Pension funds also have little investment in real estate, but they are only 1.53% of their total investment, according to FSC data at the end of March. The fact that Bulgarian pension funds have better results than the decline in stock market indices around the world is due to the fact that they invest some of the money in bonds - municipal, corporate and government.

The contributions of the insured for the second pension have been decreasing since the beginning of the year, and in the last 12 months, even without taking into account inflation. At the same time, the annual inflation by the end of April was 14.4%, and only for the first 4 months of the year it was 7.8%, according to official NSI data. Thus, from January to May 20, the money for a second pension in the various funds actually decreased by at least between 8.8% and 18%.

Assets are declining

As of the end of March 2022, the net assets of the pension funds in the country are worth BGN 19.23 billion, the FSC announced. Compared to the end of last year, the assets of the funds decreased by BGN 327 million, provided that the funds continue to receive funds from people's social security contributions. The total number of insured in all private pension funds is over 4.8 million people.

As pension funds collect fees from all social security contributions they receive, they make a profit despite the negative profitability of people's money management. For the first quarter of the year the net profit of the funds is nearly BGN 24 million.

We take a second pension for only one year

Many people will receive a second pension for only about a year. Working Bulgarians have an average of BGN 4,212 for a second pension, accumulated in private universal pension funds, according to FSC data at the end of March.

However, many people who have long since emigrated are also considered insured. They have a small amount in the Bulgarian pension funds, but for years they have not received money from their individual accounts and do not rely on a second pension from Bulgaria. If these people are removed from the calculations, it turns out that the average amount of accumulated funds for the second pension of people for whom at least one social security contribution has been received in the last 12 months is BGN 5,672, according to FSC data.

This number is also not entirely correct, because there are many long-term unemployed people in the country who have not been able to find a job for more than a year and therefore do not receive insurance in their pension funds. But even if we take the larger number for the average amount of funds in a universal pension fund per person, it turns out that the money is enough to receive the minimum pension of BGN 370 for only a year and 3 months.

The payment of the first second pensions to people who have reached retirement age after September 1, 2021 has already begun. By the end of March, 3,908 people had started receiving their second pensions. Of these, 463 people will receive lifelong pensions, and 3,445 people will receive deferred payments for a certain period of time. These are people who have insured in private pension funds and have reached retirement age.

In the first quarter, the funds paid BGN 196,000 for pensions, which makes an average of BGN 140 per person per month, and a little over BGN 2 million for deferred payments to the insured, which is an average of nearly BGN 200 per person. per month. Most people want to get their money quickly through larger installments in a short period of time.