ANTI-CRISIS PENSION POLICY MEASURES IN BULGARIA ANTI-CRISIS PENSION POLICY MEASURES IN BULGARIA Valentina Dinkova Financial Supervision Commission Bulgaria Brussels, 07/05/2009

2 DEMOGRAPHICS AND MACROECONOMICS Nominal GDP (BGN bn)66.7 GDP per capita (USD) Population (000s) Labour force (000s) Employment rate94.4 Population over 65 (%)17.3 Dependency ratio [1] 35.6 Data from 2008 or latest available year 1 EUR = BGN (exchange rate pegged to EUR under currency board) [1] Ratio of over 65-year-olds to the labour force

3 CONTENTS 1.General information about the pension insurance in Bulgaria 2.Steps taken in the situation of a financial crisis 3.Expected outcomes

4 GENERAL INFORMATION Three-pillar Model – since 2000 –I Pillar - mandatory pay-as-you-go system; –ІІ Pillar - mandatory supplementary DC schemes: Universal Pension Funds (UPF) Professional Pension Funds (PPF) –ІІІ Pillar -voluntary supplementary DC schemes: Voluntary Pension Funds (VPF) Voluntary Pension Funds with occupational schemes(VPFOS) Total members (000s) * Net assets (EUR mln) *One person can be insured in more than one type of pension fund

5 DYNAMICS OF THE SUPPLEMENTARY PENSION FUNDS’ NET ASSETS (IN THOUSANDS EUR) Type of Funds UPF PPF VPF VPFOS Total % of GDP2,03%2,60%3,07%4,10%3,45%

6 AVERAGE RATE OF RETURN OF THE SUPPLEMENTARY PENSION FUNDS FOR A 24-MONTH PERIOD ON AN ANNUAL BASIS

7 ANTI-CRISIS ACTION PLAN On State level On financial supervisory authorities level On pension insurance companies level

8 SUPERVISORY STEPS TAKEN IN THE CRISIS SITUATION Improved coordination Increased monitoring Improved design of the pension system Improved governance and risk management of the pension funds Disclosure and communication Improved financial education

9  The draft Law of amendment of the Social Insurance Code (April 2009): - improvement of the corporate governance; - improvement of the investment regulations; - introduction of different investment portfolios in the voluntary pension insurance; - decrease in the fees and the deductions, charged by the pension companies; - informing of the insured persons; - improvement of the supervision on the supplementary pension insurance. INTRODUCTION OF THE BEST PRACTICES RELATED TO SUPPLEMENTARY PENSION INSURANCE IN THE NATIONAL LEGISLATION

10  Consolidation of the pension insurance companies’ management structures and capacity and increase of the level of corporate governance  Increased opportunities for investment choice of the persons insured in the voluntary pension funds  Increase of the money in the individual accounts with more than 9% at the end of the insurance from the reduction of the fees and deductions in the Supplementary Mandatory Pension Insurance EXPECTED OUTCOMES FROM THE PROPOSED AMENDMENTS

11 STEPS TAKEN BY THE PENSION INSURANCE COMPANIES  Increased competence of the employees, directly engaged in pension funds’ investments and risk management;  Improvement of the risk management activity and the control over investment activity and risk;  Re-structuring of the pension funds’ portfolios for decrease of the portfolios’ risks

12 STRUCTURE OF SPFs' INVESTMENT PORTFOLIO

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