Need for pension system reforms
The Bulgarian pension system requires institutional improvement in order to achieve a balance between solidarity and contribution equivalence. According to Prof. Dr. Bogomil Manov from the Fiscal Council, the current model suffers from a weak link between contributions and the size of the pension, as well as an unfavorable demographic structure.
"Sustainable pension systems are based on the fullest possible consideration of insurance contributions throughout one's entire working life."
Key European practices for Bulgaria:
- The Swedish model (NDC): Virtual individual accounts with automatic mechanisms for financial stability and balancing during demographic changes.
- The points model (Germany and Austria): Transparency through the conversion of income into pension points, which facilitates the calculation of entitlements.
- Separating the social function: Following the Danish example, social protection against poverty should be financed from general taxes, not from insurance contributions.
The proposed approach does not aim to replace the system, but rather to upgrade it in a way that limits political interference and increases public trust in the long-term adequacy of pension income.