Multifunds in Pension Insurance: What Does It Mean for Citizens?

There is a huge public expectation for this reform, Svetla Nestorova from the Bulgarian Association of Supplementary Pension Insurance Companies (BADDP) told journalists on the sidelines of Parliament regarding the legislative changes for the introduction of multi-funds in supplementary pension insurance, which the MPs are discussing on second reading in plenary.

Bulgarian citizens are expecting this reform, it has been discussed for so long and at so many levels. It is a natural development towards the individual accounts of people growing faster, their fees being reduced and there being different opportunities for people with more investment interest to receive more for their money, added Nestorova.

She emphasized that if this law passes in the hall today, it means that the pension funds will have to offer different profiles for investing their clients' money. According to her, when a person is younger and has more investment interest, their money can be invested more dynamically and bring them higher returns. 

Nestorova pointed out that the three investment profiles that companies will have to offer are dynamic, balanced and conservative. Dynamic means that the funds will be invested in a higher percentage in variable income securities, which depend on market movements, but are also income-generating, said Nestorova. The balanced fund will be half variable income securities and half fixed income securities - such as bonds and government securities, and there the sensitivity to market movements is lower, and the conservative fund will resemble a savings box, where the money waits for the moment of retirement and almost does not yield returns, but is not affected by market movements, she added.

The logic is that when a person has a 40-year horizon to save for their pension, it is right that for most of the time their money should bring more returns, and at the end to turn towards security, she said. It is important to say that citizens will be able to choose this and if they feel insecure and will have the opportunity to remain in the current hypothesis, noted Svetla Nestorova.