"I worked my whole life, yet the pension is not enough" – where is the link between contributions and income broken?

Injustices in our pension system remain painfully visible this year as well. Although the maximum social security income is increasing, the incentive to pay maximum contributions is effectively disappearing – many Bulgarians with long service and high contributions receive pensions close to those of people with fewer years of work and lower incomes.

The case of 90-year-old Mira Valeva from Burgas is illustrative. She has 32 years of experience as a middle school teacher, but today she is forced to supplement her income by selling vegetables on the streets.

Mira Valeva, pensioner: "I am basically in the mud because I support myself. My children want to help me, but I don't want to burden them. My husband passed away, they give me a 100 BGN teacher's fund supplement because I was also a lead instructor in Russian language, and my pension recently is 480 euros."

She is convinced that there is no real equality in the pension model – she sees how people with shorter service and unskilled labor receive almost the same or even higher pensions than hers. It turns out that her feeling is not an isolated case but reflects a deeper systemic problem.

Prof. Bogomil Manov, member of the Fiscal Council: "In all three pillars, the existing contradictions deform the system as a whole. The distortions are in several directions; the first is the wrong formula used to determine the pension. In our country, the pension is determined based on the average social security income, the length of service, and the individual coefficient of the person. As can be seen, essentially, the way the pension is determined is to a large extent detached from the person's contribution throughout their working life."

Thus, many people do not receive an income that they feel corresponds to their actual contribution to the system. According to Prof. Manov, the solution is not to "reinvent the wheel," but to apply working models from countries such as Germany, Austria, Denmark, and Sweden, where the link between paid contributions and the pension amount is clearer.

This is exactly what Vasko Gradev expects – a pensioner who, despite receiving a maximum pension, insists on a stricter "contributions-pension" link.

Vasko Gradev, pensioner: "It is fair that what one has contributed should be returned to them by the state afterwards. The system should be combined. It cannot be entirely social, because then the incentive is lost. People who are insured and have honestly paid their contributions their whole lives."

Gradev has worked for 43 years; he is an engineer by education.

Vasko Gradev, pensioner: "I have been a manager and have received a good salary. I did not hide taxes; I was insured transparently, at the maximum."

The paradox is that for future generations, who are insured today at the maximum social security income, a "capped" pension is not guaranteed precisely because of the existence of this cap. While until this July about 7,000 people were receiving maximum pensions, after the latest increase according to the so-called Swiss rule, their number now exceeds 15,000.

Prof. Bogomil Manov, member of the Fiscal Council: "If I am insured at the average social security income, i.e., if I hide income—in quotes, but also not in quotes—then it means that over time, after a few years, I will easily reach the maximum pension."

Thus, the system in practice does not stimulate people to be insured on their actual, higher incomes – because in the end, they can receive the same maximum pension as those who have declared lower income for years.

As a step in the right direction, experts note the removal of the COVID supplement to pensions and the introduction of multi-funds in supplementary insurance. This, however, is not enough.

Prof. Bogomil Manov, member of the Fiscal Council: "This is a good step forward, but it is by no means enough, because we will soon see that the accumulations in the pension system continue to be insufficient."

The Fiscal Council recommends that the Ministry of Finance accelerate work on adjusting the model so that a clearer link between insurance contributions and the amount of pensions is restored. Otherwise, deficits in the system will continue to grow, and the feeling of injustice among pensioners will deepen.