Net Assets of Bulgarian Pension Funds Top EUR 1 B
Business | August 22, 2007, WednesdayThe net assets of Bulgarian private pension funds topped EUR 1 B last week, data from Bulgaria's Financial Supervision Commission (FSC) showed on Wednesday.
Since the start of the year, the assets of the private pension funds grew by 30%, but are still small compared to the function they are expected to pay in the Bulgarian economy.
The net assets of the Bulgarian pension funds totalled 3,1% of the country's gross domestic product last year at EUR 770 M, compared to figures in excess of 100% in some developed countries.
Bulgaria began a drastic overhaul of its pension system in 2002, introducing mandatory contributions to private pension funds (pillar 2 of the reform) and voluntary contributions (pillar 3), in addition to the existing mandatory contributions to the state pensions fund (pillar 1).
But several factors have prevented pension funds assets from growing strongly.
One of them is the fact that Bulgarian regulations force the funds to hold part of their assets in Bulgarian treasury bonds, whose yields have been below inflation rates in recent years.
Additionally, given Bulgaria's complex labour legislation, employees can legally avoid paying their mandatory pension contribution on their full income.
The high management fees charged by the pension funds further reduce their assets, although it does have the effect of boosting their profit.
Since the start of the year, the assets of the private pension funds grew by 30%, but are still small compared to the function they are expected to pay in the Bulgarian economy.
The net assets of the Bulgarian pension funds totalled 3,1% of the country's gross domestic product last year at EUR 770 M, compared to figures in excess of 100% in some developed countries.
Bulgaria began a drastic overhaul of its pension system in 2002, introducing mandatory contributions to private pension funds (pillar 2 of the reform) and voluntary contributions (pillar 3), in addition to the existing mandatory contributions to the state pensions fund (pillar 1).
But several factors have prevented pension funds assets from growing strongly.
One of them is the fact that Bulgarian regulations force the funds to hold part of their assets in Bulgarian treasury bonds, whose yields have been below inflation rates in recent years.
Additionally, given Bulgaria's complex labour legislation, employees can legally avoid paying their mandatory pension contribution on their full income.
The high management fees charged by the pension funds further reduce their assets, although it does have the effect of boosting their profit.
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