BULGARIA - Bulgaria's private professional pension funds will put 20% of their assets under state control to cover early retirement until 2014, Prime Minister Boiko Borissov said.
The decision is part of a pension overhaul approved by the premier, Finance Minister Simeon Djankov and Labor Minister Totyu Mladenov, Borissov said in an interview with television station Nova yesterday. The changes also envisage bringing forward a gradual increase in the retirement age as of 2012 instead of 2015, he said.
"This is the final draft of the amended Social Insurance Code, which I expect other ministers will approve this week and then it will be submitted for parliamentary approval," Borissov said. "The professional pension funds will start paying for early retirement from 2015."
The government backed off an initial plan to transfer the assets of nine private vocational retirement funds worth 500 million lev ($353.4 million) into the state pension fund to curb a widening deficit. The vocational funds will now transfer to the state only the accounts of people who will retire by 2014, which amount to 100 million lev.
Nine European Union members, including Poland and Bulgaria, asked the bloc to change accounting rules that count money transferred to private pension funds as spending, swelling budget deficits as the region recovers from the global financial crisis. Bulgaria plans to cut its shortfall to 2.5 percent of gross domestic product next year from 4.8 percent in 2010.
Bulgaria set up private universal and professional pension funds a decade ago to supplement the state system. Universal funds, which cover 1.7 million people, remain under private management. The vocational funds cover about 100,000 workers in specific professions who are forced to retire early, including miners and pilots. They provide benefits until workers reach the general retirement age of 63 for men and 60 for women.
"The pension system reform will ensure that the state pension fund deficit of 2.6 billion lev, will be eliminated by 2017," Borissov said.
The change envisages raising the minimum service limit to 37 years for women and 40 years for men by 2020 and increasing the retirement age to 65 for men and 63 for women from 2020, he said. The Cabinet increased last month the obligatory contributions paid to the state pension fund by workers and employers by 1.8 percentage points to 17.8 percent of income.
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