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A lifelong second pension remains a mirage for most people. Only one in ten people who have already retired and take money from mandatory universal pension funds receive a lifetime pension, according to data from the Financial Supervision Commission (FSC). The money accumulated over the years for the remaining 90% of the insured in private funds is not enough to take a lifetime pension.
At the end of June, 16,096 people received money from funds to make payments, where the money of the insured went to the universal pension funds after they retired. Of these, 1695,14 people take a lifetime pension and the remaining 401,<> people receive deferred payments, the FSC announced.
These are people who have been insured in universal pension funds and have reached retirement age. In the first half of 2023, EUR 1.833 million was paid out of the payment funds. Lv. for pensions, EUR 29.354 million Lv. for deferred payments and 114 thousand. Lv. heirs of people with lifetime pensions or who received deferred payments. The average amount of lifetime pensions paid in the first half of the year is BGN 225.12 and the average amount of deferred payments is BGN 399.08, FSC data show.
People who have enough accumulated money in a universal fund to receive at least 15% of the minimum pension for the rest of their lives are entitled to a second pension. As of July 1 last year, the minimum pension was increased from BGN 370. to BGN 467, and as of July 1, 2023, it was raised to BGN 523.04. This means that by July 1, 2022, in order to receive a lifetime pension, the insured had to have accumulated money sufficient to take a lifetime of BGN 55.5. per month. And from July 1, 2022 to July 1, 2023, the minimum amount of new lifetime pensions has increased to BGN 70.
Insured in a universal pension fund, who in retirement do not have enough accumulated money for a lifetime pension, take their funds together or deferred, read texts of the Social Security Code. If the accumulated money is more than three times the amount of the minimum pension, they pay it in installments, and if it is less - once.
The amount of monthly pensions in case of deferred payment may not be greater than the minimum pension at the date of their granting and less than 15 percent of the minimum pension. Most people want to take their money to larger monthly payments to receive in a shorter period of time, rather than taking the minimum amount possible longer.
Therefore, the average amount of deferred payments from January to June is BGN 399.08. and is greater than the lifetime pensions paid. Compared to the first half of 2022, the average amount of lifetime pensions paid increased by BGN 24.91, or by 12.44%, and the average amount of deferred payments increased by BGN 84.21, or by 26.74%.
The data announced by the FSC do not make it clear what is the average period during which retired people will receive their money in installments. But in most cases, the insured will take a second pension in the form of deferred payments of one to three years. After that, the money for a second pension runs out and people will be able to rely only on the state pension.
The average amount of accumulated money of insured in universal pension funds at the end of June is BGN 6138,12, according to FSC data. This includes only data on people for whom at least one insurance contribution has been received in the last <> months.
That is, excluded are people who have emigrated and do not rely at all on a Bulgarian pension, as well as seasonal workers from abroad who have worked in Bulgaria for several months. These 6138 BGN are sufficient to receive the current minimum pension of BGN 523.04. for one year.
The funds are also sufficient to receive the average amount of deferred payments of BGN 399.08. for 15 months, or to receive BGN 170. for three years. If a person has accumulated 6138 BGN In a universal fund, retires today and chooses to receive the minimum possible amount for deferred payments of BGN 78, will be able to take it for about six and a half years.
We have contributed EUR 1.25 billion to private funds. Lv. for six months
The proceeds from social security contributions to private pension funds in the first half of 2023 amounted to a total of EUR 1.251 billion. Lv. and increased by 16.15% compared to the same period last year, the Financial Supervision Commission announced. The increase in contributions is due to an increase in wages and an increase in the number of insured.
Good news for pensioners: See who will take 225 leva more
Receipts from social security contributions to universal pension funds, where working people born after the end of 1959 are insured, increased by 19.73 per cent. And contributions to occupational pension funds increased by 15.59 per cent year-on-year. There is a decrease in the proceeds from social security contributions in the case of voluntary pension funds. This may have been contributed by the negative results achieved by private pension funds from the management of the money of the insured last year.
The average yield of universal pension funds last year was minus 10.79%, according to FSC data. And the average yield on voluntary funds for 2022 is minus 9.03%. This may have led many people to reconsider their contributions to voluntary private pension funds. In addition, thousands of people give up their second pensions and transfer their money from universal pension funds to the state social security budget.
The reason for this is that many people will take less money if they receive two pensions - a state and a private fund - than if they receive only one state pension.
Those insured in a private universal pension fund will receive a smaller state pension because part of their social security contributions do not go to the State Social Security Pensions Fund (SSS), but enter the private fund. For people who retire this year, their state pension will be reduced by just over 10% if they are also insured in a universal pension fund. But in each of the coming years, this decrease will increase as people for more years will have paid social security contributions to the private fund.
Thus, by 2031, the reduction in the state pension for people who receive a second pension will exceed 15%, and by 2036 it will reach 19%. After 2040, the reduction in the state pension will exceed 20%, and after 2050 it will remain at levels around 25%.
As of the end of June 2023, the net assets of all private pension funds were worth just over EUR 21 billion. FSC data show. Compared to the end of last year, the managed money from the pension funds increased by 9.70% and for the year increased by 14.08%.
The growth of assets differs by type of funds. The assets of universal pension funds are growing the fastest. For a year they increase by 15.10 percent. Occupational and voluntary pension funds followed with year-on-year growth of 9.79% and 6.07%, respectively.
643 thousand set aside money at will
Contributions to voluntary pension funds are reduced. Among the reasons for this may be the increase in the cost of living.
Contributions to voluntary pension funds have significantly decreased. In the first half of the year, voluntary social security contributions amounted to EUR 53.35 million. data from the Financial Supervision Commission show. This is a decrease of more than 28% compared to the contributions made in the same period last year, when they were 74.24m euros. Lv.
Among the reasons for this huge decline may be the poor performance of voluntary funds from the money management of the insured last year, when they reported a negative yield of minus 9.03% on average. This may have led many people to give up voluntary pension contributions.
The total number of insured in voluntary pension funds as of the middle of the year was 643 803 people. The contributions of most of them, or just over 414 thousand. people are made by their employers. This is an additional incentive for hired people to the salaries they receive. 322.2 thousand people insure themselves in a voluntary pension fund. And about a thousand more people are insured by someone else - for example, their spouse can make pension contributions.
The average amount of voluntary pension contributions made in the first half of the year is BGN 67.38, compared to BGN 80.59. for the same period last year, according to FSC data. This represents a fall in the average contribution rate of 16.4%. This includes only data on people for whom social security contributions have been made. The overall decline in income from voluntary contributions is significantly greater - by over 28%. Apparently, the voluntary contributions of some people are reduced in size, and for others no contributions have been made at all.
The reason for the reduction in voluntary contributions may also be the increase in the cost of living.
The rise in the price of goods and services may have led some people not to set aside money for old age, but to choose to spend it at the moment.
The total number of insured in all types of pension funds at the end of June 2023 was 4 965 310 people, increasing by 77 649 people per year, or 1.59 per cent. The largest share of insured is concentrated in universal pension funds - 80.29%. People insured with voluntary and occupational pension funds have shares of 12.97 per cent and 6.54 per cent, respectively.
Achieved a return of 2% in a year
The yield of universal pension funds for a period of one year - from the end of July 2022 to August 1, 2023, is on average 2%, according to calculations of "Trud news" based on data of the Financial Supervision Commission. Private pension funds are performing better this year than last year, resulting in most of them going on the plus for a period of 12 consecutive months.
But two of the universal pension funds still have negative yields for the 12 months to early August.
The yield of the other universal funds is very wide ranging from 0.10% to 4.66%.