Half of the insured persons who have already submitted applications under the new second pension model have chosen to have their funds managed in a dynamic sub-fund, Nova TV reports, quoting the Chairperson of the Management Board of the Bulgarian Association of Supplementary Pension Insurance Companies Evelina Miltenova.
„The money in the second pension pillar is the personal property of the insured persons, is invested and can grow with the profitability of these investments", explains Miltenova.
Until now, all insured persons automatically fell into a universal pension fund, where the accumulated funds were invested under the same conditions for everyone. Experts report that this approach does not provide sufficient opportunities to achieve higher profitability, which would guarantee higher retirement ages. The new model introduces the right to individual choice, as funds can be allocated to different sub-funds depending on the age and risk appetite of citizens. People up to the age of 50 can be directed to a dynamic fund.
Between the age of 50 and three years before reaching retirement age, funds are transferred to a balanced fund. In the last three years before retirement, the law provides for a switch to a conservative fund in order to limit the risk of market shocks and ensure the preservation of the amount already accumulated.
„When you are young, time works for you. When you are of pre-retirement age, it is important that everything you have contributed is preserved”, the expert specifies. Insured persons retain the flexibility to change the selected sub-fund. The legislation allows this to happen once every 12 months after each choice made.
„Serious financial knowledge is not required. However, we are already noticing that insured persons are increasingly interested in where their pension funds are located and in which company they are”, adds Miltenova.
With the upcoming changes, it is planned to begin a phased reduction in pension fund management fees from 2027. It is expected that fees and deductions will be reduced by half over the next 10 years.
For the first time, the investment fee is divided into two separate components. One of them is a success fee. This means that pension funds will be able to receive part of the investment management funds only if they have achieved real profitability for their clients. The new regulation also introduces more serious protection of savings, as the state and the funds will guarantee the amount of the initially granted second pension.