The Fiscal Council points out weaknesses in the proposed changes to the Social Security Code (SSC) and makes recommendations for their correction in its opinion on the amendments, published by the Ministry of Finance for public discussion on December 17, 2025.
The Fiscal Council notes that the changes are mainly aimed at introducing a multi-fund model in the second and third pillars of the pension system by creating sub-funds with different investment and risk profiles, consistent with the life cycle of the insured persons, news.bg specified.
Three sub-funds are being introduced to the universal pension funds - dynamic, balanced and conservative. It is planned that insured persons will choose which fund to insure in, with the exception of those who have three years left until retirement. For them, the conservative fund is mandatory. In voluntary pension funds, more sub-funds with different profiles can be formed, but there must be a balanced fund.
The Fiscal Council emphasizes that the funds of insured persons remain segregated in individual accounts, they are their personal property and are guaranteed, on the principle of a bank deposit.
From the point of view of expanding and diversifying the type of eligible investments, new financial instruments are provided - both on the money and capital markets. The changes specifically mention shares in growth markets, exchange-traded funds (ETFs) and alternative investment funds under registration regime. It is also proposed to increase the requirements for more qualified staffing of pension insurance companies.
In order to introduce a single, clear and balanced regulatory framework for the payment of funds from universal pension funds after retirement, three types of pension products are envisaged - a lifelong pension, when the accumulated funds can be "purchased" a monthly pension not less than 15% of the minimum pension, a deferred payment, when the funds are above a certain threshold, but insufficient for a lifelong pension, as well as a one-time payment, when these funds are below three times the amount of the minimum pension. This change legally regulates the concept of "pension product" in the Social Security Act against the background of the currently missing legal definition of the various types of payments from universal funds after retirement of insured persons.
The Fiscal Council specifies that the creation of guarantees for insured persons, by guaranteeing that the amount of the lifetime and deferred pension cannot be less than the amount of the insurance contributions transferred to the benefit of the relevant person.
The opinion also takes into account improvements regarding the right to choose. Persons who reach retirement age during the period 2022 - 2025 will be able to exercise their right to choose up to 1 year before the officially announced retirement age, after which the period will increase to 5 years before retirement in 2038.
The changes to the Social Security Act also provide for a gradual and phased reduction in the fees and deductions collected by pension insurance companies. It is proposed that the investment fee should not be a one-time percentage of net assets, as it is now, but should consist of two components. One will remain a fixed part of the managed assets, and the other will be variable and will represent a percentage of the achieved return on investment. In addition, it is planned that the fixed part of the investment fee will decrease over time and the variable part will increase. A stepwise annual reduction of the so-called "management fee", withheld from each insurance contribution for a ten-year period, is also proposed.
The Fiscal Council considers some of the individual proposals for changes to the CSR to be positive and correct in principle:
"All these positive aspects are conceptually justified and are fully consistent with the nature of insurance in the conditions of a funded pension system," the Fiscal Council summarizes.
However, the opinion also takes into account weaknesses and problems. It is pointed out that the amendments do not sufficiently address the issue of the adequacy of the second pillar. According to the Fiscal Council, the reasons and proposals for changes do not sufficiently address one of the key issues for the sustainability of the second pillar - what real resources are expected to be accumulated and what additional pension can reasonably be expected from it.
The opinion notes that With the currently effective total amount of the social security contribution of 5%, as well as considering the incomplete or interrupted work histories of a significant part of the insured, the accumulations in individual accounts are objectively limited, which creates a need to more clearly place the topic of adequacy as a leading priority of the reform.
The Fiscal Council sees a need for a more in-depth analytical and actuarial justification. They also point out that the proposals for legislative changes are not supported by a sufficiently detailed economic and actuarial analysis.
The opinion expresses the expectation that this analysis will provide answers to the following questions:
The Fiscal Council warns that in the presence of a limited investment culture and in the absence of sufficiently clear protective mechanisms, some of the insured persons could, after their initial allocation, switch to investment profiles that do not correspond to their age and risk profile - either to riskier or to overly conservative sub-funds. They also note that this could lead to lower real pensions and, accordingly, to public dissatisfaction and tension.
The opinion also mentions the topic of a potential increase in fees and costs. It is pointed out that the fallacy of multi-fund solutions implies the possibility of introducing additional fees - for the management of individual sub-funds, for transfers between them or for other related services. It is pointed out that this could have an adverse effect on the final amount of accumulations and, accordingly, on the income upon retirement, which should be carefully assessed and limited in advance through regulations.
According to the Fiscal Council, the method for indexing lifetime pensions also needs further refinement in order to avoid depreciation of these pensions in relation to inflation and life expectancy after retirement. The council states that clear and predictable rules in this area are an important element for confidence in the system.
"The additional burden on the supervisory authorities, primarily the Financial Supervision Commission, should also be taken into account. Multi-fund pension schemes require more intensive supervision, stricter accountability and more frequent regulatory actions to prevent unfair investment practices and abuses," the opinion also states.
It also presents an assessment of the envisaged changes in the third pillar - supplementary voluntary pension insurance. The principled inclusion in the scope of the legislative amendments is accepted as a positive step. "At the same time, the way in which this has been done raises certain reservations. The proposed texts do not clearly outline the vision for the role of additional voluntary pension insurance as a strategic element of the pension system," the opinion notes.
According to the Fiscal Council, the amendments do not provide a clear answer to the following questions:
The Fiscal Council recommends that in order to improve the quality and effectiveness of the envisaged changes, the focus of the discussions be directed towards the real adequacy of future pensions in the second and third pillars, and not primarily towards the formal regulation of the activities of pension insurance companies. And further - to develop a consistent state policy for the development of the third pillar, including through incentives and integration with long-term savings policies.
"The second and third pillars of the pension system should be considered not as auxiliary or purely regulatory elements, but as key instruments for ensuring adequate income in old age in the conditions of demographic pressure and limited capacity of the cost-covering model. This requires a shift in focus from formal improvements in supervision to real outcomes for insured persons - savings, profitability and expected replacement incomes. In this context, the development of the third pillar should become a targeted public policy, integrated with the broader framework of long-term savings, financial literacy and tax incentives," the opinion concludes.
According to the Fiscal Council, only through a consistent and coordinated approach can supplementary pension insurance fulfill its role as a real compensator for the decreasing adequacy of the first pillar and contribute to higher financial security for future pensioners.