EUROPEAN PAPERS ON THE NEW WELFARE

The Global Financial Crisis: A Challenge and Trial Concerning the Bulgarian Pension Model

Abstract

The current dimensions of the socio-economic development of Bulgaria impose the multi-pillar/multi-stratum model of pension security, which guarantees the simultaneous existence, coordination and mutual complementing of various forms of pension security protection.

Since January 1, 2000 a new normative order has been in effect in Bulgaria. This has laid the foundation for the contemporary multi-pillar model of pension security protection as a concept designed and constructed in the spirit of good European practice and at the same time distinguished by a number of national peculiarities.

The world financial crisis, which erupted at the beginning of 2008, will inevitably have an impact on the functioning and development of the Bulgarian pension security system. At this stage it is extremely difficult to produce empirical data on the value dimensions of the contingent adverse ramifications that have a direct or an indirect effect as well as an immediate or delayed impact (though their expected trends can be outlined).

Key words: pension security, multi-pillar model, public pension security, supplementary pension security.

1. Introduction

Pension security represents that portion of differentiated social security set aside with a view to providing protection in the form of payments intended to compensate for the adverse repercussions following the onset of a state of lasting unemployment caused by the manifestation of labor risks. Its economic nature finds its expression in the diversity of distributive and re-distributive relations in the process of the forming and distributing of the security fund in the light of desired security and the effective functioning of the economy.

Pension security as a branch of social security originated as a result of the continual development, alteration and improvement of the organizational forms of support for incapacitated individuals. At the same time, pension security — being relatively independent as a system-forming component of social security as a whole — is the subject of an uninterrupted development and improvement in line with objective social needs, expectations and dispositions.

The current dimensions of socio-economic development necessitate the multi-pillar/multi-stratum model of pension security, which guarantees the simultaneous existence, coordination and mutual complementing of forms1 of pension security protection as follows:

• Abiding by the general template of providing security protection — establishment and subsequent distribution of a differentiated fund while observing the principle of counter payments and the right to make claims;

• Being diverse in view of the number of individual parts involved in realizing pension security protection. The initiatives for implementing the forms of pension security protection in line with this diversity are: public, company-based and private. They also include the underlying principle, compulsory and voluntary character, and its derivatives: the manner of financing/covering costs or capital, scope as to pre persons and risks, organization of payments, etc;

• Finding feasibility and concretization through the variety of pension schemes;

• Oriented toward ensuring a normal level2 of satisfying the needs of individuals entering retirement.

Plamen Yordanov: “D.A.Tseenov” Academy of Economics in Svishtov, Bulgaria. E-mail: jordanov@uni-svishtov.bg .
About the Author: Dr. Plamen Yordanov is a Chief assistant at the Department of Insurance and Social security, “D.A.Tseenov” Academy of Economics in Svishtov, Bulgaria. He holds a Ph.D. from the same Institution (2005). His main research interests and publications are in Social security, Pension systems and related matters. Dr. Yordanov is an academic lecturer in “Labor Economics”, “Theory of Social Security”, “Social Security Accounting”, “Analysis and Controlling of Social Security” and “Social Security of Farmers”.
1 We consider the concept of ‘forms’ of security protection as a way of generalizing on the activities guaranteeing protection against the adverse ramifications of the manifestations of the risks, grouped according to their definite features, for example, initiatives for carrying them out, involvement in setting up people’s incomes at retirement, underlying principle, etc… See Georgiev, Zdr., Pl. Yordanov, Theory of Social Security, Svishtov, 2001, p. 97 on.
2 In this respect it is recommended that the compensation level of final incomes be between 70% and 90% given the flexible involvement of the various forms of pension security protection — between 40% and 50% coming from public protection, between 10% and 20% from the company-based one, and between 15% and 20% from the private one. In different countries the relationships between the above-mentioned forms of pension security protection as sources of income vary when persons are pensioned off — for example, in Germany the relation is 85/5/10%, in Great Britain it is 65/25/10%, in the Netherlands 50/40/%, in Switzerland 42/32/26%. See Bero Roos, Der Aktuar in der betrieblichen Altersversorgung, Seminar ueber Verrsicherungsmathematik — Universitaet Hamburg, Februar, 2002, S. 8; Betriebliche Altersversorgung /Konpendium/, Verbund Selbstaendiger Finanzdienstleister, S. I u.a.


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