He underscored further the serious negative demographic trends in Bulgaria, which he said are among EU's worst.
Social Policy Minister Emilia Maslarova pointed to the fact that pensions are expected to raise by 9.5 per cent for 2008, along with the increases in inflation and national health insurance payments. Maslarova said that the main issue is whether to have the same increase for everybody or allow greater increase for those with longer contributory service.
Pensions have been adjusted four times in the past two years. The minimum pension has gone up by 50 per cent over that time and the average pension up by 30 per cent. The average pension is expected to increase to 200 leva (around 100 euro) per month for 2008, said Maslarova. She noted that social insurance contributions for the same period have fallen by 9 percentage points. A new formula has recently been introduced for calculating the minimum monthly pensions, the Minister added.
A proposal to have a well-managed, stable reserve fund which would support the public pensions system is becoming ever more important, considering the increasing demographic pressure, she said.
Dikran Tebeyan of the Bulgarian Industrial Association explained that this would be the so-called Silver Fund which will be funded partly by profits from privatization and partly by the budget surplus, and will supplement the social security system. The idea is to keep the fund untouched for the first ten years of its existence in view of the expected worsening of the demographic picture, Tebeyan said. A bill for the Silver Fund is in the pipeline.
He added that there is currently a fund within the fiscal reserve's framework controlled by the Finance Minister but its operation not transparent and it is unclear whether funds are being invested and, if so, what dividends these bring.
The reduction in insurance costs will not lead to an equal increase in the pensions system, Plamen Dimitrov of the Confederation of Independent Trade Unions in Bulgaria (CITUB) said. The deficit in the system is becoming ever more pronounced, and has swollen from 230 million leva to 2,000 million leva over the last four years, after a 12 per cent fall in contributions. Hence CITUB's call to keep the current level of contributions, and to keep the current ratio between employers' and employees' contributions.
The state needs to concentrate on bringing to light undeclared wages and increasing the number of people paying taxes and social insurance. Many agriculture workers and small and medium-sized firm employees are either without social insurance or are underdeclaring their incomes to minimize their social security. According to unofficial statistics, Bulgaria has some 700,000 farmers and tobacco growers and a fraction of this are paying social insurance contributions, said Dimitrov.
The idea for a uniform retirement age for men and women must take into account the real conditions, and specify what spheres this can occur in, Dimitrov said. The Bulgarian practice of receiving a full pension while working for a full wage after retirement is without precedent in the EU, and Bulgaria draws criticism for that, Dimitrov said. He expects a debate on this issue next year.