The Distribution Phase and the Short-Term Risks for the Universal Pension Funds in Bulgaria
The Distribution Phase and the Short-Term Risks for the Universal Pension Funds in Bulgaria

Author(s): Jeko Milev
Subject(s): Economy, Public Finances
Published by: Университет за национално и световно стопанство (УНСС)
Keywords: pension funds; distribution phase; investment results; risks
Summary/Abstract: The newly adopted legislation that regulates the pay-out phase for the universal pension funds in Bulgaria and the continuously rising minimum amount of the pension benefit due by the first pillar of the system started to distort the incentives for the insured individuals in a surprising way. Those with small amount of savings are more interested to stay within their pension fund than those who were able to accumulate bigger amount during the accumulation period. The current research is trying to put some light on this strange situation. The first part of the paper describes some specific moments from the new regulation that concern the distribution phase and the second part provides some estimates about individuals from different income groups and the probability of choosing to stay in their pension fund and not to transfer their savings into the first pillar of the system. The paper concludes with some recommendations about future reforms that could strengthen the pension system in the country.

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