Bulgarians are increasingly interested in what happens to their pension savings. Digital communication channels are much more convenient for young people and can encourage them to be more active in their personal finances, reported Darik Business Review.
Vladislav Rusev, the executive director of the Allianz Bulgaria pension insurance company, commented on this on Darik Radio.
How do macroeconomic factors affect pension funds?
High inflation in recent years has brought with it many processes, including the increase in interest rates. Undoubtedly, this affected the investment results.
Special project
However, inflation is a challenge in the short term. In 2023, the losses from the previous year 2022 were overcome,” commented Rusev.
On the positive side, he says, a good buffer has been built up over the years in terms of pension fund returns against inflation, which has helped cushion market shocks.
He also said that with the reversal of the monetary policy trend and the upcoming lowering of interest rates by the leading central banks, which is expected in the near future, no changes are expected in the investment policy of pension funds.
According to Rusev, the short-term results would be positive because the government securities in the funds’ portfolio would increase their fair value.
In the long term, however, he does not expect a return to the record-low zero and negative interest rates of the recent past.
What is expected when Bulgaria joins the Eurozone?
“With great joy we would welcome the accession of Bulgaria to the Eurozone. This will be a great success, including politically. However, we see that this will hardly happen on January 1, 2025.
For us, the challenge is to prepare purely operationally and informationally. But we will be ready for January 1, even if it doesn’t happen,” commented Vladislav Rusev.
He said that the main legal framework, namely the Law on the introduction of the euro in Bulgaria, which will be common to all sectors, is yet to be drawn up, after which the individual regulators will have to adopt additional regulations, instructions and requirements for each individual sector, including for pension insurance.
What happened in the 30 years since the creation of the first private pension funds in our country?
“In 1994, the first voluntary pension funds were founded in Bulgaria, and all of them exist and operate to this day. Subsequently, regulations also appeared, the market civilized and developed.
A turning point was our acceptance into the European Union. People’s understanding has also changed and today they are much more familiar with managing their personal finances,” commented Rusev.
However, he believes there are still many people who don’t care what happens to their personal pensions. Interest usually appears at a later stage, when they have 10-15 years left until retirement, and this is not the best option, recalled the executive director of POD Allianz Bulgaria.
Rusev advised young people to start saving earlier, as this will bring them much more peace of mind in the future. However, he is of the opinion that the digitization of the financial sector can stimulate their activity, as it gives them much faster access to the monitoring and management of their financial assets.
“Electronic channels of communication are developing rapidly because they are much easier and more convenient. We have 1 million customers, it would be difficult to build a physical infrastructure to serve so many people. Online services, after all, can be even more quality”, commented Rusev.
What’s coming up in the short term?
The executive director of POD Allianz Bulgaria also said that one of the main tasks before the sector is the implementation of the recommendations of the mission of the Organization for Economic Cooperation and Development in Bulgaria, dedicated specifically to private pension insurance.
“The main thing they consider unacceptable is the competition between the so-called “first” and “second” pillars of the pension system, that is, state and private insurance.
It is about the changes adopted in 2015 and 2016, related to the possibility of transferring the private pension lots to the Silver Fund. The very idea of reducing the state pension if a person is insured in a universal pension fund, that is to say that one should compensate for the other, does not make sense,” said Rusev.
He recalled that in August 2024, men born in January 1960 began to acquire the right to a pension, which means that from now on all new pensioners have mandatory additional pension insurance and, in his words, the so-called reduction factor of the state pension becomes meaningless.
In order to correct these imperfections, however, political will is required, according to the executive director of POD Allianz Bulgaria.
