According to the data presented in the report, the dependence of the VRS on the state budget will continue to grow as our pension system cannot support itself.
The new actuarial report of the National Social Insurance Institute (NSI), now available on the Institute’s website, contains an assessment of the long-term financial situation of the state social insurance (SSI) funds from 2023 to 2070.
The report was prepared by the experts of the National Social Insurance Institute based on data from the administrative registers maintained by the Institute. Data from external sources were also used, including labor market data from the National Statistical Institute, the latest Eurostat demographic forecast for Bulgaria (EUROPOP-2023), and a long-term macroeconomic forecast developed and provided to the NSSI by the Ministry of Finance.
Objective of the report
The main objective of the actuarial report is to raise awareness of the future financial situation of the Social Security Funds in the context of the current economic, demographic, and social trends and the context of the insurance legislation in force in the country as of 1 July 2024.
The baseline data is 2023, already reported, and the projection period is 2024 to 2070.
What does the report contain?
The report contains a detailed analysis of the results, which is the basis for the projections of the development of the Social Security funds until 2070. It examines two main indicators that determine the financial situation of the Bulgarian pension system – the balance of Social Security as a percentage of gross domestic product (GDP) and the required contribution rate to ensure a balanced budget.
According to the data presented in the report, the dependence of the VRS on the state budget will continue to grow as our pension system cannot support itself.
The actual pension contribution rate is only 16.3 percent of insurable income, while the required contribution rate for 2023 is calculated at 37.5 percent.
According to the experts of the National Social Insurance Institution, this significant gap results from the increased generosity of the system, whose growth rate does not correspond to demographic realities, the dynamics of insured persons and their insurance income, as well as the age structure of persons insured in the Social Insurance Institution.
The budget figures in the 2024 Law on the Budget of the Social Insurance Institution suggest that the share of the transfer from the central budget to cover the shortfall is likely to reach 5.5 percent of GDP and even exceed 6 percent over the next three years.
The report considers two scenarios against which it is possible to stabilize the state pension fund and reduce its dependence on the state budget: to increase the contribution rate or to update pensions at a lower rate.
The Insurance Institute warns that the system needs to be reformed and identifies areas to improve its financial autonomy and stability and better protect the rights of insured persons and pensioners.
The full report is available on the NSSI website.