Net assets of Bulgarian pension companies rise 20% y/y to EUR 3.5bn at end-2013

By bne IntelliNews February 12, 2014

The net assets of Bulgaria's nine pension insurance companies (PICs) increased 20% y/y to BGN 6.8bn (EUR 3.5bn) as of end-2013, according to data from the state financial supervision commission. The PICs operate under the second and third pillars of Bulgaria's pension system, which comprises mandatory and voluntary defined contribution pension funds.

The second pillar covers two types of mandatory defined contribution funds - universal pension funds (UPF) and professional pension funds (PPF). The third pillar also covers two types of defined contribution funds, but in this case voluntary - voluntary personal pension funds (VPF) and occupational pension funds (OPF).

Universal pension funds had a positive average return on investment of 6.22% in 2013, which was lower than that of professional pension funds (6.27%) and also below the return of voluntary personal pension funds (7.22%).

The pension insurance companies managed the accounts of 4.2mn Bulgarians at the end of 2013, up 2.3% from a year earlier. The company with the largest market share, both by assets (29.5%) and in terms of accounts managed (28.4%), was Doverie.

The average size of an account in an UPF was BGN 1,641 at the end of last year, the accumulated savings in a PPF account averaged BGN 2,673, while the average VPF account contained BGN 1,135.

Pension insurance companies are joint stock companies and are separate legal entities from the funds with a minimum capital requirement of BGN 3mn. Each such company can only manage one fund of each of the 
aforementioned types. The shareholders of Bulgarian PICs are concentrated in the non-financial sector, 
limiting the channels of eventual contagion among financial sector firms.

The Bulgarian pension system follows a three-pillar design. It incorporates a mandatory first pillar that is financed on a pay-as-you-go basis; a mandatory defined contribution second pillar as well as a voluntary defined contribution third pillar. The first pillar, managed by the National Social Security Institute (NSSI), has been in deficit for years.

The World Bank offered last year three scenarios that are intended to reduce the fiscal pressures arising from the deficit of Bulgaria's state pension system in a projected 40-year horizon. The global financial institution concludes that the effects of aging population can only be addressed through higher contributions, lower benefits or a shorter duration of benefit receipt.

Pension insurance companies (PIC) net assets, BGN '000 market share, %
  end-2012 end-2013 end-2012 end-2013
Doverie 1,794,969 2,009,459 31.61 29.51
Saglasie 683,781 826,843 12.03 12.14
DSK-Rodina 594,270 786,383 10.46 11.55
Allianz Bulgaria 1,316,714 1,571,034 23.17 23.07
ING 548,341 688,391 9.65 10.11
CKB Sila 539,948 659,806 9.50 9.69
Budeshte 99,498 127,039 1.75 1.87
Toplina 82,072 100,252 1.44 1.47
Pension Institute 22,277 39,929 0.39 0.59
Total 5,681,870 6,809,136 100 100
Source: Financial supervision commission        

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