Throughout your working life, you contribute part of your income to mandatory pension insurance - pillars I and II of the pension system.

The possibilities for receiving a higher pension may also include contributions to additional voluntary pension insurance in pillar III of the system.

The philosophy of the three-pillar pension model is that its individual elements build on and complement each other in order to ensure adequate and sustainable total (with sources from pillars I, II and III) replacement income after retirement.

 

1.      Voluntary Pension Funds (VPF)

Additional voluntary pension insurance (VPI) is implemented in:

- private funds for additional voluntary pension insurance (Voluntary Pension Funds - VPF) and

- Voluntary Pension Funds under Occupational Schemes (VPFOS).

The Voluntary Pension Funds (VPF) are established and managed by licensed pension insurance companies. The funds collected through them are invested with the aim of achieving long-term profitability.

Insurance in a VPF is a voluntary form of pension insurance, which provides an opportunity to save funds for a pension, supplementing the first and second pillar pension.

The Voluntary Pension Fund under Occupational Schemes (VPFOS) is a form of additional voluntary pension insurance. Insurance in such a fund is carried out on the basis of a collective agreement or collective employment contract between the employer and its employees, which determine the terms and scope of insurance, the amount of the insurance contribution and the types of pension payments. In the event that the employer interrupts the payment of insurance contributions, the insured persons do not lose their rights. Individuals can also make personal contributions, and the funds accumulated from personal contributions can be withdrawn at any time.

 

Who can be insured in a VPF?

Every person over the age of 16 can be insured or be insured in a VPF – through personal contributions, through contributions from an employer (the so-called insurer), or through contributions from a third party (the so-called other insurer, for example a spouse, another family member). When concluding a contract with a VPF, an individual account is opened for the insured person, where the deposited funds are accumulated, including the returns generated from their investment.

In addition to the opportunity for long-term individual savings for every person over the age of 16, insurance in a VPF also allows employers to insure their employees for a third additional pension and thus implement a modern and far-sighted policy in the field of human resources.

 

What are the main advantages of insurance in the VPF and VPFOS?

-          There are no restrictions on the number of contributions: you or the person who insures you decide how much money will be paid into the individual account, and the amount of the contribution can be changed at the request of the person making the contributions (including simultaneous insurance through both personal and employer contributions).

-          There is no restriction on the frequency of contributions: they can be periodic (monthly, for another period) or one-time.

-          The funds accumulated in the individual account from personal contributions can be withdrawn at any time. The funds accumulated from employer contributions can be obtained only upon acquiring the right to a pension for insurance length of service and age according to the Social Insurance Code, up to 5 years before that or in case of permanent reduced working capacity of more than 50%, regardless of the term of the TELK decision.

-          The funds accumulated from employer contributions can be received only upon acquiring the right to a pension for insurance length and age according to the Social Insurance Code, up to 5 years before that or in case of a permanent reduced working capacity of over 50%, regardless of the term of the TELK decision.

-          Tax benefit: personal contributions in the amount of up to 10% of the monthly, respectively annual tax base, are not subject to taxation. In the event that these funds are withdrawn before acquiring the right to a pension, a final tax of 10% is withheld on them.

-          The funds from the individual account are not subject to enforcement, i.e. a bailiff cannot impose a lien on them.

-          The funds accumulated in an individual account are inherited by beneficiaries specified by the insured person in the contract for participation in the VPF, or by the heirs at law.

-          Choosing the way/method of receiving the pension/payment from the Pension Fund, taking into account the amount of funds accumulated in the account: lifelong or term old-age pension, deferred or lump-sum payment of funds.

 

What are the main advantages of insurance in the VPFOS?

-          The funds accumulated in the individual accounts are personal and inviolable – they are not subject to enforcement

-          There is an opportunity for insured persons to supplement the funds contributed by the employer with their personal contributions

-          The voluntary pension insurance by an employer enables employees to receive an additional old-age pension: term pension; lump-sum or deferred payment of the funds accumulated from employer’s and personal contributions

-          The funds in individual accounts are inherited in full by the heirs by law or by persons designated by the insured person, and the size of their inheritance shares can also be determined.

-          Age for receiving a pension - upon reaching the age of 60 for men and women and up to five years earlier, if provided for in the collective labor agreement.

 

Who can be insured in the VPFOS?

Every worker/employee whose employer has concluded a contract for pension insurance of its employees.

 

What to pay attention to when choosing a VPF?

Find out which licensed pension insurance companies and the funds they manage. The information can be found on the website of the Financial Supervision Commission.

 

2.      Pan-European Pension Product (PEPP)

PEPP is a personal pension product, the purpose of which is to complement existing mandatory and voluntary pension schemes and products in the EU Member States. In Bulgaria, this type of product can be offered by a pension insurance company through a voluntary PEPP pension fund managed by it, as well as by credit institutions, life insurance undertakings, investment intermediaries, investment companies, management companies and persons managing alternative investment funds. PEPP is portable throughout the EU and is voluntary. It is intended to offer pension savers additional choice and benefits through increased competition, transparency and flexibility. These products are expected to be attractive to people whose careers and residence take them to different EU countries at a certain stage of their lives. You can find out about the products and providers offered in the different Member States in the special register of EIOPA (European Insurance and Occupational Pensions Authority). Such products are not currently offered in Bulgaria.

 

Useful links:

Financial Supervision Commission

European Insurance and Occupational Pensions Authority (EIOPA)