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© 2024 International Monetary Fund
SIP/2024/021
IMF Selected Issues Paper
European Department
The Bulgarian Pension System: Caught Between Adequacy and Sustainability
Prepared by Jean-Jacques Hallaert
Authorized for distribution by Jean-François Dauphin
June 2024
IMF Selected Issues Papers are prepared by IMF staff as background documentation for periodic consultations with member countries. It is based on the information available at the time it was completed on May 10, 2024. This paper is also published separately as IMF Country Report No 24/164.
ABSTRACT: During the COVID-19 pandemic, the Bulgarian authorities increased pensions substantially to support pensioners’ living standards and aggregate demand. These increases have become permanent and improved the adequacy of pensions. However, not matched by revenue measures, they have widened the deficit of the pension system. Reforms that increase the incentives to contribute to the pension system and thus revenue would improve the financial sustainability of the pension system and reduce fiscal risks.
RECOMMENDED CITATION: Hallaert, Jean-Jacques (2024) The Bulgarian Pension System: Caught Between Adequacy and Sustainability, Washington DC: International Monetary Fund, Selected Issues Paper, SIP/2024/021
| JEL Classification Numbers: | H53, H55, I38 |
| Keywords: | Bulgaria, Pension, Pension Adequacy, Financial Sustainability, Fiscal Risk from Pensions |
| Author’s E-Mail Address: | JHallaert@imf.org |
| JEL Classification Numbers: | H53, H55, I38 |
| Keywords: | Bulgaria, Pension, Pension Adequacy, Financial Sustainability, Fiscal Risk from Pensions |
| Author’s E-Mail Address: | JHallaert@imf.org |
Title page
SELECTED ISSUES PAPERS
The Bulgarian Pension System: Caught Between Adequacy and Sustainability
Bulgaria
Prepared by Jean-Jacques Hallaert
Title page
BULGARIA
SELECTED ISSUES
May 10, 2024
Approved By
European Department
Prepared By Jean-Jacques Hallaert
Contents
THE BULGARIAN PENSION SYSTEM: CAUGHT BETWEEN ADEQUACY AND SUSTAINABILITY
A. An Overview of the Pension System and of Past Policies to Ensure Financial Sustainability
B. The COVID-19 Pandemic Measures: A Game Changer that Increased Imbalances
C. Long-Term Demographic Pressures
D. How to Mitigate the Projected Increase in Pension Burden?
E. Conclusion
BOX
1. Various Population Projections
FIGURES
1. Pension Spending
2. Pensioners and Contributors
3. Expected Years in Retirement
4. Pension Level and Wage Evolution
5. Generosity of the Pension System
6. Contribution Rate to the Public System
7. Maximum Insurable Income and Wages
8. Replacement Rate and Elderly Poverty Rates
9. Pension Adequacy
10. Contributions to Public Pensions and Benefit Ratio
11. Payments to Pensioners
12. Social Contributions in Share of Payments to Pensioners
13. Fiscal Transfers to Cover the Deficits
14. Pension Entitlements in Social Insurance
15. Old-Age Dependency
16. Projected Increase in Public Pension Spending
17. Proportionality Measure Based on the 2021 Ageing Report
18. Contributions to the Public Pension System
19. Contribution Rates to the Public Pension
20. Fiscal Redistribution by Instrument
TABLES
1. COVID-Related Fiscal Measures
2. Pension and Increases
3. Maximum Insurable Income and Maximum Pension
4. Population Growth by Age Group
REFERENCES
References