Bulgaria's parliament approved on Saturday major changes to the pension system to avert a default of the heavily indebted social security system as the nation's population ages.
The changes, approved by the government in November, aim to cut a shortfall in the state pension fund of over 2 billion levs ($1.36 billion) by the end of 2016 and keep it in the black until 2035.
The bill's approval ended weeks of bargaining between the centre-right cabinet, trade unions and business associations over the reform's timeframe and the size of pension payments. The International Monetary Fund warned that a further delay in the reform would increase Bulgaria's budget deficit in the medium term and could put pressure on the country's currency peg.
Labour Minister Totyo Mladenov has said that a failure to take any measures would mean the system going bankrupt.
The pension funds' deficit will be cut by about 600 million levs in 2011 following a planned 1.8 percent increase in contributions, a rise in the private sector minimum wage and expected higher employment levels.
The number of contribution years people need to work for a full pension will start increasing gradually in 2012 and early retirement will be limited from 2015. The retirement age will start rising in 2021 until it reaches 65 years for men and 63 years for women, from 63 and 60 respectively at present.
Parliament voted to redirect assets of private professional pension funds partially to the state social security institute, angering right-wing parties which have threatened to send the law to the Constitutional Court.
In the next four years pension contributions for early retirement will be directed to the state pension system, which will pay early pensions to workers in physically hard jobs.
About 100 million levs in assets of the professional pension funds will be transferred to the social security institute as contributions for people in such jobs who will retire in the next few years. The private professional funds will start paying early pensions as of 2015.
The right-wing Blue Coalition said the move would hurt investors' confidence and was "partial nationalisation".
The government initially planned to transfer all private professional funds to the state, but softened its position after talks with employer unions and pension funds.
ReutersLast Mod: 11 Aralık 2010, 17:30