The Financial Supervision Commission adopted on a second vote an Ordinance on the technical interest rates under Art. 169, para. 1, item 3 and para. 8, item 3 of the Social Insurance Code and the formulas for calculating the supplementary lifelong old-age pensions after a repeated public consultation.

With the Act to Amend and Supplement the Social Insurance Code (promulgated SG No. 19/2021), regulating the payment of pensions for insurance in a universal pension fund, the legislator instructed the Financial Supervision Commission to determine by ordinance the formulas for their calculation, as well as the requirements to the technical interest rates for determining their amount and the pensions from the occupational pension funds.

The formulas for calculating the supplementary lifelong old-age pensions provided for in the ordinance are based on established provisions in actuarial science and practice. Defining uniform formulas for pensions from universal pension funds ensures the same way of calculating the pensions of all persons, regardless of the fund in which they are insured. The formulas provided in the ordinance make it possible to determine the amount of the pension on the basis of the transferred gross contributions or on the basis of the higher amount of funds in the individual account in accordance with the possibilities provided by law. Regardless of the chosen type of guarantee for determining the initial amount of the pension, all funds on the individual account of the person at the time of concluding the pension contract are taken into account. The formulas also allow, depending on the agreement between the pensioner and the pension insurance company, that the pension be determined both at the time of concluding the pension contract and from an earlier or later time (e.g. from the moment of acquiring the right to a pension or from at a later date if the pensioner wishes to continue working after the conclusion of the pension contract). The regulation of the formulas in a regulatory act provides clarity and legal certainty in the relations between the pension insurance companies and the pensioners, facilitates the future pensioners in planning their income after retirement and increases the transparency and trust in the activity of supplementary pension insurance.

When calculating the amount of pensions, a technical interest rate is used, which reflects the expectations for the return on investment of pensioners’ funds. The specific amount of the technical interest rate is determined by each pension insurance company in compliance with the prescribed regulatory requirements and is approved by the Financial Supervision Commission. The ordinance requires pension insurance companies to adhere to the precautionary principle when determining the specific amounts of technical interest rates in order to reduce the risk of shortage of funds for future payments, as adopted in actuarial practice. According to the legal delegation, the ordinance also regulates the maximum amounts of technical interest rates. In this regard, it is envisaged that the technical interest rate for determining the supplementary lifelong old-age pension may not be higher than the long-term interest rate for assessing the degree of convergence published by the Bulgarian National Bank (average for the last seven years). The indicator used is determined on the basis of the yield on long-term government securities, which according to the Social Insurance Code must be taken into account when determining the technical interest rate. With regard to pensions from occupational pension funds, the same indicator was used to set the maximum technical interest rate, setting a wider range (150 per cent of the long-term interest rate for assessing the degree of convergence) given the differences in their activities and investments. In both cases, the technical interest rate may not be less than zero.