Adequacy and Expected Replacement Ratio of Mandatory Pension Funds in Bulgaria
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Transcript of Adequacy and Expected Replacement Ratio of Mandatory Pension Funds in Bulgaria
Adequacy and Expected Adequacy and Expected Replacement Ratio of Replacement Ratio of
Mandatory Pension Funds in Mandatory Pension Funds in BulgariaBulgaria
Albena IvanovaAlbena IvanovaActuary Actuary
Financial Supervision CommissionFinancial Supervision CommissionBulgariaBulgaria
Workshop on Private Pension Provision – Tallinn, September 6-Workshop on Private Pension Provision – Tallinn, September 6-77thth 2007 2007
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Ist PillarMandatory social
insurancePAYG
2nd PillarSupplementary mandatory
pension insuranceDC pension scheme managed by Pension
Insurance Company (PIC)
3rd PillarSupplementary voluntary
pension insuranceDC pension scheme
managed by PIC
A Three-Pillar Model
Universal Pension Funds (UPF) –
mandatory participation for persons born after
31.12.1959(as of 01.01.2002)
Professional Pension Funds (PPF) – for
persons working under heavy or harmful
conditions category І and ІІ
(as of 01.01.2000)
Voluntary Pension
Funds (VPF)(as of 1994)
VPF under occupational
schemes(as of
01.01.2007)
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FactorsFactors Affecting Replacement Affecting Replacement RatioRatio from 2ndfrom 2nd PillarPillar
● CContinuanceontinuance and type of contributory and type of contributory periodperiod– age of entry in the pension systemage of entry in the pension system– retirement age and early retirement ageretirement age and early retirement age– interruptioninterruption inin the working careerthe working career
● ContributionsContributions in individual accountsin individual accounts– contributory incomecontributory income and rate of increaseand rate of increase– contribution ratecontribution rate
● FeesFees paidpaid by contributorsby contributors
● Rate of returnRate of return
● Demographic factors for life long pensions Demographic factors for life long pensions oror the period for the term paymentsthe period for the term payments
● Actuarial assumptionsActuarial assumptions
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Parameters and Assumptions for Parameters and Assumptions for Replacement RatioReplacement Ratio ForecastForecast - UPF- UPF
●contributory income contributory income – – average wageaverage wage ●contributioncontribution rate rate – 5 % – 5 % inin 2007; 2007;●feesfees – 5% – 5% from each contributionfrom each contribution,,
1% 1% investment feeinvestment fee;;●rate of returnrate of return – 6% – 6% per year from per year from 20020077; ; ●contributory periodcontributory period – – full period of full period of
contributionscontributions::–– malemale – 40 – 40 yearsyears;;–– femalefemale – 37 – 37 yearsyears;;–– uninterrupteduninterrupted workwork carriercarrier
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Replacement Ratio forReplacement Ratio for Pension Pension System Entrants inSystem Entrants in 2010 2010 (full(full contributory periodcontributory period))
SexSex MaleMale FemaleFemale
Age of entry in pension Age of entry in pension systemsystem 2323 2323 2323 2323
Retirement age/early Retirement age/early retirement ageretirement age 6363 5858 6060 5555
Gross replacement Gross replacement ratioratio (%)(%) 15,415,4 11,011,0 11,011,0 8,28,2
Net replacement ratioNet replacement ratio (%)(%) 19,319,3 13,813,8 13,813,8 10,310,3
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Dynamics of Replacement Ratio -Dynamics of Replacement Ratio - UPFUPF
Retirement Age – male:Retirement Age – male: 63 63 years (* years (*660 years )0 years ), , female:female: 60 60 years years (different contributory periods(different contributory periods))
Replacement ratioReplacement ratio ((%%))202202
00202202
55203203
00203203
55204204
00204204
55205205
00
Gross replacement ratio- Gross replacement ratio- malemale *5,4*5,4 7,37,3 8,68,6 10,210,2 11,811,8 13,613,6 15,415,4
Gross replacement ratio- Gross replacement ratio- femalefemale 4,84,8 5,85,8 6,96,9 8,28,2 9,59,5 10,510,5 11,811,8
Net replacement ratio- Net replacement ratio- malemale 6,86,8 9,19,1 10,710,7 12,712,7 14,814,8 17,017,0 19,319,3
Net replacement ratio- Net replacement ratio- femalefemale 5,95,9 7,37,3 8,68,6 10,310,3 11,811,8 13,213,2 14,814,8
0,0
5,0
10,0
15,0
20,0
25,0
2020г. 2025г. 2030г. 2035г. 2040г. 2045г. 2050г.
GRRmale
GRRfemale
NRRmale
NRRfemale
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Sensitivity Test of Replacement Sensitivity Test of Replacement Ratio-UPFRatio-UPF
ParametersParameters LimitsLimitsGross replacement ratio (%)Gross replacement ratio (%)
malemale femalefemale
Contributory incomeContributory income min -maxmin -max 10,7 - 15,410,7 - 15,4 8,3 - 11,08,3 - 11,0
Social insurance Social insurance contributioncontribution 5% - 10%5% - 10% 15,4 - 30,815,4 - 30,8 11,0 - 22,111,0 - 22,1
FeesFees 5%/1% - 5%/1% - 3,5%/0,6%3,5%/0,6% 15,4 - 16,815,4 - 16,8 11,0 - 12,011,0 - 12,0
Rate of returnRate of return 3% - 10%3% - 10% 9,6 - 33,29,6 - 33,2 7,1 - 22,27,1 - 22,2
Interval Interval 9,6 - 33,29,6 - 33,2 7,1 - 22,27,1 - 22,2
ParametersParameters LimitsLimitsNet replacement ratio (%)Net replacement ratio (%)
malemale femalefemale
Contributory incomeContributory income min -maxmin -max 11,9 - 22,011,9 - 22,0 9,2 - 15,8 9,2 - 15,8
Social insurance Social insurance contributioncontribution 5% - 10%5% - 10% 19,3 - 38,619,3 - 38,6 13,8 - 27,613,8 - 27,6
FeesFees 5%/1% - 5%/1% - 3,5%/0,6%3,5%/0,6% 19,3 - 21,019,3 - 21,0 13,8 - 14,913,8 - 14,9
Rate of returnRate of return 3% - 10%3% - 10% 12,0 - 41,612,0 - 41,6 8,9 - 27,88,9 - 27,8
IntervalInterval 1111,,99 - 41,6 - 41,6 8,9 - 27,88,9 - 27,8
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Parameters and Assumptions Parameters and Assumptions for for Replacement Ratio Forecast - PPFReplacement Ratio Forecast - PPF
● contributory incomecontributory income – – average average wage forwage for labor labor categories I and II -categories I and II - working under heavy or working under heavy or harmful conditionsharmful conditions
● contributioncontribution raterate– 12 % – 12 % for I category for I category andand 7 % 7 % for II categoryfor II category;;
●feesfees – 5% – 5% from each contributionfrom each contribution,,1% 1% investment feeinvestment fee;;
● rate of returnrate of return – 6% – 6% per yearper year fromfrom 2007; 2007; ● contributory periodcontributory period – – minimum contributory minimum contributory
periodperiod::–– I categoryI category – 10 – 10 yearsyears;;–– II categoryII category– 15 – 15 yearsyears;;–– uninterrupteduninterrupted workwork carriercarrier
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Dynamics of Net Replacement Ratio-Dynamics of Net Replacement Ratio-PPFPPF
* Incomplete contributory period
Labor Labor categoriecategorie
ss
ReplacemenReplacement ratiot ratio 20102010 20202020 20302030 20402040 20502050
I category I category GRRGRR 16,30%16,30% 15,37%15,37% 15,44%15,44% 16,21%16,21% 17,19%17,19%
NRRNRR 20,38%20,38% 19,21%19,21% 19,30%19,30% 20,26%20,26% 21,49%21,49%
II II categorycategory
GRRGRR 22,89%22,89% 30,27%30,27% 30,68%30,68% 33,27%33,27% 36,19%36,19%
NRRNRR* *
28,61%28,61% 37,84%37,84% 38,34%38,34% 41,59%41,59% 45,24%45,24%
0%
5%10%
15%20%
25%
30%35%
40%45%
50%
2010 2020 2030 2040 2050
GRR for Іcategory
NRR for Іcategory
GRR for ІІcategory
NRR for ІІcategory
1010
Thank you for your attentionThank you for your attention!!
Albena IvanovaAlbena Ivanova
[email protected][email protected]
http://www.fsc.bghttp://www.fsc.bg