BASPSC

Bulgarian Association of supplementary pension security companies

Category: Research and statistics

  STATISTICS AND ANALYSIS OF THE INSURANCE MARKET BY THE FSC

International news and events / News / Papers and presentations / Research and statistics

PensionsEurope – WG IORP and WG PPP – EIOPA publish 2021 Consumer Trends Report

Consumer Trends Report 2021 – EN

We would like to inform you that today EIOPA published the 2021 Consumer Trends Report. You can find the report attached or download it here.

The report covers both the insurance and the pension sectors, identifying market developments, trends, and (new) risks for consumers and members/beneficiaries.

The second chapter of the report focuses on pensions and distinguishes between IORPs and Personal Pension Products (PPPs). After having shortly described the market developments and issues, the report also includes two specific topic areas, respectively on sustainability in the pension sector and impact of COVID-19. The two final sub-chapters (2.3 and 2.4) are dedicated to the complaints filed and to NCAs’ supervisory activities.

Please find below a short summary of the main findings:
– On IORPs
o a shift from state pensions to private pension providers is observed – the total number of members and beneficiaries of IORPs in the EEA increased
o the shift from DB schemes to DC, already identified in previous editions of the report, remains noteworthy
– On PPPs
o The number of contributors to personal pension products increased in most jurisdictions
o Trends in personal pension markets continue to vary significantly across countries
– On sustainability in the pension sector
o In light of the SFDR, pension funds have begun to update their internal investment policies and disclosure document. Nevertheless, the scale varies and it is early to assess its adequacy.
o Only a few Members States observed a remarked increase of occupational pension products or personal pension products with a sustainable investment objective (DK, EE) while in others a slight increase was observed (AT, LV, LT, PT).
o Most NCAs shared their intention to conduct thematic reviews to monitor the implementation and outcome of these new sustainability requirements.
o The way pension providers conduct their business is expected to be re-shaped in the near future as a consequence of the SFDR rules. The scheme design and the asset allocation are anticipated to be revised, as well as the engagement with consumers and beneficiaries
– On the impact of COVID-19
o The impact of COVID-19 has not been uniform across countries. Several Member States cannot conclusively say whether the COVID-19 crisis has negatively impacted pension contributions.
o Nevertheless, almost one third of the national markets reported a decrease in contributions mainly due to shrinking in business (sponsor contributions) and lower personal income.

Papers and presentations / Research and statistics

Longevity and equality between the generations in the supplementary mandatory pension insurance in Bulgaria by Ioannis Kotsianos, FSA, CERA

Longevity and equality between the generations in the supplementary mandatory pension insurance in Bulgaria
by Ioannis Kotsianos, FSA, CERA

Estimates of mortality and distribution of surplus between generations in order to ensure sustainability and fairness in the payment of pensions
The payment of the pensions from the Supplementary Mandatory Pension Insurance is becoming more and more relevant with the approach of the time for the first payments of the funds accumulated on the accounts of insured persons.

Ioannis Kotsianos, Chairperson of the Executive Committee of Allianz Bulgaria, examines the issue with a special focus on the costs associated with increased life expectancy and the issue of equality between the generations. In his report “Longevity and Equality between the Generations in the Supplementary Mandatory Pension Insurance in Bulgaria”, he answers questions such as:
• What are the main risks and challenges in the payment phase?
• What is intergenerational equality and why is it so important?
• Is it possible to structure a fair system that reduces generational income disparities due to the effect of financial markets?
Is it possible to structure a fair system that reduces generational income disparities due to the effect of financial markets?
There is currently a debate in Bulgaria on the rules for the payment of pensions from the supplementary mandatory pension insurance pillar (1bis), which focuses on two main topics. Firstly, whether the pension funds should guarantee at the time of maturity the amount of the contributions accumulated during the insurance period. Secondly, there are several different opinions on the framework for determining and indexing lifelong pensions. The report examines the payment of pensions with a special focus on the costs related to increased life expectancy and the issue of intergenerational equality.

The challenge regarding the first part is rather intuitive. As retirees live longer, the cost of paying their fixed-rate pensions increases. To understand the potential scale of this impact, the Lee-Carter model was applied to the mortality data in Bulgaria.

The second part of the issue is more complicated. It concerns the impact of market risk (especially variations in interest rates) on the amount of the lifelong pension that can be granted to pensioners. When granting a pension, it is obligatory for the present economic value of the future payments to be as close as possible to the amount of the accumulated funds on the accounts of the insured. This means that people who retire at a period with high interest rates would receive a higher pension than those who retire when interest rates are low.

The report analyzes how future indexation of pensions can create a compensatory mechanism and ensure that generational differences dictated by the market are minimized. The impact of key parameters such as the amount of the surplus over the guaranteed contributions at the time of retirement, the technical interest rate for determining the guaranteed component of the pension and the share of the surplus in the fund for payment of pensions that should be transferred to create a guarantee reserve is also considered.
You will find more useful information in the Report: general overview of the pension insurance system in Bulgaria; Proposal for reform of the supplementary mandatory pension insurance in universal pension funds; Main risks and challenges in the payment phase; Simplified sensitivity analysis, etc.
You can read the whole report :

Longevity_and_intergenerational_equity_in_pension_payout-BG_05022020

Top