Bulgaria’s pension system stands at a critical juncture as the country prepares to join the Eurozone in 2026. This transition will bring pensions denominated in euros instead of leva, prompting questions about the system’s future stability amid demographic shifts and budgetary pressures. Our analysis explores the structure of Bulgaria’s pension scheme, current challenges, and projections looking ahead to 2070.

The Bulgarian pension system consists of three pillars. The first pillar is the state social security system, funded through the pay-as-you-go model. This means that contributions collected during the month are transferred to the treasury and then used to pay current pensioners the following month. The state budget supplements the system with transfers to cover shortfalls.

The second pillar is mandatory public pension insurance, established in 2000, which operates on a capital-funded basis with defined contributions. Insured individuals contribute 5% of their income—2.4% from the employee and 2.6% from the employer, to pension funds managed by private insurance companies. These funds aim to generate additional returns on the invested contributions and provide a safety net against possible crises in the state social security system.

The third pillar comprises voluntary additional pension schemes, where individuals choose their contribution levels and pension plans freely. There are also professional pension funds designed for certain occupations, where employers contribute a portion of the insured person’s income, adding an extra layer of financial protection.

By 2026, as Bulgaria joins the Eurozone, pensions will be paid in euros. To assess the system’s sustainability, analysts examine the relationship between pension expenditures and GDP, the country’s aging population, and forecasts by the National Statistical Institute.

In 2024, the social security budget included expenses exceeding 24 billion leva, covering pensions, social benefits, and related programs. However, revenue from social security contributions was just over 12 billion leva, resulting in a budget deficit close to 48%. This gap is compensated by transfers from the state budget. That same year, Bulgaria had approximately 2.2 million insured persons and just over 2 million pensioners receiving benefits. Pensioners and benefit recipients make up about 32% of the population, while those insured and paying contributions amount to 35%.

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