The Bulgarian government said it approved draft amendments allowing the state pension reserve fund, the so called Silver Fund, to invest in financial instruments issued by local issuers in a bid to generate real return.
The fund has been managed very conservatively since its inception, investing solely in deposits with the Bulgarian central bank, which has led to low albeit positive nominal yield, the government said in a statement following a regular weekly meeting on Wednesday. A responsible approach to the management of public funds requires trying to also ensure real positive yield, it added.
The draft amendments envisage allowing the fund to invest up to 30% of its assets in Bulgarian government securities and to raise that cap by 10% annually until it reaches 70% of the fund's assets by 2016. The fund will be able to invest in equities listed on the local and foreign regulated markets and included in a benchmark index.
Under the amendments, the fund will be tapped for pension payments after 2028.
Reacting to the proposed changes, Bulgaria's central bank said they are too risky and called for the bill's withdrawal.
The Silver Fund was established in 2008 as a reserve fund accumulating proceeds from privatisation deals and state concessions for payment of pensions in the future when retired Bulgarians are expected to outnumber those in active working age. The 1.7 billion levs ($1.14 billion/869 million euro) the fund has accumulated so far are kept in short-term deposits with the central bank.