Pension reform widens gender gap

A study conducted in 2007, based on National Social Security Institute data, finds gender inequalities in recent pension reforms in Bulgaria. The study identifies factors leading to a ‘gender gap’ in pensions, notably women’s shorter periods of participation in the labour market due to unemployment or childcare, and lower earnings due to sectoral and occupational segregation. The average woman’s pension is just 70% to 74% of the average man’s.

In April–May 2007, the Centre of Women’s Studies and Policies (Център за изследвания и политики за жените, CWSP) and the National Social Security Institute (Националния осигурителен институт, NSSI) conducted a study as part of a project on the ‘Gender dimension of the pension reform in Bulgaria’. The initiative was supported by the Subregional office for central and eastern Europe (SRO-Budapest) of the International Labour Organization (ILO). According to the study findings (364Kb PDF), inequalities between women and men can be observed in all aspects of Bulgaria’s recent pension reform (BG0701039I, BG0502102F, BG0308101F).

Pension reform

The Bulgarian pension system underwent major reform in the late 1990s with significant implications both for women and men. According to the study, while the reform guarantees ‘equality of the insured persons’ in principle, it could not overcome existing inequalities between men and women as beneficiaries and even deepened them. The study finds that gender mainstreaming was not a driving force in shaping the reforms, in the context of the difficulties surrounding Bulgaria’s economic and political transition.

A closer link between contributions and benefits introduced by the reform, as well as greater individualisation in pension rights, has generally been detrimental for women, the research finds. Women’s weaker position in the labour market and their disproportionate amount of unpaid care work has resulted in lower pensions from all three pillars – state, company and individual – with a negative impact on women’s security and well-being in old age.

Factors contributing to pension gender gaps

Retirement age and length of pension contributions

In the socialist era, women retired five years earlier than men, at the age of 55 compared with 60 years for men. The reforms provided for a gradual increase in retirement age until it reached 63 years for men in 2006 and will reach 60 years for women in 2009. Furthermore, regulations require people to have accumulated a certain number of points in order to be entitled to a full pension. The number of points is calculated as the sum of the worker’s age and number of years they have made pension contributions; the points required for a full pension will stand at 94 for women and 100 for men in 2009.

Pension formula

The pension reform introduced a new formula for calculating pension entitlement, based on length of service, insurable income and an individual ‘coefficient’, with women and men having equal rights. However, in reality this formula leaves a large group of women with lower pensions due to their lower lifetime earnings and shorter insurance periods. The typical female pensioner retiring at 60 years will receive a pension equal to 22.4% of the national average wage, while her male counterpart will receive a pension equal to 30.4% of this threshold. At the end of 2005, the average gender gap in old age pensions stood at 34%.

Gender wage gap

The main factor behind the current pension gender gap is the lower remuneration of female workers, due to widespread sectoral and occupational segregation. Women’s average insurable income is 85% of men’s and about 89% of the national average (Figure 1).

Insurable income, by sex (as % of national average)

Source: NSSI, 2007

According to data from the National Statistical Institute (Национален Статистически Институт, NSI), in 2005 the average wage gender gap was almost 18%. Differentials in favour of men are observed in almost all economic sectors (see table below) and occupations, particularly in those with a high proportion of women in the workforce, leading to lower insurable income for women. The gender gap in insurable income is higher for craft and related trade workers (38%), plant and machine operators (22%), and professionals (19%), but is insignificant for unskilled workers (0.2%).

Gender gap in insurable income, by economic sector (%)
This table shows the gap between women’s average insurable income, as a proportion of men’s, as well as comparing the sectoral average insurable income with the national average.

Economic sector	Women’s average insurable income as % of men’s	Sector’s average insurable income as % of national average
Manufacture of wearing apparel, dressing and dyeing of fur	87	63
Manufacture of textiles	76	81
Health and social work	74	130
Education	90	87
Hotels and restaurants	90	60
Manufacture of food products	82	61
Trade	83	75
Public administration	82	107
Real estate, renting and business activities	116	92
Construction	110	81
Total	85

Source: NSSI, 2007

Data for the average individual coefficient, that is, the ratio between the average individual insurable income and the national average, also highlight gender differences (Figure 2). In December 2005, men newly receiving an old age pension had an individual coefficient of 1.508 compared with only 1.159 for newly retired women – a difference of more than 30%.

Individual coefficient, by sex

Source: NSSI, 2007

The differences in the average individual coefficient and in the contribution periods of women and men account for more than 20% of the gender gap in benefit replacement rates, that is, the proportion of former income represented by the pension (Figure 3).

Pension benefit replacement rates, by sex (%)

Source: NSSI, 2007

Finally, the survey also finds lower female participation in occupational and voluntary pension insurance funds, and lower accumulated sums in individual schemes.

Nadezhda Daskalova, Institute for Social and Trade Union Research