Second-pillar pension fund assets may be invested only in securities issued or guaranteed by the government; securities tradable at regulated stock markets; municipal bonds; bank deposits, and real estate and mortgages.
Investment in government securities and/or bank deposits must be at least 50% of pension fund assets. Investment in real estate has a maximum limit of 5% of pension fund assets.
Investment in securities issued by a single issuer has a maximum limit of 5% of pension fund assets and a maximum of 10% of the issuer’s shares.
Investments in government bonds and municipal bonds abroad have a maximum limit of 5% of pension fund assets. Investments in securities tradable at regulated stock markets abroad have a maximum limit of 5%.
Investments abroad are permitted under the law, but have not taken place because of the lack of the necessary order that the law requires the companies to follow.
As at 30 September 2001 the investments of occupational second-pillar pension fund assets lacked diversification, with securities issued or guaranteed by the government accounting for 57.62% of the total and local bank deposits for 36.76%. The balance was made up of real estate (3.16%), municipal bonds (1.14%) and cash, current accounts and short-term receivables (1.32%).
Third-pillar pension fund assets are invested in securities issued or guaranteed by the government; securities tradable at regulated stock markets; municipal bonds; bank deposits and mortgage bonds issued by banks; real estate and mortgages, and other investment instruments.
At least 50% of pension fund assets must be invested into securities issued or guaranteed by the government and/or bank deposits and mortgage bonds issued by banks. Investment in real estate and mortgages has a maximum limit of 10% of pension fund assets. Other investment instruments shall not exceed 5% of pension fund assets.
Investment in securities issued by a single issuer has a maximum limit of 5% of pension fund assets and a maximum limit of 10% of the issuer’s shares.
The pension company may invest not more than 10% of the pension fund assets abroad and in similar assets to second-pillar funds. Similarly, no investments have taken place due to lack of regulation.
The investment of third-pillar pension fund assets, like the second pillar, shows a lack of diversification. As of 30 September 2001, securities issued or guaranteed by the government accounted for 50.14% and local bank deposits for 32.18%. Securities tradable at regulated stock markets accounted for 1.21%, real estate for 4.76%, municipal bonds for 7.44%, cash, current accounts and short-term receivables for 2.33% and other investments for 1.94%.

TAXATION
First pillar contributions and benefits are not taxable. Second-pillar contributions are not taxable and second-pillar pension fund asset investment income, allocated to pension fund members’ individual accounts with a second-pillar fund is not taxed. Benefits are income tax free.
Under the third pillar, employers’ contributions are considered business expenses up to a maximum limit of BGL40 a month for each covered employee.
Employees’ personal contributions are deductible. There is no maximum limit. Investment income allocated to pension fund members’ individual accounts with a pension fund is not taxed.
Benefits are taxable as follows:
q Withdrawals prior to retirement at an income tax rate of 20%;
q Withdrawals after retirement are added to the person’s annual income and are taxed on an ordinary annual income basis.

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