THE CYTA pension fund lost 33 per cent of its value, it was reported in the press on Tuesday. The assets of the fund at the end of 2012, according to the report, were €955m, but by the end of 2014 these had fallen to €646m, because of the wiping out of deposits in Laiki Bank, the bailing in of deposits at the Bank of Cyprus and the fall in the value of investments in property and shares. It also cited the higher age expectancy of retirees and increased obligations of the fund as a result of the voluntary redundancy schemes.
What is scandalous is that the state, which would take over the fund when Cyta is privatised, would be expected to plug this hole. On what moral or economic grounds should the taxpayer inject €200m or €300m into the Cyta pension fund? Is it because the political parties passed a discriminatory law guaranteeing the pension funds of semi-governmental organisations, thus allowing the administrators to make irrational investments? For all we know, they could have been participating in pyramid schemes, buying lottery tickets or making investments based on backhanders. This law, no doubt imposed by unions with the support of vote-buying politicians, needs to be repealed now, because it is blatantly discriminatory.
The state has not offered to plug the hole of pension funds of private firms that also had deposits in Laiki and Bank of Cyprus or had invested in real estate, so how could it justify the preferential treatment of SGOs, like Cyta and CyBC, which has a hole in excess of €100m? Private sector employees have simply received a lower retirement pay-off because their provident fund lost money and this should be the way SGO pension funds operate.
The monthly pensions that SGO funds pay should be determined by what a fund can afford to pay instead of a sum determined by the unions on the understanding that the state would keep covering the growing deficits.
This is what happens in all well-governed countries in the world and the Anastasiades government needs to address this matter sooner rather than later. Actuaries should be brought in to carry out studies and decide how these funds would be made viable, given the increase in people drawing pensions and the rise of life expectancy.
Monthly pensions of SGO workers would have to be cut but they would still be much higher than those paid to most private sector workers.
Why should the taxpayer pick up the bill for maintaining the unsustainably high pensions of SGO fat cats?