THE SOCIAL Insurance Fund will be viable until 2080 Minister of Labour Zeta Emiliandou has said. Basing her comments on the actuarial study of 2014 figures, she explained this meant that, “pensions, maternity and illness benefits as well as unemployment assistance remain secure until 2080”. This study, which is carried out every three years, looks at whether, based on current revenue and expenditure as well as certain assumptions, the fund would be viable.
This was very good news, especially as, according to Emilianidou, there would be no need to raise contributions to the fund in the immediate future. Nobody has any reason to question the actuaries of the International Labour Office who conducted the study, but their findings seem quite surprising given the trends in the rest of Europe in which several countries have in recent years reported problems with their pension funds, caused by ageing populations and low birth rates.
These trends are also evident in Cyprus which has the third lowest birth rate in the EU and has seen average life expectancy increase by a little over three years since 1990, so some adjustments would have been expected. The pensionable age has not been made higher for private sector workers so how can the fund remain viable for another 65 years? Logically, with fewer young people contributing to the fund because of the low birth rate and people collecting state pensions for longer because of the higher life expectancy is it not likely there would be a shortfall before 2080?
Perhaps there was an assumption that foreign workers would be contributing to the social insurance fund in the event of labour shortages. And to be fair, the pensions etc for private sector workers are organised on rational lines with everyone contributing – workers and employers – and pay-outs being in line with contributions.
The real problems will be faced by the public sector pension fund, to which employees contributed nothing until the last few years, while the contributions they have started to make recently do not justify the princely pensions of two and three thousands euro per month. The CyBC workers’ pension fund which is organised along this irrational way currently has a shortfall in excess of €100 million, which the taxpayer is covering. Conveniently, the government said absolutely nothing about the viability of state pension fund which is not based on sound financial practices.
Perhaps the next time that ILO sends its actuaries to Cyprus they could also carry out a study of the state and SGO pension funds and inform us until when those would be viable. After all, it will be taxpayer that would be called to bail them out, as has already happened.