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Georgiades defends reimbursement of provident funds

The government’s decision to reimburse 75 per cent of provident funds seized during the 2013 meltdown and cap reimbursements at €100,000 was known all along and is fully justified, Finance Minister Harris Georgiades said on Friday.

Speaking to state radio, Georgiades addressed complaints voiced by various trade unions, including bankers’ union Etyk, Edek’s union arm Deok, and even a political party – main opposition Akel.

In a barrage of damning statements on Thursday, they argued that the government should have reimbursed provident funds in full, not in part, and without a cap on the maximum amount payable.

They also complained that eligibility for provident fund reimbursement should not be tied to age – per the government’s decision, only people turning 65, or already older, will be entitled to the refund.

“Since 2013 we had said that we will initially cover a part of the funds’ losses, and we did this at the end of 2013 with a total €300 million,” Georgiades said.

“We had said, at the time, that when the economy allows, we will return to supplement the partial coverage. We are now doing this with an additional €166 million.”

Total provident fund losses amounted to approximately €0.75 billion, with funds in now-defunct Laiki Bank wiped out almost entirely, while those at Bank of Cyprus saw about half their deposits seized.

“This €166 million will not be paid in one go but over several years, precisely because the plan was to supplement people’s pensions – hence eligibility at 65 – starting with next year’s budget,” Georgiades explained.

Paying out all €166 million immediately was simply not feasible, the minister added.

“To do that, we would have to close down a ministry,” he joked.

He then addressed the €100,000 cap, noting that it is high enough to fully cover 96-98 per cent of affected individuals.

“The provident funds of a very small number, some 1,100 individuals – essentially senior bank officials – exceed the cap,” Georgiades said.

“They will also be reimbursed, but no more than €100,000.”

In any case, Georgiades argued, the cap is no lower than the sum for which any depositor was protected during the haircut.

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