No need to raise retirement age says minister

The social insurance fund (SIF) is financially viable until at least the year 2080, meaning there is no need to raise the age of retirement, according to the findings of an actuarial study outlined by Labour Minister Yiannis Panayiotou on Tuesday.

Panayiotou said the actuarial review was carried out by the International Labour Organisation, a UN agency. The study has a reference date of December 31, 2020. Its main finding is that the SIF in Cyprus is financially viable through to the year 2080, based on various assumptions.

The next statutory review of the SIF will have a reference date of December 31, 2023. It will be carried out during the first quarter of 2025.

Regarding the latest review, the minister said it found that each year the fund’s revenues – from contributions and investments – are sufficient to cover annual increases in spending on pensions.

In addition, the reserves of the SIF are at “satisfactory levels”. By 2080 the reserves are projected to be three times the value of the annual expenditures of the fund.

The review drew on data from the European Union and Eurostat in making various assumptions – for example demographic trends over the years. It also factored in changes in life expectancy during the period January 2018 to January 2023, to readjust the pensionable age. Potential changes to the pensionable age are by law reviewed every five years.

The analysis determined it is not necessary to raise the retirement age until the next review.

Also, the review found that despite the expansion of men’s rights to a widower’s pension, this additional expense will not necessitate a corresponding increase in contributions.

In its analysis, the International Labour Organisation made a number of recommendations, particularly regarding investments. It proposed a review of current policy with a view to diversifying the SIF’s investment portfolio. Specifically, they recommend that a larger proportion be invested in ‘non-public assets’ so as to ensure higher yields at relatively low risk.

The review says any alteration to the SIF’s investment policy should be gradual.

According to the minister, the review’s findings serve as a “baseline” for the planned pension reform of 2025, which the current government has promised to deliver.

Closing, Panayiotou recalled that the SIF has provided universal pension coverage for 60 years now.