Fiscal council chairman Andreas Charalambous on Thursday called on the government to be responsible with its plans to invest the social insurance fund’s cash reserves in the hope of growing those reserves, saying that “we should not embark on adventures which endanger the social insurance fund”.

Instead, he told the Cyprus News Agency, “we must create realistic expectations of what the return of such a fund can be, given that it must be low-risk”.

Then asked whether the government’s plans to terminate state borrowing from the social insurance fund, he said that “the termination of borrowing and the repayment of the amount already borrowed should be done gradually”, so as to ward off the risk of a financial crisis.

“For example, as a first step, there could be no additional borrowing. In practice, this would mean that the state, instead of having the two- or three-per-cent surpluses foreseen in the coming years, would have balanced books,” he said.

He said that from that point onwards, “the return of the amount borrowed to the reserve must be done very gradually so as not to have any impact on the state’s public finances and so that it can be managed prudently”.

At present, the amount borrowed by the state from the social insurance fund stands at around €12 billion.

Charalambous also made reference to demographics, stating that with Cyprus’ ageing population, “social insurance funds alone cannot ensure the adequacy of pensions”.

“That is why it is very important to launch a major project gradually, to begin implementing it as soon as possible, so as to provide additional support for pensioners, mainly to ensure long-term sustainability,” he said of the plans to encourage people to also pursue private pensions through provident funds.

Demographics, he said, are also a driving reason behind the government’s insistence that it will not abolish the 12-per-cent downward adjustment of pension payments for people who take early retirement at 63 years of age. The government instead plans only to reduce it to 7.5 per cent, with the standard retirement age remaining set at 65.

“It is not possible, as the conditions are today and based on the demographic data worldwide and in Cyprus, to reduce the retirement age. Such a thing would, without doubt, affect the adequacy of pensions,” he said.