Low birth rate, high life expectancy call for pension fund reforms
Reform of the national pension system is high on the government’s agenda as the low birth rate combined with the increase in life expectancy are expected to affect the public finances and the Social Insurance Fund, according to a Cyprus News Agency report.
In a statement at a conference organised by the Employers and Industrialists Federation (OEV), discussing the challenges and prospects of the pension system in Cyprus, Labour Minister Zeta Emilianidou said that the government has rendered it necessary to strengthen the second and third pension pillars, to secure additional retirement benefits that will adequately cover the citizens’ needs.
A series of measures were introduced in 2009 in view of the demographic problems faced by Cyprus, while additional measures were imposed by the Troika in December 2012, to ensure the viability of the SIF, Emilianidou noted in her speech, read by the Director of the Department of Labour, Alexandros Alexandrou.
The Minister said that due to the correlation between the age of retirement and the increase in life expectancy, the government is adopting proposals in search of policies that would provide incentives for the employees to work for longer and therefore avoid affecting the adequacy of pensions.
She also said that the time has come to examine the modernisation of the legal framework and the strengthening of the second pension pillar. Recently, she noted, the Cabinet has authorised the Ministers of Finance and Labour, to start a dialogue with stakeholders on a series of reforming actions plans, their financial planning and especially the role of the private sector in ensuring adequate pensions.
The government intends to promote a comprehensive and integrated reform of the pension system in Cyprus, according to the head of the Department of Economic Research and EU Affairs of the Ministry of Finance Yiorgos Panteli.
He said that the combination of increased life expectancy and low birth rates will result in a burden on public finances and in the gradual decrease of the accumulated reserve of the SIF.
Besides the pension plans of the public sector, he said, it is imperative that the general framework for the provision of pensions is reformed in line with international best practices, so as to guarantee the citizens’ income in old age.
He noted that there are significant weaknesses and challenges in the general framework of the pension system in Cyprus and that taking additional structural measures is a must.
Panteli highlighted the need to upgrade the supervision of occupational pension funds and pension funds offered by insurance companies. He also said that the existence of a large number of very small provident funds, despite the small size of Cyprus, is an obstacle to achieving economies of scale and raises the costs for the parties involved.
The government’s primary objective, he said, is the strengthening of the second and third pension pillars that cover occupational and private pension funds, to provide citizens with additional retirement benefits that will adequately cover their needs.