Low birth rate, high life ex­pectancy call for pen­sion fund re­forms

Financial Mirror (Cyprus) - - FRONT PAGE -

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.

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