The Government has included the reform of the pension system in its 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, rendering necessary the strengthening of the second and third pension pillars, to secure additional retirement benefits that will adequately cover the citizens’ needs, it was noted during a conference held Tuesday in Nicosia.
The conference which was organized by the Federation of the Employers and Industrialists (OEB), discussed the challenges and prospects of the pension system in Cyprus.
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 Social Insurance Fund, Minister of Labour, Welfare and Social Insurance Zeta Emilianides 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 modernization of the legal framework and the strengthening of the second pension pillar. Recently, she noted, the Cabinet has authorized the Ministers of Finance and Labour, to hold a dialogue with stakeholders on a series of reforming actions of occupational pension funds and at the same time strengthen their supervision.
OEB President Christos Michaelides noted that the increase in life expectancy, the declining birth rates, the economic conditions, the institutional framework and other factors influence the future and efficiency of the pension system.
He emphasized the need for a fruitful dialogue for the entire system, covering not only the sustainability and adequacy of the Social Insurance Fund, but also the management of provident and pension funds, the performance of the various pension 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 Social Insurance Fund.
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.