EMPLOYEE pension funds in the 24 municipalities of Cyprus are collectively missing tens of millions of pounds because municipal officials have not been making the requisite yearly payments, according to trade unions SEK and PEO.
SEK official Savvas Koulla told the Cyprus Mail yesterday that over £50 million pounds were owed just in the four principal municipalities of Nicosia, Limassol, Larnaca and Paphos. The number cannot be confirmed because actuary evaluations to find out how much money is in the funds have not been conducted in many of the areas, including Limassol.
“Some municipalities have made actuary evaluations, while others haven’t,” Koulla said. “Among those that did conduct the studies was the Nicosia Municipality, which in 2003 found that £18 million was missing from its pension funds.”
Koulla considered the projected figure of £50 million to be a conservative estimate. “We know there is £18 million missing in Nicosia alone. The situation is as bad or worse in the other large municipalities, so we’re talking about a total number that could total £65 million, maybe even more.
“Since 1980 when this pension fund was implemented, they should have been putting money into this fund, but they haven’t been doing so. Other municipalities haven’t done the actuary evaluations that they should be doing.”
SEK General Secretary Nikos Tampas said that they had contacted the municipalities and the Ministry of Communications and Works to investigate this issue further. “If they don’t do anything, we will see what measures we can take on our own as workers,” Tampas said, adding that it was still too early to say what those measures might involve since they first wanted to give the authorities a chance to respond.
Finance Manager of the Nicosia Municipality Nicholas Efstathiou confirmed that there was money missing from the municipal employee pension funds, although he said that it was worse in some municipalities than others.
“Five years ago, the Attorney-general told all the Municipalities that they had to conduct an actuary evaluation of pension funds and provident funds, but not all of them obeyed.”
Efstathiou confirmed that Nicosia had conducted an internal evaluation and found that it had an £18 million debt to the pension fund, but he said that for the volume and age of the Nicosia Municipality, it was not an abnormal figure. “We’re probably the healthiest [financially] of all the municipalities.”
The Municipal Treasurer noted that the Municipality was trying to put an additional one million pounds per year into the pension fund to deal with the debt. “It’s a slow process, but a sure process.”
The Cyprus municipalities give out defined-benefit pensions, which promise the employee a specific monthly benefit at retirement that may be stated as an exact monetary amount.
According to Efstathiou, defined-benefit pensions lead to under-funding problems. “They promise you the amount they will give you 40 years later, which is why defined-benefit pensions funds are a disaster worldwide. The UK found this out 10 years ago.”
Efstathiou said the government could cut down on its costs by consolidating some of the municipalities, since every added municipality brings with it the additional costs of setting up its own separate services, such as garbage collection.
“What the government should do is decrease the number of municipalities and give them more power.”
The obligations of EU member states as regards their management and supervision of pension funds is listed explicitly under Directive 2003/41/EC.
The Directive requires every institution in member states to draw up annual accounts and reports of its pension schemes.
