PRESIDENT Demetris Christofias made the first payment of €200 million into the Social Security Fund (SSF) yesterday, as part of the government’s commitment to add €1 billion to the fund’s reserves during the period 2009-2013.
“We are creating the conditions for an effective investment policy for the Fund’s reserves, and at the same time we are rejecting the possibility of imposing burdensome taxation on citizens at a time when the state should repay its obligations to the Fund”, Christofias said.
He added that the government is “trying to increase the lowest pension levels so that the pioneers of the SSF, the working people from the early days, who today are just getting crumbs, can live a satisfying life.”
Although Social Security Services Head Theofanis Trifonos welcomed the government’s honouring of its commitment to build up the SSF’s reserves, he pointed out that yesterday signalled “the start of the repayment of excessive and ever-increasing borrowing from the Social Security Fund by governments for decades”.
Currently, the SSF’s reserves come to €6.3 billion, most of which is invested in non-negotiable Central Bank bills, with just €80 million or so held on deposit with commercial and co-operative banks.
The government’s efforts over recent months to improve the lot of current pensioners and address the long-term sustainability of the SSF form the endgame of a process that has taken three years, against a background of warnings from the EU.
Chronic under-funding of state pension systems across Europe pushed the issue of retirement benefits towards the top of the EU’s priority list long before the current world economic crisis hit home.
There are two main aspects of the problem in Cyprus. The first is an ever-increasing elderly population who are living longer, so the ratio of working people making contributions to pensioners is shrinking, thus extending the burden on public finances.
The second is the fact that too many people are receiving very low retirement benefits because they have made insufficient social insurance contributions during their working life.
A study by the Labour Ministry had shown that without a reform codified in law, the SSF would go bust by 2043, leaving hundreds of thousands without pensions. Drawn-out discussions and negotiations between government, trade unions and employers’ organisations on reforming the social security system resulted in a law finally being approved by the House of Representatives in March this year.
