Nicosia struggles with pension puzzle

Employees’ contributions have not been lost, we just don’t have the £18 million’

NICOSIA’S municipality will need more than a decade to compensate for a £18 million shortfall in what should have been its contributions to employees’ pension fund.

According to municipal councillor Antonis Antoniou, for as long as memory serves the municipality has not set up a pension fund per se for its employees.

Instead, those retiring still receive their pension from a fund in the municipality’s budget. The fund is part of the municipality’s annual expenditures.

Although so far no employee has complained, Antoniou said a problem would arise if there were a sudden increase in the number of retirees. In one hypothetical case, if the municipality were to close down today, there would not be enough money to cover all of its employees, currently numbering around 170.

“Employees’ contributions have not been lost,” explained Antoniou. “But the employer (the municipality) did not contribute his share.”

Antoniou stressed that no scam was involved, saying this situation was the result of the municipality’s practices dating back several decades.

A couple of years ago the municipality commissioned a study to see how a proper pension fund could be established. The comptroller found that £1.75 million should be input every year for a period of 15 years to bring the pension fund up to par.

But given that the municipality can currently afford just £750,000 every year to cover pensions, it is next to impossible that the proposed plan can be implemented.

“To say it’s a long shot would be an understatement,” remarked Antoniou.

There was no way those sums of money could be raised, unless the government stepped in. That is extremely improbable, though, as the government has indicated it aims to slash subsidies to the already debt-ridden municipalities as part of wider austerity measures.

The Nicosia municipality’s annual income is an estimated $14 million; Antoniou told the Cyprus Mail the municipality incurred a small deficit every year, but could not quote an exact figure.

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