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- Ελληνικά
The Actuarial Study of the International Labour Organization on the Sustainability of the Social Security Fund (SIF) with a reference date of 31 December 2020, confirms the sustainability of the SIF beyond 2080 and includes important recommendations for rationalizing investment policy and upgrading funding policy.
I wish to thank the staff of the Actuarial Services of the International Labour Organization and the staff of the Social Security Services of the Ministry of Labour for their cooperation and contributions, and to confirm the Government's determination to further strengthen the pension system through the forthcoming pension reform, in line with the President's Governance Programme.
The main purpose of the periodic actuarial reviews of the Social Security Fund, pursuant to Article 76(2) of the Social Security Act, is to examine the current financial situation of the Fund and to present the Actuary's estimates of its future financial situation, as well as to examine whether or not the level of contributions is sufficient to ensure the long-term sustainability of the Fund, assuming that the provisions of the Act remain unchanged.
The next statutory actuarial review of the Social Security Fund with a reference date of 31 December 2023 will be carried out in the first quarter of 2025.
The results of the statutory actuarial review of the Social Security Fund with a reference date of 31 December 2020, which was carried out on the basis of the actuarial standards for social security of the International Actuarial Association, show that the reform measures of the Social Security Plan of April 2009 and December 2012, respectively, ensure the long-term sustainability of the Social Security Fund, making it financially viable beyond 2080.
According to these results, it is estimated that during the period 2021-2080 covered by this study:
(a) each year the TKA's income from contributions and investment income is sufficient to cover the corresponding annual pension expenditure
and
(b) the TKA's reserve is maintained at a satisfactory level, the estimated level of which in 2080 is estimated to be three times the TKA's annual expenditure.
In determining the assumptions of the actuarial study, account was taken, inter alia, of the estimates of international organisations such as the European Commission, in particular as regards economic assumptions, and the European Statistical Office as regards demographic assumptions.
The change in life expectancy in the period 1.1.2018 - 1.1.2023 was examined as part of the actuarial study for the purposes of adjusting the pensionable age, as required by law to be examined every five years. The result of this analysis showed that no increase in the pensionable age is required for the period up to the next review.
We also considered whether there is a need to increase the contribution rate to the Social Security Fund, in addition to future statutory increases, in order to cover the cost of extending the right to a widow's pension to men in accordance with the Social Security Amendment Act 126(I) of 2019. The result of the analysis of this contingency showed that it is not necessary to impose an additional increase in contributions to cover this benefit as currently provided for in the legislation.
In order to strengthen the financial governance of the CIF and thereby better safeguard the pension rights of members and intergenerational equity, the ILO recommends that the investment policy of the CIF be revised, with the main objective of better diversifying the investment portfolio of the CIF. In particular, it recommends that consideration be given to increasing the proportion of investments in non-public sector assets to ensure higher returns in the context of low and measured risk. Investing in the near future part of the SFF's assets in non-sovereign assets would help in the long run to contain future increases in the government's debt to the SFF and at the same time provide the SFF with more flexibility in times of significant financial constraints.
According to the recommendations, any change in the TKA's investment policy should be gradual and the exact amounts of the TKA's annual surpluses that can be invested in non-public assets, as well as the timetable for their implementation, should be determined in cooperation with the Minister of Finance, who under the Social Security Act has the authority to determine the TKA's investment policy, with a view to the smooth implementation of budgetary planning.
In addition, the International Labour Organisation recommends the formulation of an integrated financing policy for the Social Security Fund, providing for a framework of parameters for contributions and benefits in order to ensure adequacy with fair and sustainable rules. According to the proposal, the funding policy will set out the time horizons and funding targets of the CEF, and will assess the current and future financial risks faced by the CEF and the degree of uncertainty of the estimates of its sustainability. In addition, the funding policy shall provide for the maintenance of an adequate level of reserves with a view to achieving the stability of the CEF's funding in the long term.
The conclusions of the Actuarial Study constitute a reference point for the planned 2025 pension reform, and the recommendations of the ILO will be used constructively by the Government, which has the political will to implement them, through public consultation, social dialogue and cooperation with political forces.
This year, the Social Security Institution completes 60 years of universality, during which all workers in our country have enjoyed the protection of social security, as provided for in Article 9 of the Constitution of the Republic of Cyprus.
I am confident that the pension reform of 2025, which will be implemented by the Christodoulides Government, will be equally historic because it will build on our insurance heritage and ensure adequate pensions for our children.
In accordance with the provisions of Article 76(2) of the Social Security Law No. 59(I)/2010, on the basis of the Actuarial Study of the International Labour Organization on the sustainability of the Social Security Fund, an information report will be submitted to the House of Representatives.
(NZ/NYAN)
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