The planned upgrade of the investment policy and governance framework of the Social Insurance Fund was presented yesterday before the Labour Advisory Body, as previously announced by Labour Minister Marinos Mousiouttas in statements to Politis.
The objective is the full repayment of the state’s debt to the fund, which amounts to €12bn, by 2066. At the same time, future surpluses, estimated at €800m annually, will be channelled into a dedicated investment fund.
Based on the actuarial study, said Mr Mousiouttas after the session, there is a 40‑year period from 2026 to 2066 within which the existing borrowing from the fund will be fully repaid.
“The long‑standing practice of state borrowing from the Social Insurance Fund is coming to an end,” he reiterated, noting that all future surpluses will be placed into a fund for investment purposes.
“This fund will build reserves exceeding €12bn, reaching between €50bn and €60bn,” he said, with those resources originating from both surpluses and debt repayments.
According to the minister, it is essential that the management of this fund follows best practice in line with European standards, stressing that these resources must be safeguarded with the utmost care.
Repayment through annual instalments
As regards the existing debt, he noted that it will be repaid gradually through an instalment that could amount to around three per mille of GDP each year.
“At present, this translates to €100m to €120m annually. This amount, together with the surplus, will be credited directly to the Social Insurance Fund account.”
In this way, he explained, the debt will decrease progressively, without new borrowing, as all surpluses are deposited into the fund.
Repayments, he added, will be linked to public debt, but safeguards will be applied to ensure flexibility, as “none of us wants the fund to be in a very strong position while the wider economy struggles.”
Transfers from the state will be made annually into the fund’s account, with payments expected to begin immediately once the managing entity or organisation is established, which is projected for 2027.
At the same time, the minister announced the creation of a separate independent entity, based on international governance standards, to ensure proper management of the fund’s investments, referring to the model used for the hydrocarbons fund.
A milestone of historic significance
“The decision to end internal state borrowing from the Social Insurance Fund’s surpluses is a milestone of historic importance for the country,” the general director of the Employers and Industrialists Federation (OEB), Michalis Antoniou, told Politis.
With this decision, he added, an entire era concludes and the transition begins towards a period of institutional maturity for the fund and greater macroeconomic confidence.
“The outline of the government’s plans shows that serious preparatory work has been carried out and that risks and opportunities are being carefully assessed,” he said.
According to Mr Antoniou, key areas include the creation of a strong independent management body for the fund’s reserves, guided by prudent investment rules. “It is equally important,” he stressed, “to assess the impact on public finances and introduce safeguards for challenging economic periods.”
“The return of the debt is important, but the cessation of internal borrowing from the fund’s surpluses has systemic significance, exceeding that of the gradual repayment itself,” he underlined.
PEO secretary‑general Sotiroula Charalambous described as positive the decision to regulate the state’s debt to the fund and establish a repayment plan, adding that the philosophy of ending borrowing is also positive.
“We are waiting to see the legislative framework that will regulate the issue, the governance mechanism and the investment policy framework,” she added.
Andreas Matsas, secretary‑general of SEK, also stressed that addressing the issue marks a positive development after decades, highlighting both the end of borrowing and the creation of an independent management body.
However, he pointed out that several open issues remain that must be addressed to achieve a comprehensive pension reform.
“It was necessary to regulate the state’s debt to the fund and we welcome the government’s intention to enter dialogue with social partners, so that the issue can be resolved and state borrowing from the fund can cease.”
“It is a major issue and requires careful handling. Dialogue will continue, and we expect the Ministry of Finance to participate in future meetings with more concrete proposals on how the repayment will be implemented.”
According to Mr Christodoulou, the benefits from ending borrowing and gradually returning the €12bn will not be immediate, but will materialise over time, as investments must first yield results, meaning the gains will be felt mainly by future generations of pensioners.
Acceleration of pension reform
During yesterday’s session, the first pillar of pension reform was also discussed, and will be further examined in the Technical Committee, along with clarifications on the 12 per cent contribution and issues related to the zero pillar.
The zero pillar, which relates to the minimum pension, is expected to be discussed at the next meeting on 25 May. Mr Mousiouttas reiterated his determination to bring forward legislation for the first pillar before 15 July.
Provident funds
The second pillar, concerning provident funds, was not discussed in detail at the meeting, although some reference was made. Social partners maintain their positions, with employers emphasising a voluntary approach supported by incentives, while trade unions continue to advocate mandatory participation to strengthen post‑retirement income adequacy.
