**Title: Fiscal Council Chairman Urges Caution in Social Insurance Fund Investments**
On Thursday, Andreas Charalambous, the chairman of Cyprus's fiscal council, emphasized the need for the government to exercise caution regarding its plans to invest the cash reserves of the social insurance fund. Speaking to the Cyprus News Agency, Charalambous warned against "adventures which endanger the social insurance fund," advocating for a more prudent approach to managing these funds.
Charalambous highlighted the importance of setting realistic expectations for the returns on investments made with the social insurance fund. He stressed that any investment strategy should prioritize low-risk options, given the fund's critical role in supporting the financial security of retirees and pensioners. “We must create realistic expectations of what the return of such a fund can be,” he stated.
The fiscal council chairman also addressed the government's intention to terminate state borrowing from the social insurance fund, which currently amounts to approximately €12 billion. Charalambous proposed a gradual approach to both the cessation of borrowing and the repayment of existing debts. He suggested that the government should first halt any new borrowing, which would lead to balanced books instead of the projected surpluses of two to three percent in the coming years.
“From that point onwards, the return of the amount borrowed to the reserve must be done very gradually so as not to have any impact on the state’s public finances and so that it can be managed prudently,” he explained. This cautious approach aims to mitigate the risk of a financial crisis that could arise from abrupt changes in fiscal policy.
Demographic trends in Cyprus were also a focal point of Charalambous's remarks. He noted that with an ageing population, relying solely on social insurance funds may not be sufficient to ensure adequate pensions for retirees. To address this challenge, he advocated for the implementation of a major project aimed at encouraging private pension savings through provident funds. This initiative, he argued, is essential for providing additional support to pensioners and ensuring long-term sustainability of retirement income.
Charalambous also touched on the government's stance regarding early retirement policies. He reaffirmed the necessity of maintaining the current pension adjustment for those who retire early at the age of 63. The government plans to reduce the existing 12 percent downward adjustment to 7.5 percent, while keeping the standard retirement age at 65. “It is not possible, as the conditions are today and based on the demographic data worldwide and in Cyprus, to reduce the retirement age,” he remarked, emphasizing that such a change would jeopardize the adequacy of pensions.
As the government navigates these complex issues, Charalambous's call for responsibility and caution reflects a broader concern for the financial stability of Cyprus's social insurance system. His insights underscore the importance of strategic planning and prudent management to safeguard the future of pensions in the face of evolving demographic challenges.