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How much is the CERN Pension Fund deficit today? or 80 MCHF/year !!!

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Presentation on theme: "How much is the CERN Pension Fund deficit today? or 80 MCHF/year !!!"— Presentation transcript:

1 How much is the CERN Pension Fund deficit today? or 80 MCHF/year !!!

2 2 If our capitalised fund was balanced … Staff meetings / March 2010 Return on investment 100% 75% 50% 25% 0% ON Staff contribution CERN contribution Paid pensions Pension Fund Assets

3 3 Staff meetings / March 2010 Return on investment 100% 75% 50% 25% 0% ON OFF ON but our pension fund is not balanced DEFICIT OF MCHF CAPITAL OF MCHF Staff contribution CERN contribution Paid pensions 65% The deficit is self-fuelling! - 80M CHF/year +40M CHF/y +80M CHF/y Conclusion Imbalance means the CERN contribution goes up in smoke !!! Pension Fund Assets

4 4 Staff meetings / March 2010 Return on investment 100% 75% 50% 25% 0% ON OFF ON Downward spiral: and year after year... OFF 65% The Actuary has concluded: “the Fund will run out of money by 2038” Staff contribution CERN contribution Paid pensions 65% Self-fuelling Pension Fund Assets How old will you be in 2038 ?

5 5 Will the return on investment save us? Staff meetings / March 2010 Return on investment 100% 75% 50% 25% 0% ON OFF ON Staff contribution CERN contribution Paid pensions Pension Fund Assets Return on investment Funding Ratio 5%10% 5 coins10 coins100% 3 coins6 coins60% Example of the year 2009: An exceptional return (~10%) has only permitted to stabilize the deficit !!! WilI the return on investment save us in the long term: no !

6 6 For pensioners and staff recruited before 1987 Staff meetings / March 2010 Return on investment 100% 75% 50% 25% 0% ON OFF ON Staff contribution CERN contribution Paid pensions Pension Fund Assets Origin of deficit: a few CERN Council decisions 1976: suppression of guarantee of resources : suppression of reduction factors for early departures : delay increase in contributions (from 21% to 30%) Deficit mainly due to some Council decisions taken in the past Contribution: staff have always paid what they have been asked to ! Benefits: CERN Council decided to setup a mechanism of under-indexation for :pensions reduced by up to 8% ! OriginActuarial Review Missing contributions (estimation 2007) Guarantee of resources (3,5% net yield) MCHF No reduction factors/early departures MCHF Delay CERN increase 1983 measuresc181 MCHF

7 7 For staff recruited from 1987 ~80% of current staff members Staff meetings / March 2010 Return on investment 100% 75% 50% 25% 0% ON Staff contribution CERN contribution Paid pensions Pension Fund Assets For staff recruited from 1987, the system is balanced: our level of contribution is sufficient for funding our future pensions Why? Contribution: level of contribution has been constantly high Benefits: CERN Council decided to introduce a reduction factor to our pensions between the ages of 60 (by -30%) and 64 (by -7%)

8 8 Return on investment Many countries have problems with their pension system Staff meetings / March 2010 Staff contribution Employer contribution Paid pensions Main differences with capitalized fund: active staff pay for pensioners no return on investment Very sensitive to demographic variations Currently in a worse financial situation “Pay-as-you-go” scheme Many CERN Council Delegations think with this model in mind... along with the current corrective measures in vogue in many countries, but at CERN... the problem is very different: capitalized (and not “pay as you go”) scheme

9 9 Staff meetings / March 2010 Deficit: what has CERN done since 2004? So many studies! CERN Council has requested six studies/working groups since Delaying tactics, but no financial effort by CERN to tackle the deficit... CERN is burying its head in the sand! In 2004: deficit of 254 MCHF

10 10 Staff meetings / March 2010 And yet... Reminder: obligation of CERN to guarantee benefits regardless of funding situation derived from its Status of International Organization CERN has two roles: Employer + State CERN has its own social security system Deficit Its existence has been known by Council for a long time Can be mostly explained by past decisions by Council Since 2004, Council has shown no real intention to make up this deficit In 2005, Council increased contributions (CERN+STAFF) by only 0,51% instead of 3% CERN has abused its dual role as “Employer + State” Employer: it has decided on various elements of a staff policy State: it has not compensated the Pension Fund for the cost of these elements of staff policy

11 11 Staff meetings / March 2010 What is CERN doing now? December 2009 Council meeting No official communication to staff and pensioners!!! Was the PFGB White paper (WP) on full funding examined? Set up (another!) Advisory Committee with 3 CERN/ESO Council delegates 1 CERN Management representative as secretary but no representative of the staff/pensioners!!! (Part of) mandate of this committee: Prepare the DG for future negotiations with the staff Since 1 st January 2010 Advisory Committee has already met twice Staff Association has met the new President of CERN Council “Desire to proceed quickly: new measures on 1 st January 2011” “Measures involving all parties”

12 12 Our opinion Staff meetings / March 2010 Council does not like WP conclusions Concertation process not conducted in good faith To not attract the attention of the staff: “dormez, je le veux” Council wishes to depart from the conclusions of the White Paper Staff Council has decided that the Staff Association President: should resign from his position in the PFGB  to be free from his duty of discretion  to be able to fully defend the rights of all the beneficiaries

13 13 Reminder White Paper: how to absorb the deficit? Staff meetings / March MCHF/year +0 MCHF/year

14 14 Reminder White Paper: Pension Fund Governing Board Staff meetings / March 2010 STAFF: +5 MCHF CERN/MS: +109 MCHF PFGB (CERN/ESO Council, CERN Management, Pensioners, CERN/ESO Staff, Experts) : Recognizes CERN’s responsibility in the face of this deficit of MCHF But CERN Council wants to change this ratio

15 15 What have been the financial efforts to deal with the deficit of the Fund so far: by the employees: Staff recruited from 1987 In 1986, CERN Council decided to reduce our pensions between the ages of 60 (by -30%) and 64 (by -7%)In 1986, CERN Council decided to reduce our pensions between the ages of 60 (by -30%) and 64 (by -7%) Staff recruited before current pensioners included In 2005, CERN Council decided to implement a mechanism of under- indexation for : pensions reduced by up to 8% by the employer: CERN: peanuts ! In 2005, 2/3 of 0,51% (instead of 3%) increase in contributionsIn 2005, 2/3 of 0,51% (instead of 3%) increase in contributions Is the ratio in the White Paper fair? Staff meetings / March 2010 Is the ratio in the White Paper fair? Obviously, because up to now to tackle the deficit: no substantial financial effort has been agreed on by CERN efforts have already been agreed on by the “employee” college

16 16 Staff meetings / March 2010 Advisory committee without staff representatives? Tripartism scorned! What should we be afraid of? Our contributions will rocket Our benefits will be attacked (regardless of our acquired rights ???) Recent evolution in other IO EPO: from defined-benefit to defined-contribution scheme ESA: contributions (Org.-Staff ratio from 67%-33% to 60%-40%) We thought we had guarantees? The case of EUTELSAT - Feb.2010 : nothing but doubts

17 17 Staff meetings / March 2010 Why act now: what is the cost of doing nothing ? CERN Council’s apathy could continue: the Fund would be empty in 2038 CERN Council will impose a new major effort on active staff (never mind the fact that 4/5 of the staff joined CERN after 1987) by asking them to contribute more by reducing benefits increased temptation to attack our acquired rights on beneficiaries by raising the current ceiling of 8% of under-indexation of pensions 5YR-2010 (salaries, CHIS): an opportunity given to trample over our rights Staff: a cost to be reduced and no longer a resource to be managed

18 18 Staff meetings / March 2010 Why act now: the stakes linked to the deficit of 2000MCHF Staff recruited from 1987 ~ 4/5 of current active staff Deficit: it is not for us to pay the bill! We must make this clear before we are asked to pay If nothing is done to make up this deficit An empty fund in We would be the main victims! Staff recruited before current pensioners included Mechanism of under-indexation for If this measure compensates for a contribution deficit, this means that CERN must pay its share (twice the amount)!

19 19 Staff meetings / March 2010 Why act now? For our pensions, there is no better guarantee than a properly capitalized Fund! 1 st step: petition in March “2 000 MCHF deficit, that’s enough!” We cannot let the deficit grow even more! We therefore ask CERN, as a conservative measure, to financially compensate any loss beyond the current deficit of MCHF The best way to test whether CERN Council truly wants to stop burying its head in the sand CERN budget for 2011 voted in June 2010: it’s time for action ! CERN Council must assume its responsibilities and inject the money it has not injected in the past 2 nd step (later): CERN Council must assume its responsibilities and inject the money it has not injected in the past

20 20 In short 1/2 Pension Fund: MCHF deficit is growing by 80 MCHF/year Imbalance means the CERN contribution goes up in smoke ! The Fund will run out of money by 2038 !!! The return on investment WILL NOT save us in the long term 114 MCHF/year are needed to restore the balance in 30 years PFGB recognizes CERN’s responsibility in the face of this deficit by proposing a ratio: CERN/MS: +109 MCHF / STAFF: +5 MCHF This ratio by PFGB is fair when considering that: substantial efforts have already been agreed on by the “employee” college no substantial effort has been agreed on by CERN Main origin of deficit: CERN has not compensated the Pension Fund for the cost of some elements of staff policy it decided on in the past Staff meetings / March 2010

21 21 But Council wishes to depart from the conclusions of the PFGB Advisory committee without staff representatives: concertation process not conducted in good faith !!! Delegations will come with their own solutions: many Delegates think with the “pay as you go” scheme in mind (and not capitalized scheme)... along with the current corrective measures in vogue in many countries as in other International Organizations: ESA, EPO staff: a cost to be reduced and no longer a resource to be managed Staff must react now because: Attacks against our interests will come: contribution, benefits, acquired rights It is not up to 4/5 staff to pay the bill ! In 2010: 5YR/CHIS dossier 18 March: Gathering of Pensioners and Staff Petition: “2 000 MCHF deficit, that’s enough!” Conservative measure: ask CERN to financially compensate any loss beyond MCHF should represent 80 MCHF of the 114 MCHF/year needed Staff meetings / March 2010 In short 2/2

22 Staff Meetings - March 2010 Appeal to the staff and pensioners MCHF deficit, that’s enough! Let us join forces! Thursday 18 th March How much is the CERN Pension fund deficit today? How much is the CERN Pension fund deficit today? click here click here


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