Pensions: what’s new in June?
Since the mass mobilization in March (see Echo no. 98), many of you, young and old, have been asking your staff delegates about how the pensions issue is evolving. This is a sign, if one were needed, that this matter remains a great concern of the active and retired staff. The record deficit of 2 thousand million Swiss francs of our scheme explains this. All the more so since this deficit is growing a little more every day, even if the investment of the fund’s remaining capital yielded 5% per year. An objective that seems ever more distant given the results of the first semester of 2010: the febrile state of the financial markets, an image of a European economy in difficulty, is far from reassuring. In this context, the figure of an additional loss of 33 million francs since the beginning of 2010, as is shown on our web site (http://association.web.cern.ch/association/en/), appears even rather minimalist.
Is there a pilot in the plane?
Beyond the health of the financial markets which, we know, cannot alone make up the current deficit in the long term, what concerns you most is the attitude of our decision makers. In the past, CERN Council has far too often shown a lax attitude in this respect(http://association.web.cern.ch/association/Docs/Chronology.pdf). And although we have all welcomed over the past months the first signs of a possible end to this habit of burying their heads in the sand, it would seem legitimate that the Member States fully take on this huge responsibility. For example, by following the scenario presented in the document (White Paper) approved by the Pension Fund Governing Board. This would make sense, as CERN Finance Committee and Council have officialized this paper (which became a Green Paper in March 2010), in which the employers are asked to foot 95% of the cost. Moreover, after considering another document entitled “analysis of the structural causes of the deficit” that they requested from the General Manager of the Fund, it is no longer possible for the present delegates to ignore the historical responsibility of CERN Council.
We can nonetheless fear that the Member States are looking to offload their responsibility by asking for further ill-considered efforts by the “employee” college.
CERN Council creates an advisory group
Is it with this intention that CERN Council created an advisory group in December 2009 with representatives of the Member States and a representative of the Director-General as secretary? In any case, we notice that the “employee” college is absent and is thus kept out of the discussions.
In the Official Committee meetings in March 2010, a three-point plan of action was proposed which we summarize here:
Part I: stabilize the deficit by injecting an additional 80 million Swiss francs per year from 2011
Part II: decrease the benefits for staff members recruited from 2011
Part III: transitional measures to narrow the gap between the benefits of current and future staff (active and retired)
According to our information, this Advisory Group has been mostly working on Part I, postponing the proposals for Parts II and III to the autumn.
Who will pay what to stabilize the deficit?
Part I, which is supposed to total 80 million Swiss francs, is divided into five measures:
1.1 an increase in the contribution rate (respecting the ratio 1/3 employee, 2/3 employer)
1.2 an additional contribution by CERN
1.3 an additional contribution by ESO
1.4 an under-indexation of pensions (up to a maximum of 8%)
1.5 an introduction of the possibility to work between 65 and 70 years old
One thing is certain: 80 million Swiss francs must be raised by 2011 to have any hope of stabilizing the 2 thousand million Swiss francs deficit of our Fund.
This said, without knowing how the 80 million Swiss francs will be shared out over the five measures, it is difficult to judge what will be the efforts asked of the different parties. We note however that the under-indexation of pensions will represent in the end a quarter of the total. This is not negligible. We can reasonably think that the contribution rate should not go beyond 34%, which is already extremely high. Studies are in progress to evaluate the savings for the Fund resulting from a voluntary programme offering the possibility to work between 65 and 70 years old. We like to think that these savings would be limited, so that abandoning this measure would mean avoiding a delicate political issue. We will come back to this soon.
However, the crucial point of Part I is the amplitude of the additional contributions by the Organizations, for they must ensure that the 80 million Swiss francs necessary by 2011 are reached. No doubt this point will dominate the discussions in the Council meeting on 17 June. The outcome of this meeting will tell us a good deal about the true intentions of the Member States to assume their responsibility as guarantor of our Pension Fund.
We could be in for a difficult summer
At the June Committees, the Member State delegations will applaud the spectacular progress of the LHC and congratulate the staff. It would be nice if our decision makers remembered this good news when pensions come up on the agenda.
Since it is planned that the Director-General will begin the concertation process with the staff representatives after the June Committees, we will keep a particularly close eye on how the effort is shared out between the « employers » and the « employees ». In Part I, of course, but also for Parts II and III. Indeed, for the latter two, it will not have escaped your attention that for the time being only the “employee” college has been asked to make an effort. This is, therefore, totally unacceptable. Just as it would be if, in Part II, acquired rights were attacked.
