how much is the cern pension fund deficit today? or 80 mchf/year !!!

A S S O C I A T I O NStaffdu Personnel

How much is the CERN Pension Fund deficit today?

or 80 MCHF/year !!!or 80 MCHF/year !!!

2

If our capitalised fund was balanced …If our capitalised fund was balanced …

Staff meetings / March 2010

Return on investment

100%

75%

50%

25%

0% ON

ON

ON

ON

ON

Staff

contribution

CERN

contribution

Paid pensionsPaid pensions

Pension Fund AssetsPension Fund Assets

3Staff meetings / March 2010


100%

75%

50%

25%

0% ON

OFF

OFF

ON

ON

but our pension fund is not balancedbut our pension fund is not balanced

DEFICIT OF

2 000 MCHF

CAPITAL OF

3 700 MCHF

Staff

contribution

CERN

contribution


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 !!!




100%

75%

50%

25%

0% ON

OFF

OFF

ON

ON

Downward spiral: and year after year...Downward spiral: and year after year...

OFF

OFF

OFF

65%

The Actuary has concluded:

“the Fund will run out of money by 2038”

Staff

contribution

CERN

contribution


65%

Self-fuelling

Self-fuelling

Self-fuellingPension Fund AssetsPension Fund Assets

How old will you be in 2038 ?

5

Will the return on investment save us?Will the return on investment save us?



100%

75%

50%

25%

0% ON

OFF

OFF

ON

ON

Staff

contribution

CERN

contribution



Return on investment Funding

Ratio5% 10%

5 coins 10 coins 100%

3 coins 6 coins 60%

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

For pensioners and staff recruited before 1987For pensioners and staff recruited before 1987



100%

75%

50%

25%

0% ON

OFF

OFF

ON

ON

Staff

contribution

CERN

contribution


Pension Fund AssetsPension Fund AssetsOrigin of deficit: a few CERN Council decisions

1976: suppression of guarantee of resources

1976-87: suppression of reduction factors for early departures

1983-96: 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 2005-2033: pensions reduced by up to 8% !

Origin ActuarialReview

Missing contributions (estimation 2007)

Guarantee of resources (3,5% net yield) 1986 517 MCHF

No reduction factors/early departures 1988 350 MCHF

Delay CERN increase 1983 measures c 181 MCHF

7

For staff recruited from 1987For staff recruited from 1987

~80% of current staff members~80% of current staff members



100%

75%

50%

25%

0% ON

ON

ON

ON

ON

Staff

contribution

CERN

contribution



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


Many countries have problems with their pension systemMany countries have problems with their pension system


Staff

contribution

Employer

contribution


• 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” schemePay-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


Deficit: what has CERN done since 2004?Deficit: what has CERN done since 2004?

• So many studies!

CERN Council has requested six studies/working groups since 2004.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


And yet ...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


What is CERN doing now?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 1st 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 1st January 2011”

• “Measures involving all parties”

12


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 a secretary

• but no representative of the staff/pensioners!!!

• (Part of) mandate of this committee:• Prepare the DG for future negotiations with the staff

• Since 1st 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 1st January 2011”

• “Measures involving all parties”

Our opinionOur opinion


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 PFGBto be free from his duty of discretionto be able to fully defend the rights of all the beneficiaries

13

Reminder White Paper: how to absorb the deficit?Reminder White Paper: how to absorb the deficit?


+114 MCHF/year

+0 MCHF/year

14

Reminder White Paper: Pension Fund Governing BoardReminder White Paper: Pension Fund Governing Board


16

White paper: a possible scenario

1. Increase contribution rate from 30.88% to 34%Impact: +15.5 MCHF/year

2. Introduction of a tax retrocession-type mechanism corresponding to 12% of benefits, which would be paid back to the Organization

Impact: +45.3 MCHF/year

3. Creation of an employer buffer fund assuming an annual return of 5%

Impact: +53.3 MCHF/year

Total amount of +114.1MCHF/year over 30 years

Staff meetings / Sept. - Oct. 09

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 2 000 MCHF

But CERN Council wants to change

this ratio

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 In 1986, CERN Council decided to reduce our pensions between the ages of 60 (by -30%) and 64 (by -7%)60 (by -30%) and 64 (by -7%)

• Staff recruited before 1987 - current pensioners included

• In 2005, CERN Council decided to implement a mechanism of under-indexation for 2005-2033: 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?Is the ratio in the White Paper fair?


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


Advisory committee without staff representatives?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


Why act now: what is the cost of doing nothingWhy 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


Why act now: the stakes linked to the deficit of 2000MCHFWhy 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 2038... We would be the main victims!

• Staff recruited before 1987 - current pensioners included

• Mechanism of under-indexation for 2005-2033

• If this measure compensates for a contribution deficit, this means that CERN must pay its share (twice the amount)!


Why act now?Why act now?

• For our pensions, there is no better guarantee than a properly capitalized Fund!

• 1st 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 2 000 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 !

• 2nd step (later): CERN Council must assume its responsibilities CERN Council must assume its responsibilities and inject the money it has not injected in the pastand inject the money it has not injected in the past

20

In shortIn short 1/21/2

• Pension Fund: 2 000 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


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 2 000 MCHF

• should represent 80 MCHF of the 114 MCHF/year needed


In shortIn short 2/22/2

A S S O C I A T I O NStaffdu Personnel

Staff Meetings - March 2010Staff Meetings - March 2010

Appeal to the staff and pensioners2 000 MCHF deficit, that’s enough!

Let us join forces!Thursday 18th March

How much is the CERN Pension fund deficit today?How much is the CERN Pension fund deficit today?click hereclick here

how much is the cern pension fund deficit today? or 80 mchf/year !!!

Documents

active staff

staff association

opinion staff

cern pension fund deficit

state cern

balanced staff meetings

cern council decisions

obligation of cern