GREECE- Greece’s largest pension fund, the Social Security Foundation (IKA), is considering the use of external investment managers to manage E1.8bn of its assets.

This follows a joint move by IKA and the Farmers’ Insurance Fund (OGA) to launch a mutual fund company. The IKA-OGA mutual funds company is expected to establish two funds, a balanced fund and a fixed interest fund, with total assets of E1.76bn.

The social security ministry is increasing the limit on pension funds investment in equities and real estate from 20% to 23%. This will release an estimated 5% of the E7.5bn of pension fund reserves that the Bank of Greece holds as compulsory deposits.

The government hopes the new IKA-OGE funds will invigorate the underperforming Athens Stock Exchange (ASE). Schroder Salomon Smith Barney in Athens has estimated that the funds could account for 1% of ASE’s total free float.

The Greek government also intends to put E 1.26bn into IKA next year as part of its plans to reform the state pensions system. Finance minister Nikos Christodoulakis said that the payment was to help IKA built up future reserves. He said it would be funded from the social security budget and through the issue of government bonds.

The social security sector currently absorbs 3.5% of Greece’s GDP. This is expected to rise to 11% by 2030, according to a study carried out for the Greek government by the UK government actuary’s department last year. However, the government says the reforms will reduce this to 7%.

The government is proposing to increase the replacement rate from 60% to 70%, and replace the retirement age of 65 with retirement after 37 years. It also plans to amalgamate the current 200 supplementary pension funds into 10 plans, and create a new, single pension fund for wage earners by 2008.



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