Some parties with all their respect and weight, and others less than that, demanded the Public Institution for Social Security (PIFFS) to give a share of its profits to the retired and the insured. We have earlier explained in more than one article that what they are asking for is illegal, illogical and, moreover, difficult to implement because of the deficits that the institution faces as a result of the huge actuarial deficit it suffers from.
Actuarial accounting is a difficult mathematical science to specialize in, but it is also a good area for a decent income.
The business of insurance and social security companies requires that actuarial calculations be made approximately every three years to know their financial conditions, and to calculate the premiums. If a person applies for life insurance coverage from an insurance company so that the company pays a large amount to him in the event of any physical disability that prevents him from working, or pays a large amount to his heirs in the event of his natural death, the premium is determined based on actuarial calculations.
The insurance or pension institutions also accept new subscribers on a continuous basis, and they pay a percentage of their salaries to the institution monthly, and often the entity in which they work pays a similar or slightly higher premium, so that the institution, after specific years of work, can pay the pensioner lifetime salary. How can all these calculations be done without accurate actuarial equations?
In order to know the soundness of the actuarial or financial position of any retirement fund in the world, it is required to freeze all the fund numbers at the end of a certain day (as if its management is in the process of liquidating it) and to calculate the real value of all the fund’s investments and assets at that moment.
If we assume that it is 30 billion dinars and deducting all obligations of the Fund towards all its insured and retired, and suppose that at that moment it is 50 billion dinars, then we arrive at the fact that this institution suffers from an actuarial deficit of 20 billion dinars, and this is exactly the situation of the PIFFS in Kuwait, with the fact that the above figures are of course hypothetical.
Therefore, it is unreasonable for some to ask the institution to share the profits it achieves with the insured, given that the benefits that the contributor receives from the Institution are more generous than any pension fund in the world.
The subscribers, male and female, retire at the lowest age in the world. The retirement pension is paid to the insured for life. In the event of death, the salary shall continue to be paid to his widow and his children until they are 26 years old.
As for the daughter, the payment continues for lifetime, and stops if she marries, and returns again in the event of her divorce, and so on. Thus, the observer can notice the huge financial obligations that fall on the shoulders of this institution, especially in times of natural calamities, epidemics and others.
Therefore, the institution is required to form reserves to meet these circumstances, as they are mutual insurance institutions and not a company that seeks to achieve profits for its founders. If any company stops making profits in a financial year, it is natural for it to refrain from distributing any profits to its shareholders, and they will accept that.
As for the PIFSS, it is forced to pay the salaries of its retirees every month, in order to completely secure their livelihood. Therefore, social security funds are usually supported by the government, and are subject to severe monitoring from several bodies.
It was stated in yesterday’s article that the news of the establishment of the academy was published in a newspaper, and for clarification, the news was published by the Al-Rai daily.
By Ahmad alsarraf