[2008-03-27]  Egypt preparing to let pension funds buy equities
The Egyptian government is preparing legislation which would make it possible to invest up to 25 percent of pension fund surpluses in equities and other tradeable instruments, a senior official said on Wednesday.

The change, which the Ministry of Finance hopes to push through parliament by the end of the year, would be a radical overhaul of the current system under which almost all pension fund surpluses are invested in government infrastructure projects.

Mohamed Ahmed Maait, adviser to Finance Minister Youssef Boutros-Ghali, told Reuters that Egypt's state pension system was one of the most expensive in the world, with contributions assessed at 41 percent of basic income.

Easing restrictions on investing the surpluses is one part of a package which should make reduce the burden on both employers and employees, and reward those who make the largest contributions, he added.

Maait said the National Authority for Social Insurance would be able to invest the surplus funds and interest on its existing assets in the stock market, in real estate or directly in new or existing commercial enterprises, including industry, agriculture and construction.

It has already started investing a very small proportion of its interest income in equities, and those investments now account for under 1 percent of its total assets, he said.

"It is now less than 2 billion pounds, but those investments are achieving 23 percent return over the last three years," said Maait. The pension fund surpluses accumulated over the years and deposited with the government's National Investment Bank are now worth about 250 billion pounds.

"I see no problem in taking some risk to ensure a higher rate of return, especially when these are very long-term liabilities," he said.

The government is not considering introducing pension schemes which allow employees to take their own decisions on how to invest contributions, he added.


Source: © Reuters 2008.