Dorita Yiannakou
When the government decides to introduce a new pension system almost half a century after the major reform of 1980, it has a duty to get it right, not design it around other considerations. And let us not forget that elections are approaching.
The lure of pension increases, even when those increases are limited in some cases, cannot be the sole basis for a reform that will bind the state and social insurance contributors for decades.
Finance Minister Makis Keravnos now appears to be changing the plans Labour Minister Marinos Mousiouttas had in mind, as the numbers do not seem to add up. There may not be enough money to cover future contributors while also keeping the state’s finances sustainable.
We are not yet in a position to know the figures. And, judging by the fact that the actuarial studies are still being prepared, neither are they.
In any event, placing higher contributions on future workers to fund increases in their eventual pensions is not a rational choice. Contributors may barely have time to feel the benefit of a pension increase, since it will be introduced gradually, before—just like that—five years have passed and the state must once again examine the sustainability of the Social Insurance Fund and the country’s public finances.
By then, some external crisis will probably have occurred. As always, it will affect Cyprus, and the state will be left to pick up the pieces.
All of that is understandable. Any finance minister must maintain fiscal buffers to deal with a possible crisis, whether it comes from inside or outside the country.
At the same time, however, pension reform cannot be treated as a simple quid pro quo, in which every change in contributions must automatically correspond to a specific benefit. This is a much broader, long-term process. It concerns the adequacy and sustainability of the pension system and, above all, the provision of decent pensions for future generations.
At the heart of such a reform should be the creation of a system capable of meeting pensioners’ needs without placing a disproportionate burden on today’s workers or those of the future. Changes to contributions, pension rights, and retirement conditions are tools for reaching that goal; they are not goals in themselves.
The real question, therefore, is not simply who will pay more and who will receive more. It is whether the new system will, over time, provide people completing their working lives with a pension that allows them to live with dignity.
At the same time, the system must remain financially sustainable and fair across generations.
Seen in this light, pension reform is an investment in the future of the welfare state. The decisions made today do not concern only current pensioners or workers nearing retirement. They also concern younger contributors, who will be called upon to support and rely on the system in the decades ahead.
The government, the social partners, and Parliament must keep all of this in mind before approving the legislation.
The reform must be designed for long-term sustainability, not short-term political convenience. A reform of this scale, one that will determine the pensions and contributions of future generations, does not have the luxury of failure.
Let us not allow pension reform to become yet another fiasco.
