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Around 50,000 pensioners could receive more than €100 extra each month under the government's proposed changes to Cyprus' pension system, Labour Minister Marinos Mousiouttas said on Wednesday.
The proposal, presented to the Labour Advisory Board, would affect all 123,000 people currently receiving old-age pensions. Around 60,000 pensioners are expected to receive increases of less than €100 a month over a five-year period.
The changes would also affect people who have yet to retire. Future pensioners on lower incomes could receive pensions between 5% and 60% higher than under the current system, according to figures presented by the ministry.
One of the main changes under discussion concerns people who retire at 63. The government is proposing to reduce the actuarial adjustment applied to early retirement from 12% to 7.5% on the basic part of the pension.
Mousiouttas said the retirement age itself would remain unchanged, as would the current contribution rate to the Social Insurance Fund.
Cost to public finances
Cyprus Chief Actuary Costas Stavrakas said the proposed system would require additional public spending of around €50 million annually during each of its first five years.
At the same time, the reform would end state borrowing from the Social Insurance Fund, he said.
The state has borrowed approximately €12 billion from the fund. Stavrakas said some projections indicate that repayment could take around 40 years. He added that the amount repaid would be relatively small compared with future surpluses expected to accumulate in the fund.
Mousiouttas said repaying the money would require the state to borrow from financial markets, creating interest costs that would also have to be taken into account when assessing the reform's financial impact.
The proposed changes cover both existing pension arrangements and future retirement income. Current pensioners would be covered through Pillars 0 and 1, while Pillar 2 would cover provident funds for future pensioners.
Reform timetable
The government has been working on the pension reform for about two years, with discussions taking place through various committees and with social partners.
Mousiouttas said the government wants to reach the highest possible level of agreement before sending the proposal to the Council of Ministers and Parliament.
The Labour Advisory Board is due to continue its discussions on August 28. The government's target remains January 1, 2027 for the reform to take effect, with pensioners expected to receive their first payment under the new system on February 1.
Mousiouttas described the objectives of the reform as improving fairness, increasing pension adequacy and maintaining the long-term financial sustainability of the Social Insurance Fund.
The Finance Ministry is also involved in the process. Mousiouttas said he had worked closely with Finance Minister Makis Keravnos and expressed hope that Keravnos would attend the August 28 presentation to outline the proposed investment model for the Social Insurance Fund.
The government says the pension system can provide stronger support for people on lower incomes without increasing the retirement age or the existing contribution rate. Final decisions will depend on the outcome of the ongoing discussions with the social partners and the subsequent parliamentary process.
