Newsroom
Cyprus’ long-awaited pension reform is running into resistance, with workers’ unions warning that some of the most important questions remain unanswered: Will employees have to pay more? Will future pensioners receive enough to live on? And who will ultimately pick up the bill?
The Labour Advisory Board met Thursday morning with Labour Minister Marinos Mousiouttas to continue discussions on the proposed legislation. The government had hoped to submit the bill to Parliament by the end of September, but that deadline now appears increasingly difficult to meet.
The reform is meant to improve pensions and strengthen the system for the future. However, unions say the draft currently on the table leaves too many gaps, particularly over its cost and how available funds will be divided.
For the average worker, the debate may sound painfully technical. In practice, however, it comes down to the money deducted from every monthly salary and the amount waiting at the end of a person’s working life.
Will workers have to contribute more?
Trade union SEK says workers and employers had agreed that the reform should not lead to an additional increase in social insurance contributions or a higher retirement age.
Contributions are already scheduled to rise every five years under existing legislation. Unions say they will oppose further increases if the government’s calculations fail to add up.
SEK Deputy General Secretary Panikos Argyrides told the Reporter that the Social Insurance Fund is currently capable of paying improved benefits but warned that any changes must protect the rights built up by people who have paid into it throughout their working lives.
The retirement age currently stands at 65 and is linked to changes in life expectancy. Unions insist it should not be raised simply to make the reform financially viable.
The 12% cut remains a sticking point
Another unresolved issue is the 12% reduction imposed on people who choose to retire at 63 rather than 65.
Unions have submitted alternatives, but no agreement has been reached. PEO says it does not support the arrangement included in the current bill, while SEK argues that different limits and criteria should be considered if they can be introduced without increasing the overall cost to the fund.
The issue is especially important for people in physically demanding jobs who may find it difficult to continue working until 65. For them, retiring earlier can mean accepting a permanent reduction in their pension.
What about provident funds?
There is also disagreement over the proposed second pillar of the system, which covers workplace provident funds.
Only about 35% of workers are currently covered by such funds, according to the unions. Employers reportedly want the schemes to remain voluntary, while unions argue that voluntary participation has failed to provide coverage for most of the workforce.
One proposal would retain the voluntary system with additional incentives but introduce compulsory participation later if coverage does not improve.
Concerns for low-income pensioners
PEO is also asking the government to explain how much it is prepared to spend on social pensions, minimum pension supplements, and support for low-income retirees.
According to the union, the state currently spends about €182 million to €183 million a year in these areas. It fears that the proposed reform could rely too heavily on moving existing money around or tightening eligibility rules, rather than providing additional support.
PEO also says the current plan may still leave some pensioners living below the poverty line and has expressed concern about possible tighter rules governing incapacity benefits.
The government has not yet provided all the answers sought by the unions, and negotiations are continuing.
For workers in their 20s and 30s, the final decisions could shape the contributions they make for most of their careers. For people approaching retirement, the concern is more immediate: whether they can afford to stop working and what kind of income they will have when they do.
