Dorita Yiannakou
The finishing touches are being put on the pension reform bill today. Labour Minister Marinos Mousiouttas is presenting the proposed measures to Finance Minister Makis Keravnos, with the aim of securing final approval and assessing their impact on public finances.
At the heart of the discussions is whether the proposed measures can be implemented as they stand or whether, given the fiscal constraints, they will need to be reviewed and amended before the bill moves forward.
According to our information, the labour and finance ministers are considering a review of “Pillar Zero,” which covers state support for vulnerable groups, particularly the low-income pensioner allowance and the income threshold used to determine who qualifies.
Mousiouttas will then brief President Nikos Christodoulides, after which the bill will be sent to the social partners so they can give their views on specific provisions.
Finance Ministry weighs repayment of €12 billion Social Insurance Fund debt
The Finance Ministry is also examining how the state could gradually repay the €12 billion it owes to the Social Insurance Fund.
Mousiouttas has already called two meetings of the Labour Advisory Board in August in an effort to secure the agreement of the social partners. They have been informed that meetings will be held on Aug. 19 and 28.
According to our information, some social partners have expressed frustration because they will be unable to attend the Aug. 19 meeting. Despite the objections, Mousiouttas appears determined to hold both meetings this month, as he wants to brief and consult the political parties on the bill before the end of August.
Provident funds
Meanwhile, according to information from the relevant authorities, tomorrow’s meeting of the technical committee on provident funds may be postponed until after the Aug. 15 holiday.
The meeting is currently scheduled for tomorrow, but there is a strong possibility it will be delayed because those involved are waiting for actuary Costas Stavrakis to complete specific work before discussions on the outstanding issues can continue.
The social partners say they are waiting for a roadmap with specific measures so the framework governing provident funds can be modernized.
The unions are pushing for mandatory participation, while employers insist that any expansion of provident funds should remain voluntary.
The sticking points
There is concern among the social partners over whether the final pension reform bill will actually be an improved version of the proposal presented previously, as questions remain over its contents and final provisions.
We have been told there are no clear indications that there will be substantial changes from the original proposal.
One of the main sticking points appears to remain the 12% actuarial reduction imposed on those who retire early.
As for Pillar Zero, which is designed to provide a minimum level of income support to protect people from poverty, one possibility under consideration is for the state to take on greater responsibility in ensuring basic protection for low-income pensioners.
There are concerns, however, that such a move could trigger opposition because it could increase the state's obligations and create additional costs for public finances.
Another difficult issue is the government's intention to gradually repay the €12 billion it owes to the Social Insurance Fund.
The government's plan is to return €100 million to €120 million a year to the fund, meaning repayment would take approximately 30 years. According to our information, the relevant authorities have raised concerns about the possibility of fiscal slippage.
At the same time, the changes under discussion could affect the state's obligations under European fiscal rules. For this reason, the involvement of the finance minister is considered essential before final decisions are made.
Mousiouttas optimistic
Meanwhile, Mousiouttas has publicly expressed optimism that an agreement can be reached on the various aspects of the reform.
The labor minister has also made clear that the government's plans do not include raising either the retirement age or social insurance contributions.
He said the government's main objective is to make the best possible use of the Social Insurance Fund's resources while ensuring that the pension system remains sustainable over the long term.
With this in mind, Mousiouttas stressed that any decision involving additional spending would have to be matched by savings elsewhere in order to maintain fiscal balance. He said this approach reflects the need to set clear priorities and use available resources as efficiently as possible.
According to the minister, the reform plans take into account a number of factors expected to affect the fund's future financial position.
These include the expected increase in the number of contributors, stronger inspections aimed at tackling undeclared and underdeclared work, and the fund's available surpluses.
Particular emphasis has been placed on managing both current and future surpluses with a long-term approach. Mousiouttas said they cannot be viewed through a short-term lens but must form part of planning covering approximately 40 years, in line with the actuarial study.
The reform also includes plans to create a special fund into which surpluses are expected to be deposited after 2028. Legislation governing the establishment and operation of the fund is expected to be submitted by the end of 2027.
An independent supervisory authority is also planned to monitor and oversee the fund's operation, along with the adoption of a specific investment policy.
The aim is to ensure that available funds can generate returns over the long term and strengthen the financial resilience of the pension system.
