Talks continue on ‘emblematic policy’ of pension reform

The government on Monday held talks with stakeholders on the ‘second pillar’ of pension reform, which the administration is keen to roll out by next year.

Labour Minister Marinos Moushiouttas chaired a meeting of the Labour Advisory Board – the top advisory body on labour relations and social policy consisting of representatives of the government, employers and trade unions.

Discussions on the planned pension reform kicked off in earnest in early January.

“Today we opened up a small window regarding the second pillar,” Moushiouttas later told journalists.

He said the government presented stakeholders with an outline of its approach to pension reform.

It was an initial, general discussion, without going into detail.

The minister called the planned reform an “emblematic policy” of the current administration.

Reform of the pension system is being planned for early 2027, with the government expected to table the relevant bills to parliament this June.

The key goals are to raise the pension amounts for those on the low end, reduce and gradually scrap the 12 per cent ‘penalty’ for those retiring before 65, and potentially cutting back on the pensions for high earners in the private sector.

The 12 per cent ‘penalty’ is a permanent reduction applied to social insurance pensions for individuals opting to take early retirement at the age of 63 instead of the statutory age of 65. Introduced in 2012, it acts as an actuarial offset for receiving pension payments for two extra years.

The government is reportedly considering various alternatives for the ‘penalty’, with a possibility of eventually abolishing it by the year 2030.

The first ‘pillar’ of pension reform concerns state pensions; the second concerns provident funds, as well as the cash reserves of the Social Insurance Fund (SIF) and its investment policy.

Employers organisations – the Chamber of Commerce and the Employers and Industrialists Federation – are expected to submit detailed positions based on a study assigned to a consultancy.

For its part, the pensioners union (Ekysy) wants to focus on people with pensions lower than €1,000 – particularly at a time when the cost of living is ‘eating away’ at this income.

For decades, the state has dipped into the SIF for financing, paying it 2.15 per cent interest for the money it borrows.

In January, Moushiouttas told a parliamentary committee that the state’s accrued debt to the SIF comes to €11.3 billion.

The last major reform on the pension system took place in 1980, with additional changes introduced during 2012-2013 as part of Cyprus’ agreement with international lenders.