Pension reform to cost state over €800m in six years
Labour Minister Marinos Mousiouttas says the pension overhaul will add €820m in costs over six years, as the government prepares to table the first bill in parliament.
The reform of Cyprus's pension system will cost the state more than €800 million over a six-year period, Labour Minister Marinos Mousiouttas said on Monday, as reported by Cyprus Mail, speaking after the latest meeting of the labour advisory board.
Citing figures previously released by the finance ministry, Mousiouttas said the total additional burden is estimated at €486 million for the state, plus €334 million for the Social Insurance Fund — €820 million in total over six years. The €334 million figure concerns the amount the state will return to the Social Insurance Fund over that period.
For decades the state has borrowed from the Social Insurance Fund to cover financing needs, paying 2.15 per cent interest on the money it takes. The total owed to the fund now stands at around €12 billion. Under the coming overhaul, the state will stop borrowing from the fund and gradually repay its debt in instalments.
The draft government bill now under review by trade unions and employers covers the so-called first pillar of the reform, which concerns state pensions. The second pillar deals with provident funds, the cash reserves of the Social Insurance Fund and its investment policy, while pillar zero covers pensions for low-income earners.
Mousiouttas said the first-pillar bill will be tabled in parliament by the end of the month, though because October 1 is a public holiday the House plenary may not convene until October 8. The government wants the first phase of the reform — pillars zero and one — to start at the turn of the year.
Disagreements remain. Employers' organisations want provident funds to stay as they are, determined through collective agreements, while the government wants to regulate them; the open question is whether such funds would keep their voluntary character. Trade unions and employers also want a deal on the second pillar before the first is voted into law, which the government opposes.
On the retirement age, Mousiouttas repeated the government's position: if needed, contributions could rise rather than pensions being cut or the retirement age increased. Life expectancy studies are carried out every five years, he said, and any discussion of raising the retirement age would be separate from the pension reform.
The last major pension reform was in 1980, with further changes introduced in 2012-2013 under Cyprus's bailout agreement with international lenders.
What it means for residents
The reform touches the state pension most people on the island will eventually claim, and the way the state handles the Social Insurance Fund that pays it. The headline cost is borne by public finances, but the design choices — contributions, provident funds, retirement age — will shape what workers and employers pay and get back for years.
- Watch the calendar — the first-pillar bill is expected in parliament by the end of September or on October 8, with phase one targeted for the turn of the year.
- Provident funds may change — if the government regulates them, the terms of occupational plans could shift from purely collective-agreement arrangements.
- Retirement age is not part of this bill — any increase would follow separate life-expectancy studies, so current plans stay as they are for now.
This text is written from the source article and is not a translation of it.
