Cyprus is preparing a large-scale pension reform that provides for a gradual increase in payments by 5–60% over three years and the development of occupational pension schemes as a second source of income after retirement. Labour Minister Marinos Mousiouttas stated this at the 17th Pension Forum in Nicosia, Cyprus Mail reports.
According to the minister, the bill has already been discussed with social partners. It is now at the final stage before being submitted to Cyprus’ Council of Ministers and House of Representatives.
The reform provides for a revision of the basic pension to increase pensioners’ incomes. The additional part of payments will continue to depend on earnings, while no increase in contribution rates is planned.
Over the next 15 years, pensions will be calculated simultaneously under the current and new methods. This is intended to guarantee that no pensioner receives less than under the current system.
It is also proposed to take justified periods outside employment into account. The state is to pay contributions for parents performing care duties, people with disabilities, informal caregivers, and young people who are only entering the labour market.
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The standard retirement age in Cyprus will remain 65. At the same time, the government has proposed reducing the actuarial reduction of the basic pension for those retiring at 63 from 12% to 7.5%. This will apply to people who have already claimed their pension, as well as those who do so within the next five years.
After the transition period, workers are planned to be encouraged to remain in work until 65, with the option of voluntarily working until 67. Those who work until 67 will receive a 15% supplement, while for retirement at 63 the reduction may be about 15%.
A separate focus will be the development of occupational pension schemes and savings funds. According to Mousiouttas’ estimate, their full implementation will require three to four years, while the occupational fund itself will need about ten years to build up. The issues of mandatory participation, automatic employee enrolment, and oversight of the funds are still under discussion.
Cyprus’ Social Insurance Fund reserves currently exceed €12 billion. The government is also to gradually repay its debt to the fund from 2028 through annual payments.
