Cyprus pension system faces demographic pressures, says CBC

Cyprus ranks third in eurozone for pension fund numbers Cyprus retained the third-highest number of pension funds in the eurozone despite a decline of more than 30 per cent over the past five years, according to figures by the Central Bank of Cyprus (CBC). The Central Bank of Cyprus (CBC) released its first statistical report on pension funds for 2025 on Friday, providing an overview of developments in the assets and liabilities of Cyprus-based pension funds, as well as information on the number of funds and their members. According to the report, the total number of pension funds in Cyprus stood at fewer than 600 at the end of 2025, reflecting a decline of more than 30 per cent during the previous five years following the implementation of legislation governing occupational retirement provision. Despite the reduction, Cyprus continues to rank third in the eurozone in terms of the number of pension funds, behind Ireland, which has around 5,000 funds, and Spain, which has approximately 1,000. However, the country ranks among the lowest in the eurozone in terms of average assets per pension fund, with each fund holding less than €10 million on average, pointing to a persistently fragmented sector. The report stated that although 75 per cent of members in Cyprus are active, compared with 58 per cent across the eurozone, the period between 2020 and 2025 recorded a faster decline, reflecting growing pressures arising from demographic ageing. According to the CBC, the pension landscape is dominated by defined contribution schemes, which account for more than 80 per cent of pension funds, compared with defined benefit schemes. The central bank explained that the prevalence of defined contribution arrangements reflects their lower costs and reduced risks for employers. The report also showed that the investment profile of pension funds remains concentrated in traditional asset classes, although there are signs of gradual diversification that could improve returns while also increasing volatility. According to the report, 26 per cent of pension fund assets in Cyprus are invested in debt securities, while 25 per cent are held in equities. In addition, cash and deposits account for 14 per cent of pension fund assets, a level that is double the eurozone average of 7 per cent. The CBC said that pension funds in Cyprus display relative resilience, helping to preserve the stability of the sector and support the long-term sustainability of retirement benefits. However, it also estimated that around 20 per cent of the total value of defined benefit schemes remains underfunded. The report pointed out that pension entitlements are considerably higher in defined benefit schemes, reflecting their design to provide predetermined levels of income, with the associated risks borne largely by employers. “As pension entitlements continue to increase, strengthening transparency regarding costs, improving understanding of charges and enhancing financial literacy are becoming increasingly necessary in order to secure adequate retirement outcomes,” the CBC said. Against this backdrop, the report underlined that the absence of an independent and unified supervisory authority for pensions remains a major institutional gap in Cyprus. “The establishment of a unified supervisory framework would strengthen confidence in long-term savings, improve supervision and support the resilience and sustainability of the pension system in light of ongoing demographic ageing and changing market conditions,” the CBC said.