Our View: Much-touted pension reform just an election ploy

The sloppy amateurishness with which the government has approached the much-trumpeted reform of the pension system is astounding. The overall impression is that Labour Minister Marinos Mousiouttas does not have a clear idea or plan, and is engaging in continual improvisation, based on his ongoing discussions with the representatives of the unions and employers’ organisations. The government celebrated the reform from the first day it was announced, towards the end of August, with Mousiouttas declaring that 123,000 pensioners would receive an increase while 50,000 were to receive an increase in excess of €100 per month. President Nikos Christodoulides hailed this as “the most substantial reform of the pension system since 1980,” while his spokesmen advertised the increased pensions at every opportunity. Funnily enough, this “substantial reform” was nowhere near completed, although the government was trumpeting the increases, which, initial reports suggested would be funded by a €50m annual contribution by the taxpayer over the next five years, until the 2031 actuarial study was due to be carried out. Perhaps there is something we are not aware of, but how is it possible for the government to carry out the current reform without several actuarial studies? In fact, two weeks after the celebratory announcements, union and employers’ representatives were asking the government to present a detailed costing of the reform, comparing the existing regime and the new one. The employers’ federation Oev met the president to express fears that the pension increases would make increased contributions to the Social Insurance Fund (SIF) necessary sooner rather than later. Meanwhile, unions are demanding bigger increases on the lowest pensions. One of their demands was partially satisfied – the penalty for retirement at 63 was reduced from 12 to 7.5 per cent – indicating this was reform by public demand. The haggling with unions and employers at the Labour Advisory Body is set to continue even though the reform bill is currently at the Legal Service for the legislative review which is taking longer than was expected (it is a relief that at least the Legal Service is treating the reform with the seriousness it merits). The bill should have been submitted to the council of ministers for approval the week before last, but the legislative review has still not been completed. Another may be needed later because the bill still has to be discussed by the House labour/finance committees, while the talks with the social partners at the Labour Advisory Body will continue throughout this month. In fact, Mousiouttas said that the Body would meet twice a week in October to discuss the proposals of unions and bosses and these talks would continue after the reform bill had been submitted to the legislature. The proposals of the social partners would be discussed at the Body and subsequently be forwarded to the House, said the minister. Does this give the impression of a government with a clear idea of how it wants to reform the pension system? It will be accepting proposals from the social partners, in this reform by public demand, even after the council of ministers has approved the reform bill, and adding them to the bill while it is being discussed by the House. It has become abundantly clear that the government’s sole objective is to have this hotchpotch reform approved before the end of 2026 because the president wants to provide voters with higher pensions in the year leading to the presidential elections. It is very worrying that a very important reform, which could have an impact on the long-term viability of the SIF, could affect public finances, increase costs of businesses in the medium term, is being treated as just another election ploy. The reform should have been the product of in-depth study by technocrats and actuaries, who would have taken into account the ageing population combined with the low birth rate, the contribution of foreign workers to the SIF, with the sole objective of not endangering the long-term viability of the Fund. The lowest pensions should be increased, but has the government done the maths? Has it costed the increases, before making its announcements? And why is it prepared to carry on chopping and changing the bill at the eleventh hour? It may be a big disappointment for people on low pensions, but as things are, it may be better for the economy to put off the approval of the bill so that all its aspects can be re-examined.