Pension reform sparks seven concerns from unions and employers

Economy cypruspensionerspensionsTop News Pension reform sparks seven concerns from unions and employers Image 281 Relevant News Fire breaks out at Limassol clothing shop in suspected arson attack 21 August 2026 Pension reform sparks seven concerns from unions and employers 21 August 2026 Gunmen open fire on driver in Ayia Napa attempted murder 21 August 2026 Angelos Angelodimou 21 August 2026 FacebookXWhatsAppEmailPrintViber Pensioners and workers have struggled since Wednesday to calculate how much of an increase they will actually receive under the government’s pension reform, with confusion also spreading among trade unions and employer organisations a day after its presentation by the Labour Ministry and the state Actuary. Labour Minister Marinos Moushouttas said the target is for pensioners to feel the increase in their pocket by February. Each pensioner’s case is different, however. Three factors will determine the size of the increase: the amount paid into Social Insurance each month based on salary, the number of years contributions were paid, and how frequently those contributions were made. No general calculation can capture every case. Members of the Labour Advisory Body, representing unions and employers taking part in talks on the reform’s final shape, have raised a number of concerns, questions and disagreements. The government and the Actuary aim to address these at the Body’s next meeting on August 28, when an informal session is also scheduled to clarify the government’s policy on its low-pension scheme. Seven key concerns Investment policy. The government has decided to end the practice of lending out Social Insurance Fund surpluses, which yielded returns of up to two and a half to three per cent. It plans instead to set up a Management Committee to invest future surpluses. KEVE Secretary General Filokypros Rousounides stressed the need for further clarification. PEO Secretary General Sotiroulla Charalambous echoed the point, adding that careful steps are needed to avoid unwelcome developments later on. Financing. Rousounides and OEV Director General Michalis Antoniou argued that the government has not sufficiently clarified how the reform, and specifically the pension increases and related benefits, will be financed. Antoniou added that the financial side of the increased benefits needs examining, including whether revenue would be sufficient under current assumptions without raising contributions. The 12 per cent penalty. The reform cuts the actuarial adjustment penalty for those retiring at 63 to 7.5 per cent, applied only to the basic portion of the pension rather than the full amount. Unions SEK, PEO and DEOK objected, saying they either disagree with the approach or will submit proposals to improve it. The penalty is not expected to be abolished entirely: doing so would automatically lower the retirement age from 65 to 63, and it would create sustainability problems for the Fund, according to actuarial studies. Low-income pensioners. The reform includes an increase in low pensions, a new Low-Income Pensioner Support Allowance, and a minimum guaranteed increase for existing Social Insurance Fund pensioners. Some have raised numerous questions about this scheme, while others are attempting to exploit the issue politically. These points are due to be clarified at the August 28 session. Pension increases. Much has been said about the announced increases, though few people understand exactly how much they will personally receive. Sotiroulla Charalambous noted that everyone needs to understand the increases will be phased in over five years rather than immediately, something the Labour Ministry has already made clear. She added, however, that she wants the timeline discussed again. Special pensions. Sotiroulla Charalambous argued that the proposal fails to address widowers’ pensions for men before 2018, calling it a social injustice. She said the changes to disability and widowhood pensions still need to be studied, noting some changes are more positive than others. Provident Funds. The government intends to leave the second pillar, the Provident Funds, to a later stage, with discussions continuing at technical committee level. If agreement is reached, expected between October and November, a framework agreement with social partners would follow, though implementation would come at a future stage. Social partners want an overall agreement so the pension reform can be considered complete. That ambition is currently in tension with government caution: fears that disagreements over the second pillar could create obstacles for the first-pillar bill are what is preventing the government from putting the Provident Funds issue on the table now. Fiscal Council intervention The Fiscal Council has also weighed in on the reform. Chairman Andreas Charalambous said the decisions announced appear, at first glance, to be moving in the right direction, though some issues remain open or require clarification. He said the Council will publish its interim report in early September, with particular emphasis on the pension reform. The cost of the changes and how they will be financed remain open questions that, based on available information, have not yet been fully determined. He called both elements important. On the elements he considers to be heading in the right direction, Charalambous said the Council agrees with keeping the retirement age at 65. He added that the incentives offered for voluntarily extending working life are also correct in principle. Strengthening low-income pensioners and the basic pension, along with readjusting the proportional portion, are also correct steps, Charalambous said. He stressed, however, that what matters is having an actuarial study to establish precisely how the changes affect the Fund’s long-term sustainability and financing. Charalambous said the Council agrees the second pillar and Provident Funds need to be developed, noting that demographic trends in both Cyprus and Europe mean “Social Insurance Funds” alone cannot ensure adequate pensions. He said the same applies to the third pillar, where individuals are given incentives to make their own arrangements. On the decision to end state borrowing from the Fund, Charalambous said it was correct but could not happen overnight and would need to be phased in gradually. He added that it was also essential to create the right conditions for proper management of the Fund’s reserve. 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