**Pension Reform to Cost Over €800 Million, Labour Minister Confirms**
The Cypriot government is set to undertake a significant overhaul of its pension system, with the total cost projected to exceed €800 million over a six-year period. Labour Minister Marinos Mousiouttas announced these figures on Monday following discussions with employers and trade unions during the latest meeting of the labour advisory board.
According to data previously released by the finance ministry, the estimated financial burden from the pension reform will amount to €486 million for the state and an additional €334 million for the Social Insurance Fund, bringing the total to approximately €820 million. The €334 million figure represents the amount the government plans to return to the Social Insurance Fund, from which it has historically borrowed funds at an interest rate of 2.15 percent. The total debt owed to the fund currently stands at around €12 billion.
As part of the upcoming pension reform, the government plans to cease borrowing from the Social Insurance Fund and will initiate a gradual repayment process for the outstanding debt. This move is expected to stabilize the fund's financial health and ensure its long-term sustainability.
Mousiouttas clarified that the draft government bill currently under review pertains specifically to the "first pillar" of the pension reform, which focuses on state pensions. The reform is structured into multiple pillars: the first pillar addresses state pensions, the second pillar relates to provident funds and the investment policies of the Social Insurance Fund, while "pillar zero" is designed for low-income earners.
The minister indicated that the bill concerning the first pillar is expected to be presented to parliament by the end of the month. However, due to the public holiday on October 1, the House plenary session may be postponed, with the bill potentially being tabled on October 8 instead.
The government aims to implement the first phase of the reform, which includes pillars zero and one, by the start of the new year. Mousiouttas mentioned that there will be separate legislations for social pensions and provident funds. Provident funds, which are voluntary or industry-wide retirement plans funded by both employer and employee contributions, have been a topic of debate. While employers' organizations prefer to maintain the current system governed by collective agreements, the government seeks to introduce regulations for these funds. A specific provision in the bill will address whether these funds will continue to be voluntary.
A key point of contention remains between the government and the trade unions and employers regarding the sequencing of the reform. While the unions and employers advocate for a resolution on the second pillar of reform before the first pillar is legislated, the government believes that the two can proceed independently.
Regarding potential changes to the retirement age, Mousiouttas reiterated the government's stance, stating that discussions about increasing contributions may occur to avoid cuts to pension payouts or a rise in the retirement age. He noted that the government conducts studies on life expectancy every five years, and any findings suggesting a need to adjust the retirement age will be considered. However, he emphasized that such discussions are separate from the current pension reform efforts.
The last significant reform of the pension system in Cyprus occurred in 1980, with additional modifications made during 2012-2013 as part of the country's bailout agreement with international lenders. The current reform initiative aims to modernize the pension system to better serve the needs of Cypriots and ensure financial viability for future generations.
As discussions continue among stakeholders, the government remains committed to advancing the reform process, with the expectation that it will lead to a more sustainable and equitable pension system for all citizens.