**Pension Reform to Cost Over €50 Million Annually, Aims for Implementation by January 2027**
The planned overhaul of Cyprus's pension system is projected to incur annual costs that will exceed €50 million, according to Labour Minister Marinos Mousiouttas. He made this announcement during a media briefing following a recent meeting of the labour advisory board, which is currently convening twice weekly to assess the government's proposed pension reforms.
Mousiouttas emphasized that the target date for the implementation of the pension reform remains set for January 1, 2027. He noted that discussions regarding the fiscal implications of the reform have been ongoing, but he refrained from providing specific figures when pressed by journalists. “It will be considerably more,” he stated, in reference to the estimated costs previously mentioned by experts.
The minister confirmed that the government plans to submit the necessary bills to parliament by September 30, aiming for a smooth rollout of the reform. "The goal is to be able to implement the reform as of January 1, 2027, so that people can feel the difference as of February 1," he remarked.
The labour advisory board's discussions are expected to continue until October 10, as they refine the details of the reform. Mousiouttas outlined the key components of the reform, which is designed to benefit approximately 123,000 retirees. Notably, over 50,000 pensioners will see an increase of more than €100 per month, while more than 8,000 individuals will receive an increase of €200 over a five-year period. The increases will vary, ranging from five to 55 percent depending on individual circumstances.
The reform was developed with input from the United Nations’ International Labour Organisation and aims to achieve three main objectives: ensuring adequate income for those who have worked throughout their lives, restoring generational equity, and maintaining the sustainability of the Social Insurance Fund (SIF) for future decades.
A significant aspect of the reform involves simplifying the calculation of the basic pension. Instead of relying on complex formulas that are difficult for many to understand, the new system will be based on the total duration of a person's registration and insurance. Contributions made by the state during periods of life previously considered as gaps will now also be counted, enhancing the overall pension calculation.
While the statutory retirement age will remain at 65, individuals will have the option to continue working until the age of 67. Importantly, the contribution percentage to the SIF will not increase. However, the existing 12 percent penalty for early retirement will be reduced to approximately 7.5 percent, as abolishing it entirely could jeopardize the fund's viability.
Under the new reform, every pensioner currently insured with the SIF is guaranteed a minimum increase of €30 per month, applicable to those receiving pensions up to €600. Mousiouttas acknowledged that while €30 may seem modest, it can significantly impact households where every euro is crucial, amounting to an additional €390 per year.
The total increase in pensions is scheduled to be distributed from 2027 to 2031, with beneficiaries receiving up to 60 percent of the increase during the first two years. For instance, a retiree currently receiving a €504 pension could see an overall increase of about €250 over the five-year period.
Mousiouttas also reiterated the government's commitment to cease the long-standing practice of borrowing from the SIF. He stated that future annual surpluses will be deposited into an investment fund, and plans have been established to gradually repay the current debt, which stands at approximately €12 billion, over a 40-year period. Actuarial studies suggest that the SIF is expected to generate surpluses over the next four decades.
The minister linked the upcoming pension reform to the recent overhaul of the tax system, suggesting that both reforms should be viewed together. He noted that the tax reform has increased disposable income for families, stating, "Two reforms, one logic: that growth only has meaning when a family sees the results on the table."
As discussions continue and the government prepares to submit the reform bills, the focus remains on ensuring that the new pension system not only provides adequate support for retirees but also maintains the financial health of the Social Insurance Fund for future generations.