Unions push for changes to pension penalty

The 12 per cent pension reduction imposed on people who retire at 63 dominated discussions at the Labour Advisory Board on Thursday as negotiations over the government’s pension reform continued. The government presented its proposal in detail, while social partners outlined their positions and reservations, stressing the need for a full financial assessment of the reform. Its cost and funding are expected to be discussed at a further meeting attended by Finance Minister Makis Keravnos. Labour Minister Marinos Mousiouttas described Thursday’s discussion as “very good”, saying the government had presented its proposal on the 12 per cent reduction in detail in an effort to address concerns raised by the social partners. Related Articles • Govt: pension reform remains on track for 2027 • Disy backs pension reform without higher contributions or retirement age Mousiouttas said around 40,000 of Cyprus’ 120,000 pensioners were currently subject to some form of reduction, with a further 40,000 expected to be affected over the next five years, partly as a result of demographic trends and an ageing population. Under the government’s proposal, the 12 per cent reduction would be cut by 4.5 percentage points to 7.5 per cent on the basic pension, but not on the supplementary pension. In conjunction with the other proposed changes, those affected would see their pensions increase by an average of around 6 per cent, Mousiottas said. He stressed that the reform would not result in cuts to existing pensions, but would instead provide for increases ranging from 5 to 60 per cent. Mousiouttas said the reform was estimated to cost €24 million for existing pensioners, with a further cumulative cost of €12 million over the next five years. He added that the government remained open to proposals from the social partners, provided the overall cost of the reform did not increase. The proposal would also see the state pay social insurance contributions on behalf of certain groups. These include mothers caring for their children for up to three years, people with disabilities and, under certain conditions, graduates, as well as young people who have finished school or completed their military service and are looking for work. On the sustainability of the new system, Mousiouttas said a study would be carried out after five years to determine whether additional resources were needed to continue increasing pensions. Depending on its findings, an increase in contributions could be considered. The social insurance fund’s new investment policy is also expected to play an important role in ensuring the reform’s long-term sustainability. According to the minister, funds owed by the state would be returned to the social insurance fund, while its surpluses would no longer be retained by the state. The money would instead be utilised through a structure operating in line with European standards. During a five-year transitional period, the 12 per cent provision will continue to apply to both existing and future pensioners. Thereafter, a new calculation method will be introduced, providing higher pension benefits to those who choose to continue working beyond the age of 65 and up to 67. Peo general secretary Sotiroula Charalambous stressed the need for the Labour Advisory Board to be presented with the reform’s full financial details to allow for meaningful and constructive dialogue. She sought clarification on how much of the cost would be covered by the social insurance fund and how much by the state budget, as well as how the proposed expenditure compared with the state’s current overall contribution to the pension system. Charalambous said Peo considered the current proposal an improvement on the previous one, but still had reservations, particularly because the proposed reduction in the 12 per cent penalty applied only to the basic pension. Regarding possible future increases in contributions, she said further clarification was needed on when and how these could be introduced, stressing that there should be no uncertainty over the future benefits of insured workers. Sek general secretary Andreas Matsas said the union had entered the negotiations with three fundamental principles: pensions should not be reduced, the retirement age should not be increased and social insurance contributions should not rise. Sek is calling for the complete abolition of the 12 per cent reduction and has submitted a proposal for gradually mitigating its impact. Matsas said elements of the government’s and unions’ proposals could be combined to reach a “mutually acceptable solution”. Pasydy also emphasised the need to ensure the sustainability of the social insurance fund while preventing any reduction in pensions. The union’s general secretary, Stratis Matthaiou, reiterated its position regarding employees who are required to retire before the age of 63, including police officers, firefighters, military personnel and teachers. Pasydy believes people who are required to retire early should not be subject to the 12 per cent reduction. Cyprus Employers and Industrialists Federation (Oev) deputy director Lena Panayiotou said three costed proposals for reducing the 12 per cent penalty had been presented during the meeting, with further details requested. She emphasised that the reform must be considered as a whole rather than through individual measures and expressed concern about the possibility of future increases in contributions. Panayiotou said Oev was awaiting the participation of Finance Minister Makis Keravnos and an analysis of the financial data before taking a position on the government’s new proposal. Cyprus Chamber of Commerce and Industry (Keve) general secretary Philokypros Rousounidis described the discussion as “lively” and “productive”. He said Mousiouttas appeared open to alternative proposals, provided they remained within the available financial framework. Keve is also awaiting Keravnos’ participation so that the overall cost of the reform and its sources of funding can be presented, after which the chamber will be in a position to submit specific proposals. A comprehensive reform of the pension system is planned for early 2027. Its main objectives include increasing pensions for low-income earners, reducing and potentially eliminating the 12 per cent early-retirement penalty, and potentially reducing pensions for high earners in the private sector.