Pension reform in Cyprus will cost €820 million over six years — Cyprus Mail
Pension reform in Cyprus will cost a total of €820 million over six years, according to the government’s estimate. Labour Minister Marinos Mousiouttas said this after a meeting of the labour advisory council, Cyprus Mail reports.
According to the minister, the additional burden on the state is estimated at €486 million. Another €334 million will be funds that the state must return to the Social Insurance Fund, bringing the total to €820 million.
Repayment of funds to the fund
For decades, the state used funds from the Social Insurance Fund for financing and paid 2.15% annual interest on these borrowings. The total amount of the state’s debt to the fund currently stands at about €12 billion.
As part of the future reform, the government plans to stop borrowing from the fund and gradually repay the debt to it in instalments.
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Stages of the reform
The government draft law being considered by trade unions and employers’ organisations concerns the first pillar of the reform — state pensions. The second pillar covers occupational savings funds, the reserves of the Social Insurance Fund and its investment policy. The zero pillar provides for pensions for people with low incomes.
The bill on the first pillar is planned to be submitted to parliament by the end of the month. At the same time, due to the public holiday on October 1, no plenary session will take place, so the document may be introduced at the next meeting on October 8. The government seeks to launch the first phase of the reform, which covers the zero and first pillars, around the turn of the year.
Employers’ organisations support retaining the current approach under which occupational savings funds are determined by collective agreements. The government, however, wants to regulate their activities. Trade unions and employers also insist on an agreement on the second pillar of the reform before changes to the first pillar are adopted, while the government has a different position.
Mousiouttas also said that, if necessary, the authorities could raise contributions to avoid cuts in pension payments or an increase in the retirement age. The issue of retirement age, he said, will be considered separately based on life-expectancy studies conducted every five years.
