The low-income pension benefit received by pensioner households is set for a major overhaul as part of the government’s planned pension reform, with two scenarios under consideration and higher income eligibility thresholds proposed.
An actuarial presentation outlining the proposed changes has already been sent electronically to social partners. The plans will be examined on Friday, 28 August, ahead of and during a new meeting of the Labour Advisory Body.
A central aim of redesigning the benefit, commonly known as the “small cheque”, is to prevent recipients from seeing their supplementary payments fall as pensions gradually increase under the wider reform of Pillar 1 and the Social Insurance Fund (SIF).
Benefit could become a legal entitlement
The proposed reform describes the low-income pension benefit, known as Pillar 0 of the pension system, as an integral part of the philosophy behind the reformed Social Insurance Fund.
The government also plans to place the benefit on a statutory footing in the near future, creating a guaranteed entitlement to a minimum pension for all those who qualify.
The redesigned benefit would supplement Social Insurance Fund pensions and aim to provide more effective protection against poverty, including by helping replace the income of workers who received low wages during their working lives.
Since the benefit was introduced in 2010 under the Christofias administration, payments have been based on decisions by the Council of Ministers rather than legislation.
Income thresholds would also be adjusted and reviewed to bring them into line with income adequacy indicators, with the possibility of revisions every three or five years.
Higher payments and regular reviews proposed
The reform aims to increase the adequacy of the benefit by raising the maximum combined monthly payment from the Social Insurance Fund and the low-income pension benefit.
The objective is for all recipients to have improved incomes in relation to the revised eligibility thresholds.
Periodic reviews would also be introduced to account for increases in the cost of living, while both the eligibility threshold and benefit amount would be linked to annual adjustments to the new basic Social Insurance Fund pension.
Plans also envisage creating a single public service for recipients. The benefit is currently administered by the Deputy Ministry of Social Welfare rather than the Ministry of Labour.
Two scenarios under consideration
According to the presentation sent to members of the Labour Advisory Body, two scenarios have been proposed.
Under the first, the combined Social Insurance Fund pension and low-income pension benefit would be increased by a percentage of the full new basic pension payable at age 65, based on the total pension amount.
Under the second scenario, the combined benefit would be calculated using a minimum of 39 recognised contribution years and a maximum of 58. An additional two years would be credited for every five years of contributions, whether paid or credited, with a new basic pension coefficient at age 65 of 1.3 per month.
Under both scenarios, the income eligibility thresholds would increase:
- For households with one pensioner, the maximum would rise from €794 to €900.
- For households with two pensioners, the maximum would rise from €1,191 to €1,350.
Both options also include a safeguard ensuring that the new total payment cannot be lower than the recipient’s existing Social Insurance Fund pension and low-income pension benefit combined.
The presentation also includes tables illustrating how the proposals would work in specific cases.
Around 34,000 pensioners receive benefit
The presentation also outlines a series of problems with the existing low-income pension benefit, which is currently received by around 34,000 pensioners.
The state spent €87 million on the scheme in 2025. Combined with pension income, the benefit is intended to guarantee recipients a minimum household income based on financial criteria.
Currently, the minimum combined income guaranteed through the pension and benefit is €728 per month for a single pensioner and €1,236 for a couple.
The maximum combined income stands at €880 per month for a single pensioner and €1,290 for a couple.
For eligibility purposes, a pensioner couple is calculated as 1.5 units, while for determining the benefit itself the couple is treated as two units.
Current system described as complex
Among the main problems identified is the complexity of the benefit and what the presentation describes as inefficiencies in the current policy design.
The interaction between Social Insurance Fund pensions, the social pension and the low-income pension benefit is described as complex and inefficient.
Differences between the Social Insurance Fund minimum pension and the social pension are effectively offset by the benefit, while the existing system is also said to reduce incentives for lower-income pensioners to work and save.
The formula used to determine the value of the benefit is also described as difficult for the public to understand.
The presentation further identifies administrative complexity, particularly in processing applications, which creates a significant administrative burden.
Eligibility threshold has not changed since 2013
Another concern is the relationship between the benefit and the EU poverty threshold.
The income threshold determining eligibility for the low-income pension benefit has remained unchanged since 2013.
Between 2022 and 2025, the EU’s official at-risk-of-poverty threshold consistently exceeded the income threshold used to determine eligibility for the benefit.
The scheme was originally designed to support households falling below the poverty threshold calculated annually through the EU-SILC survey.
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