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- A legal issue over the low-income pensioners' allowance concerns whether EU citizens who worked in Cyprus but left should also be eligible.
- The government is seeking a legally acceptable solution that protects the fund’s finances while ensuring eligible residents in Cyprus receive the allowance.
- Discussions on the reform’s second pillar, through provident funds, are continuing, with a framework agreement on operation, contributions and benefits still to be reached.
- Labour Minister Marinos Mousiouttas said pensions cannot all be guaranteed at €1,103 under current financial capacity, though some could approach that level later.
Cyprus is maintaining its target of introducing the pension reform on 1 January 2027, despite delays in the preparation and legal review of the relevant legislation.
At the same time, consultations are continuing to resolve a legal issue concerning the low-income pensioners’ allowance, while discussions are progressing on the creation of the reform’s second pillar through provident funds.
Speaking on the television programme Mesimeri kai Kati, Labour Minister Marinos Mousiouttas said the Law Office had identified an issue during its review of the legislation that required correction or further clarification, delaying the reform’s submission.
Legal issue over low-income pensioners’ allowance
The issue concerns an allowance intended for people residing in Cyprus. Questions arose over whether it should also be paid to EU citizens who worked in Cyprus but subsequently returned to their home countries or moved to another EU member state.
“The European regulation indicated that, logically, they should also be included in the entitlement to this allowance,” Mousiouttas said, noting that such an extension would carry a significant financial cost.
Efforts are therefore under way, in cooperation with the Law Office and the Social Insurance Department, to identify a legally acceptable way of ensuring that eligible residents in Cyprus receive the allowance without undermining the financial sustainability of the fund.
The minister said several alternatives were being examined to ensure that the arrangement complies with the law while protecting the fund’s finances.
Government insists on 1 January 2027 start date
Despite the delays, Mousiouttas said the government remained committed to implementing the reform on 1 January 2027.
He acknowledged, however, that the remaining time was particularly limited, with approximately one month left before Parliament suspends its work for the Christmas holidays.
“The timeframes are very tight,” he said, expressing the view that if the legislation is submitted to Parliament in the coming days, there will still be an opportunity to move the process forward.
The minister said he expected the necessary cooperation from political parties, which have publicly expressed support for the reform and acknowledged its importance.
He added that the outstanding questions and concerns would need to be addressed before the legislation could be brought before the House plenary for a vote.
Asked whether a new timetable would be introduced if the target was missed, Mousiouttas said he believed the reform would be approved in time.
However, if Parliament requires more time, the process could continue in early 2027, when parliamentary proceedings resume on 8 January.
Discussions continue on provident funds
Regarding the second pillar of the pension reform, the minister explained that provident funds would provide a supplementary mechanism to strengthen retirement incomes.
Discussions have already started at the Technical Committee and moved to the Labour Advisory Board last week. The board will meet weekly to examine issues relating to provident funds.
The first objective is to reach a framework agreement with social partners setting out how the funds will operate. This will cover contribution levels, whether participation will be compulsory or voluntary, borrowing arrangements and how benefits will be paid.
“Once we reach a framework agreement, the drafting of the legislation on provident funds will begin,” Mousiouttas said.
The new system is expected to become operational within three to four years.
The minister acknowledged that social partners have differing views on two key issues: whether participation in the funds should be compulsory or voluntary, and whether existing provident funds should also be included in the reform.
He nevertheless expressed optimism that a compromise could be reached, allowing the necessary legal framework for the second pillar to be established.
Pensions of €1,103 cannot be guaranteed for everyone
Asked to comment on the position of SEK’s General Secretary that no pension should be lower than €1,103, Mousiouttas said he would like pensions to be higher, but the financial capacity of the fund and the state did not allow such a target to be achieved.
He said he had made it clear from the outset that he did not want to create expectations that could not be met.
“The capabilities of the fund and the state do not allow us to reach that level. They allow us to improve considerably on where we were before, but we cannot reach those figures,” he said.
He stressed that the second pillar would be important in strengthening pensions through provident funds.
Once the system becomes operational in three to four years, he said, some pensions could approach or even exceed €1,103.
However, he clarified that the amount could not be guaranteed for all pensioners under the current arrangements.
Action plan to speed up benefit applications
The minister also addressed delays in processing benefit applications, acknowledging that the Social Insurance Department was facing staff shortages.
A significant number of department employees are currently involved in the pension reform, affecting the processing of other applications.
Mousiouttas stressed, however, that understaffing could not be used as an excuse for the delays.
He said he had instructed the department to submit proposals and an action plan by Friday on how to speed up applications for maternity, sickness and unemployment benefits.
The aim is to assign more staff to processing applications, allowing more cases to be handled in less time and reducing waiting periods.
He also referred to a new technological system introduced at the department around one to two months ago. Staff have not yet gained sufficient experience in using it, which is another factor affecting processing times.
Around 15% of maternity benefit applications rejected
Mousiouttas said approximately 15% of maternity benefit applications are rejected for various reasons.
One of the main reasons is that applicants do not meet the insurance requirements set out in the legislation, which has been in force since 1980.
As part of the pension reform, the Labour Ministry has already introduced legislative changes aimed at addressing this issue by improving the conditions applicants must meet to qualify for maternity benefit.
The minister described this as another positive outcome expected from the reform once it is approved.
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