Cyprus’ proposed pension reform provides for higher payments for all 123,000 pensioners, with the size of the increase depending on income, years of contributions and the current pension amount.
The proposed framework was presented to social partners on Wednesday by the Ministry of Labour and Social Insurance. According to the Labour Minister, around 50,000 pensioners could receive increases of more than €100 a month, while about 60,000 could see increases of less than €100 over a five-year period.
The reform could also result in increases of between 5% and 60% for future low-income pensioners compared with the existing system.
The President described the proposal as the biggest and most substantial pension reform since 1980.
Largest increases for lower incomes
The examples presented show that the biggest percentage increases would mainly benefit people with lower incomes and smaller pensions.
A pensioner with 15 years of paid contributions and four years of credited contributions who currently receives €411 would receive €577 under the proposed system, representing a 40% increase.
With 30 years of paid contributions and seven credited years, the pension would rise from €411 to €655, an increase of 50%.
For a low-income pensioner with 35 years of paid contributions and seven credited years, the payment would increase from €436 to €702, also by around 50%.
With 42 years of paid contributions and seven credited years, a pension of €508 would rise to €764.
Smaller increases for higher incomes
For low-to-middle incomes, the increases would be more moderate.
A pension based on 25 years of paid contributions and seven credited years would rise from €497 to €666, an increase of 34%. With 35 years of paid contributions and seven credited years, the pension would increase from €642 to €827, or 29%.
For someone with a full insurance period, the pension would rise from €762 to €976, representing a 28% increase.
For middle-income pensioners, the proposed increases are lower. A pension based on 25 years of paid contributions would rise from €618 to €767, an increase of 24%.
With 35 years of paid contributions and seven credited years, the payment would increase from €847 to €998, or 18%. With a full insurance period of 42 years of paid contributions and seven credited years, it would rise from €1,016 to €1,188, an increase of 17%.
For middle-to-high incomes, increases range from around 6% to 11%, while the changes for higher incomes are minimal.
A pension of €1,223 would rise to €1,271, an increase of 4%. In two other examples, payments would increase only from €1,706 to €1,713 and from €2,032 to €2,034.
Social partners raise concerns
The social partners have raised concerns over the tight timetable for discussing the proposed pension reform.
KEBE Secretary General Philokypros Rousounides said the time available for consultation, as set by the Labour Minister, was very limited.
OEB Director General Michalis Antoniou said the issues under discussion were complex and would affect current and future workers and pensioners, businesses, public finances and the wider economy.
He called for patience until a complete picture of the proposed changes was available, noting that expectations had been created around large pension increases.
PEO General Secretary Sotiroulla Charalambous also stressed that the discussions remained at an early stage and that the federation would examine the proposals through its collective bodies.
SEK General Secretary Andreas Matsas welcomed the improvement in pension benefits as a positive development but said key issues remained unresolved.
These include the proposed adjustment to the 12% penalty for retirement at 63 and the second pillar of pension provision, including provident funds.
DOK President Stelios Christodoulou described the proposal as a major reform with several parameters that require detailed examination.
12% early-retirement penalty also targeted
The proposed framework also includes a reduction in the 12% penalty applied to those who retire at the age of 63.
The Government has presented the measure alongside the proposed pension increases as part of a wider overhaul of the pension system.
The social partners are now examining the framework before further discussions with the Government.
Also read: Reform: 50% increase in low pensions and cut to 12% penalty
For more videos and updates, check out our YouTube channel
