The pension reform must go beyond increasing low pensions and address weaknesses in occupational pension funds and private insurance, according to Dimitris Georgiades, president of the Cyprus Council of Economy and Competitiveness.
Speaking at a press conference marking the publication of the council’s 2025 annual report, Georgiades said the current focus on strengthening low pensions was an important part of reform but would not solve the wider problem of pension adequacy.
He argued that a sustainable retirement system requires several sources of income, including the state social insurance system, occupational pension funds and private insurance.
Cyprus lags in occupational and private pensions
Georgiades said Cyprus’ main weakness lies in the second and third pillars of the pension system: occupational pension schemes and private pension provision.
He said international experience showed that adequate retirement income depended on a combination of different pension pillars, potentially including a fourth.
The council wants reforms that would encourage occupational pension funds and private insurance to expand, helping people build up savings for retirement.
Georgiades added that Cyprus needed a clear long-term plan setting out what each pillar should provide and how the country could reach its pension goals over the coming decades.
Stronger oversight needed for pension funds
Georgiades said a sound regulatory and supervisory framework was essential, particularly given past scandals involving the management of provident and pension funds.
He argued that gaps in legislation could discourage people from keeping their retirement savings invested for the long term.
In particular, he said the current system encouraged people to withdraw their pension savings as a lump sum when they retired, rather than receive the money gradually through regular payments.
He also raised concerns about the ease with which people could access or borrow against their provident fund savings.
Georgiades welcomed the gradual development of multi-employer pension funds, saying they could help address some of the existing weaknesses.
He called for incremental reforms backed by a clear long-term strategy rather than a narrow focus on immediate changes.
Cyprus risks relying too heavily on consumption
Georgiades said Cyprus had significantly lower savings and fewer assets in the second and third pension pillars than European countries, arguing that some indicators could be around one-third of comparable European levels.
He recalled that the international lenders known as the Troika had questioned Cyprus’ high consumption in 2014 and 2015.
According to Georgiades, the release of provident fund savings contributed to that consumption, with people spending money that could otherwise have supported their retirement.
He warned that the long-term consequences of this pattern would eventually have to be addressed.
Pension savings could help fund innovative businesses
Georgiades also linked pension reform to the challenge of financing innovative businesses in Cyprus and across Europe.
He said companies relied heavily on bank lending, even though banks were naturally more conservative in their approach to financing riskier ventures.
A stronger pool of pension savings could help develop capital markets and provide an alternative source of funding for innovative companies, he argued.
Institutional investors could also encourage better corporate governance, he added.
Council vice-president George Syrichas said national savings in Cyprus were low compared with Europe, reflecting a tendency to consume rather than save. As a result, investment often depended on attracting foreign capital.
He argued that a stronger pension system could help increase domestic savings and support investment without relying as heavily on funds from abroad.
Council raises questions over national minimum wage
Georgiades also expressed reservations about how Cyprus sets its national minimum wage, suggesting that authorities should examine whether a formula or mechanism could determine future adjustments.
He said the size of the undeclared economy remained a concern because it could prevent official figures from fully reflecting actual economic conditions.
He cautioned that policymakers should take this into account when designing measures such as minimum wage rules and benefit policies.
Georgiades also questioned how temporary jobs should be treated under a minimum wage system and whether differences in rents and living costs between districts should influence the approach.
He described the issue as complex and said the economic differences between areas made a single national framework difficult to assess.
Also read: Cost of living: Monthly family costs and Cyprus’ most expensive city
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