Speaking before MPs, Mousiouttas said the government plans to submit the pension reform bills to Parliament by June 2026 and not earlier. He acknowledged that he previously stated, as an MP, that the bills could be ready by the end of the year. However, timelines changed after social partners requested further clarifications.
He noted that none of the social partners submitted formal positions so far, prompting the extension of consultations.
Focus on the first pension pillar
The minister clarified that the reform will only concern the first pension pillar. This pillar covers pensions paid through the Social Insurance Fund. Issues to be included in the bill involve the low-pensioner allowance, the investment policy of the Fund, pension benefits, and the 12% early retirement penalty.
He expressed hope that once consultations conclude, the proposals will be published for public consultation.
Consultations with social partners
Mousiouttas said at least 12 meetings have already taken place at both political and technical levels. Actuaries explained the provisions of the first pillar and the so-called zero pillar, which concerns state support for low-income pensioners.
Despite this, social partners requested additional explanations during the most recent Labour Advisory Body meeting. As a result, a final detailed briefing will take place at the next session, scheduled for early February.
Changes to Social Insurance Fund investments
The Labour Minister said the reform will also address how the Social Insurance Fund’s reserves are managed. Discussions are ongoing with the Finance Minister on a revised investment policy.
He stated that €11–12 billion currently deposited in state accounts represent funds loaned by the Social Insurance Fund to the state. The reform will also cover this issue, along with the low-pensioner allowance known as the “small top-up”.
Currently, 95% of incoming contributions are deposited in the Republic’s consolidated fund at an interest rate of 2.16%. Two years ago, rates reached as high as 4.75%. The remaining 5% is deposited with banks, subject to approval by the Finance Minister.
Mousiouttas stressed that the investment policy will change under the reform to generate higher returns without increasing risk, benefiting both the Fund and workers.
Second and third pillars left out
The decision marks a shift from earlier government planning. Previous statements by the former Labour Minister and President Nikos Christodoulides’s election programme envisaged reforms across all three pension pillars. These include provident funds, occupational pension schemes, and private pension plans.
The revised approach now limits reform efforts exclusively to the first pillar.
Minimum wage directive to come first
EU harmonisation bill expected soon
Mousiouttas also told MPs that Cyprus will first proceed with harmonisation of the EU directive on adequate minimum wages. The bill is expected to be submitted to Parliament for approval before the House dissolves for parliamentary elections, likely in late February or early March.
The directive places strong emphasis on strengthening collective bargaining.
Collective agreements threshold
Labour Relations Department Director Antis Apostolou said EU member states with collective agreement coverage below 80% must submit an action plan by October 2026. The plan must outline measures to expand collective bargaining.
He said the directive establishes two pillars: procedures for setting minimum wages and obligations for states to promote collective agreements where coverage remains low.
A recent ruling by the European Court of Justice resolved several disputed issues, helping the Ministry refine provisions of the bill. The matter will now be revisited at the Labour Advisory Body.
Also read: Pension reform bill by June 2026, Labour Minister confirms
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