Cyprus’ pension reform includes increases of up to 50% in the minimum pension, alongside a reduction in the 12% actuarial penalty for retirement at 63, according to details presented to social partners on Wednesday.
The proposals were presented by the Minister of Labour and his team during a meeting of the Labour Advisory Board. The presentation included detailed examples and responses to questions previously raised by social partners.
Biggest increases for minimum pension
The largest increases would go to people currently receiving the minimum pension.
Under the existing system, a pensioner receiving €436 would receive €702 under the proposed pension reform. Another pensioner currently receiving €508 would see their pension rise to €764, representing an increase of around 50%.
For higher pension recipients, the increases would be more limited. A pensioner currently receiving €2,129 would receive €2,168, while someone receiving €2,540 would see their pension rise to €2,580.
12% penalty to be eased
The pension reform also addresses the 12% actuarial adjustment applied to pensions taken at age 63.
The proposal provides for a reduction in the penalty rather than its complete abolition, as removing it entirely would affect the long-term sustainability of the Social Insurance Fund.
The reduction would apply to half of the relevant period, up to a maximum of nine months, for the basic pension.
It would cover both existing pensioners and future pensioners who retire up to the final year of the transitional period in 2031.
The actuarial relief would apply for the lifetime of those receiving it.
New contributions from income earners
The proposed pension reform would finance the increases by broadening the contribution base and introducing a new contribution obligation for certain income earners.
The measure would apply, up to the annual amount of basic insurable earnings, to Cypriot citizens, EU citizens and certain third-country nationals covered by EU Regulation 883/2004 who normally reside in areas controlled by the Republic of Cyprus and are not covered by another insurance obligation or equivalent credit.
Income taken into account would include earnings from office, dividends, interest, rents, copyright or patent royalties, fees and other property-related profits.
For employees who are shareholders in the company where they work, dividends received from that company would also be included when determining their earnings for social insurance purposes.
Also read: Cyprus unveils biggest pension reform since 1980
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