The red lines, the gray areas, and the course of the discussions  

The timeline set by Labor Minister Marinos Mousiouttas for the submission of the pension reform bill has begun its countdown. Before the end of July, the much-discussed pension reform will be put up for public consultation. Of course, this will not be a “pension reform” per se, as it is often characterized, but rather a reform of the first pillar—which concerns the state pension—and in Cyprus’s case, the Social Insurance Fund. 

At the meeting between the President of the Republic and the new leadership of SEK, they received assurances that, with the submission of the bill on Pillar A, the agreement on Pillar B—that is, the occupational pension funds—would also be included. This is an issue that was discussed at length by the labor advisory body, and its implementation will take 3–4 years. However, the social partners were calling for an immediate link between the two pillars—something the government has assured them will be achieved through the agreement. The concern centered on the possibility of a change in government and, consequently, a change in philosophy and approach. 

The red lines and unanswered questions 

However, the other issue that remains unresolved and constitutes a red line for the unions is the issue of low-income retirees, since under the proposed changes, a large portion of retirees would remain below the poverty line.  

Furthermore, for those who were also receiving the small pension from the Deputy Ministry of Welfare, now that the two pensions will be merged into one, and the amount of the basic pension will increase, the small pension will be reduced or, in some cases, no longer paid.  

These are the points expected to spark the strongest reactions in Parliament, where the bill will be officially tabled for debate starting September 20. In fact, a tough game of poker is expected to unfold, with the 2028 presidential election on the horizon. 

In a calmer atmosphere  

For employers, one of the key issues was to clarify where the funds would come from to finance the pension increases. These increases, as Marinos Mousiouttas stated, will range from 5% to 55%, depending on the specific circumstances of each case, and will apply to everyone, as he noted. It is worth noting that just a few months ago, the minister assured the public that no pensioner receiving a high pension would receive an additional increase. 

As for where the funds will come from, the minister broke it down as follows: 

First, a new income bracket is being introduced: the “high-income earners.” These are individuals who do not contribute to the fund but have income from rent, stocks, or other sources—not from employment—and do not pay social security contributions; they will now be required to pay social security contributions. These individuals were receiving social security pensions from the state without making any contributions. 

Second, as the minister noted, there will be improved oversight of existing agencies regarding undeclared work and other issues related to social security. Wherever laws are not being followed, the corresponding fines must therefore be imposed. In fact, he explained that over the past year there has been a massive increase in revenue for the social security fund, due to more effective inspections and a significant increase in the labor force, primarily foreign workers. However, it should be noted that all workers from third countries who pay social security contributions to the Fund will never receive a state pension. Consequently, as the workforce from third countries grows, so will contribution rates. 

Third, as he explained, once the pension reform takes effect on January 1, 2028, following the passage of the relevant bill by Parliament, a management authority for the TKA will be established, and its funds will be eligible for investment. 

What remains to be done before the bill is submitted? 

According to sources at the Ministry of Labor, a meeting between the ministers of Labor and Finance is pending, to finalize the last details of the bill so that it can be presented to the labor advisory body and submitted to the Cabinet.