With the need for more answers and clear data as a common thread, consultations on pension reform continue, while the government seeks to finalize the process and bring the bill before Parliament.
Both KEVE and DEOK acknowledge the need for changes to the current system; however, they raise a series of questions regarding the cost, sustainability, the level of future pensions, and the assumptions on which the reform is based. Filokypros Rousounidis and Stelios Christodoulou, speaking on the “Alpha Kalimera” program, made it clear that before the dialogue concludes, there must be a clear picture of the long-term implications of the proposed changes.
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Haris Papatheocharous: A photo with his wife from 2015
Pension reform: Aim is to bring it before the Cabinet soon
Positive, but with questions
The CCCI is approaching the final consultations with the government with a positive stance toward the need to reform the pension system, though significant questions remain unanswered. The Chamber’s Secretary General, Filikipros Rousounidis, warned that the bill should not be sent to Parliament without the broadest possible agreement among the social partners.
Speaking on the “Alpha Kalimera” program, Mr. Rousounidis noted that KEVE recognizes the need to modernize and strengthen the adequacy of the pension system and views the effort to reform it—after decades—positively. He emphasized, however, that the cost of the changes must be fully clarified so that their impact on both the economy and public finances is known. As he noted, updated data is expected from the Ministry of Labor so that it can be evaluated by both the technocrats and the external consultants of the Cyprus Chamber of Commerce and Industry (KEVE).
The Secretary General of KEVE expressed concern that, although the process is nearing completion, significant issues remain unresolved. “What really concerns us is that the bill might not go to Parliament without having been agreed upon to the greatest extent possible,” he said, noting that such a scenario carries risks, especially during an election campaign. “The point is to avoid passing something and then having to start fixing it,” he added, emphasizing that this is one of the most significant reforms of recent decades.
According to Mr. Rousounidis, the social partners are working toward finding common ground, and the KEBE is participating in the dialogue with a positive and constructive attitude. He emphasized, however, that concrete answers are now needed from the Ministry and the relevant officials. “At least within the next seven to ten days, everything should be clarified,” he said, explaining that KEVE’s proposals must be based on scientifically and cost-effectively substantiated data.
Among the issues of concern to employers are the assumptions used for the allocation of reserves and how these affect the reform’s calculations. Mr. Rousounidis noted that certain projections appear to be based on mechanisms that will take time to be fully implemented, and asked for clarification on how they can be incorporated into the relevant calculations at an earlier stage.
He also expressed particular concern about the long-term evolution of the supplemental pension. As he explained, the Cypriot system is proportional in nature; the more contributions an insured person pays, the larger the pension they can expect to receive. According to initial analyses by CCCI advisors, there are questions regarding whether the supplementary portion of the pension may be reduced in the long term. “For someone who pays higher contributions, it is important to ensure that a right they have acquired is safeguarded and that they are entitled to a substantial pension in the future,” he said, noting that this specific issue requires further examination.
DEMOK Calls for Answers
With several questions still unresolved, the dialogue on pension reform continues, with DEOK President Stelios Christodoulou, stressing that the social partners need clear answers before the process is completed.
Speaking on the “Alpha Kalimera” program, Mr. Christodoulou noted that the Ministry of Labor is attempting to move the consultations forward at a rapid pace; however, questions remain on the part of the social partners. He also clarified the DEOK’s key positions: “The reform should not raise the age limit. The reform should not increase the Social Security contribution rate. And the reform must ensure that the pensions paid are decent, both for current retirees and for future ones.”
Regarding the 12% penalty for early retirement, the DEOK President noted that the benefit from the changes will not be calculated based on the current basic pension, but on the new basic pension provided for by the reform. As he explained, this differs from the calculations presented to date and, in his view, underscores the need for a complete picture of the actual impact of the changes.
Mr. Christodoulou emphasized that such an important reform should not be rushed. “Pension reform and the pension system in general are our greatest social achievement. The best ally in such reforms is patience and a thorough examination of all examples and all parameters,” he said. Among the issues requiring further clarification are the return on the Social Security Fund’s reserve and the possibility of actuarial adjustments if returns fall below the assumptions on which the reform is based.
DEOK is also asking for specific examples of how pensions will evolve over time. As Mr. Christodoulou noted, it must be examined what, for example, a current pensioner receiving €1,500 in five or seven years under the existing system and what their corresponding pension would be under the new one. “We’re not going to create a pension system just for the next three or four years. We need to lay the groundwork for the next 20 to 30 years,” he noted.
Finally, he reminded that increases in Social Security contributions have already been agreed upon for the coming years, and that, starting in 2013, it has been agreed to link the retirement age to life expectancy. In this context, DEOK does not accept additional increases beyond those already agreed upon. At the same time, Mr. Christodoulou raised the issue of the second pension pillar, calling for incentives from the government for employers and employees to strengthen and expand the Provident Funds.
