The much-publicized pension reform is now under scrutiny, having been thoroughly scrutinized by the social partners, and despite the expectations that were raised, the narrative seems to be falling apart.
“The pension reform, coming after 46 years, was more than necessary.” Marinos Mousiouttas, Minister of Labor
ΣΧΕΤΙΚΑ ΑΡΘΡΑ
Haris Papatheocharous: A photo with his wife from 2015
Pension reform: Aim is to bring it before the Cabinet soon
“The more we study it, the more our concern grows.” Sotiroula Charalambous, Secretary General of PEO
“At this point, there is no prospect of completing the process through a comprehensive regulation that would allow pensions to be raised to a sufficient level.” Andreas Matsas, Secretary General of SEK
“If the state does not contribute sufficiently to this reform, the reform will be incomplete.” Stelios Christodoulou, President of DEOK
“Our concerns also lie in the various scenarios that were presented to us.” Philokypros Rousounidis, Secretary General of KEVE
“We must extend our support only as far as the financial realities of the existing Social Insurance Fund allow.” Michalis Antoniou, Director General of OEB
The Minister of Labor states that a fairer and more merit-based formula is now being promoted, based on the capabilities of the Social Insurance Fund as well as the State’s financial resilience.
“The proposal is based on the fact that low pensions are very low, and we are placing particular emphasis on increasing low pensions more than others.” Marinos Mousiouttas, Minister of Labor
We began the pension reform by incorporating certain other social elements into it.
With the implementation of the amendment bill, there will be a 5-year transition period. During these 5 years, it will become clear whether the increases implemented make the TKA sustainable or not. If it is not sustainable, then employees will be asked to contribute more, effectively shouldering the burden of the increases that will already be underway.
“If it turns out, under any circumstances, it turns out that, for the fund to be sustainable, the pensions we have decided upon would have to be reduced—because there is no way we would accept such a measure—we determined that, of all the factors, the one that could be adjusted, if necessary, is the contribution rate.” Marinos Mousiouttas, Minister of Labor
After months of consultations, the social partners had agreed on three points. The first was that contributions would not be increased; the second, that the retirement age would not be raised; and the third, that the Fund’s sustainability would not be compromised. Following the provision for a possible increase in contributions, the OEB proposed raising the retirement age.
“If we cannot ensure this and proceed with improvements beyond the limits permitted by the Fund, then both options must be available to the legislature when, in 2032, it is called upon to decide how to ensure the Fund’s sustainability.” Michalis Antoniou, General Director of the OEB
“Since one of these three pillars will differ, the discussion must be opened up to address all three, and specifically these two issues.” Philokypros Rousounidis, Secretary General of KEBE
Marinos Mousiouttas makes it clear that the government’s proposal will not include such a provision.
“The contribution rates paid by employees, employers, and the state should be increased somewhat. Period. And if necessary.” Marinos Mousiouttas, Minister of Labor
12% Penalty
Regarding the 12% actuarial reduction, the initial provision is to reduce it to 7.5% of the basic pension.
Once the 5-year transition period ends, those who wish to retire at age 63 will not only find it more difficult to do so—since the requirements will increase—but they will also face a larger reduction.
“The fact is that the number of years required—currently thirty-three—will gradually increase to thirty-eight. And the claim that there will be no actuarial reduction in the basic pension is, in essence, not true, because the basis on which the pension will be calculated at age sixty-three after five years—and I emphasize this—differs by 15.4% from the way someone will receive their pension at age sixty-five. It’s lower.” Sotiroula Charalambous, Secretary General of PEO
Pension Adequacy
An issue also arises with low-income pensioners. There are many beneficiaries who, despite the increases, will not be able to rise above the poverty line.
“That is why we believe it is imperative to also address the second pillar, which concerns the Social Insurance Funds, and the third pillar, as an alternative option.” Andreas Matsas, Secretary General of SEK
There are ambiguities regarding the financial governance of the Social Security Fund (TKA) and the state’s social intervention, particularly with regard to low-income pensioners—Pillar “0.”
“When the discussion on pension reform began tentatively in early 2025, the issue of Provident Funds was part of the dialogue. Along the way, following various interventions, this issue has been partially set aside.” Stelios Christodoulou, President of DEOK
Fund Sustainability
The issue of the social insurance fund’s sustainability is also what worries the social partners, since they have not yet been presented with data confirming that future pensions are secure. At the same time, the provision to end government borrowing from the Fund also calls into question the sustainability of the government’s own finances.
“We cannot mortgage the future of future workers, our children, and everyone else, and carry out a reform that serves only today’s retirees.” Filokypros Rousounidis, Secretary General of KEVE
“A true reserve would require the government to stop using the Fund’s surpluses—which amount to approximately one billion euros annually—and to begin repaying part of the debt, the twelve billion. This is a cause for concern for the Cyprus Chamber of Commerce and Industry (OEB) because the current circumstances may not be the most appropriate.” Michalis Antoniou, Director General of the OEB
The Minister of Finance attended the meeting of the Labor Advisory Council, where the public debt manager was also present. For 2027 and 2028, the Republic of Cyprus’s general government debt repayments will exceed 2.5 billion each year, for a total of over 5 billion.
“One reason we persistently demand clear and transparent financial data on every aspect is that, in our view, this approach does not constitute a reform of the pension system; it is a redistribution of resources within the Social Insurance Fund.” Sotiroula Charalambous, Secretary General of PEO
“And that is why we need both additional funding and policies related to pension reform.” Andreas Matsas, Secretary General of SEK
“We are striving to ensure adequate pensions; we must clarify and agree among ourselves on how ‘adequacy’ is defined.” Stelios Christodoulou, President of DEOK
“At the next meeting, which is scheduled for this coming Thursday. We will have this detailed table, which will be presented and analyzed with everyone to close this chapter on who contributes what and why.” Marinos Mousiouttas, Minister of Labor
Parliament
Despite recommendations from partners that there is no need to rush, the government still intends to submit the bill on September 24 so that debate can begin in the relevant committees. Nevertheless, according to ALPHA’s sources, certain political parties have already conveyed to the social partners that if there are points on which they disagree or that they do not like, they will send the bill back for further revision, citing a lack of sufficient social dialogue.
See the report by Kleio Vourkou
