While the social partners are engaged in intense discussions on the need to reach an agreement on the second pillar of the pension reform, Andreas Milidonis, Professor of Finance at the University of Cyprus, presents his proposal for a revised approach to provident funds.

He proposes automatic enrollment of employees in Provident Funds, which would be mandatory.

“The current structure of the pension system has created significant inequalities at the expense of private-sector workers, with the result that a large percentage of them (possibly more than 50% of the workforce) to be overly dependent on the Social Insurance Fund—that is, Pillar I—for their retirement benefits.” ^{Andreas Milidonis, Professor of Finance at the University of Cyprus}

He recommends that employees, employers, and the government all contribute to savings.

Specifically, it is proposed that the employee contribute a certain amount to the Provident Fund.

The employer contributes the same amount; however, if the employee wishes to contribute more than 3–5% of their salary to the fund, the employer is not required to contribute any additional amount.

A third contributor will be the government, which is proposed to support retirement savings but without providing the same incentive to everyone.

Those with low incomes who do not benefit from a tax deduction will receive a direct government contribution to the Provident Fund. The amount will be 50% of their own contribution, capped at €1,000 per year.

Those with higher incomes who already benefit from the tax deduction for their contributions will not receive additional funds from the Provident Fund.

Andreas Milidonis met with Marinos Mousiouttas on July 3, during which they discussed the academic’s positions.

The government is not providing it

In our communication with the ministry, we were told that, based on current fiscal data, it is impossible for the state to contribute to the provident funds. At the same time, it was clarified that if there is no agreement on Pillar 2 among the labor advisory body and the social partners, the ministry will proceed as planned to submit a bill solely for the determination of pension amounts.

Those outside Parliament

The progress of the discussions and the objectives of the pension reform were presented to representatives of the DIPA,EDEK, and the Ecologists – Citizens’ Cooperation movement by the Minister of Labor.

See the report by Kleio Vourkou