How the Ambitious Pension Reform Caused Confusion, Raised Questions, and Led to Disappointment

The President of the Republic’s statements regarding pension increases of €250–€300, combined with Labor Minister Marinos Mousiouttas’ assurances during negotiations that the increases would range from 5% to 60%, with an emphasis on low-income pensioners, undoubtedly raised the bar for citizens’ expectations and hopes. This narrative of substantial increases was reinforced when the ATA chapter was closed more than a year ago.

But that wasn’t all. The attempt to present the amendment bill for the Social Security Fund (TKA) as a pension reform—even though the TKA concerns only the first pillar, while pillars 2 (Occupational Plans / Provident Funds) and 3 (Occupational Plans / Provident Funds) are still pending, causing further confusion as to exactly what this reform entails.

On August 19, the bill was presented to the partners during a session that lasted much longer than expected. The discussion was heated and would have continued past 1:00 p.m. if some participants had not had to leave. And while statements from the Minister of Labor were expected, the President of the Republic rushed to announce them via a video message on social media.

As President Christodoulides stated, this is a reform that provides the greatest support to our low-income pensioners. A reform that boosts disposable income for households. He added that it is being done for the retiree who deserves a better quality of life, and for the worker who wants to secure their future.

Following this message, Minister Marinos Mousiouttas went on to explain that all 123,000 retirees will see their pensions increase. Forty-two percent (51,664 retirees) will receive increases of more than 100 euros, while the rest will see increases of less than 100 euros.

This was enough to cause the phones at the Union of Cypriot Pensioners to ring off the hook, as Secretary-General Eftychios Papamichail reported to Alpha TV on Sunday.

As he explained, pensioners—and particularly those on low pensions—had different expectations based on the government’s statements. As Mr. Papamichail explained, low-income pensioners, to be precise, cannot even cover their basic needs and are being driven into poverty.

Currently, the minimum monthly pension, without dependents, is €450.35, and the monthly amount at the full basic level is €529.82.

Many retirees today spend their summers without air conditioning because they do not have enough money to pay their electricity bills, and the same situation occurs in the winter. There are also many who cannot care for themselves, but the salary of a caregiver far exceeds their income.

It is these retirees who were counting on the €250–€300. Ultimately, the increases that were announced (the details of which will be analyzed below) will be phased in over a five-year period.

As he explains, pensioners subject to the 12% penalty are also dissatisfied. The actuarial reduction imposed for early retirement (at age 63) applied to the entire pension amount. In contrast, the new proposal calls for a gradual reduction to 7.5% over time.

The Five-Year Period and Scheduled Increases

According to the draft amendment bill, in the first year, the retiree will receive 40% of the total increase to which they are entitled. In the second year, they will have received a total of 60%; in the third, 70%; in the fourth, 80%; and in the fifth, 100%.

For example, if the total increase to which a retiree is entitled is €100 and the reform takes effect in January 2027, their pension will increase by €40 per month in the first year.
In 2028, €20 will be added, bringing the total increase to €60 per month.
In 2029, another €10 will be added, bringing the total increase to €70.
In 2030, another €10 will be added, bringing the total to €80.
And in 2031, the final €20 will be added, bringing the total increase to €100 per month.

For current pensioners of the Fund, the draft bill stipulates that those receiving a monthly pension of 600 euros will receive a minimum guaranteed increase of 30 euros starting in the first year.

Life expectancy at birth for 2024 was estimated at 81.4 years for men and 85.8 years for women.

However, the issue of the five-year increase has sparked serious reactions, with the Secretary-General of EKYSY raising the issue of a decent standard of living. He noted that he is awaiting the Labor Minister’s proposal regarding the plan for low-income retirees.

The increases and the 18 cases as examples

The new formula that has been developed appears to be fairer to individuals who worked for more years and consequently paid more contributions to the Social Security Fund.
Actuaries from the International Labor Organization, whose contribution was decisive, provided the 18 most common examples.

Example 1a: For low-income individuals with 15 years of paid contributions, 4 years of subsidized contributions, and no units in the supplementary component, the current pension amounts to 411 euros. Under the reform, the final plan calls for a 40% increase, bringing the pension to 577 euros.

Actuaries calculate the pension amount based on the retiree’s income (and thus the contributions paid to the Social Security Fund) during their working years. The formula they present is as follows:

Pensionable earnings will also be recognized for new population groups for specific periods.

Specifically, contributions will be subsidized for:

· women, for periods related to child-rearing,

· informal caregivers who provide full-time, unpaid in-home care to relatives up to the second degree,

· people with disabilities,

· students, and

· new entrants to the labor market.

The social partners’ first impressions

The undertaking is certainly no easy task. The social partners have enlisted internationally recognized consultants and actuaries to review the proposal.

According to the Chief Actuary of the International Labour Organization, this initiative will cost the public treasury €50 million annually for the first five years. However, as he clarified, it will take 50 years to calculate the total cost of this reform. He also confirmed that the proposed amendments have ensured the fund’s sustainability and that there is no risk to future retirees until then.

The General Director of the OEB, Michalis Antoniou, pointed out that there is a need to verify the scenarios based on our own data and the actuaries who advise us. “We will need,” he said, “clarifications regarding the transition periods, the five-year period following the implementation of the new regulations, because there is some ambiguity in that area as far as our understanding is concerned.”

He clarified that, at the same time, Pillar 2 (provident funds) should be implemented in parallel with this reform process. Meanwhile, he characterized the establishment of mandatory pension funds as a “casus belli.”

The General Secretary of the Cyprus Chamber of Commerce and Industry (KEVE), Philokypros Rousounidis, pointed out that the time frame is extremely tight. As he explained, beyond the contributions and the overall cost of the reform, KEVE is also concerned with how these funds will be raised.

SEK General Secretary Andreas Matsas, on the very day the amended bill was announced, described the reform as piecemeal. Meanwhile, as SEK notes in a statement, it is necessary to immediately advance the remaining pillars of the reform, so that the final outcome is comprehensive as a result of social dialogue and aligns with the goal of a substantive and comprehensive reform of the pension system.

There are many questions regarding social pension beneficiaries as well, who numbered 18,297 in December 2025. Several beneficiaries will gradually lose part of their social benefits as their basic pension increases.

The unions have requested and will receive clarifications on this matter on August 28, and they have been sent a detailed study on Pillar 0.

Beyond the 12% penalty, we have some questions regarding the approach taken to the changes being made to disability pensions, stated PEO General Secretary Sotiroula Charalambous. She added that there is no provision for widowers who lost their spouses before 2018.

The portion of the men’s widow’s pension, according to statements made by former Minister of Labor Yiannis Panagiotou before the Finance Committee, costs the state €5 million, so it is not an expense the government intends to incur, and the current minister is approaching the issue in a similar manner.

The partners’ positions are expected to become clearer on August 28. Nevertheless, the discussions held with the partners in the context of this article have shown that the “political” aspect takes precedence in many cases and stands in the way of drafting a bill that will serve as the foundation for decades to come for the pensions of Cypriot citizens.