There is intense public debate over the reform of the pension system, with labor unions and employer organizations drawing diametrically opposed “red lines.”
Appearing as guests on the “Alpha Kalimera” show, PEO Secretary General Sotiroula Charalambous, and the General Director of the Cyprus Employers’ Federation (OEB), Michalis Antoniou, highlighted the deep divide over the sustainability of the Social Insurance Fund, the cost of the changes, and the various scenarios regarding contributions and retirement age limits.
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Haris Papatheocharous: A photo with his wife from 2015
Pension reform: Aim is to bring it before the Cabinet soon
Concerns over the plans
The General Secretary of PEO, Sotiroula Charalambous, speaking on the “Alpha Kalimera” program. As she alleged, the government is attempting an “internal” redistribution of resources within the Social Insurance Fund (TKA), leaving the critical question of where the necessary funds will come from completely unanswered.
“We didn’t receive any answers to the questions we raised,” Ms. Charalambous noted, highlighting the complete lack of clarity surrounding the funding of any such increases. As she explained, approximately 182–183 million euros are currently spent from the state budget to support low-income pensioners and the social pension. However, under the new proposals, the government is transferring the cost of the social pension directly to the TKA, without clarifying whether it intends to contribute additional funds.
Read more: Pensions: Social partners left… concerned and with unanswered questions
According to the General Secretary of PEO, the burden of the reform falls primarily on the insured themselves. “It is clear that this reform is being carried out primarily using the Fund’s own resources. In other words, the young will support the elderly,” she pointed out. At the same time, he emphasized that the unions are being asked to agree to a plan without key answers: “At this point, they haven’t told us whether they’ll add even one euro more than what we’re already paying, even though we have significant disagreements regarding the 12% penalty and the widow’s pension for men.”
Ms. Charalambous even described the government’s stance toward retirees as provocative, contrasting it with the announcements about budget surpluses. “It’s a bit provocative when we announce every week that we’re reducing the public debt and are champions in Europe, and when state revenues are rising due to inflation, to tell pensioners: ‘Here’s the money, and if I give anything, I’ll have to cut from elsewhere or burden future generations.’
Read more: Mousiouttas and Keravnos: “The goal is to increase pensions for low-income retirees”
She also made special mention of the employers’ positions regarding a possible increase in contributions or even raising the retirement age to 70 or 75. She recalled that the government itself had set the condition that these two issues would not be touched, emphasizing that “From what we’re hearing, it’s clear that the fundamental issues are being set aside, so essentially the framework within which this discussion began is being blown apart.”
In closing, the PEO leader sent a clear message that the labor movement will not consent to anything that jeopardizes workers’ futures: “If by ‘reform’ they mean that we’re now going to engage in a ‘quick fix’ by redistributing resources and burdening future generations with harsher conditions, then for us that is not what we call reform.”
Employers’ “No”
For employers, any new increase in social security contributions as part of the pension reform is a “red line.” Speaking on the “Alpha Kalimera” program, the General Director of the Cyprus Employers’ Federation (OEB), Michalis Antoniou, emphasized that if the economic projections are not verified, the gradual increase in the retirement age is the only alternative measure to ensure the sustainability of the Social Insurance Fund (SIF).
As Mr. Antoniou explained, pension planning is based on 50-year projections, which are updated through actuarial studies every three years. He emphasized that the common starting point for the government and social partners was to achieve improvements without raising contributions, without changing the retirement age, and without cross-subsidies among pensioners. However, he noted that the provision in the government’s bill allowing for potential new contribution increases following the 2030–2031 actuarial study is strongly opposed by the OEB.
“Contributions are already far too high, and current legislation calls for them to increase again in 2029, 2034, and 2039, reaching 10.7%. We cannot raise this rate any further,” the OEB’s Director General stated categorically. In this context, he outlined the options available to the system: “There are three things we can do: Either we raise contributions, or we raise the retirement age, or we reduce pensions. No one is even discussing the third option. The other two, however, must be tools that, if necessary, we should be able to utilize.”
Read more: Tough Negotiations Over Pensions
Responding to reactions regarding the retirement age, Mr. Antoniou clarified that a sudden transition to age 70 is not being proposed, but rather a gradual adjustment that will provide “some breathing room for the Fund’s finances without adding additional burdens.” He even argued that this position is receiving a positive response from a large number of private-sector workers, especially those of working age between 35 and 55, who are concerned about the constant erosion of their income.
In closing, Mr. Antoniou highlighted the creation of a “real reserve” in the Social Security Fund as a major and underestimated issue, warning of the implications for public finances. As he pointed out, ending the practice of internal borrowing by the state will deprive the state coffers of approximately 1 billion euros in annual liquidity. This, he concluded, will force the government to resort to more expensive borrowing from international markets, especially at a time when repayments on older loans from the Troika and the European SURE program are beginning.
