The pension reform will result in increases for approximately 123,000 retirees, said the Minister of Labor and Social Security, Marinos Mousiouttas, speaking Wednesday at an event organized by the citizens’ group “55 Plus Minus Together – Cyprus,” which focused on pension reform.
“More than 50,000 of them will receive an increase of over 100 euros per month over a five-year period, while more than 8,000 will see increases in their pensions exceeding 200 euros. Depending on the case, the increases range from five to fifty-five percent,” he added.
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He noted that on September 3, the draft bill on pension reform was posted for public consultation on the “e-Consultation” online platform.
“The text is open to every citizen, not just institutional bodies, and the deadline for submitting views, comments, and observations expires today, September 16. At the same time, the social dialogue is in its most intensive phase. The draft was submitted to the social partners in mid-August, and since then we have been meeting twice a week, holding thematic meetings so that we don’t speak in general terms about the whole, but specifically about each chapter individually. The dialogue is demanding, and, yes, there are disagreements. That doesn’t worry me. The opposite would worry me,” he added.
The timeline, the Minister continued, remains clear.
“The bill will be submitted to the House of Representatives in September so that the legislature can begin its review. And the goal of the Nikos Christodoulides administration remains unchanged. The new system is to take effect on January 1, 2027, so that retirees will see the increases in their accounts by the end of January,” he noted.
He also said that the reform, which was designed with the support of the International Labor Organization, serves three objectives: To ensure an adequate income for those who have worked their entire lives, to restore intergenerational equity, as well as within the same generation, and to keep the Social Security Fund sustainable for decades to come.
As for what will actually change, the Minister said that at the core of the plan is the revised basic pension.
“Its amount will no longer depend on complex calculations that few people understand, but on something simple and straightforward. It will be based on the total time you’ve been enrolled and insured. And this is where the major change lies. This period includes not only the contributions you paid yourself, but also contributions subsidized by the state for periods of your life that the system previously treated as gaps,” he added.
He also noted that the retirement age remains at 65.
As he said, it is not increasing.
“However, anyone who wishes to—and only those who wish to—will be able to continue working and making contributions until age 67, with a correspondingly higher pension in the end. We are offering a choice and not imposing any obligation. Furthermore, I want to reiterate that the contribution rate to the Social Security Fund is not increasing either. “The calculation factor for the basic pension scales from 1.1 at age 63, to 1.3 at age 65, and up to 1.5 at age 67, so that every additional year of work truly counts,” he added.
Referring to the 12% actuarial reduction for those retiring at age 63, the Minister said that for years this reduction “has been a source of bitterness for thousands of our fellow citizens.”
“Its complete abolition would undermine the Fund’s sustainability. We are therefore pushing for a substantial reduction of this cut, which will bring the reduction to a level close to 7.5 percent. And two things are particularly important here. First, the reduction will be permanent and not limited to a transitional period. Second, it will apply to both current retirees and those who retire by the end of the five-year transition period,” he added.
He also said that a minimum guaranteed increase of 30 euros per month is being established for every current Social Security Fund retiree with a pension of up to 600 euros, and it will be paid starting from the very firstmonth of implementation.
“I know that to some, 30 euros may seem like a small amount. But for a household that counts every euro before going to the pharmacy, it’s not a small amount. It’s 390 euros a year. Every year. And that’s the minimum, not the maximum, since for the lowest pensions, the total benefit from the reform is much greater. The increases will be phased in over a five-year transition period, from 2027 to 2031, with the largest portion paid out upfront, in the early years, and with a more favorable calculation rate for those who retire during this period,” he noted.
Based on the current plan, the Minister said, thirty percent of the total increase is paid out in the first year and another thirty percent in the second.
“In other words, 60 percent of the increase goes into the retiree’s pocket within the first two years. For example, a retiree with a full working life who currently receives 504 euros can expect a total increase of approximately 250 euros by the end of the five-year period. Other changes are also taking place. Recipients of the Social Pension are being incorporated into the Social Insurance Fund as a special category, with their rights guaranteed, while the transitional protection period for future beneficiaries is being significantly extended. For those who cannot afford to pay contributions, the state will cover them based on income criteria. “Disability and widow’s pensions, as well as the orphan’s allowance, are being reformed, along with the supplements for each dependent child,” he added.
The Minister also noted that the reform broadens the system’s funding base, with a new contribution requirement for income that until now has not contributed to social security, such as dividends, interest, and rent, up to a set ceiling, which corresponds to the annual amount of the basic insurable earnings.
“It is a matter of basic fairness, since it is not possible for the burden to be borne solely by wages. And this brings us to the Fund’s reserve. We are talking about a sum in the order of 12 billion euros, which the state has borrowed over time from workers’ contributions. This money does not belong to the government. It belongs to those who worked and contributed. The borrowing will end, annual surpluses will now be deposited into an investment account managed by the Fund itself, and arrangements have been agreed upon for the gradual repayment of the existing debt, taking into account the state of the economy,” he added.
Repayment, the Minister said, is scheduled over a 40-year period, while actuarial studies indicate that the Fund will run surpluses for the next four decades.
“A new framework for the governance and supervision of investments is being established, in line with European requirements. The Fund is no longer a passive lender but has become a prudent manager of the insured’s assets. As for the second pillar—occupational pension plans— the relevant dialogue will continue throughout September. It will take time to come to fruition, and its benefits will be felt primarily by future generations. “However, we refused to put on hold what can be done today while waiting for what will take years. Today’s retirees do not have the luxury of waiting,” he noted.
The Minister of Labor also said that the pension reform does not stand alone.
“It complements the tax reform that will take effect on January 1, 2026, and which, with a higher tax-free threshold and deductions that take into account the actual financial burdens of a household, leaves more money where it’s really needed. “Two reforms, one logic: that growth only makes sense when it reaches every family’s table,” he concluded.
Source: KYPE
