Cyprus’s planned pension reform is shaping up to be a complex and difficult process, with early discussions suggesting that reaching an agreement will require intensive negotiations among social partners.
The first rounds of talks within the Labour Advisory Body indicate that a race against time is underway to secure consensus, while an extensive debate is also expected in parliament once the relevant legislation is submitted.
Government aims to submit legislation by June
Speaking after the second meeting of the Labour Advisory Body on Thursday, Labour Minister Marinos Mousiouttas said social partners had been briefed by the Ministry of Labour and Social Insurance’s actuary on the key aspects of the pension reform.
The minister expressed optimism that the timetable for submitting legislation on the first pillar of the pension system could be maintained, with the bills expected to be tabled in June before the new parliament that will emerge from the May legislative elections.
According to Mousiouttas, the ministry’s actuary has begun responding to written questions submitted by social partners as well as new queries raised during the discussions. The debate on these issues is expected to continue at the next meeting scheduled for March 16.
Key questions raised by social partners
According to information obtained by Politis, social partners have raised a number of questions regarding the methodology used to define poverty and how frequently it is revised.
They have also requested clarification on how the amount of €764 was determined as the maximum basic pension, as well as the current level of state contributions and how these may change after the reform.
Additional concerns include the cost of the proposed easing of actuarial adjustments both annually and over the long term, the investment policy of the pension fund, and the possible creation of a supervisory authority.
Other issues raised involve the repayment of the state’s debt to the Social Insurance Fund and the government’s plan to end the practice of borrowing from the fund.
Social partners have also questioned the proposed redistribution of state contributions from the supplementary part of the pension system to the basic pension, and what would happen if employer and employee contributions to the supplementary component prove insufficient.
Questions over contributions and automatic enrolment
Further questions relate to mechanisms for subsidised contributions, potential contributions from income earners, and the automatic enrolment of individuals from the age of 16.
Trade unions PEO and DEOK have asked whether individuals who fail to enrol would face any penalties.
Social partners are also requesting the full delivery of the study conducted by the International Labour Organization, including the assumptions used in its analysis.
Discussion on provident funds expected
Social partners are also awaiting clarification on the government’s plans regarding provident funds.
According to the labour minister, one of the scheduled meetings in March will present partners with a proposed timeline for discussions on the second pillar of the pension system, along with its general framework.
The next meeting of the Labour Advisory Body is set for March 16, with additional sessions scheduled for March 23 and March 30.