The first discussions at the Labour Advisory Body indicate that a race against time will be required if an agreement is to be reached. A lengthy round of discussions is also expected in parliament once the relevant bills are submitted.
Among the questions raised by the social partners are: a) the methodology for defining poverty and how often it will be revised, b) how the amount of €764 for the maximum basic pension was determined, c) what the state’s contribution is today and what it will be after the reform, and d) the cost of current credits. Credits in the Social Insurance Fund concern periods during which an insured person is not working, or is working less, but is credited with insurance units as if contributions had been paid, thereby preserving entitlement to benefits such as pensions and allowances.
They are also seeking answers on the cost of the proposed easing of the actuarial adjustment, known as the penalty, both annually and over time, the fund’s investment policy and the issue of creating a supervisory authority, the repayment of the state’s debt to the Social Insurance Fund, and the plan for ending borrowing.
The submitted questions also include concerns over the redistribution of the state contribution from the supplementary part to the basic part, and what will happen if employer and employee contributions to the supplementary part prove insufficient.
As regards mechanisms for subsidised contributions and contributions from income earners, as well as the automatic registration of 16-year-olds, PEO and DEOK raised the question of whether failure to register will lead to sanctions.
The social partners are also requesting delivery of the full study by the International Labour Organisation and the assumptions that were taken into account.
We still have a long way to go
SEK secretary-general Andreas Matsas told Politis that “we are still far away”, stressing the need for joint planning of the first and second pillars of pension benefits so that there are no surprises, even if they are not implemented simultaneously.
He acknowledges that there are several issues that could be handled better through joint planning. At the same time, he points out that it must be clarified how the objective that “no pensioner should live below the poverty line” will be applied in practice.
PEO secretary-general Sotiroula Charalambous told Politis that answers to the questions have started to be provided by the actuary, noting that “there are many matters on which we are still awaiting answers. We still have a long road ahead until all questions are answered”.
According to Charalambous, the state must clarify whether the €764 basic pension will apply to all pensioners.
Beyond the substantive questions, she says, issues also arise regarding the practical implementation of measures, such as the registration of everyone in the system from the age of 16, the provision for social insurance contributions by income earners and how monitoring will be carried out.
DEOK president Stelios Christodoulou said that the road to a conclusion is long, while noting that “all the bodies involved are willing to move as quickly as possible so that from the beginning of 2027 pensioners can begin to enjoy the benefits of pension reform”.
“Our effort is to provide solutions to key issues affecting pensioners, such as pension adequacy, the 12% issue, the fund’s investment policy, and the repayment of the debt to the Social Insurance Fund, so that we can have a credible and sustainable social insurance system that serves as an important safety net for today’s pensioners as well as future generations,” he said.
“We must bear in mind that social insurance contributions are declining because of low birth rates and delays in entering the system. At the same time, as life expectancy rises and the fund’s expenses increase, we need to be particularly careful to ensure that pensions are not put at risk,” he added.
Provident funds, he stressed, should serve as a supporting pillar for pension adequacy, adding that “the most correct and fair solution is to achieve universal coverage for workers”.
We should not rush
The secretary-general of the Cyprus Chamber of Commerce and Industry, Philokypros Rousounides, told Politis that there should be no rush to take decisions on such an important pillar of the economy affecting workers.
Any decision taken, he said, must be scientifically substantiated in order to ensure a fair, sound and sustainable system.
“We have already asked a recognised expert to prepare a specific study,” he noted, stressing that “our primary concern is to safeguard the sustainability of the Social Insurance Fund”.
At the same time, he said, “we are examining the actuary’s presentation in depth. This is not a simple equation”.
OEB director-general Michalis Antoniou, for his part, told Politis that the issue of pension reform is complex and requires deeper examination and effort in order to achieve convergence.
“Experience shows that time is needed to complete the process, especially amid unpredictable events that change priorities, such as the war in the Middle East. Hopefully we will meet the timetables,” he said, stressing the need for detailed, comprehensive and in-depth analysis aimed at reaching common ground.
According to Antoniou, OEB submitted around 30 questions out of the approximately 80 submitted by the social partners in total. Among the issues raised by the federation, he said, is the presentation of the full actuarial study so that the organisation’s experts, who help shape its positions, can make use of the data.
At the same time, Antoniou stressed that for the reform to be completed it is important for both the first pillar and the second pillar, namely provident funds, to be agreed, even if implementation does not follow the same time horizon.
Mousiouttas optimistic
Labour Minister Marinos Mousiouttas, after the second meeting of the Labour Advisory Body on Thursday, expressed optimism that the timetable would be met, with the bills on the first pillar to be submitted by June to the new parliament that will emerge from the May parliamentary elections.