Minister of Labour and Social Insurance Marinos Mousouttas confirmed that the government's pension reform proposal does not include the full abolition of the 12% actuarial reduction applied to those who choose to retire at 63. Speaking on Politis 107.6 and 97.6 during the morning programme Proini Epitheorisi, he clarified that the government is instead proposing a change to the way the reduction is calculated. Unions maintain a different position on this point.
The minister stressed that fully abolishing the actuarial reduction is not on the table, as this would alter the fundamental philosophy of the system. He confirmed that the baseline retirement age remains 65, with no intention of raising the retirement threshold.
Provident funds divide social partners
Significant differences persist over the question of Provident Funds. Employers' organisations favour voluntary participation, while unions are calling for mandatory enrolment. Moussouttas declined to reveal the government's position at this stage, saying the priority is to explore common ground between the two sides.
He clarified that regardless of the final arrangement, any changes to Provident Funds would come into effect after three years, with benefits for new retirees only becoming tangible within a decade or decade and a half. "The Provident Fund is something additional to the pension and the two do not affect one another," he said, adding that the aim is for it to function in a complementary capacity.
Academic raises intergenerational concern
Andreas Milidonis, Professor of Finance at the University of Cyprus, responded to the minister's statements with a post on X, saying they struck him as unusual. He questioned whether the Social Insurance Fund would be stretched to its limits to pay today's pensioners, asking: "And what pension will our children receive?"
Employers call for incentives
The employers' side is maintaining a cautious stance. Giorgos Pantelidis, President of the Cyprus Employers and Industrialists Federation (OEB), speaking at a board meeting also attended by the minister, described the strengthening of pensions and the long-term sustainability of the system as a matter of the utmost importance, with implications for society, the economy, and the wellbeing of current and future generations.
OEB maintains that participation in Provident Funds cannot be made mandatory and that the voluntary character must be preserved. The state, it argued, must provide meaningful and strong incentives to both employers and employees to encourage participation in the second pillar.
Minimum pensions cannot match minimum wage
On the question of raising low pensions to the poverty threshold level, Mousouttas was categorical that this is not economically feasible under current conditions. He explained that the Social Insurance Fund operates on the basis of contributions paid in and available capital, and that any additional expenditure resulting from changes to benefits must be offset by savings elsewhere. "The Fund's money is not inexhaustible," he said.
Bill to go to parliament in September
The minister reiterated the government's intention to complete the social dialogue on pension reform and submit the relevant bill to parliament in September. The Ministry of Labour will in the coming days send the complete draft legislation, along with a summary of the key changes, to members of the Labour Advisory Body, after which the provisions will be examined chapter by chapter with the aim of achieving the broadest possible consensus between the government, unions and employers.
"The effort is always to achieve, if not unanimity, then a broad convergence of views," he said, while noting that the government will proceed with the submission even if full agreement is not reached.
Mousouttas expressed confidence that the groundwork will be completed before parliament resumes in the autumn, allowing the bill to be tabled immediately for discussion. He also announced that during the summer, the ministry will hold briefing sessions with all parliamentary parties, with actuaries and Social Insurance officials present, to present the reform in detail.
State debt to the Fund to be repaid
The minister recalled that the government has already decided to begin repaying the state's debt to the Social Insurance Fund from 1 January 2028. Annual surpluses of the Fund will be held in a dedicated account and managed by an independent statutory body in line with European standards, with the aim of investing the capital safely and with limited risk, in order to safeguard the interests of current and future pensioners.
According to information obtained by Politis, a meeting of the Labour Advisory Body is expected towards the end of next week, as the minister will be outside Cyprus at the start of the week.
