By Costas Skarparis*
The forthcoming pension reform is one of the most significant social reforms of recent decades. The quality of life of today's and future pensioners, as well as workers' trust in the Social Insurance system, will depend on its outcome. For this reason, it cannot be limited to unsatisfactory, piecemeal arrangements and half-measures.
A budgetary, not social, framing
The Minister of Labour recently asked that, if additional improvements are to be made to his proposals at fiscal cost, it must be indicated "where the money will be taken from." This approach treats a deeply social issue as a simple accounting exercise. Social insurance must not operate on this logic — all the more so when both the finances of the state and the finances of the Social Insurance Fund allow for substantial improvements.
The financial data
The real figures are undeniable. According to the latest actuarial studies, the sustainability of the Social Insurance Fund is secured at least until 2080. Furthermore, in recent years its revenues, together with interest, have exceeded its expenditure by approximately €1 billion annually. At the same time, public revenues have risen significantly due to increased tax and VAT receipts. The financial capacity, therefore, exists. What is required is political will, and unfortunately, it does not exist on the government's part.
It is not enough for the government to celebrate the positive performance of the Cypriot economy. Economic growth acquires real value only when it improves the daily lives of citizens, and particularly of pensioners, who supported the Social Insurance system and our country through their contributions for decades.
Widowers' pension injustice
Within this framework, the government's stance on the widowhood pension issue provokes justified reactions. Its refusal to correct the injustice against widowed men whose wives died before 1 January 2018 perpetuates unequal treatment that runs contrary to the principle of equality, as enshrined in Article 28 of the Constitution. This injustice must be lifted without further delay. It is, after all, a transitional arrangement with a time-limited cost.
The 12% penalty
Equally disappointing is the approach to the 12% penalty for those retiring at the age of 63. Instead of abolishing it, only a small reduction is proposed, to the basic part of the pension, over a period of five years. In practice, this means an increase of just €4 to €5 a month per year. Such a proposal can hardly be presented as substantive reform. For those affected, it is a mockery — a symbolic gesture that does not correct the injustice.
Unresolved issues
At the same time, the picture remains unclear on a number of critical issues. There is still no clear picture regarding increases to pensions, incapacity pensions, unemployment and sickness benefits, funeral grants, nor the role that Provident Funds will play as a complementary pillar of the pension system.
The reality for today's pensioners
The reality experienced today by thousands of pensioners does not allow for further delays. The minimum pension, that is, the social pension, stands at just €435, before the deduction of the GHS (GeSY) contribution. More than 100,000 pensioners receive a pension below €1,000, while many thousands more live on an income of €600 to €700 a month. At the same time, the poverty line stands at €1,103 for a single person and €1,655 for a two-person household. These figures demonstrate that for many thousands of pensioners, a dignified standard of living remains an unmet goal.
What genuine reform requires
The reform will acquire real social substance only if it corrects the injustice in widowers' pensions, abolishes the 12% penalty, substantially strengthens all pensions and particularly the lowest ones, upgrades the Low Pension Support Scheme, raises the poverty threshold, improves social benefits, and secures the universal application of Provident Funds as a complementary pillar of pension protection. On the positive side, we consider the government's commitment to stop borrowing from the Social Insurance Fund, and the gradual repayment of the state's very large debt to the Fund — a practice previously followed only by the Demetris Christofias government.
Conclusion
The success of pension reform will not be judged by how much the state saves, but by whether it corrects injustices and secures dignified pensions. The financial figures of the Social Insurance Fund are positive, and, should it be needed, the state has the capacity — and the obligation — to support the system further still. What is missing is not resources, but the political decision to put people at the centre. This is genuine social justice, and this is what the workers and pensioners of Cyprus deserve.
Former Secretary-General of EKYSY-PEO
