The bill on pension reform, incorporating the changes made so far, is expected to be sent to social partners by tomorrow, Labour Minister Marinos Mousiouttas said. He reiterated the government’s intention to submit it to the Cabinet and the House of Representatives as soon as possible.
Speaking after today’s meeting of the Labour Advisory Board, Mr Mousiouttas described it as one of the most interesting meetings, saying it had taken place in an exceptionally good atmosphere despite differences of opinion. He said there were no expected surprises such as those at the previous meeting, adding that it remained to be seen whether there was room for changes, both on these issues and on others he described as less significant.
The target remains to implement the reform from 1 January. According to the minister, the Cyprus Chamber of Commerce and Industry (CCCI) has submitted its position in writing and the positions of the Employers and Industrialists Federation (OEB) are awaited. He added that additions and amendments could still be submitted even after the bill is tabled.
Next steps and timetable
The minister also outlined the board’s upcoming meetings. On 29 October, he said, discussions on Provident Funds will begin at the Labour Advisory Board. The funds have so far been examined in detail by technical committees. He clarified that 29 October falls on a Thursday and is the final meeting of the month.
Social partners are expected to submit their proposals by the 20th of the month, after which explanations and clarifications will be sought. The proposals submitted will be analysed on the 27th, and on the 29th the full set of proposals, together with the ministry’s own suggestions, will be brought to the Labour Advisory Board so that discussions on Provident Funds can continue.
Mousiouttas said he was optimistic that the bill would be submitted to the House on time. Asked when it would go to the Cabinet, he said “as soon as possible”, clarifying that this meant in less than a month. He did not give a specific date.
He explained that the bill had not yet gone to the Cabinet, although it could have done so, because the final opinion of the Law Office on the legislation was still pending. He said he knew that the Office had already examined the text to a large extent and expected its work to be completed in the coming days, allowing the process to move forward.
Meetings and discussions will continue, he added. If agreement is reached on issues where no convergence has so far been achieved, this can still be recorded when the bill is before the House, verbally or in writing. “The dialogue is continuous, and we mean it. It is not simply a matter of attending meetings,” he said. The sustainability of the Fund and public finances, he noted, are the main considerations.
Provident Funds and widows’ pensions
The meeting’s discussion focused on five main issues, including the 12% actuarial reduction for early retirement at 63. The minister said the trade unions’ positions were heard again in detail, without a response or commitment to changes. The aim, he said, was to see whether their positions could be combined with the ministry’s proposal, which had been presented in three versions.
Mr Mousiouttas said the ministry had again listened to the social partners on the 12% reduction and the other four issues, without committing to changes. “The aim is not for something we have said to be treated as gospel,” he said, adding that the ministry would examine whether there was scope for adjustments. He stressed that the financial capacity of both the Fund and the state had to be taken into account, since all the requests carry a cost. The ministry will consider whether adjustments can be made and, where feasible, whether some of the social partners’ requests can be met.
The level of pensions was also discussed, particularly the benefit for low-income pensioners. The minister said organisations were asking for it to reach the poverty threshold of €1,130, instead of the €910 proposed by the ministry. He said the change would entail a significant cost. The ministry wants to exhaust the dialogue, he added, and will review its actuarial studies to determine whether changes are possible on one or more issues.
The meeting also addressed widowers’ pensions for men whose wives died before 1 January 2018. On Provident Funds, trade unions reiterated that discussions should take place in parallel and that a framework agreement should be reached before the bill on the first pillar is passed, at least.
The minister said social partners had again been asked to bring forward meetings on Provident Funds. Two meetings will be held on the 20th and 27th of the month, and the issue will be discussed by the Labour Advisory Board on the 29th. “Within the next 15 days we will have the partners’ positions on the second pillar, followed by our own positions,” he said, adding that efforts would be made to reconcile views and, if possible, reach a framework agreement on the second pillar, which the ministry also considers an important complement to pension benefits. Other important issues, mainly technical in nature, are also being processed, he said.
Employers also raised the issue of dividends. The minister said the relevant provision had been amended and covered dividends of up to two insurance account units, with an income ceiling of €23,000. He gave the example of a person earning an annual salary of €15,000 and receiving a dividend of €30,000: €15,000 of salary and €8,000 of the dividend would be included in Social Insurance, bringing the total to €23,000. In effect, he said, a cap is being introduced.
Dividend provisions and pension examples
On the taxation of dividends, Mousiouttas said the relevant tax had recently been reduced and described the provision as fair and moving in the right direction. According to figures he cited, many people declare both a salary and dividends, while their monthly salary is between €500 and €750. These are annual salaries of about €9,000 to €10,000, on the basis of which those individuals would qualify for a social pension and the low-income pensioners’ benefit. The dividend provision, he said, seeks to correct this “injustice”, so that people receive the pension corresponding to their contributions rather than welfare benefits.
Asked about the pension calculation examples published by the ministry, he said they would not change as a result of the discussions, at least not for the worse. The examples are based on 2024 data and can be updated once the bill is approved by the House.
The indicative examples published by the Ministry of Labour and Social Insurance cover low, medium and high incomes. For low-to-medium incomes, the proposed reform provides for increases of up to 34%. For people with 25 years of contributions and seven credited years, the pension rises from €497 to €667. With 35 years of contributions and seven credited years, it rises from €642 to €827, while with 42 years of contributions and seven credited years, it rises from €762 to €976.
For medium incomes, increases reach up to 11%. With 25 years of contributions and seven credited years, the pension rises from €921 to €1,019, an increase of €98. With 35 years of contributions and seven credited years, it rises from €1,258 to €1,341, an increase of €83; and with 42 years of contributions and seven credited years, from €1,524 to €1,611, an increase of €87.
The examples for high incomes show no reductions, while some cases record small increases. With 25 years of contributions and seven credited years, the pension rises from €1,223 to €1,271, an increase of €48. With 35 years of contributions and seven credited years, it rises from €1,706 to €1,713, an increase of €7; and with 42 years of contributions and seven credited years, from €2,032 to €2,034, an increase of €2.
The examples are based on 2024 values and concern the full implementation of the reform.
Source: CNA
