The government and unions are heading into detailed negotiations over Cyprus’s pension reform, with sharp disagreements emerging over how much pensioners will pay and receive.
After more than 10 technical committee meetings, three issues are dominating the talks: raising the minimum pension, reducing the 12% early retirement penalty, and whether to include private sector provident funds in the reform.
Minimum pension to reach €764
The biggest change on the table is a major increase to the basic pension. Currently capped at around €520-530, the maximum basic pension is expected to jump to €764 under the government’s plan to merge it with other social supplements like the “small cheque”.
Pensioners receiving up to €1,700 will see increases. Beyond that threshold, pensions will be cut – with those reductions paying for the increases to low-income pensioners.
This issue is expected to dominate much of the dialogue between government and social partners due to the scale of the changes involved.
12% penalty dispute
The government had raised hopes it might scrap the 12% penalty for retiring before 65, but those expectations now appear dashed, DEOK president Stelios Christodoulou told Phileleftheros.
The union is writing to the Labour Minister demanding clarity on the government’s intentions.
The government plans to credit workers who retire at 63 with an additional nine months of work. But Christodoulou said the government’s calculations appear to have changed – the initial amounts presented differ from the new figures. He said the government must explain how the nine additional months will be calculated.
The Labour Minister told Phileleftheros the 12% penalty is part of the negotiations. It won’t increase or stay the same – there will be a downward change, he said.
But he warned – citing the late Zeta Emilianidou – that fully abolishing the 12% reduction would effectively lower the retirement age to 63 instead of 65.
Provident funds clash
Unions and employers both insist the reform must cover two areas at once: state pensions from the Social Insurance Fund and private sector provident funds.
The government disagrees. It wants to tackle only state pensions now, arguing that changes to provident funds will take two to four years. Other parts of the reform can follow later, it says.
Christodoulou told Phileleftheros that even if both areas aren’t reformed simultaneously, the government must set out a roadmap for provident funds from the start. That way there’s a clear strategy, and the implementation timeline can be decided later.
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