Cyprus’s Labour Ministry has officially postponed submission of the pension reform bill from July to September, Labour Minister Marinos Moushouttas announced on Monday, citing the need for more time to consult social partners and reach broader consensus.
Speaking after a meeting of the Labour Advisory Body, Moushouttas said he had informed social partners on Sunday evening that the government had reconsidered their views on the reform and decided to allow more time for dialogue before the Council of Ministers formalised any decision.
The minister said the draft bill would be shared with social partners within days, along with a summary of key issues including the proposed 12% actuarial reduction, so that each topic could be examined individually at subsequent sessions of the Labour Advisory Body. The aim, he said, was to submit the outcome of those discussions to parliament when it reconvenes in September.
Red lines
Moushouttas made clear, however, that the government would not wait for unanimous agreement before proceeding, saying the goal was to achieve as many areas of convergence as possible. He added that any change to one area of the reform would need to be offset by a corresponding reduction elsewhere.
The minister set out three parameters that would remain fixed regardless of the outcome of consultations: contributions would not rise, the retirement age would not increase, and the sustainability of the Social Insurance Fund would not be compromised.
Key issues under discussion
According to information cited by Phileleftheros, four issues are expected to dominate consultations.
The first is the 12% actuarial penalty applied to early retirement. The government is considering reducing this by four to four-and-a-half percentage points, but is expected simultaneously to increase the number of contribution years required to qualify for that relief. The change would take effect after approximately five years, and bridging the gap between the government’s position and that of social partners remains the central challenge.
The second issue is the increase of minimum pensions, which relates both to income adequacy and the poverty threshold. Even with an increase to basic pensions, some retirees would still receive amounts below the poverty line, meaning the adequacy objective would not be met. Discussions are expected to address the definition of adequacy, whether the poverty threshold itself will change, and whether a so-called Pillar Zero — aimed at bolstering the lowest pensions — will be included.
The third issue concerns widows’ and disability pensions, which affect a significant number of people. Trade unions are seeking to ensure that any changes produce meaningful benefits for those receiving these pensions, according to the same information.
The fourth issue — the Social Insurance Fund’s investment policy — is described as the most complex element of the reform at this stage. Concerns cited include the risk that investments may not yield the expected returns, whether it would be wiser to proceed gradually with the government retaining oversight, and how the shift from internal to external state borrowing would affect public finances.
Second pillar disagreement
Moushouttas identified the second pillar — provident funds — as the area of sharpest disagreement with social partners. He said the session had revealed a clear divergence of views, and that the government would do what it could to bring this element to parliament alongside the main bill as an agreed position.
He added, however, that the second pillar legislation could not go to parliament in September, as it would require a further two to three years of work. Any decisions reached on the second pillar, he said, could not be implemented for another three to four years.