Pensions will remain unchanged for the rest of the year despite a recent agreement between the government and social patterns to increase the cost-of-living allowance (CoLA).
Since Friday, when pension payments began, several readers have reached out to Phileleftheros expressing their disappointment that they did not see any increase in their pensions despite the hike in the CoLA allowance reaching 66.7%, which some retirees among their friends and acquaintances received.
However, it seems that those who benefited from the increased CoLA were predominantly former civil servants, as their state-provided pensions were included in the agreement.
Pensions are also subject to revision due to inflation. Within the framework of the current legislation, last July, due to last year’s surge in inflation, pensions witnessed a significant increase of 4.2%.
This percentage corresponded to the increase in the average consumer price index during the first half of 2022, compared to the average index of the second half of 2021. According to the legislation, pensions increase every year on July 1 by the percentage increase in the average consumer price index during the preceding semester, compared to the average index of the last semester of the previous year. However, if this percentage is lower than 1%, no increase is granted.
Based on the Ministry of Labour’s analysis so far this year, it appears that the percentage increase is marginally lower than 1%. As a result, no increase in Social Security pensions is expected from July 1.
Final decisions and announcements, however, are expected within the week as the Social Insurance Services await the Consumer Price Index data for June, which will be issued by the Statistical Service on July 6.
Breathing room for low-income pensioners
Unless unforeseen circumstances arise, those who receive pensions solely from the Social Insurance Services will not see any increases. However, other categories of retirees, especially the most vulnerable, will receive income support. Specifically, in addition to retirees from the public sector who received an increase due to the higher CoLA, support will also be provided to low-income pensioners.
As decided by the Ministry of Social Welfare and approved by the Cabinet, allowance for low-income pensioners will increase by 5% starting from June 1. Therefore those eligible will receive a retroactive payment for June.
What is CoLA?
CoLA is an increase made to wages to counteract the effects of rising prices in the economy, caused by inflation.
It is typically equal to the percentage increase in the Consumer Price Index for a specific period. The Consumer Price Index represents the average prices of a basket of goods and is used to measure inflation.
Following the 2013 financial crisis, trade unions and employers in Cyprus signed a transitional agreement over the payment of CoLA at 50% of the Consumer Price Index accounted for once a year instead of once every six months.
In 2023, the government, trade unions and employers agreed to raise CoLA to 66.7% for the public and semi-public sectors.
Read more:
Compromise agreement on CoLA could be signed on Friday