Labour Minister Yiannis Panayiotou expressed confidence yesterday that a new, comprehensive, sustainable and adequate pension system will be implemented before the current government’s term ends.
Speaking at the 16th Pension Forum presented by AON, the Minister outlined a timetable for adopting the new system, as well as its key parameters and objectives.
On timelines, Panayiotou said the necessary technical groundwork for reforming the first pension pillar has been completed with support from the International Labour Organisation. He added that the reform bills are expected to be tabled in parliament within the coming weeks. The goal is for the bills to be approved by the cabinet and put before the House plenary for a vote before parliamentary elections, he said.
On the reform’s objectives, the Labour Minister stressed that before the government term ends, there will be a comprehensive pension system characterised by adequacy, sustainability and security for the coming years, decades and future generations. The pension system reform starts with upgrading the first pillar, he said.
This includes strengthening the adequacy of low pensions in the Social Insurance Fund, enhancing inclusion, particularly for women workers and mothers, and improving the fund’s sustainability through modernising its investment policy so it is not limited to public sector investments.
The Minister stressed that upgrading the first pillar will further strengthen the momentum of the second pillar.
Panayiotou linked the pension reform to the question of wage adequacy. A low-wage worker is almost certain to end up a low-pension retiree, regardless of how they manage their resources, he said.
If incomes are not adequate, they cannot be used in a way that ensures a decent future pension situation.
Responding to criticism that wage costs burden businesses, he said decisions affecting wage costs may initially be seen as burdensome for companies and organisations.
However, this approach does not meet the real need to strengthen pension adequacy in the medium term, nor does it improve the prospects of the second insurance pillar.
For meaningful worker participation in the second pillar to be feasible, adequate wages are necessary so that investment participation is not limited exclusively to covering daily needs.
A particularly important point raised by the Labour Minister was that the prospects created by upgrading the second insurance pillar mainly concern the middle class.
According to the methodologies applied, the middle class in Cyprus is limited to less than 50%, he said. For the future to be sustainable not only economically but also socially, this percentage must increase to over 60%.
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