The government is set to table pension reform legislation by June, with the intention of implementing changes by January 2027. Labour Minister Marinos Moushiouttas shared this timeline during a recent budget discussion for the ministry, emphasising the importance of overhauling the current pensions system.
In the meeting, Moushiouttas responded to queries from MPs, who quickly shifted the focus to the pressing issues surrounding the Social Insurance Fund (SIF). He noted that for decades, the state has borrowed from the SIF, currently owing €11.3 billion, with a repayment interest rate of 2.15 per cent.
According to the minister, the upcoming legislation will outline a structured plan for gradually repaying this significant debt. Additionally, it will introduce an investment policy aimed at effectively managing the funds drawn from the SIF.
Moushiouttas was optimistic about the potential impacts of the reform, suggesting it would lead to increased pension payouts, although he refrained from specifying the extent of these increases. He fielded questions regarding the ‘penalty’ imposed on pensions, which currently deducts 12 per cent from payouts for those retiring before the age of 65, despite having completed 40 years of contributions. He indicated that it was unlikely this penalty would be removed in the current year.
Disy deputy Harris Georgiades highlighted that the cash reserves of the SIF seem to be improving, attributing this positive trend to a robust labour market with a growing number of employed individuals making contributions.
The government has articulated three main objectives for the pension reform: to increase pension amounts, bolster welfare funds, and ensure the long-term sustainability of the SIF. The last significant overhaul of the pensions system occurred in 1980, with subsequent adjustments made during 2012-2013 as part of Cyprus’ agreement with international lenders.
