Nicosia: Under the leading scenario for Cyprus' pension reform, 60% of the total pension increase is expected to be granted within the first two years, Labour Minister Marinos Mousiouttas revealed in an interview. The plan outlines that 30% of the increase will be implemented in the first year, followed by another 30% in the second year, with remaining increments spread over the next three years. However, Mousiouttas noted that the distribution plan is under final review, and adjustments may be made to shorten the implementation period.
According to Cyprus News Agency, the gradual implementation is aimed at maintaining the sustainability of the Social Insurance Fund and assessing the impact on economic indicators. This phased approach applies to pension increases and does not affect the immediate payment of the 'small cheque' benefit for low-pensioners. Discussions on the draft bill will continue with social partners, focusing on the low-pensioner benefit and the zero pillar, with the government open to changes that do not threaten the reform's philosophy or the Social Insurance Fund's sustainability.
Mousiouttas emphasized the government's readiness to table the pension reform bill in Parliament during September, regardless of ongoing discussions on Provident Funds, which form the second pillar of the reform. The second pillar is a long-term project requiring new legislation and structures, expected to take around four years for completion.
The Minister also highlighted that approximately 50,000 pensioners are set to receive an increase of more than £100 per month, while 7,000 to 8,000 low-income pensioners will see increases exceeding £200. The reform prioritizes the basic pension and years of employment, ensuring no pensioner receives less than their current total amount, even if the state subsidy is reduced.
Significant changes are also planned for the housewife's pension and new insurance credits for parents, persons with disabilities, and informal carers. Additionally, contributions from investment incomes are proposed for those without a social insurance account, aiming to bolster the Social Insurance Fund. This includes contributions from rents, shares, and dividends, with a 15% recipient contribution and a 5% state contribution.
Looking towards the future, the government plans to establish a new Social Insurance investment fund by 2028, funded by state debt repayments and future surpluses. The fund will follow European investment standards, focusing on low-risk strategies for gradual growth.
Actuarial studies indicate that the current reform scenario is sustainable for 40 years, with provisions for a new pension formula after the initial five years linking pension amounts to retirement age. Discussions continue on whether Provident Fund participation will become mandatory, with considerations for transferable pension rights and fund structures for self-employed and small business workers.