Supported by
Pensions in Cyprus are set to rise. The reform bill is ready.
Pensions in Cyprus are set to increase, with the greatest support going to those receiving the lowest benefits. Minister of Labor Marinos Mousiouttas announced that the draft reform of the first pillar of the system is ready. It is expected to be approved by the Council of Ministers and submitted to Parliament in the coming days.
The government still plans to start the reform on January 1, 2027. According to previous estimates, the changes are expected to improve the situation of approximately 123,000 current retirees. However, this does not mean an equal raise for everyone or that the full benefit increase will be paid out at the beginning of next year.
The rest of the article is below
Pensions in Cyprus: what will the reform change?
The project primarily concerns benefits from the Social Insurance Fund. This is the first pillar of the system, based on insurance and contributions.
The Minister confirmed the completion of work on the document during a speech on October 1st. He also announced solutions for people whose insurance history includes breaks related to, among other things, caring for loved ones.
The reform is therefore intended to change not only the amount of payments, but also the way in which periods in which a given person did not perform paid work are taken into account.
PENSION REFORM PROJECT
The most important announced changes
| Area | Government proposal |
|---|---|
| Current retirees | Pay increases, with particular support for the lowest benefits |
| Retirement at 63 | Reduction of the deduction from 12 to 7.5 percent in the basic part of the benefit |
| Periods outside employment | Extension of state-supported insurance periods |
| Planned start | January 1, 2027, after the adoption of the regulations |
The reform has not yet been enacted. The final rules will depend on the adopted law.
Who can receive over 100 euros more?
In August, the Ministry of Labor presented estimates according to which approximately 50,000 current retirees is to receive an increase in benefits exceeding 100 euros per month. For approximately 60 thousand people the increase is to be less than 100 euros.
The calculations cover a five-year horizon. Therefore, they should not be interpreted as an announcement of a single, immediate increase in January.
These figures are approximate and do not include a detailed breakdown of all 123,000 retirees. The amount of the change will depend on individual insurance history and the method of benefit calculation.
In the case of future pensioners with low earnings, the minister announced that benefits would be higher by 5–60 percent compared to the current systemThis is a comparison of two methods of calculating pensions, not an increase for each person.
Smaller deduction for early retirement
One of the most important proposals is to limit the reduction in benefits when retiring at age 63.
The variant presented so far assumes a reduction of the deduction from 12 to 7.5 percent in the basic part of the pensionThis does not automatically mean that the 7.5% rate will apply to the entire amount withdrawn.
This is an important distinction, as the pension comprises a basic component and a component based on contributions. Detailed rules should be outlined in the draft submitted to Parliament.
Caring for loved ones should count towards insurance
In his latest speech, the minister mentioned mothers, people with disabilities, young people returning from studies and informal caregivers as groups covered by planned insurance periods supported by the state.
He paid particular attention to those who care for parents or children on a daily basis. Their responsibilities may limit their ability to work and thus impact their future retirement.
The new method of calculating the basic benefit is to take into account the registered insurance period – both paid for by contributions and covered by appropriate state support.
What about people retiring in the coming years?
The model presented earlier provides for a transition period 2027–2031For new retirees, a comparison of benefits under the current and proposed rules will be performed, with a mechanism to correct unfavorable results.
The project also provides protection for current pensioners against reduction of their current benefit due to recalculation.
The most important decisions now will be made by the Council of Ministers and parliamentary proceedings. The January 1st deadline remains the government's goal. An earlier announcement of the first amended payments in February depends on whether the bill is adopted and implemented on schedule.
Sources: Reporter, InBusinessNews
