Cyprus government unveils major pension system reform proposal

The government of Cyprus has presented a comprehensive pension system reform, the most significant since 1980, with an implementation target of January 1, 2027. Under the proposal, all 123,000 existing old-age pensioners are expected to receive an increase in their benefits, with higher support allocated to those receiving the lowest pensions. Key measures include raising income thresholds for low-pensioner household allowances from €794 to €900 for single retirees and from €1,191 to €1,350 for couples. Additionally, the government intends to reduce the actuarial penalty for early retirement at 63 from 12% to 7.5%, although unions have expressed concerns that this reduction only applies to the basic portion of the pension.

The reform also introduces social provisions, such as recognizing fictitious insurance years for mothers who took leave to raise children, allowing up to three years of credited pensionable earnings per child. The Ministry of Labour has proposed two distinct scenarios for calculating the low-pensioner allowance, which may involve consolidating the allowance with the basic pension to streamline payments. Further discussions with social partners are scheduled for August 28 to address these proposals, with the government aiming to submit the finalized bill to the House of Representatives during September.