Cyprus evaluates pension system reform and second pillar expansion

Discussions are intensifying in Cyprus regarding a revised pension reform bill aimed at ensuring the long-term sustainability of the system and providing adequate living standards for future retirees. The current debate focuses on both the first pillar, the Social Insurance Fund, and the strengthening of the second pillar, which consists of provident funds and occupational pension schemes.

According to data from the Ministry of Finance, by the end of 2025, provident funds managed 4.65 billion euros for approximately 146,000 members. However, experts highlight significant gaps in the system. University of Cyprus professor Andreas Milidonis noted that the income replacement rate after retirement in Cyprus stands at approximately 41%, ranking among the lowest in the European Union. Furthermore, more than 300,000 workers currently lack adequate coverage from the second pillar, indicating a substantial need for expansion.

The ongoing social dialogue involves the state, employers, and employees, with institutions like the Fiscal Council, headed by Andreas Charalambous, advocating for the gradual enhancement of the second pillar. Key unresolved issues include the scope of participation, whether the system should be mandatory or voluntary, and the implementation timeline. Stakeholders are balancing the need for professional, transparent management of savings with the desire to avoid disproportionate administrative burdens on small and medium-sized enterprises.