Cyprus government announces major pension system reform

Labour Minister Marinos Mousiouttas has outlined a comprehensive overhaul of the Cypriot pension system, presented during the 17th Pension Forum in Nicosia. The reform aims to address long-term sustainability and demographic shifts by encouraging longer working lives while introducing a second income pillar through occupational retirement schemes. The legislation, currently in final consultation, seeks to replace the system established in 1980.

Key changes include increasing the required years of insurance contributions from 33 to 38. After a five-year transition, early retirement at age 63 will become less attractive, with a 15 per cent reduction in pension payouts. Conversely, individuals who delay retirement until age 67 will receive a 15 per cent incentive. While the government aims for significant pension increases, officials and the Cyprus Fiscal Council remain in debate over whether to make provident funds compulsory, a step strongly advocated by fiscal experts to ensure long-term income adequacy.

These proposals now await submission to the Council of Ministers and the House of Representatives. The government hopes the changes will improve retirement adequacy, although the minister noted that discussions are ongoing to find a middle ground on the mandatory nature of secondary pillars.