Cyprus Labour Ministry proposes reducing the deduction from the basic pension from 12% to 7.5%

On Monday, 7 September, the Cyprus Labour Ministry presented its pension system reform to a meeting of the Consultative Council on Labour Affairs. The proposals were presented by Labour Minister Marinos Mousiuttas and Finance Minister Makis Keravnos. The key proposal is to reduce the deduction from the basic pension from 12% to 7.5%.

At present, around 40,000 of Cyprus’s 120,000 pensioners receive a pension with a deduction. According to government calculations, demographic changes will bring approximately 40,000 more pensioners under the deduction within five years.

According to government spokesperson Konstantinos Letymbiotis, following the reform, 51,664 pensioners — more than four in ten — will receive an increase of over €100 per month. The increase will affect all pensions, but primarily those with the lowest payments.

Mousiuttas called the reform the most important of those being implemented by the government this year. Bills concerning the first tier of the Social Insurance Fund are expected to be submitted to Parliament in September.

The government links the reform to the long-term sustainability of the Social Insurance Fund and a fair distribution of the burden between generations. For comparison, in 2023 Cyprus allocated 6.0% of GDP to pensions, while the EU average was 9.9%.