Cyprus Labour Ministry proposes reducing pension penalty for retiring at 63 from 12% to 7.5%

The Cyprus government has proposed reducing the actuarial deduction from the pension of those who retire at 63 from 12% to 7.5%. The proposal was discussed at the Ministry of Labour and Social Insurance during a meeting of the Labour Advisory Council (Εργατικό Συμβουλευτικό Σώμα) — a tripartite body involving the government, trade unions and employers.

The retirement age in Cyprus is 65. Anyone who claims a pension at 63 permanently loses 12% of the payment, and trade unions refer to this deduction as a “penalty”. The 4.5-percentage-point reduction will affect only the basic pension.

The deduction currently applies to 40,000 of the 120,000 existing pensioners, while around 40,000 new cases are expected over the next five years. For those affected by the measure, pensions will increase by an average of 6%. The measure will cost €24 million for existing pensioners and a further €12 million over five years.

Labour Minister Marinos Mousiouttas called the discussion very positive and reiterated that the reform will provide increases ranging from 5% to 60%, with no pensioner seeing their payment reduced. The government previously said that 51,664 pensioners would receive an increase of more than €100 per month, and that the reform should take effect on 1 January 2027.

The trade unions did not give their consent. PEO, represented by Sotiroula Charalambous, demanded that the full financial calculations be presented first. SEK, represented by Andreas Matsas, set out three conditions — pensions must not be reduced, the retirement age must not be raised and contributions must not be increased — while clarifying that the organisation is not demanding the complete abolition of the deduction. DEOK warned of the burden on future generations: contributions are scheduled to rise in 2029, 2034 and 2039, from the current 8.8% to 10.3%. PASYDY requested exemptions for those whom the law requires to retire before the age of 63.

A possible increase in contributions after an actuarial study in five years was also discussed: the government described this as one of the scenarios, not a decision. The social partners asked for the Finance Minister to be invited to the next meetings so they could hear the full cost of the reform and its sources of funding.