Filenews 15 February 2026 - by Eleftheria Paizanou and Angelos Angelodimou
The increases that will occur in pensions through the pension reform, which will be attempted to be implemented on January 1, 2027, are expected to be noticeable for citizens. The Minister of Labour, Marinos Mousioutas, in an interview with "F", states that the increases will be greater for low-income pensioners. He noted, at the same time, that the pension with the "small axe" for low-income pensioners will be unified.
Referring to the reduction of pensions by 12% (the well-known penalty), he said that developments are expected through the reform, stressing that there will be a downward differentiation. According to Mr. Mousioutas, through the actuarial study it will be clarified how the issue will be regulated.
At the same time, he clarifies that, in the first phase, the reform will include only the first pillar, which concerns the increase of pensions for the Social Insurance Fund. As he said, the second pillar, which concerns the provident funds and the third, which is related to private insurance, will be implemented after four years, because the upgrading and independence of the supervisory authority, which is a prerequisite and requirement of the competent European Authority, will have to be preceded. It is recalled that the trade unions demand that all pillars be promoted at the same time.
The minister also refers to the changes expected in the Social Security Fund, while in relation to the investment policy of the fund, he emphasizes that great care is required, as it is the money of the past, current and future generations. In conclusion, he reveals that, during the consultations with social partners on the minimum wage, the hourly wage yield will also be set.
The preparation of the pension reform bills is underway. The government seems to be focusing on the first pillar, which concerns pensions and the Social Insurance Fund. However, the trade unions argue that the pension reform should cover the other two pillars, namely the provident funds and private insurance. Is it possible to implement this at the same time?
Trade unions and social partners generally focus on the first two pillars. They leave the third pillar for the future. As for the second pillar, it is not on a whim that we say that it cannot proceed immediately. It cannot proceed immediately, because, based on experts, its implementation and implementation requires at least two to four years, in accordance with the existing European standards, because it will have to be preceded by the upgrading and independence of the supervisory authority, which is a prerequisite and requirement of the competent European Authority. Therefore, the simultaneous promotion of the first and second pillars automatically means that any implementation will take place after three or four years, not now.
Thus, as a Government, we have decided and announced that we will now promote the first pillar, which concerns the Social Insurance Fund (SSF), pensions, the way of administration and the investment policy of the Social Security Fund, as well as other related benefits. If and when the timetable we have set is implemented, i.e. by June to submit the bills to the Parliament and given a debate lasting about six months, we believe that they will be able to be implemented from January 1, 2027.
That is, to be able to increase pensions to the extent that the final studies we will have will show, to remove the distortions that exist, to decide on the management model of the Social Security Fund, as well as its investment policy, as well as the gradual repayment of the state's debt to the Fund. All this will be included in the bills that we will submit by next June.
Now you will say to me: if and when the other sides do not agree, will you proceed? That is precisely why we are starting an intensive dialogue. On February 16, the big session of the Labour Advisory Board will take place, where we will all, in front of everyone, listen again to Sánchez, the project team of the International Labour Organization, led by the Cypriot Costas Stavrakis, who will develop the planning from start to finish.
We will listen to observations, impressions, suggestions and concerns of all partners. A second session of the Labour Advisory Board will follow, on February 24. We have set successive sessions, so that the process can proceed and it becomes clear how close or far we are I do not see any major discrepancies in what we have heard informally, regarding the first pillar. A key difference is, as you rightly mentioned, that the partners are being asked to move forward with the two pillars. It makes sense for them to ask for it, because there will be better bargaining power if they are both together.
What we have said and we will report to the Labour Advisory Board is that yes, the first pillar should proceed and we should delineate the roadmap for the second pillar, as well as the general lines on the basis of which we will move, in order to remove any objections and reservations that exist from the partners.
I think that, especially for the first pillar, we should all be in the same direction. In private discussions, no major issues of disagreement are found. Therefore, the implementation of the first pillar will provide relief to all those for whom we all recognise that there are low pensions. So, we are moving forward to increase pensions.
Will it apply to all pensions? Will it focus on low-income pensioners? Will it be done in stages?
What is certain is that the increase in pensions will be felt by the citizens. However, details on whether it will be staggered or whether the increase will be the same for everyone do not yet have any. What I understand, based on logic, listening to the general context from the experts, is that the increase will be greater in terms of lower pensions.
Something else that will also happen is the following: Let me remind you that today low-income pensioners or some of them receive an additional benefit, the so-called "little axe", which does not come from the Social Security Fund, but from the Fixed Fund and is paid by the Deputy Ministry of Social Welfare. That is, a pensioner receives a part of the pension from us and another supplement from another ministry or from another fund.
This will not exist in the future. The pensioner will receive a single remittance, which will include all. Internally, the state will find a way to pay the remittance to the citizen in a single manner, while the relevant processes on how the cost will be distributed and where it will be covered will be done internally.
-From what I understand, the minimum pension will also increase...
We will start with the lowest pensions.
–What suggestions are on the table?
Let's discuss with the partners first.
Recently, the President of the Republic stated that, in the times we live in, limiting a pension to €500 is not enough for someone to live on.
I completely agree.
Developments are expected with the penalty of 12%
– Do we have any developments in relation to the 12% reduction from pensions, Minister?
The 12% reduction in pensions is included in the discussions of the first pillar of the pension reform. The only thing that is certain is that it will not increase, nor will it remain as it is. There will be a downward differentiation. Whether this will be staggered or more drastic will be seen from the actuarial study, as the change at one point necessarily affects other data of the system.
At the end of the discussion with the social partners, their requests will be examined. In any case, the issue will be a key element of the discussion on the first pillar.
Because there is often confusion around the issue, I will invoke what the late Zeta Emilianidou said in Parliament: if the state completely abolishes the 12% reduction in pension, this essentially implies a reduction in the retirement age to 63 years, instead of the 65th that is currently in force. A person who retires at the age of 63 cannot be in a more advantageous position than an employee who remains in his job for two additional years.
Minimum wage: Hourly earnings under the microscope
On the issue of the national minimum wage, will it be put back on the table soon or will it be examined later? Will there be a new revision?
Our position is that the formal debate on the minimum wage has ended with the decree issued for January 1, 2026. However, the decision of the Council of Ministers explicitly states that the Special Committee for the minimum wage will continue its work and should include in the study it is preparing the element of hourly wages, which was a constant request of the unions and was not satisfied in the recent decision.
I believe that with the discussion between the sides, and indeed early and not just before the end of the validity period, we will be able to draw better conclusions both on the demands of the unions and on any demands of the employers.
The tripartite process – state, employers and employees through the Labour Advisory Board – over the last 60 years has offered a lot to Cyprus. I believe that it must continue.
Even when there are disagreements, dialogue can reduce distances or even lead to a final agreement. The dialogue must continue until a final solution is found.
Under the microscope of a ban on borrowing from Social Security Funds
– In relation to the Social Security Fund, Minister, will the state pay a specific instalment every year to repay the borrowing of €12.8 billion? Will there be provision for a ban on borrowing and will there be investments?
The investment policy of the Social Security Fund will be determined in consultation with the Minister of Finance, with whom we will have a meeting within the next few days. There is constant contact, because the issue we are discussing also concerns the Ministry of Finance. We are trying to come up with the formula that will be used to decide on the investment policy to be followed.
The first issue is the investment policy of the Fund and the second is the formula that will be used for the gradual repayment of the debt to the Social Security Fund. However, it is quite premature to say anything, at a time when the discussion has not yet begun in such depth that we can form an overall position with the Ministry of Finance.
– But will there be a provision for a ban on borrowing from the Social Security Fund? The amount of €12.8 billion borrowed by the state is large...
The ban on lending is something we will consider. However, what will certainly start to happen is the reduction of the existing debt to the Social Security Fund. With the implementation of the new investment policy, it will become clear how the money will be invested. The investment can also include placing in government bonds, as is the case today, which is considered one of the safest options, with the least risk, possibly with a lower yield, but with limited risk.
Because the Fund's investment policy does not belong to me or anyone else, but concerns the whole of society, any moves in relation to the Fund's investment policy must be made with full awareness that they are managing the money of past, present and future generations. It is not a question of today or tomorrow. Therefore, the actions must ensure the long-term sustainability of the Fund.
– Are there any thoughts of making investments abroad or elsewhere?
This should be decided with a very great, great, great hundred times great care. I remind you that in the past, a bill was prepared for the Social Security Fund, which provided for investments and participation in stock exchanges.
This may yield higher returns, but there is also the possibility of losses, and this money is not ours. Therefore, the philosophy that should govern the decisions is as little risk as possible and as much safeguarding of the Fund as possible.
The other two pillars. Can you give us more details about the other two pillars of the pension reform?
The second pillar concerns the provident funds, which will function as a supplementary pension benefit. Therefore, they will either be mandatory – which is the subject of discussion – or they will operate on a voluntary basis. Based on the pension benefit someone receives from the first pillar, they will be able to supplement it through the second, in order to improve their overall pension.
I repeat that no substantive discussion has been initiated on the second pillar, so it is somewhat premature to develop it further. This discussion can take place in a month or two, when it will have begun to be examined in depth.
– Will the changes brought about by the pension reform burden the state coffers?
The effort is not to burden or burden the state coffers as little as possible. Today, the investment policy of the Social Security Fund is determined by the Ministry of Finance. The Ministry of Finance is the main advisor on these issues and, therefore, we seek its contribution both for deposits and for the method of repayment of the loan. We want the help and consent of the Ministry of Finance.
As the debate has focused mainly on the first pillar, the second has not yet been examined in depth.
