Cyprus has presented plans to reform the pension system from 2027, which include increases for existing pensioners and changes to the actuarial reduction for early retirement. For those who already live on the island or are considering moving to Cyprus, here is what they need to know about the current system and the changes that may occur.
The government on Wednesday presented its proposal for the reform of the pension system to the trade unions and employers' organizations, stating that all 123.000 existing old-age pensioners would benefit from an increase, with more support directed to lower pensions.
It is also proposed to reduce the actuarial adjustment for those who retire at the age of 63, from the current 12% to 7.5% of the basic part of the pension.
The changes have not yet become law. New consultations with the social partners are scheduled for August 28, while the government seeks to implement the reform from January 1, 2027.
For foreign residents and those planning to move to Cyprus, however, many of the most important questions concern how the existing pension system works.
The key points
-Pension rights in Cyprus are mainly based on Social Security contributions rather than citizenship.
Some can receive a pension from the age of 63 if they meet stricter contribution requirements. Today, retirement at exactly 63 years of age can bring about a permanent actuarial reduction of up to 12%.
This is one of the areas focused on in the reform proposal presented on Wednesday, providing for a reduction in the adjustment to 7.5% on the basic part of the pension.
What if you have worked in different countries?
For those who have worked both in Cyprus and in other EU countries, pension rights can, as a rule, be coordinated.
Periods of insurance completed in EU countries, the European Economic Area and Switzerland can be taken into account to determine whether someone is entitled to a pension.
This does not mean that a single European pension is being created. Instead, each country calculates and pays the pension corresponding to the periods of insurance completed on its territory.
Therefore, someone who has worked in Cyprus for only part of his professional career should not consider that these years are lost.
What about third-country nationals?
Third-country nationals who work legally in Cyprus also establish rights through Social Insurance.
Whether contributions paid in another country can be taken into account depends in part on whether Cyprus has a social security agreement with that country.
Cyprus currently has bilateral agreements with countries and regions that include the United Kingdom, Egypt, Canada, Quebec, Australia, Serbia and Syria.
Not all countries are covered. Israel, for example, is not currently included in the official list of bilateral social security agreements of Cyprus.
Are contributions refunded if you leave Cyprus?
Not automatically.
Social Insurance in Cyprus is not a personal savings account from which one can simply withdraw their money when moving abroad.
The legislation provides for a one-off benefit for certain persons who reach the age of 68 without establishing the right to a pension. However, separate conditions apply, including the completion of at least six actual units of basic insurance and at least 312 weeks from the start of their insurance.
Consequently, this benefit should not be presented as a general reimbursement of contributions.
What about asylum seekers and refugees?
Asylum seekers can currently work in defined sectors and professions nine months after applying for international protection.
From the moment they work legally, the Social Security contributions paid through their employment are included in their insurance history.
Neither asylum seeker nor refugee status automatically creates a pension right. Eligibility still depends on the person's insurance history and normal retirement rules.
Can you receive a pension from both the UK and Cyprus?
Yes.
Those who qualify for both schemes can receive the UK state pension and the statutory Cyprus pension separately.
Brexit did not end the coordination of social security systems between the UK and Cyprus. Depending on personal circumstances, rights are protected either through the Withdrawal Agreement or the EU-UK Trade and Cooperation Agreement.
The UK state pension is also adjusted annually for pensioners living in Cyprus. This means that it does not remain "frozen", as is the case in some countries outside Europe.
How are pensions from abroad taxed in Cyprus?
Cyprus tax residents who receive a pension from abroad can generally choose each year between being taxed at the normal income tax rates and a special regime. Under the second, a 5% tax is imposed on the part of the annual pension that exceeds €5,000.
According to the usual tax scales applied in Cyprus from 2026, the first €22,000 of taxable income is taxed at a rate of 0%.
For British pensioners, the Double Taxation Treaty between the UK and Cyprus is also important. The British state pension and most private pensions paid to a tax resident of Cyprus are, as a rule, taxed in Cyprus.
An important exception is pensions from service with the British Government, which are generally taxed in the United Kingdom, subject to the more specific provisions of the Convention.
Can you leave Cyprus and continue receiving your pension?
Within the EU, EEA and Switzerland, statutory pensions are generally protected by European rules on the coordination of social security systems and can continue to be paid after moving to another country.
Cyprus' bilateral agreements also include provisions allowing, where they do, the payment of pensions abroad.
Those planning to retire in a country not covered by these arrangements should check their personal case with the Cyprus Social Insurance Services, particularly when it comes to supplementary or non-contributory benefits.
What can change from 2027?
The government proposal provides for an increase in pensions, especially the lowest ones, as well as a change in the existing reduction for retirement to 63 years.
Labour Minister Marinos Mousiouttas said that all 123,000 existing old-age pensioners will benefit, while low-income pensioners will receive the largest increases.
The broader reform also includes measures aimed at improving the adequacy of pensions and addressing gaps in the insurance history.
For the time being, however, these are proposals and not guaranteed rights. Those who are working, retiring or planning to move to Cyprus should continue to base their financial decisions on the rules currently in force, until the relevant legislation is adopted.
From en.philenews.com
-The normal retirement age is 65, although some can receive a pension from 63, under stricter conditions.
-Working in other EU countries can help establish the right to a pension in Cyprus.
-Cyprus has also entered into social security agreements with countries such as the United Kingdom, Canada, and Australia.
-Leaving Cyprus does not automatically mean that contributions are refunded.
-One can receive both a Cypriot and a British pension, as long as they meet the requirements of each scheme.
-The reforms announced this week remain proposals until they are approved by Parliament.
Who establishes pension rights in Cyprus?
Employees and self-employed persons legally working in Cyprus are, as a rule, covered by the Social Insurance Scheme, including foreign nationals.
Employees currently pay 8.8% of their insurable earnings to Social Insurance, while the same percentage is paid by employers. Employees also contribute 2.65% to the GHS, which is independent of pension contributions.
For employees who are paid on a monthly basis, the maximum amount of earnings on which Social Security contributions are paid in 2026 is €5,742 per month.
The self-employed currently pay 16.6%, which is generally calculated on the basis of the determined insurable earnings linked to their occupational category and not simply on the basis of their actual monthly profit.
When can you receive a pension in Cyprus?
The normal statutory retirement age is 65 years.
The conditions are more complex than simply completing 15 years of work. Under the current rules, a person generally needs at least 15 effective units of basic insurance and at least 780 weeks from the start of their insurance. He must also meet an additional condition related to the density of his insurance history.
-Working in other EU countries can help establish the right to a pension in Cyprus.
-Cyprus has also entered into social security agreements with countries such as the United Kingdom, Canada, and Australia.
-Leaving Cyprus does not automatically mean that contributions are refunded.
-One can receive both a Cypriot and a British pension, as long as they meet the requirements of each scheme.
-The reforms announced this week remain proposals until they are approved by Parliament.
Who establishes pension rights in Cyprus?
Employees and self-employed persons legally working in Cyprus are, as a rule, covered by the Social Insurance Scheme, including foreign nationals.
Employees currently pay 8.8% of their insurable earnings to Social Insurance, while the same percentage is paid by employers. Employees also contribute 2.65% to the GHS, which is independent of pension contributions.
For employees who are paid on a monthly basis, the maximum amount of earnings on which Social Security contributions are paid in 2026 is €5,742 per month.
The self-employed currently pay 16.6%, which is generally calculated on the basis of the determined insurable earnings linked to their occupational category and not simply on the basis of their actual monthly profit.
When can you receive a pension in Cyprus?
The normal statutory retirement age is 65 years.
The conditions are more complex than simply completing 15 years of work. Under the current rules, a person generally needs at least 15 effective units of basic insurance and at least 780 weeks from the start of their insurance. He must also meet an additional condition related to the density of his insurance history.
Some can receive a pension from the age of 63 if they meet stricter contribution requirements. Today, retirement at exactly 63 years of age can bring about a permanent actuarial reduction of up to 12%.
This is one of the areas focused on in the reform proposal presented on Wednesday, providing for a reduction in the adjustment to 7.5% on the basic part of the pension.
What if you have worked in different countries?
For those who have worked both in Cyprus and in other EU countries, pension rights can, as a rule, be coordinated.
Periods of insurance completed in EU countries, the European Economic Area and Switzerland can be taken into account to determine whether someone is entitled to a pension.
This does not mean that a single European pension is being created. Instead, each country calculates and pays the pension corresponding to the periods of insurance completed on its territory.
Therefore, someone who has worked in Cyprus for only part of his professional career should not consider that these years are lost.
What about third-country nationals?
Third-country nationals who work legally in Cyprus also establish rights through Social Insurance.
Whether contributions paid in another country can be taken into account depends in part on whether Cyprus has a social security agreement with that country.
Cyprus currently has bilateral agreements with countries and regions that include the United Kingdom, Egypt, Canada, Quebec, Australia, Serbia and Syria.
Not all countries are covered. Israel, for example, is not currently included in the official list of bilateral social security agreements of Cyprus.
Are contributions refunded if you leave Cyprus?
Not automatically.
Social Insurance in Cyprus is not a personal savings account from which one can simply withdraw their money when moving abroad.
The legislation provides for a one-off benefit for certain persons who reach the age of 68 without establishing the right to a pension. However, separate conditions apply, including the completion of at least six actual units of basic insurance and at least 312 weeks from the start of their insurance.
Consequently, this benefit should not be presented as a general reimbursement of contributions.
What about asylum seekers and refugees?
Asylum seekers can currently work in defined sectors and professions nine months after applying for international protection.
From the moment they work legally, the Social Security contributions paid through their employment are included in their insurance history.
Neither asylum seeker nor refugee status automatically creates a pension right. Eligibility still depends on the person's insurance history and normal retirement rules.
Can you receive a pension from both the UK and Cyprus?
Yes.
Those who qualify for both schemes can receive the UK state pension and the statutory Cyprus pension separately.
Brexit did not end the coordination of social security systems between the UK and Cyprus. Depending on personal circumstances, rights are protected either through the Withdrawal Agreement or the EU-UK Trade and Cooperation Agreement.
The UK state pension is also adjusted annually for pensioners living in Cyprus. This means that it does not remain "frozen", as is the case in some countries outside Europe.
How are pensions from abroad taxed in Cyprus?
Cyprus tax residents who receive a pension from abroad can generally choose each year between being taxed at the normal income tax rates and a special regime. Under the second, a 5% tax is imposed on the part of the annual pension that exceeds €5,000.
According to the usual tax scales applied in Cyprus from 2026, the first €22,000 of taxable income is taxed at a rate of 0%.
For British pensioners, the Double Taxation Treaty between the UK and Cyprus is also important. The British state pension and most private pensions paid to a tax resident of Cyprus are, as a rule, taxed in Cyprus.
An important exception is pensions from service with the British Government, which are generally taxed in the United Kingdom, subject to the more specific provisions of the Convention.
Can you leave Cyprus and continue receiving your pension?
Within the EU, EEA and Switzerland, statutory pensions are generally protected by European rules on the coordination of social security systems and can continue to be paid after moving to another country.
Cyprus' bilateral agreements also include provisions allowing, where they do, the payment of pensions abroad.
Those planning to retire in a country not covered by these arrangements should check their personal case with the Cyprus Social Insurance Services, particularly when it comes to supplementary or non-contributory benefits.
What can change from 2027?
The government proposal provides for an increase in pensions, especially the lowest ones, as well as a change in the existing reduction for retirement to 63 years.
Labour Minister Marinos Mousiouttas said that all 123,000 existing old-age pensioners will benefit, while low-income pensioners will receive the largest increases.
The broader reform also includes measures aimed at improving the adequacy of pensions and addressing gaps in the insurance history.
For the time being, however, these are proposals and not guaranteed rights. Those who are working, retiring or planning to move to Cyprus should continue to base their financial decisions on the rules currently in force, until the relevant legislation is adopted.
From en.philenews.com
