PENSIONS - INCREASES OF €200+ BUT IN FIVE YEARS - WHAT ABOUT THE 12% PENALTY? - MOUSIOUTTAS - EVERYONE IS POSITIVELY AFFECTED - Filenews 20/8 by Angelos Angelodimou
The reduction of pensions was avoided, the penalty of 12% was reduced, increases of up to 50% are granted, however, at the same time, several questions arise, in relation to the provisions of the pension reform, which was presented yesterday to the social partners.
Speaking after the end of the session of the Labour Advisory Body, the Minister of Labour Marinos Mousiouttas stressed, among other things, that of the 123,000 old-age pensioners today, all are positively affected by the pension reform. Indicatively, he pointed out that about 50,000 pensioners will have an increase of more than €100 per month and around 60,000 will have an increase of less than €100 per month over five years, while future pensioners with low earnings may see increases of 5% to 60% compared to the existing system.
He noted that the debate will continue during the next session of the House on August 28, with the goal remaining to implement the reform from January 1, 2027. It is noted that on the same day, i.e. on August 28 and before the session of the House, an informal session will be held, where the State Actuary will present pillar 0 – which concerns state social support and the protection of low-income pensioners from poverty – and the government's plan for low-income pensioners and the allowance they will receive will be examined based on the new data.
Burden on public finances
The Central Actuary of Cyprus, Costas Stavrakis, noted that with the proposed reform the long-term sustainability of the system is ensured, adding that a second aspect concerns the cost of the reform in public finances, in the short, medium and long term. "Through the system, a rationalization is being made, therefore there will be a burden on public finances in the first five years of the order of €50 million every year.
At the same time, the impact on public finances is even greater, the future surpluses of the fund, which according to our studies will have surpluses in the next 40 years, will no longer be borrowed by the state. This is a huge commitment and impact on public finances that puts the Social Insurance Fund, the pension fund, at the highest priority for the state," he noted. Asked by when it is estimated that the €12 billion will be returned. that the state has borrowed from the TCA, Mr. Stavrakis said that based on certain scenarios it is estimated that it will be done in 40 years, adding that this return is very small in relation to what will be accumulated from future surpluses, for which there is a commitment that they will not be kept by the state.
Basic provisions
Based on the note handed over to the social partners by the Minister of Labour and his team, the main changes emerge through the pension reform. Specifically:
(1) An increase was decided for all pensioners, which in some cases amounts to up to 50%.
(2) The reduction of the penalty of 12% to 7.5% for the part that will concern the basic pension will proceed.
(3) Insurance protection is extended, beyond the traditional link with employment. Therefore, contributions are subsidized for: • Women, for periods related to childcare. • Informal caregivers who provide full and unpaid home care to relatives up to the 2nd degree. • People with disabilities. • Students. • New entrants to the labour market.
(4) A new obligation to pay contributions is introduced by a new category of citizens called "income earners". These are individuals whose income will be taken into account income from office, dividends, interest, rents, intellectual property or patent rights, fees and other property profits. At the same time, for employees who are shareholders of the company in which they work, the reform provides that, for the purposes of the definition of remuneration, the dividends they receive from the company in which they are employed are also included.
(5) The introduction of a minimum guaranteed increase for existing pensioners of the Social Security Fund up to €600 per month, provides for a minimum increase of €30 per month for all such pensioners, which will be paid from the first month of implementation of the reform.
Main objections
Speaking to "F", the officials of the social partners expressed satisfaction in principle with the presentation of the reform, which took place in a good atmosphere as they noted. However, they have stood on some points on which they either disagree, need further clarification, or were not even included in the reform.
First of all, everyone agrees that now the margins are very narrow and there should be a race to meet the schedules. The General Secretary of SEK, Andreas Matsas, told "F" that it is positive that there have been no reductions in pensions. On the other hand, he noted that the reduction in the penalty of 12% concerns the main part of the pension and therefore the benefit will be smaller than presented. Even with the reform, he continued, there will be pensioners below the poverty line, while he concluded by saying that if the second pillar is not covered, then it cannot be called the overall planning of the pension.
The General Secretary of PEO, Sotiroula Charalambous, in turn, referred to the fact that the amounts listed in the relevant note of the Ministry in relation to the increases in pensions concern the next five years. Therefore, when an increase of €200 is indicated, for example, it means that someone will receive this amount over a period of five years and not immediately. He added that we will wait to see the plan for low-income pensioners and how their final pension will be formed, while he stressed that the part of the Provident Funds is a very important point.
Ms. Charalambous criticized the haste of the President of the Republic to make statements before the completion of the Labour Advisory Body, showing, as she said, disrespect to the social partners. He also described as problematic the fact that the reduction of the penalty of 12% concerns only the basic part of the pension, while until now the cut concerned the entire pension.
The President of DEOK, Stelios Christodoulou, said that this is a very serious reform with several parameters that must be examined in depth for the best possible result. "The reform takes place every 40-45 years. We must aim at the adequacy of pensions for future generations, and when we say sufficiency it means not only from the Social Insurance Fund, but also from the capital of the Provident Funds," he said.
The General Secretary of the CCCI, Filokypros Roussounidis, noted that the Chamber will seek to become beneficial in terms of the implementation of the pension reform. He stressed that after the presentation to the Labor Advisory Body, many questions have arisen, at the same time that the timetables have become very tight. In relation to the second pillar, he stressed that it would be good to proceed together with the first pillar, however, it should not be an obstacle to the implementation of the reform.
He clarified again that in no case will they accept mandatory payment of contributions for the Provident Funds. The General Manager of OEB, Michalis Antoniou, stressed that they will expect more details in the coming days for the reform, while he expressed some concerns about the financing of the Fund after the increases and other benefits that were announced. Pensioners should show patience, he noted, as there is still a long way to go until there is a conclusion.
PtD: Justice, Sufficiency and Security
The pension reform aims at more fairness, sufficiency and security for every generation, the President of the Republic Nikos Christodoulidis said in a video message on Wednesday. He added that this is "the largest and most substantial reform in the Pension System since 1980". Our message to every pensioner, to every worker, to every young man and woman is clear: This Reform is done for you", the President also notes.
It is done for the pensioner who deserves a better quality of life, for the worker who wants to secure his future, for the mother who stopped working to raise her children, for our fellow citizen with a disability who did not have equal opportunities for insurance participation, for the young people who are studying and preparing to enter the labour market, and for the next generations who need a safe Social Insurance Fund, he also said.
