Diko and SEK agree on mandatory provident funds in pension reform talks

Nicosia, Cyprus. Diko and trade union SEK found common ground on Friday on mandatory provident funds and other key aspects of pension reforms. Diko president Nicholas Papadopoulos said the reforms must proceed to improve the quality of life of elderly people.

Pension adequacy and poverty

SEK general secretary Andreas Matsas said Cyprus could not continue to rank first in Europe for the proportion of pensioners who keep working because they need the money. He added that one in three pensioners was either close to or below the poverty threshold.

Matsas said Diko and SEK agreed on pension reforms and that the union wanted to see better European practices implemented in Cyprus.

Safeguarding the social insurance fund

Papadopoulos said reforms must ensure the viability of the social insurance fund and protect what had already been achieved through dialogue among social partners.

He said the changes should not increase contributions or the retirement age, nor reduce pension benefits.

“We believe the proposal that has come before us has positive aspects. The fact that the basic pension will be increased is an important and positive proposal,” he said.

Papadopoulos also welcomed the government’s plan to stop borrowing from the social insurance fund and said the reforms must include a proposal to establish mandatory provident funds.

Transition safeguards and incentives

Matsas called for safeguards to ensure a smooth transition to the reformed pension system. He said SEK would not accept increased worker contributions to the social insurance fund or any reduction in pension benefits.

“Through the mandatory implementation of provident funds, we believe pensions could be substantially complemented, particularly for workers of the private sector,” he said.

Matsas said various tax and other incentives could allow this to happen without a noticeable cost to small and medium-sized enterprises, or potentially at no cost at all.