Pension reform projected to cost €820 million over six years

Nicosia, Cyprus. Pension system reform is expected to cost the state and the Social Insurance Fund a combined €820 million over six years, Labour Minister Marinos Mousiouttas said on Monday.

He spoke after the latest meeting of the labour advisory board, as the government continued consultations with employers and trade unions.

Estimated cost

Citing figures previously released by the finance ministry, Mousiouttas said the total additional burden from pension reform was estimated at €486 million for the state and €334 million for the Social Insurance Fund.

The €334 million concerns the amount the state is expected to return to the Social Insurance Fund during the six-year period.

Social Insurance Fund debt

For decades, the state has borrowed from the Social Insurance Fund for financing, paying 2.15 per cent interest on the money borrowed. The total amount owed to the fund stands at around €12 billion.

Under the planned pension overhaul, the state will stop borrowing from the fund and gradually repay the debt in instalments.

Reform pillars

Mousiouttas said the draft government bill, which is being reviewed by trade unions and employers, concerns the first pillar of the reform.

The first pillar covers state pensions. The second pillar concerns provident funds, the cash reserves of the Social Insurance Fund and its investment policy.

The so-called zero pillar concerns pensions for low-income earners.

Mousiouttas said the bill on the first pillar would be submitted to parliament by the end of the month.