New pension system to take effect from next year, says Mousiouttas

The government is aiming for a comprehensive reform of the pensions system to come into force by January of next year, labour minister Marinos Moushiouttas announced on Thursday.

Speaking on CyBC radio from Brussels, Mousiouttas said the reform would unify the pension and the so-called small cheques paid to low-income pensioners into one cohesive legislation.

“The effort is to complete the bill by June, so that with the opening of the new parliament after the parliamentary elections, it can be submitted and their discussion can begin,” he said.

“This will allow the legislation governing the reform of pensions to be implemented from January of next year.”

Mousiouttas stressed that the reform is focused on ensuring pensioners receive a dignified income, while safeguarding the sustainability of the social insurance fund.

 “There is a willingness from all partners to discuss and find the most appropriate solutions, always bearing in mind that the social insurance fund should be preserved as the apple of our eye, because it supports both current and future generations,” he affirmed.

The minister said discussions within the labour advisory body were intensifying and expressed optimism that differing views would not derail the timetable.

He added that the reform would also address investment policy for the fund and aim to ensure higher and more stable returns without increasing risk.

Central to the reform is the treatment of the so-called small cheques, an annual payment to pensioners below a specific income threshold.

In recent years, pensioners’ organisations have criticised the mechanism, arguing that legally mandated pension increases have pushed recipients above the threshold, leaving them financially worse off.

Pensioners’ union Ekysy has described past government claims of additional funding as misleading, saying increases were effectively cancelled out through deductions to the small cheques.

The reform is also expected to address broader structural issues within the social insurance fund, including the state’s accumulated debt to the fund, which government figures place at more than €11 billion.

Previous recommendations have called for greater diversification of investments to improve returns while maintaining low risk.

Another element under discussion is the 12 per cent reduction applied to pensions for those who retire before the age of 65, a measure partially eased in 2024 for people with 40 years of contributions.

Trade unions have warned that contribution thresholds may still disadvantage lower-income workers seeking early retirement.

The last major overhaul of the pensions system dates back to 1980, with further changes introduced during the 2012 to 2013 financial crisis.