Cyprus’s Labour Ministry is pushing ahead with a sweeping pension reform it has described as the centrepiece of its 2026 agenda, Labour Minister Marinos Moushouttas said on Tuesday, as he presented the ministry’s annual review and plans for the year ahead.
The reform’s headline measure is the introduction of a “Basic Pension” to replace the current minimum and social pension, while preserving the contributory character of the supplementary pension. The ministry also plans to ease the actuarial reduction applied to early retirement at age 63, cutting the penalty to 12 per cent.
Other key elements include the recognition of subsidised contributions for new labour market entrants, informal caregivers, uninsured mothers and people with disabilities, as well as a new option allowing income earners to make voluntary contributions.
The Director General of the Ministry, Stelios Himonas, said the new Basic Pension would be set below €1,088, based on figures being processed by the actuary. “We are giving the maximum possible without disturbing economic balances,” he said.
Moushouttas added that the amount to be announced would be in line with the fund’s capacity, and reiterated that the largest percentage increase would go to the lowest pensions.
Fund governance
On transparency and management, Moushouttas said state borrowing from the Social Insurance Fund would be terminated. An independent supervisory authority would be established, and a separate account created into which fund surpluses and state debt repayment instalments would be transferred directly.
On investment policy, discussions are ongoing with the agreement of the Finance Ministry and are expected to reach their final stage shortly.
On the formula for repaying state debt to the fund, Moushouttas said it would be structured “so that money comes into the fund without jeopardising the broader economy.” He added that any investment activity “must be carried out very carefully, to safeguard the body’s independence, ensure rigorous oversight, and keep investments low-risk, so that we protect this money as something precious.”
Fund reserves
Moushouttas described the fund’s reserves as a vast portfolio. Presenting figures for 2024, he said the number of contributors rose to 592,189 from 580,023 in 2023, with total contribution revenues exceeding €2.7 billion. Benefits paid to recipients reached €2.06 billion, while the fund’s annual surplus rose sharply to around €290 million.
Foreign workers
On agreements with third countries for importing labour, Moushouttas referred to an upcoming visit by the President of the Republic to India, noting that the issue is on the agenda and that a labour agreement may follow.
Following the renewal of an existing agreement with Egypt, he said 11,594 new work permits for foreign nationals were issued in 2025, along with 9,924 renewals. There are currently 41,612 approvals in total, with 30,884 active contracts, as not all approvals have been taken up.
The six strategic goals the ministry has set for 2026 are: completing the pension reform; faster response to citizens’ needs; better working conditions; expanded support for working parents; effective action against undeclared and illegal labour; and continued investment in lifelong learning and human capital development.
