Employees in the public and wider public sector have paid the contributions for years, so that their pension can pass to a widow or dependent children when they die. Until 2013, employees who were not married, had no civil partnership and had no children got the contributions back when they retired, as they had no dependants to benefit.

The process changed under fiscal consolidation measures adopted in 2012 as part of the memorandum. Several employees whose contributions were not refunded went to court. The Supreme Court ruled that withholding the contributions from employees who retired on or after 1 January 2012 amounted to depriving them of a property right.

The bill restores the provision for refunds. Employees will have to claim them within 12 months of retiring.

A Treasury representative told the committee that a legal opinion was sought after the ruling. The opinion called on the Treasury to comply with the ruling and pay the 25 employees who won the case, and they received their contributions plus interest. Another 200 employees who claimed in time after the ruling should get back around 5 million euros in total, the representative said.

A Finance Ministry representative said that an employee who married after retiring, having received the refund, would have to repay it before their spouse could qualify for a widow’s pension.

The civil servants’ union PASYDY, the Isotita union and the Cyprus Workers’ Confederation (SEK) backed the bill.

Some parliament members, somewhat taken aback by the bill, joked that many state employees would divorce shortly before retiring so as to have no dependants and get their contributions back.

A fast rising trend of social inequality in Cyprus is clearly indicated across the numbers of a 2025 Eurostat report, also bringing to the fore a very different welfare state philosophy between our own country and the policies implemented in the Scandinavian north.

Nevertheless, the island does manage to creep over the inequality management European average line, with authorities however sadly lacking in supporting groups that require urgent financial assistance in work productive ages, simply put, before they retire.

While the Swedes and the Finns invest in a protection net which insulates all age groups, as the numbers indicate, Cyprus persists in its pension centred model, which waits for someone to leave work in order to have a decent life. An ‘all eggs in one basket’ approach which further stokes social inequality trends.

Scandinavian countries choose to share state support in a more balanced manner throughout the population, pulling more weight on subsidies towards families, housing support and unemployment benefits, thus making sure they stand behind the citizen at every stage of their lives, bo matter where they find themselves.

And not just securing they get an ok pension when they retire after toiling in the inequalities of the lower middle class.

Denmark is the only country where social benefits are higher than pensions, with both numbers measured as Purchased Power Standard for the sake of statistical analysis and comparisons. The same is true of Sweden and Finland, while Cyprus is almost four times less, with Greece around the same level.

Again, what the numbers of social inequality show is that pension cannot be the only safety net for any family, replacing other powerful welfare benefits that might go a long way towards improving personal and professional life.

In addition, if Cypriots suddenly finds themselves out of work or need state support prior to retirement, the money or the tools available by the relevant services, are extremely limited, as indicated on the Gini inequality index.

Inequality in Finland is at an all time low of 27.2%, with Sweden at 28,2%, while Cyprus is just over the European average line at 31,2%, but worse off than 2024, an indication that despite a pension bump, wealth produced is still highly concentrated in even less hands, leaving vulnerable groups dependent on a low benefit.

Former Eastern bloc are doing much better than us. At 23%, Slovakia has one of the fairest income distribution in Europe, with Czecchia at 24% and Poland following at 24.9%. They are even more balanced than Germany or Sweden.

At Thursday’s meeting, the parties resubmitted their proposals on the penalty, an actuarial reduction, but the Labour Ministry gave no response, Phileleftheros understands. A study by the ministry and the actuary had previously found that the unions’ proposals would cost more than the government’s.

Labour Minister Marinos Moushouttas said the social partners had been asked to resubmit their positions to see whether they could be combined with the government’s proposal. He said the ministry had not taken a position on their proposals, but stressed that the financial capacity of both the Fund and the state was always taken into account.

The penalty was the main issue among five discussed at the meeting.

Low-pension allowance

A proposal was submitted to raise the low-pension allowance from the 910 euros proposed by the government to 1,130 euros, which is the poverty line. Moushouttas noted that this would mean extra cost, but said: “We will listen to the views to see if there is any room for changes.”

Widowers’ pensions

The unions have repeatedly raised the case of men whose wives died before 1 January 2018. Under current law they are not entitled to a widow’s pension. In a recent discussion of the issue, the minister said such a change would require about 35 million euros in extra funding.

Provident funds

Talks on provident funds, which have so far been held in technical committees, will move to the Labour Advisory Board on 29 October, when the parties will be asked to present their positions. Two further sessions are scheduled for 20 and 27 October.

Moushouttas said the unions had again called for the provident fund talks to run in parallel, and for a framework agreement to be reached at least before the legislation on the first pillar is voted on. The ministry had again told the social partners it wanted the provident fund sessions speeded up, he said.

Dividends

The minister explained that social insurance on dividends would be capped at up to two units of the insurance account, with income counted up to 23,000 euros. A person with a salary of 15,000 euros a year and dividends of 30,000 euros, for example, would pay contributions on the 15,000-euro salary and on 8,000 euros of the dividends.

He said the measure aimed to address the practice of some employees declaring salaries of 500 to 750 euros a month, or 9,000 to 10,000 euros a year. On that basis, they would qualify for a social pension and the low-pension allowance, which he described as an “injustice” the government was trying to correct.

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The ministry’s indicative examples are based on 2024 values and divide pensioners into four income groups. Each example takes account of both years of contributions and credited years, and all of them assume seven credited years.

In the low-income group, where rises reach up to 50 per cent, a pension of 411 euros with 30 years of contributions would go up to 577 euros. One of 436 euros with 35 years would rise to 655 euros, and one of 508 euros with 42 years to 764 euros.

For low to middle incomes, rises reach up to 34 per cent. A pension of 497 euros with 25 years of contributions would go up to 667 euros. One of 642 euros with 35 years would rise to 827 euros, and one of 762 euros with 42 years to 976 euros.

Middle incomes would see rises of up to 11 per cent. A pension of 921 euros with 25 years of contributions would go up to 1,019 euros. One of 1,258 euros with 35 years would rise to 1,341 euros, and one of 1,524 euros with 42 years to 1,611 euros.

For higher incomes the increase would be negligible, the ministry said, though no pension would be reduced. A pension of 1,223 euros with 25 years of contributions would rise to 1,271 euros. One of 1,706 euros with 35 years would rise to 1,713 euros, and one of 2,032 euros with 42 years to 2,034 euros.

Full implementation means three years, in line with the ministry’s latest decisions. After the Labour Advisory Board’s most recent session, the labour minister announced three changes to the pension reform bill. Pension increases will be phased in over three years instead of five. The transitional period will be extended from five years to 15. Conditions for widows’ and disability pensions will be improved.

The reform is due to take effect on 1 January 2027. The board now meets twice a week so that the process can be completed as soon as possible.

The increases will be paid in stages, with 30 per cent in the first year, 30 per cent in the second and the remaining 40 per cent in the third, Moushouttas said after a meeting of the Labour Advisory Board.

The transitional period will be extended from five to 15 years, which he said appeared to have resolved the problem of a possible rise in contributions. Conditions for widowhood and disability pensions will also improve as a consequence of the longer transition, he added.

Unions and employers welcomed the changes, saying their persistence on these points had been vindicated. Phileleftheros understands, however, that both still expect further changes and clarifications so that a bill with the widest possible agreement can be submitted to parliament.

Moushouttas repeated that the government intends the new system to take effect on January 1, 2027, so that people can feel the changes. For that to happen, parliament must pass the bill in 2026, he said, adding that any technical difficulties after the vote could be dealt with.

According to Phileleftheros’s information, the changes aim to address concerns about what happens after the reform’s first five years. These include possible pension cuts once the transitional period ends, higher contributions, and the prospect that people retiring in 10 to 15 years could be worse off than under current conditions.

The changes are also meant to end complaints that the initial increases would be much smaller than the amounts made public, even though it had been made clear that those amounts covered the full five years.

Unions also want the government to move on four points: ‘pillar zero’, which covers low-income pensioners; the 12 per cent penalty; pensions for widowers; and credits for students and carers.

For employers, the main concern is the fiscal impact of the changes, particularly the increases for public sector pensioners. They argue that because the increases apply to the basic rather than the proportional part of pensions, they will change the ratio of what public sector employees and the government pay towards occupational pensions, at a cost to the Republic’s Consolidated Fund. Employers want clarification on how much extra the state will have to pay.

On provident funds, the reform’s second pillar, Moushouttas said: “It is clear that there is currently no legislation on provident funds.” He said he understood the social partners wanted a gentlemen’s agreement with the state setting out the broad lines and a timetable. The social partners have repeatedly said they want the second pillar to be designed, not just a gentlemen’s agreement.

Contributions on dividends

At Monday’s House Finance Committee debate on the 2027 budget, ELAM parliament member Marios Pelekanos asked Finance Minister Makis Keravnos whether the government intended to tax Cypriot business owners’ dividends indirectly through the pension reform, saying this would run counter to the tax reform.

The tax reform cut tax on dividends from 17 per cent to 5 per cent, a change officially presented as a way to improve liquidity, ease business planning and make Cyprus more attractive and competitive for investment and growth.

Keravnos said he could not comment because he did not have the final pension reform bill before him. Pelekanos said the social partners taking part in the consultations had reported that such a provision was in the bill.

Under the Labour Ministry’s draft, a new group of contributors to the Social Insurance Fund would be created for so-called ‘income earners’. Income from holding office, dividends, interest, rents, copyright or patent royalties, fees and other property gains would be taken into account. For employees who are also shareholders in the company they work for, dividends from that company would count as earnings.

People who are not insured and receive no salary but earn dividend income would pay contributions of 15.8 per cent to reach one insurance unit, worth about 11,500 euros, the draft says. As part of the social dialogue, the ministry will amend the provision on people with income from both salaries and dividends who reach maximum insurable earnings of about 69,000 euros a year.

The formula would increase the number of contributors to the Social Insurance Fund and, by extension, state revenue. The social partners are seeking clarification on the issue.

That is precisely what the Natixis Investment Managers Global Retirement Index sets out to capture. The 2026 edition, published a few days ago, assesses 44 countries using 18 indicators across four core areas: finances in retirement, material wellbeing, health and quality of life.

And here lies an interesting piece of news for Cyprus. Our country sits 23rd in the global ranking. Not at the top, of course. But not near the bottom either. Above all, it holds its place in a ranking that includes some of the richest and most developed economies in the world.

Norway again comes first in 2026, with a score of 83%, while Ireland remains second with 81%. Cyprus, then, is not being measured only against countries of its own size, but against a field of 44 economies with very different means and very different systems of social protection.

This matters, because in Cyprus we have grown used to discussing pensions almost entirely in terms of amounts. How much does a pensioner get? Is it enough? How much does the next person get? How much does a pensioner get in Greece or some other European country?

The Natixis index says something far broader: a good pension does not, on its own, make for a good retirement.

What use is a high pension if the health system cannot look after you? What does a high income matter if the cost of living is crushing? And what is financial security worth if quality of life, the environment or social wellbeing are at a low ebb?

Seen in this light, Cyprus has significant comparative advantages. It has a climate that allows much of social life to take place outdoors, relatively high life expectancy, access to an organised health system, strong social and family cohesion, and an environment that, for all its problems, still offers a good quality of life. The fact that Cyprus ranks 23rd overall, having already reached 25th place in 2025, when it broke into the top 25 for the first time, shows that this is not a country off the international map of retirement security.

There is one more point worth holding on to. Cyprus need not be presented as a place where everything is perfect for us to recognise that it is hardly the worst place in the world to grow old. It is a small country with problems, but also with significant advantages that we often take for granted.

That does not, of course, mean change is unnecessary. Quite the opposite. This is exactly why the pension reform now under way matters. According to the government, it is the first substantive overhaul of the system since 1980, and the aim is higher pensions, greater support for those on low pensions and a Social Insurance Fund that remains sustainable for generations to come.

Indeed, according to figures presented by the government, more than 51,000 pensioners, over four in 10, are expected to see an increase of more than €100 a month once the reform is fully implemented. Particular support is also planned for those currently receiving the lowest pensions.

If, therefore, the reform is implemented as designed and meets its goals, it is reasonable to expect that Cyprus’s position in future indices could improve. But that cannot be taken for granted in advance, since the ranking also depends on how the other countries perform.

What matters most, in the end, lies elsewhere. Let us stop seeing Cyprus solely in the mirror of its problems. Yes, there are pensioners who are struggling. Yes, there are low pensions and weaknesses that must be tackled. Yes, the system needs modernising.

But the international picture shows that Cyprus is not at the bottom. It stands 23rd out of 44 countries in a composite index that examines real life after work. That is a fact worth knowing.

Self-criticism is essential, but perpetual self-deprecation is not self-criticism. And when the international data show that Cyprus already holds a respectable position, perhaps it is time we acknowledged it.

Demographic ageing is not simply a social development but a structural change that requires a different response from the state, the organisation’s executive president, Dimos Antoniou, told Phileleftheros.

The worst problem, he said, was that older people had to go through time-consuming procedures that caused them great hardship to secure even what they were entitled to, because services were split across different ministries and state bodies. The result was bureaucratic delays, overlapping responsibilities and inefficient service for a population group that real data showed was growing rapidly.

Powers and staff

“The new institution cannot be merely decorative or passively advisory,” the Observatory said.

It proposes that the commissioner have broad, cross-cutting powers to intervene, carry out checks and take part in shaping policy with the relevant ministries, including Health, Labour and Finance. In the organisation’s view, only executive influence enshrined in law can bring coherence to state policy on older people.

It also wants the post to have the resources and specialist staff it needs, including gerontologists, social researchers, lawyers and data analysts, so that policy rests on evidence and the commissioner can genuinely intervene.

“The question is not if, but when,” Antoniou said, urging the government to table a bill with a clear timetable and an adequate budget, and parliament to pass it regardless of party rivalries.

Health, pensions and care homes

The Observatory points to difficulties and delays in accessing services through the General Health System (GHS), which have been raised from time to time, and to the need for specialised geriatric services and clinics. It also cites access to rehabilitation as a concern, particularly for older people who need organised care after a hospital stay to get back to daily life.

The organisation has called for more effective supervision and inspections of care homes to safeguard both the quality of services and residents’ living conditions. Antoniou also stressed the need for a fully fledged, properly staffed body able to handle cases of abuse, discrimination or neglect effectively.

Money remains a problem for some older people, and the Observatory has repeatedly raised whether pensions are adequate given the higher cost of living.

Antoniou also pointed to needs in social inclusion, accessibility and quality of life. The organisation has highlighted social isolation, loneliness and ageism, insisting that older people be treated as an active part of society rather than simply as recipients of welfare benefits.

The government still intends to implement the reform from January 1, 2027. Labour Minister Marinos Moushouttas has pledged that pensioners will feel the effects in their pockets in February.

The bill may now go to the Cabinet next week, depending on which day the Cabinet meets. The Labour Advisory Board meets on Thursday, October 8, and the social partners are expected to submit their proposals on the bill there.

Moushouttas has said the board’s sessions will continue even after the bill is tabled in the House. If the government and the social partners agree on changes, he said, the ministry is willing to adopt them.

Two processes at once

People involved told Phileleftheros they consider the way the process is unfolding problematic, because two procedures will run at the same time, one in the House and one at the Labour Advisory Board.

Timetable

Phileleftheros understands that the Social Insurance Services will need at least two months to load the new data into their IT systems, so that pensioners can receive their pensions at the new amounts.

Provident funds

On the second pillar, which covers provident funds, Moushouttas said discussions in the Technical Committee would resume on October 6, with weekly sessions every Tuesday, before moving to the Labour Advisory Board.

The government is aiming for a framework agreement with the social partners, which would later be turned into legislation and sent to the House. The government bill is expected to be ready in about a year, as it needs considerable time to prepare, Moushouttas said.

At the last Labour Advisory Board session, Moushouttas had an exchange over the issue with Andreas Matsas, General Secretary of the Cyprus Workers’ Confederation (SEK). Moushouttas spoke of a framework agreement for the second pillar, saying no bill would be tabled, only a roadmap setting out its basic principles.

Matsas asked why no bill would be tabled. He said the unions’ consent had been given on the basis that the second pillar would not be implemented at the same time as the rest of the reform. Moushouttas replied that there was no room to table a bill. “We didn’t agree on anything, so how can it be tabled?” he said. He added that implementing the second pillar would take three to four years, and that discussions would now begin.

Retirement finances drove this year’s rise. Cyprus jumped 12 places to 19th in that category, while a sharp decline in its health sub-index compared with previous years held back an even bigger climb.

Within finances, Cyprus rose 11 places on inflation as the country largely brought strong inflationary pressures under control. It gained six places on interest rates to 27th, and three places on tax to eighth worldwide, after its tax score jumped 13 percentage points.

The index looks beyond retirees’ finances to the overall conditions of life after work, across four main areas. Cyprus scored 67 per cent for finances in retirement, 66 per cent for wellbeing, 80 per cent for health and 61 per cent for quality of life.

How Europe ranks

Norway topped the index for the second year running with 83 per cent, followed by Ireland with 81 per cent. The Netherlands climbed to third with 79 per cent, overtaking Switzerland, which slipped to fourth on the same score, mainly because of pressure on material wellbeing. Denmark was fifth and Luxembourg eighth. Iceland stayed in the top ten in ninth place, despite a sharp fall caused by its unemployment score.

Malta was 11th, the highest-ranked country in southern Europe. Russia rose six places to 14th on broader improvements, Slovakia was 16th and Belgium 18th. The United Kingdom and Italy rose five places each, to 21st and 22nd respectively.

On certain sub-indices, such as tax, Cyprus outperforms countries including Austria, which fell to 23rd, and Luxembourg.

Greece ranked 36th with 52 per cent.

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