Govt plans to submit pension reform bills to parliament by June

The government plans to submit bills to parliament to reform the pension system by June, Labour Minister Marinos Mousiouttas said on Tuesday.

He was speaking to the day’s session of the House labour committee and called on it to “find common ground and promote either legislative proposals or bills which aim to help people”.

When a bill is submitted, he said, it will “contain” provisions regarding the low-income pensioners’ allowance, the social insurance fund’s investment policy, and the 12-per-cent pension “penalty”, as he described it, for people who take early retirement.

Those changes to the social insurance fund’s investment policy may include a diversification of its investments, with previous recommendations made to the government having suggested that a larger proportion of its fund be invested into non-public assets.

Mousiouttas agreed with this assessment on Tuesday, saying that it will “certainly be diversified within the framework of the pension reform so that it can bring, without risk, more benefits to the fund and to workers”>

He also said that between €11 billion and €12bn which has been borrowed from the social insurance fund is currently resting in the state’s accounts, and that his planned pension reforms will “cover” this.

Additionally, he said, “everything will be integrated into one so that there are not multiple sources of benefit provision”.

The matter of the 12-per-cent “penalty” refers to an offset, wherein those who take early retirement are paid 12 per cent less by the state as their pension than they would if they retired at the age of 65.

It was somewhat alleviated for early retirees in 2024, when the government reduced the drop in pension payments for those who retire before the age of 65 if they have completed 40 years of contributions.

At the time, the government said that the change would directly affect over 11,000 pensioners, who would all receive €800 per year extra as a result, as well as between 1,000 and 1,500 new retirees per year going forward.

However, trade union Peo’s secretary-general Sotiroula Charalambous raised concerns that the stipulation that early retirees “contribute 40.4 insurance units” could mean that some on lower incomes are effectively priced out of early retirement.

On Tuesday, Mousiouttas also said the planned pension reform would encompass the issue of the ‘small cheque’ – a once-per-year bonus payment paid to low-income pensioners who earn below a certain threshold.

In recent years, issues have arisen regarding the ‘small cheque’, with inflation-based increases in state pensions putting some pensioners above the threshold to receive it and thus leaving them financially worse off than they otherwise would have been.

At the end of last month, pensioners’ union Ekysy stated that a government claim that it had allocated €13.5 million of extra funding to cover increases to pensions for low-income pensioners “misleading” for this reason.

It said the figure is “the product of accounting alchemy”, and that “in reality, there is not a single euro of additional cost” to the government as a result of the decision.

“The state will simply not benefit from the €13.5m, because it is neither fair nor socially acceptable for low-income pensioners to receive an increase from the social insurance fund and for the government to then deduct it from their ‘small cheque’,” it said.