Assuring the Future of Pensions in Cyprus
In a recent announcement that has brought a sigh of relief to many, Labour Minister Yiannis Panayiotou has shared optimistic findings from an actuarial study conducted by the International Labour Organisation (ILO). The study, with a reference date of December 31, 2020, concludes that the social insurance fund (SIF) of Cyprus is on solid ground, with financial viability extending to the year 2080.
The comprehensive review by the ILO, a respected UN agency, indicates that the current revenues of the SIF—stemming from contributions and investments—are adequately covering the incremental rise in pension spending. This positive trend is anticipated to continue, with the fund’s reserves projected to triple the annual expenditures by 2080. Such a robust financial position negates the immediate need for increasing the retirement age.
Furthermore, the analysis took into account demographic shifts and life expectancy changes from January 2018 to January 2023. These factors are crucial as they influence the pensionable age, which is subject to a statutory reassessment every five years. The next review, scheduled for the first quarter of 2025, will have its reference point on December 31, 2023.
Despite concerns that might arise from extending men’s rights to a widower’s pension, the study assures that this will not impose a need for higher contribution rates. This finding underscores the SIF’s capacity to adapt to social changes without financial strain.
Amidst these positive outcomes, the ILO has advised on potential enhancements to the SIF’s investment strategy. It suggests a gradual shift towards a more diversified portfolio, including a greater focus on ‘non-public assets’ to achieve higher returns at relatively low risk. This recommendation aligns with global best practices in pension fund management and aims to fortify the SIF’s long-term sustainability.
Minister Panayiotou emphasized that these findings lay a strong foundation for the anticipated pension reform of 2025, which is part of the government’s commitment. He also took a moment to acknowledge the SIF’s six decades of providing universal pension coverage, marking it as a cornerstone of social security in Cyprus.
