The Labour Ministry is examining ways to gradually abolish a 12% ‘penalty’ imposed on those who retire earlier – at the age of 63 rather than at 65.
This is what Minister Zeta Emilanidou on Monday told House Finance Committee members looking into the Ministry’s 2020 budget.
She also said that instructions have been given for a specific actuarial study to be conducted on this. “What we are considering is for the 12% (cut) to be depreciated at a certain age, for example after a retiree is 70 or 72 years old.”
The actuarial study will show whether phasing out this measure will have an impact on public finances, she added. It will also consider whether additional contribution to the Social Security Fund will be needed to mitigate the possible impact.
The 12% ‘penalty’ was a measure imposed by the Troika of Cyprus’ lenders at the time when an austerity MoU had been implemented. With the implementation of this measure, the state saves €100 million annually and it was among those taken to ensure the Social Security Fund’s viability.
Emilianidou said it was wrong to call the 12% cut a ‘penalty’ because it is actually an actuarial reduction in pensions. At the same time, the introduction of widow’s pension paid to men comes in effect the latest as of January, she added.
Beneficiaries are men whose spouses passed away from January 1, 2018 onwards and the Ministry is at the final stage now of reviewing applications. Due to the unconstitutionality of the previous bill, beneficiaries will receive pensions retroactively.
In addition, ongoing discussions on the setting by law of a national minimum wage will be completed by the year’s end. And the Ministry will be expected to conduct a dialogue with social partners. Studies on this hot issue were carried out in cooperation with the International Labour Office and the European Commission.
Emilianidou has repeatedly sent the message that it will only be possible to legally set an overall national minimum wage after unemployment falls below 5%.