The majority of Cypriots won’t be able to get a decent enough pension after the mandatory retirement age of 65, according to a study carried out by Aon plc retirement and investment consultants.
This also shows that an average Cypriot employee with 10 years of contribution to Provident Funds and whose annual earnings are around €35,000 and savings €33,000 euros will not be able to retire at 65 and continue to enjoy the same standard of living as when he/she was working.
Aon’s Pantelis Argyrou who was addressing the recent 10th Pension Forum explained that based on the above parameters and contributions to the Social Security Fund which is currently 6.5% for the employee and 6.2% for the employer, that employee will have saved only a total of one annual salary.
Therefore, it will be difficult for that employee to retire and continue his/her life at the same level considering the prevailing Social Security contribution data.
Argyrou also said that he average employee today would have to save seven times his or her annual salary up to the age 65 to be able to meet sufficiently retirement needs.
What is shocking, he added, is that only 2% of current employees are expected to achieve this goal. An employee who starts saving consistently from his 25th year and over the next 40 years (without calculating income breaks) will need a total contribution of 15% for a sufficient retirement income.
And if this scenario is delayed, then the rate of savings would increase dramatically – between 19% -22%. This menas that an average employee today would have to retire at 72 to enjoy a decent enough pension.
“The pension needs of employees at higher income scales will be higher than the average worker. Workers who receive over €6,000 in annual salaries should have saved over nine annual salaries or more.
“The main reason is that employees on higher income scales will receive less reimbursement from Social Security so they will have to cover most of their private needs,” Argyrou also said.
At the same time, Statistical Service latest data shows the average monthly salary in Cyprus standing at €1,939 by end of 2018. But for conclusions based on scenarios referred by Argyrou the annual salary of an employee should reach €35,000 annually or about €3,000 monthly.
By George Pyrishis