Prospects for an agreement between social partners on provident funds remain uncertain, with pension reform likely to remain incomplete unless a solution is found to bridge the significant differences between trade unions and employers.
Trade unions continue to insist on mandatory participation in provident funds to ensure adequate retirement income, while employers oppose such a move and argue that the voluntary nature of the system should be maintained.
Unions hold firm
SEK secretary-general Andreas Matsas told Politis that efforts should focus on strengthening and expanding provident funds, including through the implementation of the European directive on extending collective bargaining agreements.
He argued that supplementary provident funds with broad application are necessary to ensure adequate pension income.
"There are ways for the government to solve the problem. If it cannot, then we will," he said.
PEO secretary-general Sotiroula Charalambous said the government appears to be pursuing a fragmented reform focused primarily on the Social Insurance Fund.
Regarding provident funds, she argued that the government has not played a supportive or constructive role in promoting their expansion.
"We should aim for all workers to have access to provident funds and we can find the tools and mechanisms to achieve that goal," she said.
Charalambous added that unions had expected the government to play a more decisive role in strengthening provident funds through the expansion of collective agreements rather than concentrating solely on the first pension pillar.
She also criticised the government's apparent reluctance to adjust support schemes for low-income pensioners in line with the actual poverty threshold.
Pension adequacy remains key concern
DEOK president Stelios Christodoulou said the central question remains how pension adequacy should be defined.
"If the minimum adequate pension is €1,000 and the Social Insurance Fund can provide only €750 to €800, we need to determine how that gap can be covered," he said.
According to Christodoulou, the only viable solution is the gradual expansion of provident funds.
"If there is no credible mechanism for extending provident funds, a voluntary system will not help achieve the goal of improving pension adequacy," he added.
Mandatory participation a red line for employers
Mandatory participation in provident funds remains a major sticking point for employers.
As previously reported by Politis, OEV director-general Michalis Antoniou described compulsory participation as a "casus belli" for employers.
"Our position is clear," Antoniou said. "Provident funds were established through agreements between OEV and the trade unions and have operated on a voluntary basis for 65 years, gradually expanding to cover more workers."
He said employers support voluntary expansion supported by strong incentives from the state for both employers and employees.
KEVE secretary-general Filokypros Rousounides also argued that the voluntary character of provident funds should be preserved, while incentives should be introduced to encourage wider adoption.
Reform process continues
During a review of the Labour Ministry's work during Cyprus' presidency of the Council of the EU, Labour Minister Marinos Mousiouttas said legislation covering the first pillar of pension reform would soon be submitted to social partners and is expected to reach parliament around 20 September, after lawmakers return from the summer recess.
He described the first pillar, which concerns the Social Insurance Fund, as the most tangible part of the reform package and one that could take effect on 1 February 2027.
"On 1 February 2027, people will feel the increase in pensions," he said.
Searching for common ground
Regarding the second pillar, Mousiouttas acknowledged that the debate reflects two fundamentally different approaches.
One side, represented by the trade unions, supports mandatory provident funds, while the other, represented by employers, supports a voluntary model.
"This is black and white, and finding the grey area, the common denominator, is more difficult," he said.
The minister said the government's goal is to move forward with the first pillar while continuing discussions on the second pillar through the technical committee comprising the Labour Ministry, trade unions and employers.
The committee is scheduled to meet on 23 July.
Mousiouttas noted that any benefits from an expanded provident fund system would take time to materialise.
Even if legislation is introduced within the next few years and employees and employers begin contributing, it could take between five and ten years before significant retirement savings accumulate.
Push for agreement
Following a meeting on 9 July between President Nikos Christodoulides, the new SEK leadership and the labour minister, both Matsas and Mousiouttas expressed hope that an agreement on the second pillar of pension reform could be incorporated into the legislation due to be submitted to parliament in September.
