• The inclusion of Provident Funds in the first phase of the pension reform constitutes the main point of disagreement between employers and unions.

• The Minister of Labour aims for an agreement before submitting the relevant bill to Parliament on September 20, while maintaining reservations.

• The trade union organizations demand the mandatory implementation of the second pillar, while the employers' side strictly favors voluntary participation.

• The academic proposal for the automatic enrollment of employees is partly rejected by the Ministry, as it disagrees with the proposed state subsidy.

• Technocrats point out that a full actuarial study and costing of the proposals are required in order to avoid a disproportionate burden on small businesses.

It is now obvious that the two-month period of August and September will be particularly "hot" regarding the highly publicized reform of the pension system.

The divergence of views between the two social partners, employers and unions, remains strong on the contentious issue of the second pension pillar.

The inclusion or exclusion of Provident Funds in Phase A of the reform is proving, in practice, to be the big thorn in finding a consensual solution.

Marinos Moushouttas, Minister of Labour, responding to a question from INK during a press conference last Friday, reiterated the government's serious reservations about whether the institution of Provident Funds should be included in Phase A of the reform.

"It is not easy to include the second pillar in Phase A," Mr. Moushouttas clarified.

However, last week after President Christodoulides' meeting with the General Secretariat of SEK, Mr. Moushouttas made statements with a positive approach regarding the second pillar.

"The commitment we have is that the effort will be made so that with the submission of the bill to Parliament there will also be an agreement on the second pillar, something that is sought mainly by the unions, but also by the employers," the Minister of Labour had stated.

Andreas Matsas, General Secretary of SEK, commenting to INK, discussed the references made by the Minister of Labour.

"The inclusion of all pillars linked to pensions is imperative, with an emphasis on the second pillar concerning Provident Funds."

"The second pension pillar will provide substantial support to retirement benefits," the General Secretary of SEK notes, taking it a step further:

"There is a specific suggestion that can create the conditions for integrating the Provident Funds pillar. Through proper handling, the proposal can be accepted by all social partners," he says. "When challenges are faced collectively, solutions are more effective," he explained, adding:

"This serves as a reminder to avoid hollow stances that unfortunately highlight the Homeric saying, 'winged words'."

The Diametrically Opposed Views of Employers and Unions

The diametrically opposed positions held on the matter by employers and unions are also highlighted by the Minister of Labour, pointing out that on this specific issue, there seem to be two colors: "White and black."

"The employers' side," he says, "demands the promotion of the Provident Funds institution on a voluntary basis, whereas the trade union movement demands its mandatory implementation."

Mr. Moushouttas expresses the view that the first pillar, meaning the Social Insurance Fund, the pension increases, and the 12% actuarial reduction, should proceed first, "and subsequently we can promote the Provident Funds as well."

A. Milidonis' Proposal Also in the Equation

Andreas Milidonis, Professor of Finance at the University of Cyprus, in a public intervention on the matter via a relevant article and his statements to INK, suggests among other things the automatic enrollment of all new employees into Provident Funds at the start of their employment.

As he points out, despite the mandatory nature of the enrollment, employees would be able to retain the right to opt-out if they wish.

The Milidonis proposal aims to tackle the problem of inadequate retirement savings.

His proposal also includes a state subsidy through the payment of an amount equal to 50% of the employee's contribution, with a maximum cap of approximately €1000.

INK brought the Milidonis proposal before the Minister of Labour for comment.

Mr. Moushouttas said he was aware of the academic's proposal, mentioning that he recently had a meeting with him.

"Without wishing to enter into details, I will stand briefly," the Minister said, "on what concerns the study and proposal of Mr. Milidonis, whose knowledge I certainly appreciate highly."

"In the Milidonis proposal, two or three points are contained which, if you allow me, are somewhat outside the philosophy of the Ministry of Labour."

"I would like," the Minister added, "to focus on the one part where he mentions that the state should be one of the three members that will deposit contributions regarding the Provident Funds."

"In our suggestion there is no such thing, and our social partners know this," Mr. Moushouttas said.

"We do not know everything," the Minister observed. "With everyone's suggestions, however, we will be able to achieve the synthesis that will give the people a good pension reform," he indicated.

How Technocrats Comment on the Academic's Proposal

INK also requested the views of technocrats knowledgeable about the pension system regarding the Milidonis proposal, who initially expressed their respect for academic research or studies.

At the same time, they point out that the proposal as an academic position and as food for thought is good.

They expressed the view that providing examples from other countries creates the image of a comprehensive and documented proposal, without however proving that the same model can be transferred as it is to Cyprus.

They mentioned that there is no costing, actuarial study, administrative plan, or impact assessment on small businesses, since there is no clear answer as to who assumes the investment risk.

Mr. Milidonis is a case of an academic who wants to provide solutions, and this honors him greatly, they note.

"He is a knower of the subject and no one disputes this." They expressed the view that Cyprus is a small economy, with large discrepancies between sectors, businesses, and forms of employment.

"A horizontal regulation," they said, "could disproportionately burden very small and seasonal businesses."

"The proposal," as they point out, "deserves to be studied, but not to be presented as a ready solution before a full costing, actuarial study, and impact assessment by sector and business size take place."

It is imperative, according to the technocrats who spoke to INK, "to analyze the processes, the fiscal cost versus the social benefit versus the labor market and the burden on businesses, whose labor cost in some cases is already unbearable."

It is noted that Marinos Moushouttas stated last Friday to INK that the bill will be given to the social partners within August in the context of the Labour Advisory Board (ESS) and that on September 20 it will be submitted to the House of Representatives.

Source: ink.com