The Cyprus Economic and Competitiveness Council issued recommendations on the topic of retirement in a statement on Thursday. These recommendations are based on the pillars of state pensions, professional pension funds, and private pension schemes.

Regarding the first pillar, which concerns state pensions provided through mandatory contributions to the Social Insurance Fund, the Council acknowledges that it alone cannot fully address the serious issue of ensuring sufficient retirement income for citizens. There is also concern about the long-term sustainability of the Social Insurance Fund, primarily due to population aging and declining birth rates in recent years.

Therefore, the Cyprus Economic and Competitiveness Council recommends that the government take necessary measures and actions to strengthen the second and third pillars of the pension system. These pillars, combined with the first pillar, can offer higher pensions and, consequently, a decent standard of living during retirement for all citizens.

Specifically, the Council emphasizes the need to reinforce the second pillar through the establishment and consolidation of Professional Pension Funds. It suggests automatic enrollment of all private sector employees into a multi-employer Professional Pension Fund or an employer-provided Pension Fund, with a small contribution from the employer and a government contribution for low-income earners whose income is not taxed.

Furthermore, the Council proposes the introduction of the transferability of pension benefits from one Pension Fund to another, as well as the option to withdraw funds upon reaching the retirement age and a reduction in the borrowing rate from the Pension Funds.

The Council also considers the collection of contributions by the Pension Funds to be significant. It suggests that these options could include regular intervals for collecting contributions (an option supported by the Council) or partial withdrawal of funds upon retirement, with the remaining amount collected at a later stage.

Regarding the third pillar and voluntary retirement savings to supplement pensions, the Council suggests that the government could consider providing the same financial incentives/tax deductions offered for participation in professional pension funds/life insurance for encouraging citizens to participate in private pension schemes (individual plans).

In connection with the above recommendations concerning the three pillars of the pension system, the Council supports the strengthening and promotion of the authorities overseeing the Professional Pension Funds (the Inspector of Professional Pension Funds and the Insurance Supervisor of the Insurance Control Service). It also suggests exploring the possibility of establishing a unified supervisory mechanism adequately staffed with individuals possessing the necessary scientific expertise and experience.

According to the Council's perspective, a significant role is played by the transparency and effectiveness of the regulatory framework, the adequacy of pension schemes, and the availability of reliable information for citizens to make informed decisions about their retirement planning.