Pension plans are a vital part of financial planning for the future. With the current economic climate, it’s important to know how retirement plans can help secure your future and make sure you have the financial security you need. Learn everything you need to know about Pension in Cyprus in the article below.
As insurance advisors, we can create a retirement plan for you that will help you boost your Pension income. A plan that will help you better and more securely provide for your future.
We are available to provide you with all the information you need to achieve this. We can also help you calculate today the amount you will receive as a pension when you retire.
Contact Top Insurance and our Licensed Insurance Consultant Mr. Charalambos Agathangelou in Paphos, and find out everything you need to know!
Below we have compiled and provided you with information to help you find out about the Republic of Cyprus pension plans.
TERMS – CONDITIONS, PROCEDURE AND RIGHTS
In what situation can I claim?
Statutory pension
The pensionable age is 65. It is possible to receive a pension at the age of 63 under certain conditions. Miners can receive a pension at the age of 63 provided they have worked in a mine for at least 3 years; and they are entitled to a one-month reduction in the retirement age for every 5-month period they worked in a mine on condition that they are no longer engaged in that activity. They may not, however, retire before the age of 58. Cypriot legislation does not provide for early retirement in other cases.
Special benefit for people with thalassemia is granted to insured people with thalassemia from the age of 50 provided that they satisfy the insured conditions for statutory pension at pensionable age. The special benefit is payable until the date the beneficiary is entitled to a statutory pension or until the pensionable age of 65.
Payment of a lump sum instead of a statutory pension
A lump sum is paid at the age of 68 to people who do not satisfy the insurance conditions for the statutory pension. The lump sum payment is not payable if the person concerned is entitled to social pension.
What conditions do I need to meet?
a) have reached pensionable age i.e. be 65 years old;
b) have attained actual basic insurance of at least 14 insurance points and 728 weeks must have elapsed since the week of commencement of insurance.
It should be noted that the actual basic insurance requirement is gradually increasing to at least 15 years. From the first Monday of January 2017 and thereafter, the insured person must have attained actual basic insurance of at least 15 insurance points.
However, an insured person is eligible to receive a statutory pension when they reach the age of 63 years if:
- they satisfy the above insurance condition and the number of insurance points from the basic insurance (actual and assimilated) is not less than 70% of the number of years which fall under the relevant reference period; or
- on reaching the age of 63, they were eligible for an invalidity pension; or
- they are aged between 63 and 65 and would have been entitled to an invalidity pension if they had not reached the age of 63.
Insured persons with thalassemia are eligible to a special benefit when they reach the age of 50 if they satisfy the relevant insurance conditions as mentioned above at the pensionable age.
Payment of a lump sum instead of a pension
If an insured person has reached the age of 68 but does not satisfy the insurance conditions for a statutory pension, he or she is entitled to a statutory lump sum instead of a pension if he or she has attained actual basic insurance of at least 6 insurance points and 312 weeks have elapsed since the week of commencement of insurance.
The lump sum is not paid if the insured person is entitled to a social pension.
What am I entitled to and how can I claim?
The pension rate
The statutory pension in Cyprus includes a basic pension and a supplementary pension.
The weekly amount of the basic pension equals to 60% of the weekly value of the annual average insurance points which have been credited to the insured person’s basic insurance during the reference period, increased to 80%, 90% or 100% if the beneficiary has one, two or three dependants respectively. In the case of an insured person without a dependent spouse, a 10% increase is paid for each dependant up to a maximum of two.
The weekly supplementary pension in Cypruw is equal to 1.5% of the weekly value of the total number of insurance points in the insured person’s supplementary insurance.
The total pension may not be less than 85% of the basic pension that would have been paid to the beneficiary if he or she had full insurance in the standard part of the Scheme.
For the purpose of calculating the pension rate, the insured person’s basic insurable earnings are revalued on the basis of the amount of the basic insurable earnings applying on the day of retirement.
The monthly pension rate is calculated by quadrupling the weekly amount.
In December of each year a 13th pension instalment is paid, equal to 1/12 of the pension paid for the whole year.
Pensions are readjusted every year based on the increase of insurable earnings and the price index.
The special benefit for people with thalassemia is calculated the same way as for statutory pension at pensionable age.
A pensioner who worked and had earnings in the period between the date of entitlement to a pension and reaching the age of 65 is entitled to an increase in the weekly pension amount equal to 1/52 of 1.5% of that income.
Actuarial reduction in statutory pension in Cyprus
The amount of the statutory pension payable to a person entitled to claim a statutory pension from the age of 63 is reduced for life (through the submission of the application form for statutory pension, with which the person declares when he wants the pension payments to commence) when the material time falls within the period:
From 1st January 2016 and thereafter, by 0.5% for each complete month or part thereof in the period between the start date of pension payments and the date of reaching the age of 65 years (i.e. a 12% reduction if pension payments begin at the age of 63).
It should be clarified that the actuarial reduction applies in the case both of insured persons entitled to the minimum statutory pension and of widowed pensioners whose late husband or wife, as the case may be, was a statutory pensioner. Furthermore, the actuarial reduction shall also apply to the orphan’s benefit which may arise from the death of a parent who was receiving a statutory pension.
To claim a statutory pension/special benefit for people with thalassemia, the insured person must submit an application on a special form which can be obtained from any social insurance district office, citizens’ service centre, citizens’ centre or via the internet. The application must be accompanied by all the required original documentation referred to in the application form which, once completed, should be delivered to any social insurance district office or citizens’ service centre or citizens’ centre.
Deadline for submitting the application
The application form must be submitted within 3 months before the date from which pension/special benefit for people with thalassemia payments are being claimed. If the application is submitted beyond the deadline, only 3 months will be paid in arrears.
For payment of the lump sum, the application form must be submitted within at most 3 months. If the application is submitted beyond the deadline the lump sum payment will be reduced by 1/12 for every month of the delay.
Jargon busters:
- Insurable earnings: the amount of the insured person’s earnings on which contributions are payable.
- Insurance points: the result arrived at by converting real and assimilated insurable earnings to insurance points.
- Basic insurable earnings: the amount of insurable earnings which is set each year and increased by Cabinet decree (published in the Official Gazette of the Republic) on the basis of the percentage increase in average insurable earnings in the previous contribution year compared to the contribution year immediately preceding it.
- Basic insurance: includes the insurable earnings for each year up to the amount of the basic insurable earnings i.e. up to one point.
- Weekly value: the valuation of the insurance point in insurable earnings, based on the weekly amount of basic insurable earnings.
- Insured person’s dependants:
- the spouse with whom he/she lives or whom he/she maintains and is not gainfully occupied;
- child aged under 15 years;
- an unmarried daughter aged between 15 and 23 years who is in regular education;
- an unmarried son aged between 15 and 25 years who is serving his term in the National Guard or is in regular education;
- a child, regardless of age, who is permanently incapable of self-support;
- a husband who is unable to work and who is supported by his wife;
- a parent who is unable to work and is supported by the insured person;
- a younger brother or sister of minor age if maintained by the insured person.
- Assimilated insurance: insurable earnings for which the insured person is not obliged to pay contributions:
- for any period of regular education in an educational institution after the age of 16;
- for periods of service in the National Guard;
- for periods when receiving benefits for sickness, unemployment, maternity, paternity, physical injury or an incapacity pension from the Social Security Fund;
- for any period of absence from work because of parental leave.
When evaluating eligibility for, and the amount of, the statutory and widow’s pensions for an insured person who died at or after pensionable age, assimilated insurance from regular education is only taken into account for 6 years i.e. up to 6 insurance points. It should be noted that for all other benefits the period of assimilated insurance for regular education is taken into account without limits. An insured woman, for the purpose of acquiring eligibility for a pension or an increase in its rate, is entitled – for each child she has given birth to or adopted – to assimilated insurance for a period of up to 156 weeks within the 12 years following the birth of each child to cover any possible gaps in her insurance.
- Contribution year: for salaried employees whose earnings are set on a monthly basis, this means the calendar year; and for other insured people, this means a period of 52 or 53 weeks commencing on the first Monday of each year and ending on the Sunday preceding the first Monday of the following year.
- Material time: in relation to any benefit, this means the first day a person would be eligible for the benefit if they submitted an application for that benefit within the set deadline.
- Reference period: the period commencing the first day of the contribution year during which the insured person reached the age of 16 and ending the last week before the week in which the person attains eligibility for pension (material time).
- Actual insurance: includes all insurable earnings for which contributions were paid.
- Actual basic insurance: refers to the insurable earnings each year in relation to which contributions have been paid up to the amount of the basic insurable earnings.
- Supplementary insurance: includes the insurable earnings each year beyond the amount of the basic insurable earnings.
- Relevant contribution year: in relation to benefits, this means the last contribution year before the benefit year which includes the date on which the insurance conditions attached to the benefit must be satisfied (i.e. the relevant contribution year is 2020 for the first half of 2022 and 2021 for the second half of 2022).
Below you can find forms you may need to fill in and other useful information:
- Application for statutory pension (for applicants reaching the age of 63 or 65 in 2016) .
- Application for special benefit for people with thalassemia
Know your rights
The links below define your rights legally. They are not European Commission websites and they do not represent the Commission’s views:
European Commission publication and website:
Who do you need to contact?
Social Insurance Services
- Central Offices
- Leoforos Vyronos 7
- 1465 Nicosia
- CYPRUS
- http://www.mlsi.gov.cy/sid
METHOD OF CALCULATION OF RETIREMENT PENSION, DISABILITY PENSION, WIDOW’S PENSION AND SOCIAL PENSION IN CYPRUS.
We have compiled information for you, obtained from interviews with Social Security chiefs and other government officials and technocrats, which will help you to find out and answer your questions about how the pension is calculated.
Interview:
The way pensions are calculated is quite complex and technical admitted the Deputy Director of Social Insurance, Evangelia Georgiadou, speaking on Alpha tv program «Ενημέρωση». Many times pensioners do not know how the amount they receive at the end of each month is calculated, except that this is the money they receive from the state for their living.
Asked how the old age pension is calculated, Mrs Georgiadou said that the social security plan is proportional so as many contributions are paid by payments so will be the amount of the benefit one will receive.
“It is divided into two parts, the basic and the supplementary part. That is, the earnings up to the basic part which is revalued every year and this year it is at €9682 and the earnings beyond that amount.”
The reason why it is divided into two parts is because each part, the basic and supplementary part, is calculated in a different way which when added together gives the final pension amount.
As far as the basic part is concerned, it is the average of all the credits one has in one’s working life, i.e. from 16 years to 63 or 65, which is why when the average of all the credits in the basic part (€9682) is multiplied by 60%.
“Beyond this amount, the proportional is what a member has, units in the proportional part multiplied by 1.5%, with no upper limit.”
On the basis of these the basic pension is €446.88, the minimum €379.85 and the maximum pension is €2,400.
How is the widow’s pension calculated?
The widow’s pension is based very much on the same calculation pattern as the old-age pension.
“When we calculate the basic part of the old age pension it is 60% of that as that is how the law determines it.”
If it is a woman who lost her husband and she was working then she will also get a pension on her own insurance.
Pension for the housewife
The social pension is the so-called family pension which is received by people who have no insurance in the social security plan or whose insurance is so little that they do not meet the requirements.
“You need 20 years of residence beyond 40 years and when someone is beyond 18 years old you need 35 years of residence in Cyprus.”
The social pension is €361.97 which is 81% of the full basic pension.
To receive a pension a citizen must apply for it. In fact, Georgiadou urged pensioners to apply three months before their last day at work as there is a 3-month delay in the payment of the pension.
Pension of €710 and 12% penalty
No one gets less than €710 pension said Labour Minister Kyriakos Kousios a few days ago with the DEOK President responding today that the pension is much more than €710. Pension funds around the world he said face demographic challenges but also issues of adequacy of pension benefits and all these parameters should be assessed.
According to an actuarial study done for the fund, it was shown that there will be pension adequacy until 2080. However, according to the DEOK Chairman, there are many parameters that need to be discussed.
“First of all, we need to see how we ensure pension adequacy for pensions as far as the low pensioners are concerned through the system and not through the fiscal intervention of the state, is the issue concerning the reserve of the fund. The total reserve which is around 8 billion has been borrowed by the state and a road map should be laid down so that this money can be returned back to the fund to form a credible investment committee for the pensioners.”
Immediate abolition of the 12% penalty
On the immediate abolition of the 12% penalty for workers in heavy manual occupations and women with insurance gaps, Anastasiou said this had been accepted by the then government following a suggestion from the Troika. He noted that mainly affected were workers in heavy occupations but also people who receive low pensions, especially women.
“In Cyprus today we have a pension gap of 38%. Women on average receive 38% lower pensions than men. I think it is very unfair to impose an actuarial reduction on these pensions as well. Formulas should be discussed to safeguard these groups.”
Furthermore, the President of the DEOK noted that the issue of the penalty should not be considered with a populist approach explaining that for better or worse it has been imposed since 2012 and since then there have been different types of pensioners as some people take it at 63 years with a penalty and there are also those who take it at 65.
“There should be an actuarial study that will determine through specific methodologies possible problems that will arise from the Social Security Fund to manage them in the most effective way.”
Click on the link below to see more :
https://www.alphanews.live/economy/pos-ypologizontai-oi-syntaxeis-giratos-hireias-kai-oikokyras
