Statutory Pension Scheme

Mandatory insurance

• All persons gainfully employed in Cyprus such as employees (including workers, employees in the private sector, public employees, semi-public employees, and apprentices) and self-employed persons.

Voluntary insurance

• Formerly mandatorily insured persons may continue insurance on a voluntary basis if they had paid contributions on insurable earnings not lower than the yearly amount of basic insurable earnings.
• Persons with ordinary residence in Cyprus who are employed abroad by Cypriot employers.

General finances

• PAYG-financed through social security contributions and state contributions out of the ‘Consolidated Fund’ of the Republic of Cyprus.

Contribution rates for mandatory insurance¹

• Fixed share of insurable earnings² with contribution assessment ceiling (EUR 1,055 per week or EUR 4,572 per month in 2020); contribution rate increases of approximately 1.3% by law every five years.
• For employed persons: from 2019 to 2023, the total contribution rate (21.5%) is shared between the employee (8.3%), the employer (8.3%) and the state (4.9%). If the employed person participates in the supplementary occupational pension scheme without paying contributions him-/herself, shares are adjusted as follows: the share paid by the employer is 12.4%, the share paid by the employee is 4.2%, and the share paid by the state is 4.9% (total contribution rate remains 21.5%).
• For self-employed persons: the total contribution rate (20.5%) is shared between the self-employed person (15.6%) and the state (4.9%).

Contribution rates to voluntary insurance

• The total contribution rate (18.4%) is shared between the insured person (14%) and the state (4.4%).

Taxation of contribution payments

• Contributions are tax-deductible.

• The Department of Social Insurance Services (under the control and supervision of the Ministry of Labour, Welfare and Social Insurance) controls and manages the ‘Social Insurance Fund’.

Qualifying conditions

• Standard old age pension: statutory retirement age is 65; minimum insurance periods: 780 weeks; insurance points³: 15; the total number of insurance points should not be less than 30% of the years in the relevant reference period.⁴
• Special conditions apply to miners: the pensionable age is 63 with a minimum insurance period in the mining industry of 3 years; it can be reduced to age 58, depending on the duration of work in the mining industry.
• Old age lump sum payment: Persons who do not satisfy the insurance conditions are entitled to a lump sum payment at the age of 68 provided that they have attained at least 6 actual basic insurance points; no less than 312 weeks must have elapsed since the week of commencement of insurance; person is not entitled to the old age lump sum payment if he/she is entitled to social pension.

Early retirement

• Available at age 63 for persons who meet the relevant insurance conditions: the total number of insurance points must not be less than 70% of the years in the relevant reference period; with negative (permanent) actuarial adjustments to pension benefits (0.5% per month, max. of 12% in total).
• Available at age 63 for persons previously eligible for an invalidity pension (i.e. the person was entitled to invalidity pension before reaching the age of 63); immediately available to those who become invalid between the age of 63 and 65.

Deferred retirement

• Retirement can be deferred (up to age 68) with positive (permanent) adjustments to pension benefits (0.5% per month).

Combining employment & retirement

• Termination of employment is not a precondition for claiming pension benefits.
• Pensioners that have reached the statutory retirement age can continue to work and earn income without prejudice to their pension benefits.

Pension benefits

• Monthly pensions (no lump sum payment) based on total amount of the individual’s insurable earnings throughout working career.
• In December of each year a 13th pension is paid, equal to 1/12 of the monthly pension paid for the whole year.
• No maximum amount specified; maximum pension benefit levelled due to contribution assessment ceiling.
• Minimum amount: the minimum amount of the statutory pension is readjusted every year by the Ministry of Labour, Welfare and Social Insurance;  it corresponds to 85% of the monthly full ‘basic pension’ that would have been paid to the beneficiary if the person had had full insurance in the standard part of the scheme, which is also set yearly by the Ministry; for 2020, the minimum monthly amount was set at EUR 358.84 for a pensioner without a dependant, at EUR 478.45 with one dependant, at EUR 538.25 with two dependants, and to EUR 598.06 with three or more dependants.
• Old age lump sum payment: the amount is equal to 15% of the total amount of the person’s insurable earnings (actual and assimilated).

Benefit calculation

• The statutory pension has two components: (i) the basic pension and (ii) the supplementary pension.
• The basic weekly pension is 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; it increases to 80%, 90% or 100% for one, two or three dependants respectively.
• The supplementary weekly pension is equal to 1.5% of the weekly value of the total number of insurance points in the insured person's supplementary insurance.
• The monthly amount of the pension is calculated by multiplying the weekly amount by four.
• Benefits are adjusted for early or deferred pension claiming.
• Adjustments: pension benefits are readjusted every year based on the increase of insurable earnings and the price index.

Taxation and social security contributions

• Pension benefits are subject to taxation, in accordance with the Income Tax Law (Law 118(I)/2002) if annual total pension amount exceeds EUR 19,500.
• Contributions to public health insurance are mandatory (2.65% of pension benefit for the Cypriot General Health System).