Cyprus Mail

Over 100 state officials enjoy both a salary and a pension

AROUND 120 active state officials are currently enjoying a full salary and a pension, costing state coffers some €1.2 million a year.

The issue of rationalising the payment of pensions to state officials resurfaced after it was proposed that savings generated on this item could help cover revenues lost from lowering Immovable Property Tax (IPT).

Daily Politis explains that, despite popular misconception, multiple pensions are at the moment not practiced.

What is currently in force is that, since 2011, the pension (one or more) paid cannot exceed 50 per cent of a person’s highest pensionable earnings.

At the same time, and since October 2014, active state officials have been receiving a salary and a pension for their prior service in the public sector.

In an October 2014 ruling, the Supreme Court said civil servants called out of retirement to serve in a different position should get both their salary and their pension from the previous post.

The court was handing down a verdict on an appeal filed by some 50 former and current public sector and semi-governmental officials who had been denied their pension while they were drawing a salary.

However, the Supreme Court concluded that an article of the State Officials on Pensions Act of 2011 was unconstitutional. The legislation, drafted by the House of Representatives came as a response to the fact that government officials were receiving multiple pensions as a result of having served in multiple posts in their career.

The House decided then to reform the pension system when it came to high-ranking government officials, and significantly cutting back on the amount paid out.

While the core of the legislation still stood, the article in question dictated that no government official should receive a pension while being employed by the state.

The Supreme Court had pointed out that the article directly violated article 23 of the Constitution, which protects private property. The court concluded that a pension should be considered as property and as such comes under the protection of article 23 of the constitution.

The court said that while private property laws can be suspended when it comes to the common interest, the state did not sufficiently prove that this is the case.

As a result, the government had to retroactively pay all pensioners on their payroll, whose pension was suspended as a result of the 2011 act.

This meant that state officials could receive both a salary and a pension. However, in the event they qualified for more than one pension, the pensions would be offset against each other so that the total pension amount did not exceed 50 per cent of the highest pensionable earnings.

“Effectively, this was understood as ending the practice of multiple pensions, in the sense that where more than one pensions were concerned, no single pension would be paid in full.”

Now, however, the offsetting of multiple pensions (one pension for service in the public sector, another for a stint as a state official) may also be under threat after it was challenged by a number of former state officials.

Six former state officials – including former Central Bank governor Afxentis Afxentiou and former health minister Dina Akkelidou – appealed against the offsetting rule. The case is being heard by the Administrative Court, and a ruling is expected soon.

Should the state lose this case as well, it will be called to make additional retroactive payments of €600,000 per year. This concerns payments to 38 affected individuals currently, although the number of individuals is expected to rise in time as more former civil servants are appointed to state offices.

On Monday, the DIKO party submitted its own proposal. It provides that a civil servant’s pension is exempt from the offsetting exercise – in other words it aims to bring back multiple pensions.

Under ruling DISY’s proposal, rather than curtailing the pension – now considered to be protected as private property – active state officials who are past the pensionable age would be paid a diminished salary. In this way their total earnings would not exceed the nominal salary they are entitled to in their current position.

However, this could raise constitutional problems on the grounds of discrimination.

In the meantime, the related debate on reforming Immovable Property Tax looks set to go down to the wire, during Thursday’s plenary session.

The parties have yet to reach common ground on how €30 million can be levied directly by the state for this year. Although a consensus has emerged that local authorities would continue to levy property tax, some €15 million by the government’s estimate.

The finance ministry is now proposing a 0.035 per cent flat IPT rate, with the central government and local authorities collecting €30 and €15 million respectively.

But opposition parties argue that a flat rate benefits large landowners and the wealthy, and are pushing for a staggered rate.

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