Our View: Government must take a hard line on early retirement

While the legislature is discussing the pension bill for public employees that was submitted by the government, unions and pressure groups have taken the opportunity to push their long-standing demand for an end to the penalty on pensions taken before the legal retirement age.

For some time, these groups have been arguing that it was unfair for people that retired at 63 instead of the statutory 65, to have 12 per cent deducted from their monthly pension. They should not be penalised in this way, especially as they may have been contributing for the minimum requirement of years to the social insurance fund, it is argued.

If there is no penalty for taking a pension at 63, this would mean the lowering the retirement age back to where it had been. Nobody would wait to reach the retirement age of 65 if they could get a full pension at 63. Is that not obvious to these campaigners. What would have been the point of putting back the retirement age to 65 if there is no disincentive to retiring at 63?

The trend in all of Europe, because of the higher life expectancy has been to put back the retirement age, primarily to ensure the viability of state pension funds, which were under significant strain. It was a reasonable move based on the logic that as people lived longer they could also have a longer working life.

Some countries have pushed back retirement age to 67, others have increased pension contributions, while others have cut pensions, in order to deal with the problem of an ageing population combined with a falling birth rate that put pension funds under pressure. Cyprus also faces this problem, but unions and pressure groups believe, inexplicably, we can buck the trend. It is an irresponsibly short-term approach.

It is argued that people involved in heavy manual labour should have the right to retire earlier because physical work takes its toll on workers who should not be penalised for retiring at 63, especially as their monthly pension would be relatively low. It is a fair point, but the danger in Cyprus is that if an exception is made for one group of workers, others will subsequently demand it and secure it. Teachers, not the most overworked members of the work force, are among those demanding taking a full pension from 63.

This is why the government must take a hard line on the matter, declaring the 12 per cent cut for retirement at 63 non-negotiable. Any concession on this would eventually lower the retirement age to 63 for everyone, putting the viability of the social insurance fund in jeopardy.