Around 25 per cent of pensioners who retired at 63 look set to benefit from a government proposal to slash the 12 per cent penalty imposed on early retirement for those who contributed over a 40-year period.

Under the current system, people can retire at 63 if they have completed 33 years of social insurance contribution and covered the relevant points. Retirement at this age is two years sooner than the official retirement age that qualifies retirees for a full contributory state pension.

However, early retirees are penalised to the tune of 12 per cent even after full pension rights come into effect at 65. The reduction was deemed unfair on people who had put in 40 years of contributions as opposed to those who had put in 33.

Demands have been made to remove the penalty across the board, but that would entitle people retiring at 63 to the same pension as those retiring at 65, effectively re-setting the retirement age back to 63 as it had been before the 2013 financial crisis and impacting all those who waited the extra two years.

On Friday, Labour Minister Yiannis Panayiotou met with the Social Insurance Council and briefed them on the conclusions of an actuarial study on social insurance fund reserves which identified the possibilities for targeted relief in for those who retire before the age of 65.

The study found that relief could be provided without any impact on the fund or without higher contributions from elsewhere for a certain segment of pensioners even if the 12 per cent was totally abolished for some. According to an announcement from the minister’s office, a proposal was formulated ad tabled.

“The proposal affects a significant percentage of pensioners who have suffered an actuarial reduction,” Panayiotou said, adding that around one quarter of people who retired at 63, having put in 40 years of contributions, would benefit.

“The proposal will directly benefit thousands and gradually hundreds of citizens,” the minister said.

The proposal will be the subject of a dialogue with the social partners in the coming period, in order to seek the widest possible social consensus,” he added.

There were additional criteria and parameters left to discuss with the social partners, the minister said.

“We have already suggested to the social partners that we schedule meetings with everyone in the coming week, after they have studied the evidence that has been put before them. We are sure that the social partners will have interesting opinions and suggestions, which we will listen to with great interest and I am optimistic that in the coming period we will manage to have some positive developments on this issue.”

However, although there is room to manoeuvre, there is no leeway on the final figure determined in the actuarial study, Panayiotou said.

Regarding the means of calculating, he said it was too soon to finalise and that things might change along the way.

With reference to the timetable, he said that everyone’s goal is to have a positive development as soon as possible.

Asked if Parliament’s approval was a given, Panayiotou said the goal is for the social dialogue to develop smoothly.

“It is a common desire that any intervention be the product of the widest possible consensus, so we will try to have a conclusion as soon as possible,” he said.

The minister said that in general, the actuarial study had confirmed the sustainability of the social insurance fund.