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Plans afoot to abolish multiple pensions

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Finance Minister Makis Kervanos

Plans are afoot to abolish the practice of paying multiple pensions to government officials, it was revealed on Friday.

Finance Minister Makis Keravnos said the government “is determined to continue this effort, always within the confines of the law, to abolish multiple pensions.”

He was keen to stress that the planned replacement for them must be “legally enshrined”, so as to avoid the possibility of proposals not being able to be implemented.

Reports had surfaced that a “gratuity payment” would be handed out to government officials as a replacement for the multiple pensions, but a source from the finance ministry told the Cyprus Mail that while an equivalent payment would be made, “it would be wrong to call it a gratuity”.

This is not a gratuity, and it is not a ‘tip’. It is a lump sum one-time payment which will be paid instead of the multiple pensions currently being paid to government officials,” the source said.

At present, high-level government positions come equipped with their own lifetime guaranteed pensions, which are paid monthly to people who have held such posts once they reach the age of 60.

This, as the source explained, “leads to some people, who have maybe been in parliament, or been House President, or been a minister, and had a high-level civil service role, or been President of the Republic, picking up four, or five, or even six pensions.”

The first stage of the government’s plan is to push the age of receipt back to 65 years old, bringing it into line with the state pension enjoyed by the rest of the country.

Then, at the age of 65, a single one-time payment would be given to those high-level government officials who would under the current system have been in receipt of multiple pensions.

That figure will be based on their service, with a formula to be created to calculate what that sum should be for each recipient.

While the source was sure that the new system would save the government money in the long run, they said the formula has not yet been drawn up to decide how much recipients would be paid.

“We are at the first stage of this process at the moment. We are working out how we can bring to an end the practice of paying multiple pensions while not violating the constitution,” the source explained.

They added, “our goal is to see how we can do this while staying on the right side of the law.”

The constitution plays an emanant role in discussions surrounding multiple pensions, as it is constitutionally stipulated that various high-level government roles, including the titles of President, minister, and House president, bring with them a separate pension.

Changing the constitution is out of the question, as that would require the consent of the Turkish Cypriot community, which has not had access to the government of the Republic of Cyprus since 1963.

However, as the source said, “something had to be done, because at the moment, this is not a fair system.

“We are trying to not provoke people, because the current system is provocative for ordinary working people who work all their lives to receive a state pension and see ministers and MPs and Presidents pick up multiple salaries and €25,000 a month,” they said.

The issue of the eventual cost of lump sum payments still features highly, but there is no clear picture yet as to how this will be worked out.

The source said the actual cost of multiple pensions for the government is not exceptionally high but concluded that it did not seem fair to most working people.

However, they said, “among the aims of this proposed change in the law is of course to lower the government’s outgoings.

We cannot guarantee that every single lump sum payment will be lower than every single pension paid out over the lifetime of every single official. If one person was a minister, took their pension, and then died within a year, of course their lump sum would be higher than their would-be pension, but the general picture, the overall picture, will see reductions.”

Earlier, Makis Keravnos had told reporters his ministry is in contact with the legal service to find a way forward, and that one conclusion that had been reached was that those already in receipt of multiple pensions could not be stripped of them.

In this sense, the planned law will not be retroactive in nature.

Another point of note is that the lump sum may be untaxed, meaning that the state may effectively lose revenue by implementing this change of formula.

Responding to this point, Keravnos said “at the moment, the priority and focus of this discussion and effort is to abolish multiple pensions,” and added that “there is time” to consider the other outstanding related issues.

Discussions so far, he said, have been productive, with “a lot of discussion and opinions heard.”

He added that there have been convergences between the relevant stakeholders, and that more discussion on the matter will follow.

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