State officials will receive a taxable one-time gratuity on retirement, instead of a pension and a one-off bonus payout as is the case now, under legislation submitted by the government on Thursday.

The two bills tabled to parliament by the finance ministry aim to streamline and rationalise the current system, where several state officials get either more than one pension or receive a salary plus a pension for previous service.

However, an important caveat is that the new system for a one-time gratuity will apply to state officials appointed after this legislation is enacted. Currently serving state officials will continue to be eligible for monthly pensions plus a one-time bonus once they retire.

Moreover, any state official appointed after enactment of the new legislation, would still be eligible for a monthly pension for any other prior service in the public sector.

Discussion of the two government bills will likely begin at the House finance committee on February 24, reports said.

MPs meanwhile have come up with a dozen legislative proposals of their own regulating the controversial issue of multiple pensions for state officials.

As it stands, the government legislation would apply to all state officials. They would contribute 3 per cent of their earnings towards the eventual gratuity on retirement.

The amount of the gratuity depends on the type of position. And it will be subject to 15 per cent income tax.

For the president, ministers and deputy ministers, the undersecretary to the president and the government spokesman, the one-time payout would be based on one-half of the amount of their final monthly earnings, multiplied by the number of months of service.

For MPs, the formula is one-quarter of their final monthly earnings, multiplied by the number of months of service.

Other officials such as commissioners or heads of governmental bodies or semi-government organisations would get one-twelfth of their final monthly earnings, multiplied by the number of months of service. The same formula applies to mayors and community leaders (mukhtars).

The finance ministry estimates that the new system – if implemented – would in the long run bring about savings in the public payroll.

The issue regained traction in 2023 after reveals that President Nikos Christodoulides and members of his cabinet continued receiving pensions for past service in the public sector while drawing a salary for their current jobs.

In 2011 parliament had passed a law prohibiting the payment of multiple pensions to any state official – other than those listed in a 1980 law.

Under the Pensions (Certain Officials of the Republic) Law of 1980, the pensions of the president, the House speaker, ministers, junior ministers, MPs and generally of state officials are suspended if they undertake any other function or office in the Republic.

But in 2014, the 2011 law was found to be unconstitutional, on the grounds that pensions are a person’s property. However, the 1980 law itself has not been voided and is still in force.