The House of Representatives unanimously approved a government request extending the retirement age of civil servants to 63 as part of efforts to improve public finances to qualify for euro entry by 2008.
Finance Minister Makis Keravnos said the extension, from 60 to 63, would save the government CYP 20 mln this year, if it were to be adopted by all currently retiring civil servants.
Implementation of the measure will start on July 1 and would be on a voluntary basis until July 1, 2008, when retirement would become mandatory at the age of 63.
The change would also help to bail out the ailing social insurance fund, which has a CYP 2 bln deficit and is at risk of collapse by 2011.
Keravnos had earlier told a House Finance Committee meeting that while in 1985 the state paid CYP 12.5 mln in pensions to civil servants, the figure exploded by 2003 reaching CYP 156.7 mln and is expected to rise to CYP 202 mln by 2012.
Implementation of the measure would take place in stages: civil servants who turn 60 between July 1 and December 31, 2006, have to retire at the age of 61; those who turned 60 between January 1, 2007 and June 30, 2008, would be obliged to retire two years later.
From then on all civil servants have to retire at the age of 63.
The new arrangement safeguards current pension coefficients and bonuses for existing civil servants and newcomers.
Keravnos said extending the retirement age would also affect society.
He explained that if the age remained at 60, then the state stood to lose people experienced in European Union issues through their work in the accession process.
On top of that the same people could have been employed in the private sector, thus taking up positions that would have been filled by youngsters.
Around 40% of civil servants retired early, with women being the majority, Keravnos said.
The state currently employs 35,845 permanent staff, 2,899 temporary and 8,581 hourly-wage personnel, which in 2005 are expected to absorb CYP 912.15 mln in wages and CYP 183.45 mln in pensions and bonuses.
Keravnos said he was confident that the extended retirement age in the public sector would also be implemented in the semi-government sector adding that a provision had already been included in their collective agreements. Once the unions give their approval then parliament could go ahead and approve the legal amendments to change the retirement age.
However, it looks as though the path for extending the retirement age of semi-governmental employees is less certain.
Left-wing union PEO failed to back the proposal in the meeting of its general council on June 22.
PEO cited the confusion coming from the right-wing union SEK which initially supported the extension of the retirement age for the semi-governmental workers. However, on June 17, SEK announced it was no longer bound by previous commitments. SEK is now calling for separate negotiations with each and every semi-governmental organisation on extending the retirement age to 63.
