Pledge to tackle 12% early retirement penalty

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The government hopes to strike a happy balance between labour union demands to scrap the 12% penalty clause imposed on people who retire early at 63 and the state’s budget.

In comments to CyBC radio on Wednesday, government spokesperson Marios Pelekanos said the Anastasiades administration has prioritised the matter and aims to resolve it before its term ends in February.

Pelekanos explained that an attempt will be made to find a solution to improve what is in effect today, but without jeopardising the state’s ability to implement its pension program.

He said the goal was to improve legislation and practices without endangering the state’s capacity to carry out its pension payments.

The government set the age of normal retirement in 2012 at 65, with legal provisions included so that for each month someone opts to collect their pension earlier, the pension is reduced by 0.5% for every month.

Authorities also must address discrepancies in the law governing pensions, as people who work past the age of 63 are not entitled to sickness benefits if they become ill or injured.

Therefore, they are essentially forced, should they get sick, to retire early without wanting to, having to accept the early retirement penalty.

The issue was spotted, with the government acting in 2020 to correct the matter.

However, the House amended a bill prepared by the government, with President Nicos Anastasiades not approving the additional changes.

The bill was referred to the Supreme Court, which found the changes violated the constitution.

The court’s ruling was issued in July, with the government re-tabling the original bill.

MPs have called on all social partners and ministries to give feedback on the proposed legislation.

In recent years, opposition parties and trade unions have contested the 12% penalty on early retirement, with demonstrations taking place.

The opposition claims that faced with the pandemic, the rise in unemployment and the inability of many workers to re-enter the workforce after a prolonged period of inactivity, full pensions at 63 should be restored.