Assessing the public pension scheme of the Republic of Cyprus

Abstract

This study focuses on identifying the fiscal consequences of the current public pension scheme of the civil servants in the Republic of Cyprus and the mechanisms of governing the benefits offered to its members. The article explores the implications of the economic impacts of the scheme on the budget expenditures. The projections presented point out the fiscal positions of the scheme under the current arrangements, up to the year 2070. The sustainable fiscal stance and projected liabilities are also presented. The empirical evidence reveals that the public pension scheme in Cyprus can generate undesirable and widely distributed economic impacts. The results suggest that the public pension scheme, if it continues to function on the basis of the existing mechanisms of governance, will affect the whole of the economy in a negative way. The article concludes that effective institutional intervention with successful reforms of the Scheme will benefit the budgetary balance of the Republic of Cyprus. The policy implications are underlined and suggestions are given for the development of the public pension scheme in Cyprus. Finally, it concludes and gives some implications for further research. © 2011 Macmillan Publishers Ltd.