MORE THAN half of Cypriot pensioners have been living below the European Union’s poverty threshold, according to this year’s report on social protection and social inclusion.
The 2009 “Joint Report on Social Protection and Social Inclusion” says that while 16 per cent of the total population have been living below the poverty threshold, matching the EU average, and only 11 per cent of the 18-64 age-group did so.
“The risk of poverty rate for the age group over 65 reaches up to 52 per cent – the highest by far among all EU countries – with the risk rate for persons living in one-person households reaching 70 per cent within this age group.”
The report is based on completed data for 2007 and defines the poverty threshold as 60 per cent of a country’s average income.
For Cyprus, the poverty threshold in 2007 was €8,719 for one-person households and €18,311 for a standard family, defined as two adults with two dependent children under the age of 14.
The living standards of people below the poverty threshold vary greatly across the EU. For example, the poverty threshold is less than €250 per month in the Baltic States, Hungary and Slovakia, but €900 per month or more in the Nordic countries, the Netherlands and the UK.
When expressed in terms of purchasing power, taking into account the differences in cost of living, the monthly income of the people below the poverty threshold is nearly five times higher in the three richest EU countries than in the three poorest.
While on average in the EU the elderly face a higher risk of poverty than the overall population (19 per cent compared to 16 per cent), substantial differences exist across countries. The risk of poverty faced by people aged 65 or more ranges from five per cent in the Czech Republic to 30 per cent in Lithuania and the United Kingdom, 33 per cent in Estonia and Latvia, and reaches 52 per cent in Cyprus.
The relative situation of the elderly depends on a number of factors, including the adequacy of the pension systems for current pensioners and the age and gender structure of the elderly population, since elderly women and the very old tend to face much higher poverty risks.
In Cyprus, a full pension entitlement under the General Social Insurance Scheme (GSIS) is based on contributions made throughout a person’s working life. The problem seems to be that many current pensioners do not meet this basic requirement, and so have to rely on a supplement to the minimum pension, made up of a Special Allowance to Pensioners (SAPS) and the Social Pension.
Just under one-fifth (19.6%) of the total number of GSIS pensioners receive the minimum pension, which currently amounts to €4,000 annually – less than half the poverty threshold for single households. When SAPS is added to the minimum GSIS pension, the final figure corresponds to €5,538.
Social Pension is a separate measure to address those over the age of 65 with no pension income from any other source. It is a non-contributory scheme and 98 per cent of the recipients are women. It amounts to €4,735 including the SAPS assistance.
When asked why Cyprus has such a high number of officially poor pensioners, Georgios Papageorgiou, Permanent Secretary at the Ministry of Labour and Social Insurance, told the Cyprus Mail that “the problem is not limited to specific economic sectors, and most likely has to do with the general conditions and attitudes which prevailed when the current pensioners were economically active.”
He pointed out that non-qualification for a full pension could be due to their not being fully or constantly employed in their lifetime, not having a constant income for seasonal reasons, or simply not registering and officially declaring an income.
The prevailing EU view is that social policies can help mitigate the impact of the economic crisis on the most vulnerable segments of the population and on the economy as a whole. As welfare systems play the role of automatic stabilisers in an economic crisis, social protection expenditure can be expected to rise at least in the immediate future. However, the capacity to address the rising demand for social security varies greatly across EU member states.
The overhaul of the Social Security Fund approved by the legislature last week forms part of the government’s plan for honouring Cyprus’ commitment to the EU, in the form of the 2008-2010 national strategy for social inclusion.
Ten quantitative targets have been set by the government, particularly regarding the risk of poverty. Papageorgiou said: “We fully intend to meet the target of reducing the risk of poverty among persons aged 65 and over by twelve points, from 52 per cent to 40 per cent, by 2011.”
The government also intends to raise the level of the minimum pension, currently €314 per month, as well as the level of other supplementary payments. “We will be announcing other measures shortly”, he added.
Although the EU report is positive regarding the government’s efforts, it criticises the lack of “joined-up thinking”.
“Although budgetary consideration has been given to most items, proposed policy measures do not always elaborate on tangible expected outcomes and how different policies relate with and impact on each other.”
The report also points out that “when long-term indicators are taken into consideration, the future adequacy and sustainability of the pension system is seen to be under serious pressure.”
The government has outlined to the EU its proposed measures for meeting this challenge, and the report acknowledges its determination: “If the measures prove effective, sustainability of the pension system will be strengthened in the long run.”
It adds: “However, high levels of risk of poverty among the elderly population make it difficult to implement short-term measures to relieve the burden on the current system.”
EU Employment Ministers discussed the report yesterday in Brussels, focusing on the contribution of social policies in responding to the global crisis, and on member states’ renewed strategies for delivering on shared EU social objectives. The report will contribute to the Spring European Council on March 19-20.
