Social insurance: you pays your money if you want a choice
You pays your money and you takes your choice: the old cry of the Cockney market vendor could be good advice for British expats pondering the social insurance system in Cyprus. You’ll pay your money, come what may, but you will need to pay some more if you want a choice. The Republic of Cyprus has a comprehensive social security scheme. It is compulsory. Everyone who is working in Cyprus must pay into it.
How much you pay, depends on how much you earn and whether you are self-employed. But, as a rough guide, you can say that any expat working in Cyprus will be contributing something over 7% of their salary to the fund. Contributions by employers and the State will bring this to around 20% of salary.
On the face of it, this is a generous scheme which provides for a wide range of benefits, including maternity grants, maternity allowance, funeral grants, sickness benefit, unemployment benefit and old age pensions.
However, many of these benefits are of little value to expats. The funeral grant, for instance, which comes to less than EUR 1,000. That may just about cover the cost of burial for Cypriots, with a family grave space, but it comes nowhere near the estimated EUR 10,000 that burial costs an expat family.
Healthcare and pensions are the main items for which an expat is likely to make a claim on social insurance. Cyprus has a good health system with an efficient network of general hospitals and clinics. Nevertheless, most Cypriots who can afford it take out private health insurance, and nearly all expats follow suit. This secures for them a wider choice of medical practitioners and hospitals and frees them from public health waiting lists.
Anyone who has paid regular social security contributions in another EU country for two full years prior to coming to Cyprus is entitled to public health cover.
Retirees living in Cyprus and receiving a state pension from another EU country are also entitled to free or subsidised healthcare. You will need to obtain the necessary forms from your home country and submit them with your application for a medical card in Cyprus. In the UK, you should contact the Department of Work and Pensions (DWP), Medical Benefits Section.
Everyone who has contributed to the social insurance scheme in Cyprus is entitled to a Cypriot pension when they reach 65. The State pension plan is complex, however, involving a number of different schemes. There is one for civil servants, one for employment governed by collective bargaining and one to accommodate private pension schemes.
Expats working in Cyprus are likely to be eligible under the General Social Insurance Scheme. In order to be covered you must have lived in Cyprus, the EU, the EEA or Switzerland for 20 years after reaching the age of 40. Time spent in the EU simply aggregates with the time spent in Cyprus to help you qualify for a pension.
Most expats tend to gravitate towards private pensions. They pay regular premiums, or invest in recommended schemes, and collect the profits or premiums plus interest once they reach the age of retirement.
With pensions, as with the entire field of social insurance, there is no one size that fits all. The important thing is to work out a package that will give you the sort of lifestyle you want, backed up by the finances needed to make it happen. Good advice is vital.
The Woodbrook Group is an international firm of financial advisers. We are not owned by any financial institution or life insurance company and can offer you unbiased and impartial advice.
We offer a free pension review to help clients plan for the future. We can help you understand your options and how to address your income needs. Michael Doherty is CEO of the Woodbrook Group, Limassol www.woodbrookgroup.com contact@woodbrookgroup.com