EN ECB -PUBLIC  
OPINION OF THE EUROPEAN CENTRAL BANK  
of 16 September  2022 
on the new o ccupational retirement b enefits p lan  
for state service employees and employees of the wider public sector  
(CON/20 22/34) 
Introduction and legal basis  
On 20  July 2022 the European Central Bank (ECB) received a request from the Minister for Finance  of the 
Republic of Cyprus for an opinion on a draft law on the Occupational Retirement Benefits Plan for 
employees  of the State service and of the wider public sect or, including local Government Authorities 
(General Implementation Provisions)  (hereinafter the ‘draft law’) . 
The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the t hird indent of Article 2(1) of Council Decision 98/415/EC
1, as 
the draft law relates to the Central Bank of Cyprus  (CBC) . In accordance with the first sentence of 
Article  17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted 
this opinion.  
1. P
urpose of the draft law
1.1 The purpose of the draft law is to establish a new single occupational pension benefits plan  f or newly
recruited public sector servants as well as employees of the wider public sector , which includes also 
newly recruited staff of the CBC.  
1.2 In particular, the draft law provides that  certain employees  will become members of the new plan. 
These categories of employees are: (1) a ll permanent employees serving on the date of entry into 
force of the draft l aw who were appointed for the first time on or after 1 October 2011, as well as 
those permanent employees who are appointed for the first time on or after the date of entry into 
force of the draft law, both in the public sector  and in the wider public sector, including the CBC  (such 
employees will be included in the plan f rom the date of their appointment to a permanent position); 
(2) al
l employees with employment contracts of indefinite duration on the date of entry into force of
the draft l aw in the State service and in the wider p ublic sector , including the CBC  (such employees
will be included in the plan from 1 January 2021); and (3) all employees with employment contracts
who, on or after the effective date of the draft l aw become employees with employment contracts of
indefinite duration in the State s ervice and in the wider  public sector , including the CBC  (such
1 Council Decision 98/415/EC of 29  June 1998 on the consultation of the European Central Bank by national authorities 
regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 
ECB -PUBLIC  
2 employees will be included in the p lan on the date of conversion of their employment contract to an 
indefinite period) . 
1.3 A new Spec ial Fund for the p ayment of r etirement benefits will be created which will be financed by 
both the employer  (including the CBC)  and the employees.  Specifically, the employer and each 
member of the p lan will both pay an amount corresponding to 5% of the member's monthly 
pensionable benefits  (hereinafter the ‘funding ratio’) . This ratio may be adjusted in the future based 
on the results of actuarial studies conducted for this purpose. The Special Fund will not be a separate 
entity and will be managed by the Minister for Finance on behalf of the Republic  of Cyprus . The draft 
law provides that the Minister for  Finance may invest the assets of the Special Fund in the best 
interests of the plan ’s members, the members’ dependents and the retirees. The draft law states that  
where it is found that the Special Fund has insufficient funds to cover its technical reserves, the 
funding ratio may be adjusted so that the Special Fund has sufficient assets to cover its technical 
reserves in full. The Minister for  Finance may adopt a decree establishing the funding ratio from time 
to time. The draft law further provides that charges calculated using a specific methodology 
determined by the Minister for Finance will be imposed for the services provided to organisations by 
the Treasury of the Republic of Cyprus for the purpose of processing the work of the Special Fund.  
 
2. General observations  
2.1 The ECB understands that the new single occupational benefits plan will not affect public servants  
appointed to a permanent position prior to 1 October 2011, including staff of the C BC, and that these 
public servants  will remain members of their current sector -specific pension plan. The ECB also 
understands that the draft law stipulates that newly recruited CBC staff may only be members of the 
plan to the extent provided for in the draft law.  
2.2 The ECB  notes  that currently the CBC enjoys statutory autonomy in determining its staff policy with 
the employees of the CBC , subject to the CBC Employee Directives,  individual employment contracts 
and collective bargaining agreements entered into between the CBC and the banking s ector union. 
The ECB also understands that for employees appointed prior to 1 October 2011, certain  matters 
such as t he percentage of the employees’  contributions, the  calculations for  pension and one- off 
lump sum benefit s for any service after 1 January 2013 are determined by Law 216(I)/20122. The 
contributions of the employees of the CBC  to the CBC pension plan are paid and held by the CBC3. 
The measures provided for in the draft law seem to represent a departure from th e current pension 
plan arrangements insofar as some of the provisions in the draft law are to be imposed unilaterally  
by the Minister for  Finance on  CBC employees  without consultation of the CBC . Under the draft law, 
the contributions of all employees to whom it  is applicable will be held in the Special F und that is to 
be managed by the Minister for Finance, who may, inter alia, invest the assets thereof  and adjust the 
funding ratio so that the Special Fund has sufficient assets to cover its technical r eserves in full.  
 
2  Law on Retirement Benefits of Employees in the Public Sector and Employees in the Wider Public Sector, including 
the Local Authorities (Provisions of General Implementation) of 2012, as amended. Law 216 (I)/2012 applies to 
employees of the public sector and the wi der public sector, including employees of the CBC.  
3  Section 4 of Law 216(I)/2012.  
ECB -PUBLIC  
3 2.3 The ECB notes that the draft law has potential implications for the CBC’s  financial independence, in 
particular its autonomy in staff matters, which is an element  of the principle of central bank 
independence under Article 130 of the Trea ty. Autonomy in staff matters extends to issues relating 
to staff pensions. As previously stated by the ECB4 on issues concerning autonomy in staff matters, 
the principle of financial independence requires that a Member State does not impair the ability of its 
national central bank (NCB) to employ and retain the qualified staff necessary to perform 
independently  the tasks conferred on it by the Treaty, the Statute of the European System of Central 
Banks  and of the  European Central Bank (hereinafter, the ‘Statute of the ESCB’) and national 
legislation . In addition, a Member S tate may not put its NCB in a position where it has  limited or no 
control over its staff, or where the g overnment of that Member State can influence that NCB’s  policy 
on staff matters. Any amendment to the legislative provisions on the remuneration for members of 
an NCB’s decision -making bodies  and its employees should be decided in close and effective 
cooperation with the NCB, taking due account of its views, to ensure the ongoing ability of the NCB to independently carry out its tasks. Autonomy in staff matters extends to issues relating to st aff 
pensions . 
2.4 As previously stated by the ECB
5, to protect the CBC’s  financial independence and its  autonomy in 
staff matters, the C ypriot  authorities are under an obligation to ensure that the application  of the draft 
law to CBC staff is decided by the C ypriot  authorities in cooperation with the CBC, taking due account 
of the CBC’s views, and such cooperation must ensure the ongoing ability  of the CBC to perform 
independently the tasks conferred on it by the Treaty, the Statute of the ESCB  and national 
legislation.  
2.5 A good example of effective cooperation between a government of a Member State and its NCB is 
one in which the relevant nationa l legislat ive provisions  provide that the public service pension plan 
is only applicable to the NCB  with its consent . This would allow the CBC to take into account the 
particularities of  its own legal framework and special legal regime as well as  any other relevant 
considerations  – in particular , obligations arising under the Treaty  – in formulating the form and extent 
of its consent or objection to the application of the plan to CBC staff. M oreover, where  the CBC’s 
consent has been given, a fresh consent should be required to any  subsequent significant change 
to the plan , to ensure the ongoing ability of the CBC to perform independently the tasks conferred on 
it by the Treaty, the Statute of the ESCB and national legislation.  
2.6 Therefore, the ECB would welcome an amendment to the draft law a ccordingly . This would allow the 
CBC to take into account the particularities of its own legal framework and special legal regime as 
well as  any other relevant considerations, in particular, obligations arising under the Treaty , so as to 
 
4  See ECB Convergence Report, June 2022 , p. 28 -29, available on the ECB’s website at www.ecb.europa.eu;  paragraph 
2 of ECB Opinion CON/2012/6; paragraphs 2.3 and 2.4 of ECB Opinion CON/2015/44 . All ECB opinions are available 
on EUR -Lex.  
5  See paragraph 3.2 of ECB Opinion CON/2009/15 .  
ECB -PUBLIC  
4 safeguard central bank independence  and the obligation to comply with the prohibition of monetary 
financing under Article 123 of the Treaty .   
 
This opinion will b e published on EUR -Lex. 
 
 
Done at Frankfurt am Main, 16 September  2022.  
 
[signed]  
 
The President of the ECB  
Christine  LAGARDE