Social security generosity, budgetary deficits and reforms in North Cyprus

This paper estimates the fiscal burden of the historical pay-as-you-go (PAYGO) Social Insurance Pension System in North Cyprus and analyzes the appropriateness of the 2008 reforms that introduced the new Social Security Pension System. Estimates are made of the system deficit. To bring the magnitude of the unfunded cost of the pension system down to a sustainable level, major parametric reforms will need to be made to the system. These include increasing the age of retirement, increasing the rate of contributions, changing the method of indexing of pension benefits and decreasing the theoretical replacement rate of the pension benefits.