Cyprus has enacted a new law regarding the establishment, operation and supervision of pension funds, to comply with the EU Pension Funds Directive, which was adopted in 2003. The Directive regulates pension funds, sets standards for their investment operations and requires them to provide information to scheme members.
Under the new law, pension funds in Cyprus are required to seek professional investment advice and to diversify their asset portfolio by including financial instruments listed on regulated stock markets. The bulk of pension scheme investments in Cyprus are deposits with banks and cooperative institutions.
It is likely that the law will lead to a shift of funds into equity markets. Given the limited scale and volatile record of Cyprus's stock market, prudent investors will no doubt wish to maintain a geographic spread of investments to minimize risk.