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The three phases of pension reform in Greece

01 October 2015 / 19:10:28  GRReporter
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The second package of memorandum provisions that turns upside down pension rights and radically alters the calculating method of the pensions of thousands of insured has been "unlocked" through the relevant instructions that the Ministry of Labour has signed. The document has already been sent to the corresponding departments of the insurance funds, which have to clarify the ambiguities in the guidelines and put into practice the provisions voted in mid-August with the third memorandum. These provisions change the calculating method of pensions, gradually increase the retirement age, gradually eliminating early retirement, and change the minimum pensions by freezing them until 1 December 2021.

The first phase of the changes included the introduction of a contribution to the national organization for the provision of health services in supplementary pensions and an increase in this contribution for the basic pensions. Pensioners have recently found that their pensions in October are even lower than those in September that were transferred at the end of last month, as the first of the three equal instalments for the period July-August is deducted under the measure that is applied retroactively.

The third, finishing phase is to be implemented in October with the social security system reform undertaken by the government that is seeking equivalent measures to avoid implementing what was agreed in July. The agreements provide for the implementation of a zero deficit or other equivalent measures, i.e. new cuts in supplementary pensions and lump-sum retirement benefits in 2015, gradually reducing, by 2019, the number of those pensioners who are entitled to the "social solidarity" allowance – a measure that will affect 300,000 people who are receiving low pensions, gradually increasing the contributions to the Insurance Institute of Farmers (OGA), the Pension Fund of Seafarers (NAT) and that of freelancers (OAEE), eliminating the taxes in favour of third parties and a closer connection between the contributions and the pension paid. Instead, the Ministry of Labour is implementing the security system reform through structural changes and piecemeal measures, which, according to experts, will lead to lower adjustment rates for the basic and supplementary pensions of future retirees and to reducing the existing pensions. Time is pressing the government, since the memorandum provides for the voting of a new insurance bill by the end of October.

Meanwhile, the Ministry of Labour must issue the necessary instructions for the implementation of the commitments under the memorandum, which come as a continuation of law 3863/2010 (now known as the Loverdos-Koutroumanis Law), which it intends to abolish in 2016.

The first instructions were in this direction and they included measures that would lead to cuts in the minimum pension regardless of the contributions and possibly in the "social solidarity" allowance for all new retirees under the age of 67, to freezing the reduced minimum pension until 2021 (affecting more than 500,000 pensioners), to applying laws 3863/2010 and 3865/2010 retroactively from 1 January 2015, which regulate the change in the calculation method of the basic pension, "punishing" even those insured who for years had the right to retire but had chosen to remain in the labour force so that from 2022 onwards the retirement age for receiving a full pension is to become 67 years, or 62 years with 40 years of service and 62 years for the reduced pension. These guidelines however do not shed light either on the exceptions or on the relevant regulations voted for the public sector. Furthermore, they mention nothing with regard to the increase in the penalty rates for early retirement to 10% from the current 6%.

Tags: Pension systemReformsMemorandumInsurance funds
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