Salary cuts to lead to dip in pensions

The final form of regulations determining how pensions are calculated according to a new system introduced by the government as of May 13, includes a mechanism that reduces the amount future pensioners will receive by at least 10 percent.

This mechanism, which people may not be aware of, is the salary index of the Hellenic Statistical Authority (ELSTAT). According to the new law, this index applies to salaries received in all years since 2002, for the calculation of the so-called “pensionable salary.” However, because of the reduction in salaries from 2009 on, the use of this particular index means that pensionable incomes are decreasing instead of increasing.

Therefore, even if a worker retires without having seen a reduction to his salary in the period after 2010 (an exception to the norm), the pensionable salary that will determine the level of his pension will be lower than the average level of his actual salary.

In the more common case that a worker has seen a decline in salary since 2010, he will suffer an even larger cut in the level of his pension when the time comes to retire as the salary index takes effect.