Social security system to get a 1.3bln-euro boos
The government plans to inject 1.26 billion euros (430 billion drachmas) into the Social Security Foundation (IKA) next year, partly to cover its contribution and also to help the country’s largest pension fund set up its own reserves for the future, Economy and Finance Minister Nikos Christodoulakis said yesterday. He said state funding would come from the regular budget and the issue of government bonds. He predicted that with state funding and changes to the social security system, the social security deficit would range from 3.5 percent to 7 percent of gross domestic product over a 30-year period. The figures are substantially lower than the 11.1 percent foreseen by UK actuary Government Actuaries Department in a report commissioned by the previous labor minister, Tassos Yiannitsis, last year. «The State will pay its entire social security contribution early next year and at the same time help create a fund to reinforce IKA over the long-term,» Christodoulakis told reporters. Of the 1.26 billion euros intended to boost the pension fund next year, 79 million euros (270 billion drachmas) are expected to cover the State’s IKA contributions this year, 29 million euros (100 billion drachmas) to cover the government contribution for workers joining the workforce after 1992 and the remaining 18 million euros (60 billion drachmas) for IKA to set up a fund to offset future deficits. The minister said funds for these purposes will come from the regular budget, as well as issues of government bonds. Referring to the projected social security deficit, he said the shortfall is expected to be smaller than originally foreseen by the UK actuary, principally due to the «fundamental structural changes in the social security system» and latest demographic figures. He did not go into specifics on the latter. He said these two factors rather than higher contributions from economic immigrants would help bring down the social security deficit. Labor and Welfare Minister Dimitris Reppas said the government’s proposed social security reforms, expected to go into effect in 2008 after a five-year transitional period, would secure a viable system until 2030. The proposals, which have received a guarded response from private-sector trade unions but rejected by the civil servants’ union, call for an increase in the replacement ratio (the ratio of pension to salary) to 70 percent from 60 percent and a higher minimum pension of 375 euros (128,000 drachmas) at present prices for those entering the workforce after 1992. The minimum retirement age is 65 years for both sexes, while the minimum number of working years is 15 years. Wage earners can choose to work 37 years for which there is no age limit. For wage earners who enter the workforce prior to 1993, the replacement rate is set at 70 percent, while their pensions will be calculated based on the average salary of their last five years of employment. The government plans to create a single pension fund for wage earners, which would kick off in 2008, to replace the existing numerous funds, while supplementary funds are also due to be integrated into no more than 10 bodies. Critics said the piecemeal approach and the government’s insistence that the social security system remain a state-run, pay-as-you-go structure seem more an attempt to placate the government’s grassroots supporters than any effort to produce a system able to survive and function effectively in the long term. The government plans to create a single pension fund for wage earners, which would kick off in 2008, to replace the existing numerous funds, while supplementary funds are also due to be integrated into no more than 10 bodies. Critics said the piecemeal approach and the government’s insistence that the social security system remain a state-run, pay-as-you-go structure seem more an attempt to placate the government’s grassroots supporters than any effort to produce a system able to survive and function effectively in the long term.
