Proposals for changes to the pension system
In the late 1990s, when Professor Ioannis Spraos drew up recommendations to reform the social security system, and then again last year when another professor, then-Labor Minister Tassos Yiannitsis, suggested ways to save the system, no one imagined that today the debate would be carried out as if we were still living in the 1980s, and that handouts would be presented in the guise of reforms. The Labor Ministry is proposing changes that involve more costs than savings, within a system which is generally considered to be ailing. During Yiannitsis’s time, British experts had estimated that the measures proposed then would give Greece’s social security system another 20 years of life. The then national economy minister, Yiannos Papantoniou, predicted that the system would only hold out until 2007. Today there are those who believe the crisis will come sooner than expected, and that it is time to add up the costs and to evaluate the benefits, if any, of the latest reform proposal. Reppas’ proposals are divided into two main streams: First, for those employed under the Social Security Foundation (IKA) and funds for bank staff, the civil service and state enterprises since January 1, 1993; and second, for those employed between 1983 and 1992. Benefits and restrictions For the latest batch of employees (those hired since 1993), the minimum pension is raised from 60 percent to 70 percent of the working wage after 35 years of service, bearing in mind that most of those hired since 1993 will begin drawing pensions after 2028. Minimum pensions have been raised for this group from the current 197 euros (67,000 drachmas) per month to 70 percent of the lowest wage in the National General Collective Labor Agreement, at current values around 328 euros (112,000 drachmas) per month. Pensions may be drawn on completion of 37 years of service, subject to no minimum age requirement, in contrast to the current rules that set a minimum retirement age of 65. Consideration is being given to a flexible pensionable age of between 55 and 65 on completion of 35 years of service, as well as a bonus of 3 percent annually for every year worked after the age of 65. For those hired between 1983 and 1992, the current rules (at least 15 years’ service on reaching the age of 65 for men and 60 for women) are to be retained, or 35 years’ service on reaching 58 years of age, or 37 years of service with no age restriction. This applies to IKA, civil service, bank and state enterprise funds. Meanwhile for banks, civil service and state enterprises, the pension as a percentage of working wage is to be gradually reduced from 80 to 70 percent, over a period of nine years (2008 to 2017), at a rate of 1 percent annually. The time span for calculating the pension is to be broadened to the previous five years, adding one year per year as of 2009 until 2011; pensions will no longer be calculated on the basis of the last wage. The same would have applied to civil service pensions if the government had not decided to include a 60,000-drachma bonus in the pension, from which contributions are withheld (6.67 percent for the main pension, 2.55 percent for health insurance and a total of 13 percent for other funds). Increasing the amount of pensionable working wage will lead to a rapid increase in pensions themselves.
