BUSINESS

Plan for a new social security contribution hike

ROULA SALOUROU

TAGS: Finance

The government is working on a plan for a gradual increase in social security contributions by at least three percentage points up to 2018, aiming to contain or even avert any cuts to main pensions. If the proposal is rejected, the reduction scenarios in certain cases come up to 40 percent for pensioners who have retired before their 65th birthday. The solution of a single fund for all main pensions is gaining ground.

In the last few days it appears that the prime minister’s office has taken an active role in negotiations on the social security reform as it does not want the reform’s cost to fall on the shoulders of pensioners in its entirety.

In this context, the plan is for a staggered increase in employer contributions to the system, by 1.5 percent next year and another 1.5 percent between 2017 and 2018. While there may not be any cuts to main pensions in that way, auxiliary pensions are set for reductions of even more than 6 percent on average. The negotiations also include a proposal that appears to have been accepted by the country’s creditors and would additionally see employee contributions increase by half a percentage point within 2016 to cover the deficits of the single auxiliary fund (ETEA).

Sources say that the combination of the increase in contributions with the cuts to auxiliary pensions would meet the target of saving 1.9 percent of gross domestic product by 2018.

However, the Hellenic Federation of Enterprises (SEV) has stressed that any increase in contributions will not only undermine competitiveness but will also increase unemployment.

Sources add that the government and the creditors now appear to be in favor of the creation of a single fund for all main pensions, probably while maintaining the farmers’ and seamen’s funds (OGA and NAT) as healthcare insurance entities (without the social security function), and the maintenance of ETEA as an autonomous fund for auxiliary social security.

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