SOCIAL SECURITY

Pay-as-you-earn system started

pay-as-you-earn-system-started

A new fund for young people entering the labor market as of January 1 and obliged to pay into an auxiliary pension was activated on New Year’s Day.

The new Supplementary Capitalization Insurance Fund (TEKA) for auxiliary pensions, also promoted as a ‘personal piggybank’ system when it was voted in September 2021, gives employees a choice of three investment plans that allow contributions to be linked to them individually instead of going into a general fund. Employees aged up to 35 will be able to sign up for the same fund as of January 2023. 

The Labor Ministry said this system has been used in other European countries for years and its purpose is to reduce the risk to social security from demographic issues (fewer workers/more pensioners). The system promotes a culture of deposits and allows the capital to be used in the Greek economy to support development and jobs, it noted.

Minister Kostis Hatzidakis said the system will restore young people’s faith in the insurance system as it will give them some control over their own pensions. “The European experience shows the new model will lead to higher supplementary pensions, by 43%-68%, for newly insured people,” he said.