ECONOMY

Key tenets of pensions law ‘unconstitutional,’ CoS rules

key-tenets-of-pensions-law-unconstitutional-cos-rules

The Council of State has ruled that basic pillars of the 2016 social security legislation, known as Katrougalos law, are unconstitutional, according to a set of decisions published on Friday.

Crucially the verdicts, which require fresh legislative interventions by the government, do not have retroactive action and only apply henceforth. As a result, there can be no claims to the state by pensioners anymore regarding the law named after former social security minister Giorgos Katrougalos.
The plenary of the country’s main constitutional court has decided that the way the social security contributions by the self-employed and freelance professionals are calculated contravenes the Constitution and is annulled, as it does not comply with the principle of equality with other professionals, i.e. salary workers.

The CoS further accepted that all pensions, regardless of their time of issue, will need to be calculated based on their level on December 31, 2014, which renders all pensioners, old and new, completely equal, against the distinction that the Katrougalos law provided for those retiring after May 2016.

The court has also deemed unconstitutional the provisions of the Katrougalos law regarding the calculation of auxiliary pensions because the legislation was drafted without any prior actuarial studies, unlike in the case of main pensions.

There is also a decision canceling the slashing of auxiliary pensions in excess of 1,300 euros, as this also contravenes the equality of workers. This is another area where the government will need to legislate as soon as possible.

All this means that auxiliary pensions will have to be recalculated, with the state likely to pay more in this respect to pensioners, according to estimates.

There was also the cancelation of the replacement rate of pensions, mainly for large pensions and for retirees with many years of insured work, such as the top replacement rate of 46.8 percent for 42 years of labor.