ECONOMY

Hikes are due for main pensions too

hikes-are-due-for-main-pensions-too

The Labor Ministry’s redrafting of the social security system is expected to bring about an increase not only in auxiliary pensions but main pensions too for thousands of citizens.

In the wake of the recent verdicts by the Council of State, the special committees formed at the ministry’s agencies are exploring scenarios with increases to main pensions issued after May 2016, as well as to auxiliary pensions reduced since July 2016.

Freelance professionals and farmers who up until today have paid their contributions based on the minimum salary should expect an increase in their monthly dues, while those with higher incomes will see a reduction in contributions, which later on will also concern all employers and salary workers in full-time employment.

One of the foundations of the Katrougalos law that the country’s highest administrative court has found to be unconstitutional concerns the replacement rate for retirees after May 13, 2016. The government has pledged to introduce higher replacement rates in the bill it intends to table by January. In practice this will lead to pension increases, at least for those who have retired or are about to retire after many years of insured employment and having paid high contributions.

The scenarios examined provide for an increase mainly for workers retiring after at least 30 years of employment, and even more so those retiring after 35 or 40 years. The total cost of such a shift, the way it will be financially covered and the possible fiscal implications this might have regarding the country’s commitments to the European Union remain to be calculated. It has been estimated that between 20,000 and 25,000 workers retire every year after at least 35 years of insured employment.

The new pensions will apply retroactively as of October 4, 2019, when the CoS decisions were published, and according to Labor Minister Yiannis Vroutsis, the payment of retroactive raises will start once the bill clears Parliament. Therefore all workers who retired after October 4 and all pensioners who had their pensions calculated based on the Katrougalos law without a “personal difference” (the disparity between pensions issued before and after 2016) after many years of insured work will see their pensions grow.