New pension reform in the pipeline

New pension reform in the pipeline

A new overhaul of Greece’s pensions system is being prepared, in which first-tier, or main pensions, will be higher and second-tier, or auxiliary, pensions will be invested, providing an element of risk.

The proposal, prepared by a committee under Cypriot-British Nobel laureate Sir Christopher Pissarides, is expected to be made public Monday for public consultation before being adapted into a bill and tabled in Parliament.

Kathimerini understands that there will be significant changes in the pension system’s structure. Specifically, main pensions will be reinforced, that is, become higher as a percentage of the person’s salary, while auxiliary pensions will no longer be redistributive, but invested, with the pensioner’s earnings depending on investment returns.

The changes in auxiliary pensions will take effect immediately for those entering the job market after the reforms are passed, while those already employed can opt into into the new system.

The pension reform proposal, part of a wider blueprint for the overhaul of the Greek economy, will also provide a clearer and, it is hoped, more effective oversight system for pension funds.

Earlier this year, Labor Minister Yiannis Vroutsis raised pensions, as a percentage of final earnings, for those with over 30 years of employment, as a means to reward those not opting for early retirement. The Pissarides Commission aims to go further in matching employee pensions to their actual contributions; until very recently, employees essentially paid for their elders’ pensions with their contributions. The commission proposes rewarding those staying in the job market for over 35 years.

As for auxiliary pensions, the commission is expected to reactivate a proposal made by former Deputy Social Minister Notis Mitarakis – currently the minister for migration and asylum – for individual pensioner accounts that would be invested, with the returns on investment providing the auxiliary pension.

That proposal, which was shelved by Vroutsis, held that the cost of transition into the new system would not exceed 0.5 percent of the country’s GDP.

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