The Labor and Social Security Ministry is examining the idea of granting younger workers – with few years of labor in the current social security system – the option of choosing to join the new funded auxiliary pension system, the very system that new entrants in the labor market must now enter by law.
The same option, per the proposals examined at the General Secretariat for Social Security, will also be offered to any groups of workers who have not been entitled to supplementary social security, such as freelance professionals and farmers.
Both sets of workers – i.e. young salary workers and freelancers – will be able to join the funded auxiliary pension system on a voluntary basis.
The core of the government proposal that Deputy Minister for Social Security Panos Tsakloglou is processing consists of a new, state-controlled supplementary social security fund based on the pay-as-you-earn system. Sources say there may also be a minimum guarantee of the original capital, in the form of state collateral. It will also have insurance coverage in case of death or disability.
The first social security pillar, that of the main pension, will remain purely distributive. For new workers there will be a supplementary personal account where their auxiliary pension contributions will be added up (amounting to 6% today) to collect interest and be invested. There is also a proposal on the table providing for the private management of those accounts under the auspices of a state entity. Workers will be able to select portfolios of classified investment risk that would potentially change based also on the age of the insured – with a greater investment risk for younger workers.
Addressing the online conference of the E-Kyklos think tank on Wednesday, Tsakloglou noted that after the interventions of the last decade, Greece continues to have the highest pension cost per gross domestic product in the European Union, at a rate of around 16.5%. He went on to note that the distributive system does not favor investments.