Social security ‘reform’ does not do enough

While the reform of the social security system is in its final stages, with the bill under debate in Parliament, an updated report on the Social Security Foundation, the largest social security and pension fund for private sector employees, warns that the demographics are working against the reform and show the disastrous consequences of the government’s backtracking on its earlier reform proposals, notably the one establishing a universal retirement age of 65. The UK Government Actuary’s Department (GAD) report on IKA, obtained by Kathimerini, shows that, under the current retirement age (60 years for men and 55 for women), which will not change, there are currently 2.3 people employed for each pensioner. This ratio will be reduced to 1.3 to 1 by the year 2035, making it almost impossible to fund adequate pensions for the 4 million retirees with the contributions of 5.1 million workers under the existing system. With a retirement age of 65, there would be now 3.3 employees per pensioner, falling to 1.9 in 2035. The actuarial study also reveals that the government proposal actually postpones the funding of the financially ailing system until after 2020. Under the previous social security law, voted on by a conservative government in 1990, the state undertook to pay 10 percent of the contributions of people entering the workforce after January 1, 1993. This method calls for more government funds until 2020 than the solution envisaged by the present socialist government. This is because the present government has only committed itself to maintaining UIKA’s cash flow needs through the budget. Other financing will come in the form of 15-year-old, zero-coupon bonds which will not begin to be issued until 2007. The GAD report forecasts that IKA’s financing needs will skyrocket in the future: for 2027, deficit financing is forecast at 3.61 billion euros, rising to 5.55 billion in 2032. And the government will have to finance other pension funds as well. When it first unveiled its proposals for social security reform, early in 2001, the government extended the retirement age, cut pensions and, most importantly, gave private pension schemes a role. These proposals met with outrage on the part of the unions and opposition political parties. Even conservative New Democracy, which now accuses the government for failing to ensure the system’s long-term viability in its watered-down version, joined forces with the left in accusing the government of a lack of social conscience. The resulting furore almost toppled the government and increased dissension, which still plagues the ruling Socialists. Labor Minister Tassos Yiannitsis was moved into another post and his successor, Dimitris Reppas, has placated pro-government unionists by ditching several of the earlier proposals.

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