New proposal from the Ministry. Working on the 12% rate for those retired at 63
By Panagiotis Rougalas
From January 2024 the basic pensions will increase from 465 euros which is currently 490-500 euros, while at the same time it is being discussed according to a new proposal of the Ministry of Labour, to apply an actuarial reduction of 12% for those who have retired at the age of 63. In practice, it concerns the exemption of the basic pension from the actuarial reduction of 12% for employees who complete 40 years of contributions.
According to the actuary's estimates, with the increases that are planned to be attributed to the full basic pension, from January it will go 490-500 euros, while at the same time existing and future pensioners will be exempted from the actuarial reduction.
The proposal presented to the social partners by the Minister of Labour, Mr. Yiannis Panagiotou, the cost as derived from the actuarial study and when the proposal is implemented, will amount to around 12 million euros per year.
According to examples, if the amount of 465 euros of the current basic pension is excluded from the actuarial reduction, it means that the pensioner who is eligible for the exception will benefit with 56 euros. When the pension rises to 500 euros, the benefit will be 60 euros, and when pensioners receive a pension that is lower than the basic one, then the amount calculated for relief will be equal to the full basic one.
How is the reduction to 1,000 euro pension going
For retirees who receive pensions of 1,000 euros, which is the average pension received by specific professional groups, in practice it is that instead of an actuarial reduction of 120 euros, with the new proposal it will be limited to 60 euros. That is, half of what it was in the last 10 years.
According to the actual margins of the Social Insurance Fund, there is no question of total abolition of the margin determined by the actuaries. With the proposal of the Ministry of Labor, neither the contributions of the employees nor the employers are affected. The economic cost of the proposal of the Ministry of Foreign Affairs is not negotiable, however, because any other reduction will negatively burden the Social Insurance Fund. Therefore, the actuarial reduction cannot be abolished completely, because as explained by the Minister Mr. Panagiotou, it would cost the Social Insurance Fund about 100 million euros a year.
Based on the schedule, the discussion is to be completed with the social partners until the end of November.
The fine print
According to what the Minister presented, “the proposal affects a significant percentage of pensioners who have suffered an actuarial reduction, which constitute almost 25% of the total, through the exclusion of the full basic pension from the actuarial reduction for those citizens who meet the criteria which have been set and focus on the completion of 85% of the insurance period, which amounts to 40 years”.
He explained that, “as is also the case with tax-free income, where up to an amount the taxpayer will not be subject to income tax, so also in the case of the actuarial reduction, according to the specific proposal, the amount of the full basic pension will be excluded from the reduction” .
Which groups benefit
Through the proposal of the Ministry of Labor, thousands and gradually hundreds of citizens (about 10,000) will benefit directly, while construction workers are particularly favored industry, in manufacturing and sales and in general in occupations that require manual work, standing and are occupations in which people who start working very early, completing many years of contributions.
As a point of reference for the proposal as presented on Friday, it is the 40 years of contributions which constitute 85% of the insurance period, while the possibility of retirement at age 63 is determined by the coverage of 70% of the insurance period, which is 33 years.