Greece Expat Pensions

I. Adjustment Of System

Greece had for decades a pension system that was not only one of the most generous in Europe but also allowed retirement at a very early age. Which made the Greek pension system the most expensive in Europe. Combined with an aging population and the financial crisis in 2008, this had to lead to a restructure of the Greek pension system.

As of 2016 the Greek government reformed the pension system. Besides cost reduction it aimed at a more equal distribution of pensions and ending the practice of giving most to well paid workers.

The effect of these reforms on pensions included raising the contribution rate of Greek pensioners and changing the eligibility age to collect pensions. The reduction of pensions also regarded already paying-out pensions in which process especially the higher pensions were reduced and often with 50% or more.

This restructure of the public pension system has taken a heavy toll on the Greek population with many pensioners falling below the poverty threshold and a vast income loss.

II. Structure

The Greece pension system has the following elements:

• Pillar 1: (Dominant) State Pensions;
• Pillar 2: (Very Modest) Occupational Pensions;
• Pillar 3: (Very modest voluntary) Personal Pension Savings.

I. Benefits

The pension scheme has two components which result in the total amount of pension:

• The Contributory Component         : The number of years of contribution in Greece.
• The Residency Component              : The number of yours of living in Greece.

The Contributory Component is funded entirely by pensioner's contributions. The more you contributed, the higher your pension. Persons who worked less than 16 years have an accrual rate of 0,77%. Those who worked for 40 years have the maximum accrual rate of 2%. The ceiling to pensionable earnings is € 5.860,80 per month.

The Residency Component is funded by the State. Pension amounts are determined by the number of years of residency between age 15 - 62. (However, the future of this pension is uncertain and not modelled by the OECD.) In case of living in Greece for 15/40 years, the monthly pension amounts to € 345,60 / € 384,-.

II. Premium

Premium for Contributory Pension

• Before 2016:
  Employee      :   6,67% of Wages
  Employer       : 13,33% of Wages
• As of 2016:
  Employee/Self Employed     : 20% of Wages/Income

Premium for Residency Pensions

• By the State.

III. Retirement Age

• The retirement age is 67 for men/women who have contributed for at least 15 years.
• In case of 40 years contribution, there is a full pension as of age 62.
• There are special regulations for people with arduous work.
• It is not possible to postpone the pension age (and receive more).

I. Structure

The second pillar pension plans in Greece are underdeveloped and of minor importance.

A positive aspect is that the previously huge difference in pension claims between different type of occupations has decreased substantially.

II. Providers

• Pension Funds;
• Group Insurance Plans.

Pension Funds

The fund has to be a separate legal entity and can be Single Employer or Profession related.

Further relevant requirements:

• Actuarial valuations have to be performed at least once a year.
• External asset management is not required by law.
• A minimum funding is imposed including a specific solvency margin.
• Which has to be calculated separately for Pension Benefits and Risk Benefits.
• In case of undercapitalization, the fund has to submit a three-year recovery plan.
• If the fund provides guarantees, it has to reinsure these risks.

Group Insurance Plans

The Group Insurance Plan market is underdeveloped.

Contributions are tax-deductible within the following limits:

• Annual employer contributions up to € 1.000,- per employee are tax deductible.
• The employee can also make tax-deductible contributions of up to € 1.000,- an annuity, which can be used for contributions to a Group Insurance Plan or individual contributions to a Private Insurance Arrangement or a combination of both.
• Please be aware that due to the difficult economic climate, pension related tax benefits might decrease in the future.

III. Retirement Age

In general the State pension age of age 67 is implemented.

I. Structure

These pensions are as of yet underdeveloped.

Companies frequently offer their employees the possibility to participate voluntarily in an additional third pillar pension system based on group insurance policies. The majority of these plans are based on the defined contribution approach. Employers can also contribute to these plans but this is optional.

II. Tax Benefits

An employee can make tax-deductible contributions of up to € 1.000,- an annuity, which can be used for contributions to a Group Insurance Plan or individual contributions to a Private Insurance Arrangement or a combination of both.

In most western countries the occupational pension oversight is relevant due to the substantial coverage by these kind of plans.

In Greece this kind of coverage is less than 1% and thus this governmental oversight is relevant but not that impactful.

The State Pension Age details are also in general followed by Occupational Pensions Plans:

• The pension age is 67 for men/women who have contributed for at least 15 years.
• In case of 40 years contribution, there is a full pension as of age 62.
• There are special regulations for people with arduous work.
• It is not possible to postpone the pension age (and receive more).

State Pensions

• The standard retirement age is age 67.
• If the conditions are met, the pay-out can start as of age 62.
• The pay-out can not be postponed after age 67.
• The pay-out is only by means of an annuity.
• For certain categories there are special conditions.

I. Residents

In principle, subject to relevant tax treaty provisions, income tax is payable by all individuals earning income in Greece, regardless of citizenship or place of permanent residence. Permanent residents are taxed on their worldwide income in Greece.

Benefits in kind are, in principle, subject to payroll withholding taxes. However, as of 1 January 2015 and considering the difficulty in evaluating the taxable basis of such benefits at the time of their granting, no employment withholding is effected thereon.

Instead, their value (since such benefits are taxable) is added to the employment income of the beneficiaries and taxed upon the assessment of their personal annual income tax return.

The 2021 Greek Income Tax Rate has the following progression:

                        Taxable  Income                                             Rate

• €          0           -           € 10.000,-                                 9 %
• € 10.000,-       -           € 20.000,-                               22 %
• € 20.000,-       -           € 30.000,-                               28 %
• € 30.000,-       -           € 40.000,-                               36 %
• € 40.000,- and more                                                  44 %

II. Expats/Non Habitual Residency (NHR)

Expats will be face Greek Income Tax for Greek Income.

III. International Tax

If you receive pension pay-out from another country than the country where you retire, it is advisable to see if there is a Double Tax Treaty in order to prevent or mitigate double taxation in the residenital country and at source.

If there is no such treaty, you can only appeal to Unilateral National Rules in order to try to prevent the effect of a possible double taxation.

I. State Pensions

Expats living in Greece can receive State Pension from another country.

II. Occupational Pensions

Expats living in Greece can receive Occupational Pension Claims from another country.

III. Tax

If you receive pension pay-out from another country than the country where you retire, then it is advisable to see if there is a Double Tax Treaty in order to prevent or mitigate double taxation in the residenital country and at source.

If there is no such treaty, you can only appeal to unilateral rules in order to try to prevent the effect of a possible double taxation.

Expats with a UK Occcupational Pension Claim often hear that it is very attractive to transfer their UK claim to a QROPS pension plan.

QROPS stands for ‘Qualifying Recognised Overseas Pension Scheme. A QROPS is an overseas pension scheme that HM Revenue & Customs (HMRC) recognises as eligible to receive transfers from registered pension schemes in the UK.

The initial idea of a QROPS was to get the value out of the UK without paying any UK tax on the transfer value. Which is now not always possible.

To qualify as a QROPS the scheme must meet the requirements set by UK tax law. For example being available to residents in that country and not being accessible before age 55 unless under special circumstances.

If you are interested in such a QROPS transfer, please make sure that a specialist looks into all relevant aspects. Among which there are the following questions:

• Would it result in a much lower tax exposure or would it increase substantially?
• Are the related QROPS costs not too high?
• Is the related transfer capital big enough to earn back the extra costs?
• Are the available investment funds of a quality level?
• Does your advisor have financial benefit from such a transfer by getting a percentage of the transfer value? (For Dutch advisors this is prohibited by law, fortunately.)

Greece Among Best Places to Retire in 2024

Greece is among the Top 10 best places in the world to retire in 2024, according to the 2024 Global Retirement Index released this week by International Living. The report is based on hundreds of opinions and real-life experiences and awards an overall score based on performance in housing, cost of living, visa and benefits, affinity rating, climate, development, and healthcare.

According to the 2024 Global Retirement Index, the Top 10 places to retire are Costa Rica in first place followed by Portugal, Mexico, Panama, Spain, Ecuador, Greece, Malaysia, France, and Colombia

Ranking 7th with an overall score of 77, Greece is described as a “dream vacation destination”. Greece received a score of 60 for housing, 79 for cost of living, 76 for visa and benefits, 86 for affinity rating, 70 for climate, 78 for development, and 82 for healthcare.

The report goes on to refer to the country’s history and famous sites, islands, healthy cuisine, weather, slower pace of life, easy-to-find expat communities, property prices, cost of living, and the Golden Visa program as winning points attracting over the last few years all the more retirees, digital nomads, and expats.

"It comes as no surprise that in the past few years, Greece has emerged as one of the preeminent retirement destinations for many,” it said. Analysts go on to add that housing in Greece is estimated to be as much as 75 percent lower than US prices and the cost of living between 30 percent and 50 percent below the cost of living in the US.

"We chose Greece because it is one of the few countries with a Golden Visa option based on property rather than on making a large investment in a business. That plus the warmer winters sealed the deal,” said one woman who recently moved with her husband to Syros.

"Greece came out as the winner in our search for a European retirement destination due to the climate and proximity to the sea. We just didn’t have that back in the US, and look forward to longer temperate seasons where we can enjoy more outdoor activities."

Greece: Viable social security but low pensions

The sustainability of the social security system is considered assured until the distant 2070, according to a new study by the National Actuarial Authority submitted to the competent department of the European Commission. 

There is, of course, a very important and highly mandatory condition: That nothing changes in terms of the so-called “parametric changes,” i.e. retirement age limits, amount and method of calculating benefits, etc. And, of course, an equally disappointing finding, that Greece has a sustainable system, but insufficient in terms of the one and only obligation: To ensure to workers and pensioners an adequate living income. 

The study, Kathimerini understands, presents a sustainable pension system, in an aging society with a smaller population, particularly reduced costs but also significantly lower pensions. The experts even estimate that the gradual reduction of the pension expenditure, below the European average, actually leads to pensions even below 900 or 850 euros per month gross. 

Therefore, the distributed pension system of Greece does not need new pension cuts in order to ensure its long-term financial sustainability.

I. End of early retirement in sight

2021 will see the closing of loopholes opened in the summer of 2015 and leading to the retirement of many workers on more favorable terms, before reaching the general retirement age of 67.

The move concerns legislation passed along as part of the third bailout program five years ago, regarding the extension of the retirement age. The idea was to impose the new limit gradually, so as to stem the surge of early retirements that has been one of the main challenges to the social security system.

This legislation is estimated to concern between 100,000 and 120,000 insured workers, with experts warning that fears of new interventions to the pension system could lead to the majority of them seeking to retire within 2021.

The experts say this concerns workers who entered the social security system before 1993, as for all others the door of early retirement has closed for good, forcing them to wait until the age of 67, unless they have completed 40 years of service by the age of 62.

Fears of an exodus are fueled by a reference in the report of the Pissarides committee to the early retirement expenditure that requires special attention and that by 2022 will be abolished.