A] Prelude*
* For more information on the Greek pension system and pension systems in general, feel free to visit our dedicated webpages:
https://expatpensionholland.nl/greece-expat-pensions
https://expatpensionholland.nl/global-pillars-systems
Pension increases, lump-sum financial aid, reductions in deductions, “corrections for injustices,” and other significant changes will be promoted starting from autumn, benefiting large groups of pensioners. Even in the case of widow’s pensions, where changes will involve some reductions, beneficiaries are expected to be cushioned as the issue will be addressed with social sensitivity.
After TIF, where the Prime Minister is expected to discuss pension increases and other key benefits, as well as lump-sum aid, the Mini Pension Reform Bill will be presented in Parliament. Its main focus will be on widow’s pensions and improvements in the deduction of the solidarity contribution for pensioners (EAS) to benefit pensioners without significant fiscal burden.
The correction of the distortion affecting working disability pensioners is also expected, while the new cash benefits regulation of EFKA, delayed by 7 years, is ready to be submitted to Parliament with the goal of system rationalization.
The Ministry of Labor will submit the relevant proposals, but the final approval will come from the Prime Minister’s Office, as the new regulations carry both political-social and economic weight.
One positive factor that could alter the planning is the unexpected revenue of EFKA (over €400 million) derived from the withholding on the earnings of working pensioners, with declarations exceeding 180,000. Increased revenue from contributions is also expected due to the rise in the minimum wage and average wages.
On the other hand, expenditures are increasing as pension applications seem likely to exceed 200,000 this year as well, partly due to the new law allowing pensioners to continue working without facing cuts to their pensions. The year is expected to end with 209,000 applications, with the record of 212,000 applications set in 2021.
Now, what are the expected changes to come this autumn?
B] Pension Increases of 2.5%
A 2.5% increase, possibly slightly higher, is expected for around 2.5 million pensioners in 2025, with the January pensions paid at Christmas. The increases will follow the formula of inflation + GDP divided by 2 each year.
For the coming years, the stability program predicts growth of 2.4% (in 2024) and 2.6% (in 2025), while inflation is expected to drop from 2.6% in 2024 to 2.3% in 2025.
Based on these estimates, the pension increase for 2025 will be around 2.5%, averaging €25 per month. Lower pensions of €500 to €600 will increase by an average of €15, while mid-range pensions of €1,000 to €1,400 will increase by €25-€35. The exact percentage increase will be announced towards the end of autumn when final estimates for the two key economic indicators are available.
C] Personal Difference Allowance
Pensioners who will not receive an increase because they still maintain a personal difference will be supported with a personal difference allowance of €100-200. The prerequisite is that their monthly pension does not exceed €1,600.
The number of beneficiaries will be smaller than last year, as each year more pensioners reduce or eliminate their personal difference, paving the way for future increases in hand.
Last year, the allowance was €200 for pensions up to €700, €150 for pensions from €701 to €1,100, and €100 for pensions from €1,101 to €1,600. Pensions above €1,600 did not receive an allowance.
D] One-Time Assistance for the Vulnerable
The fund for the personal difference allowance will come from the taxation of excess profits from refineries, estimated between €250 and €300 million.
The personal difference allowance is expected to be around €100 million. Therefore, €150-200 million remains, which will either be used to provide a higher personal difference allowance or directed to vulnerable groups of citizens as a one-time financial aid (accuracy check), such as low-income pensioners, people with disabilities, families with children, uninsured elderly, and other categories of citizens, as well as those who receive the Minimum Guaranteed Income on a monthly basis.
E] Reduction of Solidarity Contribution
One of the few remaining austerity measures from the bailout era, the solidarity contribution for pensioners (EAS), which affects more than 500,000 pensioners with incomes above €1,400, is set to be revised. The improved version of EAS will be included in the Mini Pension Reform Bill and implemented in 2025.
F] Widow’s Pensions: Eased Cuts
The issue, pending for 4 years, has already been put on the table, as widow’s pensions in the private sector have not been cut, unlike in the public sector and OGA, where cuts have been applied since 2020.
Different scenarios are being considered so that widows/widowers are cushioned. The cuts are estimated to affect over 60,000 beneficiaries of widow’s pensions in the private sector after 2016, where the provision that widow’s pensions decrease from 70% to 35% of the original pension if, after the first three years of payment, the widow/widower works or receives their own pension has not been enforced.
The first intervention is expected to address retroactive reductions so that widows/widowers are not unduly burdened and are facilitated by the return of unjustified payments in multiple installments.
G] New Method for Calculating Earnings
According to the law the calculation of pensionable earnings will be based on the wage index rather than the consumer price index, which has been the method until now. Currently, pensionable earnings are adjusted annually from 2002 onwards, based on changes in the consumer price index. A team at the Ministry of Labor is expected to develop the wage index by the end of the year.
This change means that from next year, the pensionable earnings of insured individuals, which form the basis for calculating contributory pensions, will no longer increase with inflation but with the rate of wage increases for all workers. If in 2024 the wage index shows a 3.5%-4% increase, as estimated, this percentage will also raise the salary considered for the contributory pension of those retiring in 2025.
Experts emphasize that the differences will be negligible in the first few years, but after 5-6 years of implementing the new calculation method, pensions will see increases of 5%-10%.
H] Reduction in Contributions
The government has announced a further reduction in contributions in two phases, starting in 2025. The reduction will be by one percentage point, split into half a point in 2025 and half in 2027, though there are pressures to expedite this, either later next year or in 2026.
The prevailing scenario is that the first reduction will apply only to employer contributions to ease the burden on businesses, encouraging actual wage increases.
I] Working Retirees with Disabilities
Retirees with disabilities have been waiting for months for a provision that will remove the obstacles to continuing their employment.
Currently, the law requires that a working person with a disability must stop working before retiring, and then can return to work without their pension being cut and without the obligation to pay a 10% contribution on their income from work to the e-EFKA (Unified Social Security Fund).
This provision will solve the problem, allowing disability retirement without interrupting work and protecting disabled retirees from this inconvenience.
J] Purchase of Notional Years
The fast-track processing of supplementary pensions with at least 15 years of insurance has not been as successful as expected, with pending supplementary pensions now reaching 43,000.
To alleviate the pressure on prospective supplementary pensioners, the Ministry of Labor is considering allowing an advance on the supplementary pension upon request, as well as the purchase of notional years to meet the minimum 15-year requirement for faster pension processing.
Currently, this option is not available in the former IKA-ETAM, which covers the majority of insured persons.
K] Higher Pension Due to Increased Contributions
Eight categories of insured persons who have submitted or will submit a retirement application can expect a higher pension, as they have paid higher contributions for the primary pension in the past, above the general 20% insurance rate for the former IKA.