Social Security notes quadruple strikes to main/auxiliary pensions, lump sum packages and solidarity funds

An explosive climate prevails on the central political stage concerning social security following the lack of support by opposition parties and strike action set for December 3 by both the General Confederation of Greek Workers (GSEE) and the Greek Workers Association (ADEDY). Measures for social security are up in the air, and if all equivalent measures are rejected then it seems possible that there will be more pension cuts. A recalculation of pensions would mean cuts of as much as 20% to main pensions and 6-7% to lump sum (up to 8%) and the abolition of the social solidarity pension fund (EKAS) for 80,000 beneficiaries.

Bearing in mind that social security is linked to January’s evaluation, then the ‘burning’ issue could make its way to Parliament by January 15. The government would have postponed discussion until after Christmas if consensus had been reched, however the stagnant climate at the moment means that there is no reason for delay.

Labor Minister George Katrougalos believes that the social security issue should make its way to Greek Parliament by December 20 for practical reasons as many of the measures will be implemented by January 1, 2016, something that is expected to send a positive message to the markets concerning Greece’s interest in bringing reforms.

The models chosen by the Ministry of labor shows that the pension replacement rates will range from 48-60% for main pensions from 80% and 70% for new policyholders. The government’s objective is to increase the pension portion to 65% for 40 years of contributions making the key criteria the years of insurance rather than the retirement age.

There will be small reductions in IKA pensions and larger pensions of former special funds as well as cropping of TEVE pensions that currently receive an extra bonus of 220 euros as the replacement rate of the pension reaches 140%. Public pensions will be reduced on average by 5-7%, IKA will drop by 3%, and PEVE will not a 15% decline.