Pensions: 11+1 Changes from autumn – The mini pension reform bill to be presented in Parliament after the Thessaloniki International Fair (TIF)

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.

To assist pensioners, we’ve prepared a guide outlining the major changes coming this autumn.

1/ 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.

2/ Personal Difference Allowance of €100-200

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.

3/ 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.

Last year, the financial aid of €150 was given to low-income pensioners with income from main pensions up to €700 per month (€8,400 per year) who did not have a personal difference or if they did, it was less than €10. People with disabilities received the highest allowance last year, which was €200. A Christmas bonus was also given to recipients of the Minimum Guaranteed Income, while uninsured elderly received financial assistance of €150. Recipients of the child allowance received an additional extraordinary installment, equivalent to the monthly amount of the allowance increased by half.

4/ Reduction of Solidarity Contribution (EAS)

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.

The Ministry of Labor, which has been working on scenarios for reducing the burden for months, aims to benefit pensioners without losing valuable budget resources, as the annual revenue from EAS, which funds the National Solidarity Fund (AKAGE), amounts to €730 million.

Currently, monthly deductions for the solidarity contribution on main pensions range from 3% to 14%, with deductions also applied to supplementary pensions above €300. The “scissors” often nullify pension increases, resulting in a net amount after the increase and deduction that is lower than the original. For example, a pensioner with a pension of €1,699, receiving a 3% increase for 2024, saw their pension increase to €1,751 and then faced a 6% EAS deduction, effectively nullifying the increase due to EAS.

This is the first distortion that will be corrected, aiming for the net amount after any increase not to fall below the previous amount, a correction that has a low cost of €10-20 million. Deputy Minister of Labor Panos Tsakloglou recently clarified that in cases of negative difference—where the solidarity contribution “eats” part of the increase or causes a reduction in the pension—EFKA will cover it, and the pensioner will enjoy the full increase.

Beyond that, alternative scenarios for reducing the burden are being considered, such as:

• A 50% reduction in rates.
• Abolishing the contribution for supplementary pensions (benefit of €10-71 per month).
• Changing the EAS structure so that it is not imposed from the first euro but only on the amount exceeding each bracket’s threshold, similar to how tax rates apply to income taxation.

5/ 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. Also under consideration are the following scenarios:

• Restoring the provision allowing the beneficiary of a widow’s pension to choose to have the cut applied to the smaller pension if they receive both their own and a widow’s pension.
• Not applying the cut to those still employed from 2024 onwards, ensuring equity with other pensioners who work and no longer face pension cuts.
• Applying the cut only to the national pension (€426.17) and not to the entire pension after the 3-year period.
• Merging the two national pensions into one. Currently, beneficiaries of a widow’s pension who also receive their own pension receive two contributory and two national pensions. Under the new regime, the second national pension may not be abolished but converted into a personal difference amount, so the law granting one national pension regardless of the number of pension entitlements is upheld. Additionally, two injustices are expected to be corrected under the proposed provision:

a/ Currently, widowed pensioners with children are not considered a single-parent family, preventing them from receiving tax exemptions and benefits with the same income criteria as other single-parent families. This injustice is expected to be corrected.

b/ Unfair treatment is also seen in the case of OGA pensioners with a widow’s pension from another fund. In these cases, pensioners face a double cut, losing the welfare component of the OGA pension immediately and 50% of the widow’s pension after the first three years, often resulting in a lower pension than if they had renounced the widow’s pension from the start.

However, final decisions will be made at the highest government level, considering the issue’s social sensitivity.

6/ New Method for Calculating Earnings

According to the law (No. 4387/2016), starting in 2025, 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.

For example, an insured person with 40 years of insurance and a salary ranging from 800 to 1,300 euros over the last 20 years would, under the current inflation-based system, have pensionable earnings of 1,280 euros and receive a primary pension of 1,075 euros (gross). With the new calculation method, based on the wage index, if the overall wage increase is 4% for 2024, the pensionable earnings will be 1,300 euros, and the pension received will be 1,082 euros, a 0.7% increase.

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%.

For example, an insured person who completes 40 years of insurance by 2030, assuming inflation from 2025-2029 was 2% annually and wage increases were 5%, would:

a/ If the inflation adjustment rule were still in place, receive a primary pension in 2030 of 1,190 euros.

b/ With the new wage-based calculation, receive a pension of 1,308 euros, a 10% increase.

Moreover, according to estimates by Deputy Minister of Labor Panos Tsakloglou, assuming productivity increases by 0.7% annually, as per conservative European Commission forecasts, an insured person entering the workforce now will receive a pension in 40 years that is at least 30% higher than if inflation remained the basis for calculation.

7/ Reduction in Contributions: Two Scenarios

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.

Bank of Greece Governor Yannis Stournaras also describes the reduction in social security contributions as crucial for enhancing the competitiveness of Greek businesses and maintaining jobs, as wage costs are expected to rise by 4.4% in 2024.

8/ 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.

9/ Purchase of Notional Years for Supplementary Pensions

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.

10/ Retirees with Debts

Over 4,000 debtors have already applied for retirement under the new increased debt limits and are being reviewed by the e-EFKA to determine if they meet the criteria for pension processing. If no irregularities are found, the first debtors will receive their pensions by the end of August. Applications can be submitted by self-employed debtors with debts up to 30,000 euros (previously 20,000 euros) and farmers with debts up to 10,000 euros (previously 6,000 euros).

However, debtors must give their consent to financial institutions to lift bank secrecy, as bank deposits should not exceed 12,000 euros generally or 6,000 euros for an OGA (Agricultural Insurance Organization) debtor.

11/ 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. This applies to about 100,000 workers in public utilities and banks, self-employed individuals, and those simultaneously insured in two funds. For example, older insured persons (first insured until 31/12/1992) in former public utility and bank funds paid contributions exceeding 30% until 31/12/2015. These insured persons can expect a contributory pension increased by up to 80%.

+1/ Unified EFKA Benefits Regulation

A separate bill will be introduced in the fall to establish a unified regulation of monetary benefits for the e-EFKA, pending for seven years since the fund’s establishment in 2017. The benefits currently paid vary widely from fund to fund. The new regulation will increase some benefits and decrease others to rationalize the system. e-EFKA’s monetary benefits include maternity and childbirth allowances, sickness and accident benefits, funeral expenses, camping allowances, and home care support.

For example, insured women under the former OAEE receive a maternity and childbirth allowance of 150 euros per month for four months, while those under the former ETAA receive 200 euros per month for four months, and those under the former OGA receive a lump sum of 486 euros. Meanwhile, salaried insured women receive their full salary from a combination of e-EFKA, employer, and OAED contributions (about 50% from EFKA, 40% from OAED, and 10% from the employer).

The working group has also proposed that the funeral expense allowance, which in some funds exceeds 3,000 euros but is only 762 euros in the OAEE, be standardized to between 800 and 1,300 euros, while the low benefits of the OGA will increase slightly by up to 5 euros.

In general, non-salaried individuals who currently receive lower benefits than salaried individuals will benefit, while those insured in public utilities, who currently receive generous benefits, will see reductions.

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