How pensions are calculated
The pension system in Greece is almost identical to the European one. The system is accumulative; anyone who wants to receive social benefits in retirement must first save them.
The taxes are:
- for employees - 6.7%;
- for the employer - up to 13.4% inclusive.
As soon as a citizen reaches retirement age, his money is converted into special points called “ensims”. One ensim equals 15 euros.
Special funds are responsible for calculating pensions, and they operate under almost the same conditions. The difference lies only in the categories of population served.
There are a total of 3 funds in the country:
- for civil servants;
- for other employees;
- for the agronomic sector.
Functions of insurance funds:
- payment of old age and disability pensions;
- providing the population with free medicines;
- providing residents of the country with the opportunity to take one free flight annually to a holiday destination;
- provision of medical care to the population.
But the work of the funds is accompanied by a number of disadvantages: the operating patterns of these organizations are similar to banks, so for many officials this is nothing more than a business. They earn decent sums from this, which they subsequently invest in their own projects, and citizens risk being left with nothing.
Corruption scandals have often arisen around the funds, but no changes in the structure of the funds’ functioning have yet been foreseen.
Specific numbers
Just 15 years ago, many pensioners in the world dreamed of spending their old age in Greece. And it’s true - in the early 2000s, pensions amounted to 85-95% of previous wages, which allowed old people to live a full life, travel the world and even have reserves.
On average, people received approximately 1,400 euros (the maximum pension was about 2 thousand euros) and retired at 57 years old - what is not heaven?
But all good things come to an end. When the economic crisis began, it turned out that a huge part of the country's GDP was spent on pension payments.
This is interesting! Representatives of the IMF calculated that approximately 10% of GDP was spent on pensions in Greece, and only 2.5-3% in Europe.
In 2021, the picture is completely different - older people can count on a maximum of 50% of their previous salary. However, even so, the pension size is comparable to the German one. Before specific figures are announced, it would not hurt to find out how the amount of payments to pensioners is calculated.
The amount of deductions depends on:
- work experience;
- savings amounts;
- the beginning of the insurance period.
Attention! The state pension is calculated subject to 15 years of insurance.
The authorities have already lowered the minimum pension 11 times and are not going to stop what they have achieved. The main motivation for introducing the next bill to reduce payments was a loan from the IMF in the amount of 86 billion euros, which the country can receive after carrying out the next reforms.
Today, the minimum pension has been equated to the subsistence level, which is approximately 595 euros (53,000 in rubles). Low-income pensioners receiving the minimum wage receive an additional 387 euros.
Retired employees of state-owned enterprises receive no more than 760-810 euros.
Foreigners can count on payments subject to residence in Greece for the last 15 years, as well as reaching, as well as reaching retirement age and registering with the appropriate state fund (as an alternative to registration, it is proposed to collect a sufficient number of pension points).
Attention! The authorities announced an increase in seniority by 7 years! Thus, an ordinary worker will have to have at least 40 years of experience under his belt.
On the problems of the pension regime in Greece
Effective social insurance systems in many European countries are now bursting at all seams.
Until about 2005, Greece was considered the country where the wealthiest retirees live. They received 96% of their previous salaries and essentially maintained their previous lifestyle in retirement without working.
The average salary in Greece was 2,000 euros, and the retirement age began at 57 years. Having gone on vacation, pensioners had the opportunity to live without denying themselves anything: traveling around the world, purchasing real estate in other countries.
In the context of the economic crisis and events taking place in Greece itself, it turned out that the lion's share of GDP is spent on paying pension benefits. Taking into account the fact that the population is aging, it has become obvious that the government, along with other measures to overcome the crisis, needs to raise the retirement age.
The main reasons that prompted the state to adopt a law changing the retirement age:
- A sharp drop in natural population growth.
- Reduction in the number of working-age population.
- The outflow of the local population to other countries in search of high earnings.
- Increasing number of people of retirement age.
- High unemployment rate.
- Reducing wages.
- Reducing employer contributions to funds.
- Corruption is the plunder of insurance funds by officials.
Economists considered that, at a minimum, raising the retirement age to 65 years, and in the future to 67, would move the process of gradual collapse of the system as a whole off the ground. This will allow Greece to save 1 billion euros annually.
The issue of paying real pensioners has worsened in the country to the point that the government was forced to reduce the amount of pensions by more than half. Pension costs today average 500 euros.
This measure reduced costs, but did not solve the problem globally, so the issue of raising the age limit was brought up for discussion by the legislative branch of the new Greek government.
Registration of pension
A citizen must submit a corresponding application to the Social Fund, attaching the following documents to it:
- for citizens of Greece - a passport, for foreigners - a visa, international passport and documents confirming the right to reside in the country (residence permit or permanent residence permit);
- certificate of work experience.
Typically, the period for reviewing documents is a month, and the pensioner receives a notification to his address about the amount of payments due to him.
What is the pension in Greece?
The size of pensions in Greece has been halved compared to the pre-crisis period (before 2009). Despite the reduction, the amount of pension payments in Greece in 2021 is almost the same as in economically prosperous Germany.
The minimum pension in Greece is equal to the country's standard subsistence minimum of 387 € per month. Those who receive a small pension until 2021 (after this period they plan to restructure the pension system) can qualify for an additional payment of 200 € per month.
The average pension in Greece depends on the area of employment:
- civil servants receive 770 - 820 €;
- employees and private owners 590 - 650 € (about 60% of the population) receive a pension below 700 €.
Until 2021, it is planned to increase the level of pension payments by 20%.
Conditions of retirement
Today the retirement age in Greece is 65 years. By 2021, it is planned to increase the retirement age to 67 years. In case of early retirement, 11% is lost for each year missing before the legally established period. To receive the minimum state old-age pension in Greece (384 €), you must have 15 years of insurance experience.
How to apply for a pension?
After reaching retirement age, you must submit an application to the Social Fund (the choice depends on the field of activity) for accrual of pension payments.
The following must be submitted along with the application:
- Copy of ID:
- for Greeks, passport;
- for foreigners, a foreign passport with a visa, a card confirming the status (residence permit, or permanent residence).
- Certificate of insurance experience.
Review of applications takes 30 days. The pensioner will receive a notification of the amount of pension payments to the address specified by him.
The amount of payments is calculated in accordance with the amount of contributions to the Social Funds. The amounts received are transferred through a special system into insurance points, the so-called “exims” (15 euros = 1 ensim). To receive the minimum pension, you must accumulate 4,500 points.
Reforms in perspective
Economists are confident that it is necessary to start financing funds from the state. budget. This will allow you to fix the size of pension payments without reducing them in the future. However, the forecasts for the country are disappointing: the size of pension payments will greatly depend on the salary that a person received and will vary in the range of up to 50% of the previous salary.
So, if the salary is 1,000 euros, then the amount of pension payments will be 765 euros, and with a salary of 2,000 euros, the pension will be about 1,000 euros.
What will happen after the reform?
The reform is based on financing not from contributions, but from the state budget. It is believed that insurance premiums will increase by 1.5%.
Employers will have to pay 1 percentage point, employees of enterprises - ½ percentage point. According to Greek economists, this will allow maintaining current pensions and not allowing them to be reduced.
The reduction in pensions caused a new wave of indignation, learn more from the video.
European political scientists object that in the near future, after the reform, we should expect a reduction in the size of pension payments. Economic forecasts are disappointing: the size of pensions for older people will vary from 12 to 36% of wages.
A person whose salary was 1 thousand euros will receive 765 euros in retirement. If the employee’s salary was 2.0 thousand euros, then the pension will be halved - to 1.1 thousand euros.
Retirement
Due to the high costs of payments to older people during the ensuing crisis, the authorities were forced to raise the retirement age. Currently, Greeks retire at 65, but soon the retirement age will be raised to 67. Experts have come to the conclusion that such a step will save about 1,000,000,000 euros annually, and this will significantly slow down the decline of the country’s economy.
This will only be the first step - the authorities intend to raise the retirement age several times in the future.
There are several main reasons why everything happened:
- unemployment;
- decreased birth rate;
- mass migration of the population abroad;
- falling wage levels;
- increase in the number of people living to retirement age.
Attention! The average life expectancy of pensioners in Greece is considered one of the highest in the world and is 16.85 years. Only the UK (17.67 years) and Singapore (21.75 years) are higher.
We must also not forget about corruption. Over the past 16 years, officials in Greece have significantly increased their wealth through insurance funds.
Procedure for receiving a Greek pension
Retirement rules do not differentiate Greece from other European countries. To enter a well-deserved retirement, a working person must work out the required length of service, while regularly deducting the average percentage of established contributions from his salary. If, of course, the employee wants a decent pension. For a minimum payment, you can make fewer contributions.
Today in Greece the retirement age is set at 65 years, and by 2021 it should rise to 67. If they wish, the Greeks can go on vacation earlier than expected, but then the total payment amount will be reduced by 10% for each unfinished year. But there are few “hunters” for such an opportunity. Indeed, in this case, the person will lose both wages and pensions will not please him with a decent level of income.
The minimum work experience required to receive a pension in Greece today is 33 years. But since it is becoming more and more difficult to pay pensioners every year, the requirements for length of service are gradually becoming more stringent. Soon the authorities plan to raise the bar to 40 years of minimum service life. As noted above, you can not complete the established length of service and receive pension payments, but in a very reduced form.
Unemployment
This is one of the key points that led to the collapse of the pension system. Unemployment in the country has reached unprecedented levels. If you believe the statistics, then for half of the families in Greece, assistance from the state is the only source of income. The situation has reached the point where the authorities decided to pay benefits even to bankrupt businessmen.
Once upon a time, private entrepreneurs who lost their business could not even receive free medical care, not to mention material payments. Now, if a businessman registers with the labor exchange, he can receive 350 euros monthly. However, there is one important condition: within the last three years, the entrepreneur must be registered in the register of entrepreneurs. Also, people who:
- there is another business;
- family income over the last 365 days has exceeded 30,000 euros;
- there is an outstanding debt to insurance funds.
Ensims, which are used to calculate pensions, are also used to provide financial assistance to the unemployed. Now, in order to receive benefits, you need to accumulate at least 160 ensims in 2 years, but in the near future the authorities plan to lower the total number of points for people who have lost their jobs.
The benefit amount is 360 euros + an additional 36 euros for each family member, but even here everything is not so rosy. The European Union is pushing to cut unemployment benefits. The authorities are not yet ready to take such a step, but they will have to do it.
The authorities' fight against unemployment is impressive, but we shouldn't expect any improvements in the near future.
Other changes
The process of early retirement is changing in the country. If previously it was enough to have the required amount of minimum length of service to receive payments, now, for each unfinished year, the monthly payment amount will be reduced by 10%. This will hit people who retire between 50 and 60 years of age especially hard.
Today, Greece's pension system is in incredible decline, and the picture threatens to get even worse. The new reforms are causing a lot of protests in the country. In the near future, pensioners will have to rely only on themselves.
Pension reduction and lack of indexation
Today, the state apparatus has reduced social payments to 12% for the vast majority of pensioners. Note that today about 2.6 million people live in Greece.
This situation greatly aggravates the financial situation of most people. This measure does not apply to those pensioners who earn less than six hundred euros and work in hazardous work.
Pensions will be reduced in the following cases:
- Early retirement.
- Those who retired at 50-55 years old will lose the most.
- The amount of payments was significantly affected by the increase in the tax on health insurance. This figure today is 6%.
