THE SCENARIOS ABOUT EARLY PENSIONS

The economic think tank of the Government is examining the abolition of early retirement pensions that the insurance funds offer as a possibility to hundreds of thousands of insured employees who have established their right to retire under the age of 62.

This new measure will be put into effect from 1/1/2014 and right now two possible scenarios are on the table:

1. No one retires before the age of 60 or 62. In this case, the retirement age that applies today and allows retirement at the age of 50 for those who work at the Public Sector and Public Corporations and Organizations (in Greek ΔΕΚΟ) will increase at once by 10 or 12 years.

2. Reduction of early pensions by more than 30%, which is the maximum penalty for early retirement currently, as well as modifications on the prerequisites for securing retirement rights.

Will these changes apply even to those insured before 1983, who were until now excluded from the general retirement age and could retire at any age after completing 35 years of insurance?

The general rule from now on is that no one retires before the age of 62, so it is likely that the above insurance category will also be included.

Of course it is still not clear what the government officials plan to do, if and when all those modifications will be legislated.

The penalty for early retirement will be calculated on every year prior to the general retirement age, which is 67.

This practically means that the option of early retirement will be disadvantageous for the insured, as their pensions may be reduced up to 60%.

400.000 INSURED ARE TARGETED

The plan of the Government's economic think tank concerns approximately 400.000 individuals insured at insurance funds of the Public Sector, Public Corporations and Organizations (ΔΕΚΟ), banks and the Social Security Institute (IKA) who, according to the provisions in force and by estimation of the officials of the above funds, have either locked (secured) their retirement rights at the age of 52 (Public Sector employees – parents of minors) or have established their retirement rights, which means that they can leave their work whenever they choose to, since they have already completed the necessary insurance years as well as the required insurance age.

The reason why the economic think tank of the Government is opting for the abolition of early retirement has to do with two issues: 1) the promises of the Government that any new measures that may need to be taken will not include more cuts of the main pensions, and 2) the fact that the abolition of early pensions is bound to yield a considerable fraction of the 2 billion euros that according to troika' s estimations are needed in order to fill the 2014 gap. Troika will demand new targeted measures to achieve that and the solution of early retirement abolition will not seem as a pension-cutting measure.

The solution of not giving pension to anybody under the age of 62 will render direct economic benefits, as the 30% of the insured who will not be able to retire will yield an amount of around 500 to 600 million euros.

50% TO 60% REDUCTION FOR EARLY RETIREMENT

The second scenario, which is the most likely, includes higher pension reductions for early retirement before the age of 60 or 62. In this case, a new category of reduced pensions will be created in practice, given that today, the age of 62 is the age at which an employee may retire early, with a penalty of 6% pension reduction for each year before the full pension retirement age of 67.

The highest reduction penalty is calculated for 5 years of earlier retirement (62 instead of 67), with a total pension reduction of 30%. However, according to the transitional provisions regarding social security and retirement, those who retire early at the age of 50 or 57 receive the same reduced pension as those who are forced to stay at work until the age of 62.

Consequently, the scenario that is being considered includes penalty for early retirement of more than 30%, which means that the 6% reduction will be calculated on every year before the age of 67.

For example, an insured of 57 years will receive pension reduced by 6% for every year prior to the general retirement age of 67, which means that the total pension cut will be of 50% or 60%.

Today, the maximum reduction penalty for the above insured is of 30%. If the second scenario becomes official, then the insured will still be allowed to retire at 57, however, the early pension will be reduced by 50%-60% and not by 30%, which is currently the maximum penalty for early retirement.

To put it in numbers, if the full pension of the above insured amounts to 900 euros, the early pension will be of 450 or even 400 euros, meaning that the remaining 450 euros will benefit the insurance funds.

To sum up, the most important changes are:

HIGHER PENALTY for early retirement.

MODIFICATION OF PROVISIONS regarding retirement before the age of 62 so that they include less insurance categories.

REDUCTION OF SUPPLEMENTARY PENSIONS of insurance funds that present budget deficits (are there any insurance funds with surplus?)

Our Federation is following closely these issues, trying to gather the most detailed possible information so as to keep you posted. We comprehend that the distress of our colleagues who keep overwhelming us with questions on this matter is genuine and justified and we are doing our best to respond. The best advice we can give you at this point is not to make hasty decisions.