The government's long-awaited pension reform proposal is due to be presented in detail today during a meeting of the Labour Advisory Body, paving the way for the bill's submission to parliament on 20 September.
The presentation marks both the end of a delayed drafting process and the start of what is expected to be a difficult round of discussions with social partners and political parties.
Labour Minister Marinos Mousiouttas told Politis that the government's proposal will be presented during the meeting and that an explanatory memorandum will be distributed to stakeholders.
Under the terms of the bill, pensions are expected to increase by between 2% and roughly 60% over a five-year period.
The government has also recently assured stakeholders that the legislation will not include any pension reductions.
A key question, however, remains how the increases will be financed and what the state's contribution will be, given that most of the measures under consideration do not generate direct revenue for the Social Insurance Fund.
According to information obtained by Politis, the state contribution will vary over time.
Mousiouttas previously said on the podcast A Look at the Economy that pension increases will be determined using criteria such as:
- The level of workers' contributions.
- The regularity of contributions.
- The duration of working life.
The minister also said the reform will affect all types of pensions, including:
- Old-age pensions.
- Disability pensions.
- Widow's pensions.
Changes are also planned for benefits, with more favourable arrangements for citizens.
He added that the reform includes further measures which, over time, are expected to contribute to higher pensions.
Regarding the current 12% actuarial reduction applied to early retirement, the minister said it will be reduced to below 10% through a horizontal mechanism, while stressing that it cannot be abolished entirely.
Doing so, he argued, would effectively amount to lowering the retirement age from 65 to 63.
Poverty threshold and minimum pension
The minister acknowledged that even after the reform there will continue to be pensioners whose income remains below the poverty threshold.
He said the aim is for provident funds to play a complementary role.
According to Mousiouttas, the poverty threshold currently stands at €1,103, while the minimum wage is €1,088.
He recalled pre-election calls for the minimum pension to be raised to €1,088.
However, he said it is impossible for the minimum pension to reach that level.
"I wish I could say the pension will reach not €1,088 but €1,588," he said.
"There is a ceiling to the money available in the fund, or projected to enter the fund over the next 40 years, which is the time horizon of the actuarial study."
The minister stressed that, since it has been agreed that neither contribution rates nor the retirement age will be increased, the fund's available resources are fixed and any additional benefits would have to be offset elsewhere.
Open to proposals
Mousiouttas said the government is "not dogmatic" about the pension reform and remains open to suggestions, provided that its core philosophy remains unchanged and the sustainability of the Social Insurance Fund is not threatened.
Public consultation
The bill will be submitted for public consultation and journalists will be invited to separate briefings explaining its provisions.
A further meeting is scheduled for 28 August, when social partners are expected to table their own proposals.
According to the minister, there is a strong possibility that Finance Minister Makis Keravnos, or a representative of the Finance Ministry, will attend the Labour Advisory Body meeting on 28 August to explain in detail provisions relating to the investment policy of the Social Insurance Fund and answer relevant questions.
Tight timetable
The timetable remains particularly tight, given the goal of submitting the bill to parliament by 20 September.
This leaves just one month for consultations and discussions among social partners and political parties in an effort to secure the broadest possible consensus.
The Labour Minister said he is optimistic that the reform can be implemented from the beginning of the new year, allowing pension increases to be reflected in February payments.
Provident funds
Provident funds will not be addressed at this stage, although the government remains committed to achieving a framework agreement among social partners.
Given the sharply opposing positions of the various stakeholders, such an agreement is widely considered difficult, if not impossible.
Nevertheless, the ministry says it is determined to proceed with legislation covering the first pillar of the pension system even if no agreement is reached on the second pillar.
Trade unions continue to demand mandatory participation in provident funds, a proposal strongly opposed by employers and regarded as a major point of contention between the two sides.
