The Greek Old Age Security System in 2020

By Dafni Diliagka

The Greek public pension system is part of the social insurance system of Greece. It operates under public law and is enshrined in the Greek Constitution (Art. 22(5)). The origins of the Greek social insurance system can be traced back to the 19th century, when social protection was only provided to a limited range of professions. After the Second World War, social protection was extended by the adoption of Emergency Law No. 1846 of 1951. Preceded by reform efforts in the 1990s and 2000s, a major reform process was initiated in 2010, in the midst of the economic crisis, that turned the highly fragmented Greek pension system into a unified system. The process culminated in the unification of all statutory public pension funds in 2020, following the previous unification of supplementary public pension funds in 2016. As of now, ‘standard protection’ against financial risks in old age is provided through mandatory insurance in both a statutory and a supplementary public pension scheme. In addition to the contributory earnings-related pensions provided by both schemes, the statutory pension scheme also offers a modest flat-rate ‘national pension’, which is financed and guaranteed by the state. This is intended to offer a basic level of protection to most pensioners, requiring them to have made sufficient contributions during their working life and to have lived long enough in Greece. Public pension benefits can be ‘topped up’ through voluntary enrolment in private and occupational pension schemes, which are incentivised by tax reliefs. Elderly residents who do not qualify for any old age pension and have no further means to support themselves can claim social assistance benefits which shall provide a ‘minimum’ level of protection.

Standard Protection in Old Age

Standard protection is provided by mandatory insurance in the statutory old age pension scheme (Σύστημα Κύριας Κοινωνικής Ασφάλισης) and the supplementary pension insurance scheme (Σύστημα Επικουρικής Κοινωνικής Ασφάλισης). Insurance in both public schemes is mandatory for the entire workforce, namely for all persons in employment, the self-employed, and agricultural workers. There are no options for voluntary insurance in these schemes, nor can persons choose to opt in or opt out from mandatory insurance. Benefits of the statutory old age pension scheme comprise two components: an earnings-related ‘contributory pension’ (αναλογική σύνταξη) which is financed by insurance contributions on a PAYG basis, and a tax-financed, flat-rate ‘national pension’ (εθνική σύνταξη) that provides a basic level of protection. A full ‘contributory pension’ of the statutory scheme is provided to persons at the age of 67 or, respectively, at the age of 62 with an insurance record of 40 years. The benefit is paid by the unified public pension fund e-EFKA (Ηλεκτρονικός Ενιαίος Φορέας Κοινωνικής Ασφάλισης), an independent public legal entity governed by public law. The full flat-rate ‘national pension’ is provided to pensioners with an insurance record of 20 years and 40 years of residence in Greece (between the age of 17 and 67), and is paid entirely out of the state budget. It is reduced proportionally for each year of contribution and each year of residence that falls below these thresholds. The minimum requirement for the national pension is 15 years of residence and 15 years of insurance in the statutory scheme. Pension benefits of the supplementary public pension scheme complement those of the statutory scheme and are provided by the auxiliary pension fund E.T.E.A.E.P (Ενιαίο Ταμείο Επικουρικής Ασφάλισης και Εφάπαξ Παροχών), which is financed on a PAYG basis solely from contributions of employers and employees. The supplementary scheme was turned into a notional defined contribution system (NDC) in 2012.

Top-Ups

Public pension benefits can be topped up by voluntary participation in occupational pension insurance schemes (Επαγγελματική Σύνταξη) and private pension schemes (Ιδιωτική Σύνταξη). Insurance in an occupational pension scheme is usually offered to employees of a given enterprise based on collective agreements (concluded between the employer/the employer association and the trade union) with possibilities for opting out or a collective labour contract (between the employees and the employer). Although occupational pension schemes have been introduced in 2002, these schemes are still not well-developed in Greece. Further, and with regard to private pension schemes, individuals have the option of creating their personal pension savings accounts, choosing between various conditions. Every person who has turned 18 can participate in a voluntary private pension scheme by making instalments on a monthly or other temporal basis. Participation in occupational and private pension schemes is supported by the state through tax reliefs and incentives.

Minimum

Elderly persons with insufficient financial means who are not eligible for the flat-rate ‘national pension’ of the statutory old age pension scheme that guarantees a basic level of protection are granted a social solidarity allowance for uninsured elders (επίδομα ανασφάλιστων υπερηλίκων). It is a means-tested, flat-rate social assistance benefit financed by the public tax revenue that guarantees a minimum level of protection. To qualify for the full social assistance benefit, an individual has to have lived in Greece for 35 years. For individuals with shorter periods of residence, but at least 15 years of residence (between the age of 17 and 67), the benefit is reduced accordingly. The social solidarity allowance for uninsured elders and the ‘national pension’ of the statutory old age pension scheme cannot be claimed simultaneously.