Continuous increases in age limits and reductions in the amounts that pensioners will receive
Not that we didn’t know it, but now it’s coming: the reason for further raising the retirement age by a year and a half, to 63.5 years from the current 62 for a full pension with 40 years of insurance and to 68.5 years for receiving old age pension with 15 years of insurance, which will apparently be decided in 2027 and will probably be implemented from the following year, in 2028.
The bad news comes from the actuarial study for the year 2024 prepared and sent by the National Actuarial Authority to the European body Aging Working Group (AWG), which monitors the pension systems of all European states and, depending on demographic developments, proposes changes to governments in pensions. In the case of Greece, however, revolutionary changes are not required, because everything needed for the insurance to remain viable has been legislated on memoranda, so the governments will simply implement them.
They predicted the… memoranda
Since the first years of the memoranda, in Greece a mechanism has been provided based on Law 3863/2011 that links the retirement age to life expectancy and there is a provision that from the year 2021 onwards the retirement age will increase according to life expectancy every three years . Under this law the first increase in the retirement age was due to take place in the period 2024-27, but the high number of deaths from the Covid pandemic in 2020-21 wiped out the gains in life expectancy of the immediately preceding period and the law does not apply this year .
However, according to the National Actuarial Authority’s report for 2024, published last week, we will not be spared increases in the retirement age during the period 2027-30, as the retirement age is expected to increase by then 62 years which is currently for full retirement with 40 years of insurance at 63.5 years and gradually, per decade, new increases in the age limit by one year at a time, until the completion of 67.5 years by 2070. A corresponding increase in age limit for receiving a reduced pension with more than 15 years of insurance, to 63.5 years in 2027 and gradually by one year per decade until reaching 67.5 years in 2070, but also increasing the age limit for receiving a full pension with more from 15 years of insurance from the age of 67 which is currently 68.5 years in 2027 and then by one year per decade until the completion of 72.5 years in 2070.
The basic condition on which the specific regulations are based are the forecasts of the European authorities for the demographic developments of the coming decades in Greece, which take into account the data of the 2021 census, i.e. the demographic decline of the country, combined with the necessity to remain viable the insurance in the context of the country’s fiscal restrictions, i.e. to provide pensions without further increasing the public debt.
The numbers of the study
In this context, the study of the National Actuarial Authority states:
- The population of Greece from 10.43 million in 2022 will decrease to 10 million in 2030, 9.47 million in 2040, 8.93 million in 2050, 8.31 million in 2060 and 7.77 million. in 2070.
- The dependency ratio of the over 65s relative to the economically active population aged 20-64 will increase from 39 in 2022 to 46 in 2030, 60.6 in 2040, 74.4 in 2050 but will then begin to decline (because the elderly will also have declined) to 72.1 in 2060 and 66 in 2070.
- Life expectancy for men at 65 – the main driver of pension age increases – will go from 18.7 years in 2022 to 23.9 years by 2070 and for women from 21, 7 in 26.7 years.
There will be no migration reversal: but net migration over the population will be reduced from 0.2% in 2022 to 0% in 2030, 0.1% in 2040 and 2050 and 0.2% from 2060 onwards.
Labor force participation will increase for workers aged 20-64 from 75.4% in 2022 to 79.9% by 2070 and for workers aged 20-74 from 64.7% in 2022 to 69 .7% until 2070. That is, more and more older people will be working, as employment is projected to increase for workers aged 55-64 from 57.4% in 2022 to 78.2% in 2070 and for workers aged 65-74 from 8.6% in 2022 to 23.3% in 2070.
The average contribution period is also projected to increase from 31.9 years today to 38.4 years by 2070.
The effective retirement age, which in 2022 was 63.8 for men and 64.1 for women, will rise to 65.5 by 2030 with changes to retirement age limits starting in 2027 , 66.4 by 2040, 66.6 by 2050, 66.9 by 2060 and 67.9 by 2070.
Total expenditure on primary pensions is projected to decline from 12.6% of GDP in 2022 to 11% in 2030, 11.9% in 2050 and 10.7% by 2070. Gross public pension expenditure, which in 2022 amounted to 14.5% of GDP, will be gradually reduced by 2.5% to 12% in 2070, thus ensuring the so-called “sustainability of the insurance”.
This sustainability, however, given that the number of pensioners in relation to the economically active and employed will increase, will require to ensure it apart from increasing the retirement age and reducing the overall rate of salary replacement from retirement, which is gradually reduced from 76% in 2022 to 65% by 2040 and 53% by 2070.
Young people are leaving and the demographic is “swelling”
The development model of the Mitsotakis government forces citizens to work until old age
With the candy about “successful economic governance”, the government of Kyriakos Mitsotakis shows in the polls that it convinces a large part of the citizens that something is going well in the country, however the report of the National Actuarial Authority prescribes for the immediate and medium-term future a picture to say the least disheartening .
The historical accident of the national bankruptcy of 2010-12 is primarily to blame for this dark future, however, for what happens from 2019 onwards, after the country’s exit from close foreign guardianship, the Greek governments have a significant share of responsibility, in in this case the Mitsotakis options for a national shift to a third-world model of cheap development based on construction, real estate and tourism, based on cheap labor and low tax rates for businesses.
This model means low, unattractive wages and therefore continues to fuel the flight of well-educated young people abroad, as it has even been combined with anti-immigrant policies and led to the flight of many foreigners. The people who started to leave from the years of the memorials and are still leaving belong to the productive ages that work and create families. The result of this great exodus is the pre-viral demographic withering of Greece – it has begun, is progressing and in a few years will assume the proportions of the demographic withering that took place in most of the Balkan countries when they suffered the shock of the transition from existing socialism to the unregulated market .
Under these conditions, says the study of the National Actuarial Authority, in order for the insurance system to remain viable, i.e. for pensions to be paid, the citizens of Greece must work until old age, pay more years of contributions and receive less money .
Raising the retirement age to 72 will certainly take a few decades, but 2027 will most likely be the year in which the first increase in the retirement age by a year and a half will be legislated. This is evident not only from the fact that the Deputy Minister of Social Security Panagiotis Tsakloglou guarantees that until that year there will be no increase in the retirement age limit (but not after that), but also from the fact that the study of the National Actuarial Authority places 2030 in the middle real retirement age at 65.5 years – that is one and a half to two years higher than it was in 2022.
Raising the age limit will also increase contribution time, so that current and future generations of workers will pay contributions for more years, although through a gradual reduction in the replacement rate they will receive smaller pensions.
And so the pensions, which have been decreasing for years, will continue to decrease, even falling below the minimum levels of decent living, because this was foreseen by the system of calculating the main and auxiliary pensions under the Katrougalou law and also because the labor market is jungle. So we have more and more low-wage workers either because they lost three years or because they work part-time or on a rotating basis for wages in the order of 400 euros, all of whom will end up getting a pension in the coming years with a low pensionable wage. Correspondingly, because the market situation is suffocating, we have more and more freelancers and farmers who are in debt to their fund and are not sure if they will ever be able to retire. And the worst: it may be that civil servants, or at least some categories of them, are able to stay in their jobs until old age, but is there ever a chance that private sector employers choose workers over 60 and 65 years old? What will they do when they can’t find work?
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