According to information from Sunday’s Free Press, the assessment made by the experts of the Ministry of Labor is that the new system will “de facto” lead to an increase in new compensatory pensions and in the long term the improvement of salaries for future pensioners will reach 36 % relative to the amounts they would receive if their earnings continued to rise with inflation.
The difference with the new system will be seen from the very first year, as those insured who will retire in 2025 will get a larger compensatory pension than those who retire in 2024, even if they have the same years of insurance. Younger policyholders who will retire in the coming years will have more benefits.
The system for calculating pensionable earnings will be two-fold from next year, as earnings will increase by inflation for the years from 2002 to 2024 and by the wage growth index from 2025 onwards.
If in 2024 the wage index registers an increase of 5%, this percentage will also increase the salary that will be taken into account for the compensatory pension of those who leave in 2025. However, if inflation remained, then the increase for the pensionable salary would not would exceed 3%. This means that the higher the pensionable salary, the higher the compensatory pension will be.
The new system has already been passed since 2016 with Law 4387/2016 (Katrougalou Law) and the subsequent Law 4670/2020 (Vroutsi Law), which improved the pension replacement rates after 30 years of insurance.
Five wage indicators
The new mechanism will be based on five wage indicators compiled by the National Statistics Authority, on behalf of the Ministry of Labour.
Of the five indicators, the main ones will be two. The first will be for calculating pensions and the second will be used to increase self-employed contributions.
For pensions, wage increases in the public and private sectors will be taken into account, while for contributions, only wage increases in the private sector will be taken into account, which are generally smaller than in the public sector. With this separation, the increase in State salaries, which for 2024 was over 7%, will not be transferred to contributions. In contrast, with the private sector wage growth index, professional contributions are expected to increase by around 3.5% in 2025.
The remaining individual indicators will be used for other policies of the Ministry of Labour, such as for determining increases in the State, the support of low wages, but also the wider recording of wages at the regional level, as well as in various branches of the economy.
The 5 salary indicators that the Ministry of Labor will have at its disposal from ELSTAT are:
- Wage index for determining pensionable earnings. It will consist of the salary increases of all employees in the public and private sector and will be used to calculate compensatory pensions. New pensions awarded from 1/1/2025 will have a share of the previous year’s salary increases. The higher the wages move in 2024, the greater will be the increase that will be “transferred” to the compensatory pension of those who retire in 2025 and the following years.
- Wage index of workers in the private sector. This index will be used to increase contributions to freelancers and for the limit of insurable earnings, i.e. the salary up to which private sector workers will have insurance deductions (note: currently deductions are imposed on wages up to 7,335 euro).
- Salary index for the evolution of the salaries of civil servants, which will be the point of reference for the current salary policy in the State.
- Wage index that will “record” wages in occasional and part-time employment, for drawing up support policies for very low incomes.
- Wage index at regional and sectoral level, which will track changes in wages of workers in enterprises in the region, as well as in sectors that employ many workers (eg tourism, catering, transport, industries, etc.).
What changes on contributions of professionals from time
Freelancers, the self-employed and farmers’ contributions, rather than rising each year by the previous year’s rate of increase in inflation, will from 2025 onwards be linked to private sector workers’ wage increases in the previous year. This means in practice that if wages in the private sector increase by an average of 3.5% for 2024, then professional contributions will also increase by 3.5% for 2025.
At the same time, in 2025 more than 300,000 private sector companies will see a reduction in insurance contributions by half or even one percentage point, if the government decides to implement the reduction in one installment, instead of the two originally planned. The original plan predicted that total employer and employee contributions in the private sector would rise from 36.16% today to 35.66% in 2025, a 0.5% reduction, with the other half of the reduction applied in 2027.
The latest information speaks of the application of the reduction in one installment, i.e. by 1 unit within 2025, with the most likely version that the reduction will come from the employer contribution in favor of the EOPYY, which will be set at 3.55% from 4.55%.
How and how much the new pensions will increase with the wage index for those leaving in 2025
| Pensionable salary in 2024 (1) | Pensionable salary in 2025 (2) | With the same insurance years for 2024 and 2025 | With an additional year of insurance in 2025 | ||||
| Pension with 38 years in 2024 | Pension with 38 years in 2025 | Annual benefit with pension in 2025 | Pension with 40 years in 2025 | ||||
| Annual benefit with pension in 2025 | 1.230€ | 1.285€ | 1.004€ | 1.015€ | 126€ | 1.036€ | 1.080€ |
| 526€ | 1.335€ | 1.395€ | 1.052€ | 1.064€ | 137€ | 1.087€ | 1.135€ |
| 571€ | 1.440€ | 1.505€ | 1.101€ | 1.113€ | 147€ | 1.138€ | 1.190€ |
| 616€ | 1.545€ | 1.615€ | 1.149€ | 1.162€ | 158€ | 1.190€ | 1.245€ |
| 661€ | 1.650€ | 1.724€ | 1.198€ | 1.212€ | 169€ | 1.241€ | 1.300€ |
| 706€ | 1.755€ | 1.834€ | 1.246€ | 1.261€ | 180€ | 1.292€ | 1.354€ |
| 751€ | 1.860€ | 1.944€ | 1.294€ | 1.310€ | 190€ | 1.343€ | 1.409€ |
| 796€ | 2.070€ | 2.163€ | 1.391€ | 1.409€ | 212€ | 1.445€ | 1.519€ |
| 886€ | 2.490€ | 2.602€ | 1.585€ | 1.606€ | 255€ | 1.650€ | 1.739€ |
| 1.066€ | 2.805€ | 2.931€ | 1.730€ | 1.754€ | 287€ | 1.803€ | 1.903€ |
| 1.200€ | 3.120€ | 3.260€ | 1.875€ | 1.901€ | 319€ | 1.957€ | 2.068€ |
- 1.335€
3.5% increase from 2023 inflation. 2. Estimated 4.5% increase from 2024 Wage Index.
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In the pensions of 2024, the increase of 2.6% for 2025 has also been calculated.
#Pensions #Rises #futures #leaving #onwards #πίνακες
