Share of wage increases in new pensions [παραδείγματα] 2024-07-12 11:42:42

The increase in wages will be reflected every year in the Wage Change Index, the mechanism of which will be determined by the conclusion of a working group consisting of officials from the Ministry of Labor and EL.STAT, which was established by decision of the Deputy Minister of Labor and Social Security of Panos Tsakloglou.

The finding will be delivered by December 15, 2024, so that the Wage Change Index can begin to be applied to the calculation of the new pensions for applications submitted from 1/1/2025.

The salary change index will be used to increase the pensionable earnings of those who leave from 2025 onwards, but also to increase the social security contributions of the self-employed from 2025 onwards.

The inflation-adjustment of pensionable earnings now in force will be maintained for the period 2002-2024.

The conclusion will include all the categories of insured persons to which the new wage index will be applied, as well as all the wage data that will be used to calculate the wage increase in the economy as a whole. The change in the wage index will take into account wage increases in the public and private sector, full and part-time workers, the increase in daily wages, hourly wages, etc.

The new system will lead to larger pensions as pay rises always move above inflation, so with the wage index a share of the pay rise will go into the contributory pension.

For example, a policyholder retiring in 2024 will have an increase in pensionable earnings at the rate of inflation for the years 2002-2023, while policyholders due to retire from 2025 will have pensionable earnings adjusted based on inflation for the years 2002-2023 and based on the wage index from 2024 onwards. Average wage growth for 2024 is estimated at around 5% to 5.7% by the Bank of Greece, and inflation at 2.9%. If the salary change index reaches 5% as predicted by the BoE, then with the new system the 2024 salaries for those retiring in 2025 will increase by 5%, while with inflation they would increase by 2.9%.

The higher the wages move in 2024, the greater will be the increase that will be “transferred” to the compensatory pension of the insured who will retire in 2025 and the following years.

With the wage index the increase in the contributory pension can be greater compared to the increase that would occur if the change in pensionable earnings continued to be based on inflation.

EXAMPLES

If wage growth in 2024 is 5%, then:

– An insured person who currently has a pensionable salary of 1,700 euros and intends to retire in 2025, will have a 5% increase and the pensionable salary will be 1,785 euros. If he has 40 years of insurance, he will receive a compensatory pension of 892.5 euros. If his earnings increased with the inflation of 2024 (2.9%), the pensionable salary would be 1,750 euros and the compensatory pension 874 euros. The profit from the new system is 18 euros in addition to the compensatory pension.

– An insured person with a pensionable salary of 2,000 euros who will retire in 2025, with a 5% increase from the Wage Index will have a pensionable salary of 2,100 euros. With 40 years of insurance, he will receive a compensatory pension of 1,050 euros. If his earnings were to increase with the inflation of 2024 (2.9%), the pensionable salary would be 2,060 euros and the compensatory pension 1,030 euros. The profit from the new system is 20 euros in addition to the compensatory pension.