The plan for the changes was revealed by the “Free Press” of Sunday, June 23, without any comment and much less any denial from the Ministry of Labor, because the changes are being discussed to proceed either towards the end of 2024 or at the beginning of 2025 with new insurance bill.
The 12 categories of fictitious years provided for by the provisions of laws 2084/1992 and 3996/2011 are abolished and in their place the insured (whether they have or do not have the right of redemption under these provisions) will be able to request the recognition of 5 years to complete the pensionable years.
The critical dilemma is whether the changes will affect those who have already recognized fictitious times. Officials reported in the “Insurance and Pensions” insert that the possibility of canceling the recognitions that have been paid is non-existent. However, the question of how to calculate the fictitious years in the final pensionable replacement rate is open. Here there is the possibility that those who recognized fictitious times will also be affected, as they will be counted with a lower replacement rate in the pension calculation.
With the new system, the fictitious insurance time will be taken into account to establish the pension right (e.g. a 40-year pension, of which 5 years from redemptions), but the years that will be redeemed will increase the replacement rate with a lower rate than ‘ than the actual years.
For example, under the current system, a policyholder who has 35 actual years of insurance is guaranteed a replacement rate of 37.31%. If he redeems 5 more to reach 40 years, he will get the 40 year replenishment rate, which is 50%.
With the new notional years, the 5-year buyout will help the insured to complete 40 years to reach 62 with a full pension, but the replacement rate will be less than 50%.
The reason this change is being considered is to avoid “buying” a higher pension with a vehicle the recognition of fictitious insurance time.
Thus, in the case of the purchase of a 5-year for a pension with 40 years, the replacement rate will result from the rate corresponding to the 35 actual years and from the average annual replacement rate corresponding to the total of 40 years, which comes to 1.25%. Thus, for the insured who will leave with 40 years, of which the 5 years are fictitious, the final replacement rate will be 37.31% for the 35th year plus 1.25% for each redemption year, i.e. 6.25% for the 5 fictitious years. The resulting final percentage is 43.5%, while if the 40 years is real, without redemption, the replacement percentage is 50%.
The cost of acquisitions will remain the same, i.e. each month of recognition will be redeemed with a pension contribution equal to 20% of the monthly earnings for employees, and with the amount of the monthly sector pension contribution they have chosen for professionals and farmers.
Pensions: What will change compared to the current regime
The big difference compared to the current regime is that with the new system being studied by the Ministry of Labor, the 7 notional years are limited to 5 years, but they will also be able to be redeemed by the insured who do not have the possibility to use the notional periods that apply today.
With the current regime, the insured recognize as 7 years, as long as they have fictitious times from the list of 12 categories defined by the legislation (see pages 2-3). If they do not belong to any category, they do not have the right to buy virtual time.
The 5 years can be used to establish the right to a full pension, i.e. with 40 years of insurance and an age limit of 62 years.
It will not be allowed – as is the case today for the old insured – the retrospective recognition of fictitious time to secure a pension right with the conditions of insurance time and age limit that were in force until 2012.
However, it is being considered to allow a short transition period from the passage of the changes onwards, so that old insured persons who are close to retirement age and have already applied for the redemption of notional time, to complete their pensionable years under the conditions that applied until 2012 , to be able to retire under the previous regime.
The new system will replace all categories of fictitious years that are currently available to the insured. For example, there will be no redemption of fictitious time due to military service, due to studies, due to children, due to previous service in relation to the State or due to pre-registration of freelancers and self-employed persons in their respective registers, before the start of their activity.
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