The new supplementary insurance system for new entrants to the labor market will be implemented from 1 January 2022.
Key features of the new system are the creation of an individual account (“piggy bank”) for each new insured, and the introduction of capitalization elements in the supplementary insurance with the establishment of the public Auxiliary Capital Insurance Fund (TEKA), in order to effectively deal with the risk arising from the demographic aging of the population.
According to the Ministry of Labor and Social Affairs, the new insurance reform strengthens the viability of the insurance system, which is achieved through the spread of insurance risk, maintains the public character, protects existing pensions – main and auxiliary – gives impetus to the development process of the economy, through the investment of part of the contributions of the insured of the new system in the Greek economy, the transparency in the management of the insured’s resources is promoted, higher supplementary pensions are ensured for the new insured, their trust in the social security system is restored and strong disincentives are created for “Black” – undeclared work.
“Major structural reform with a view to the future”
Speaking to APE-MPE, the Deputy Minister of Labor and Social Affairs, Panos Tsakloglou, states that the gradual conversion of auxiliary insurance from distributive to capitalization is an important structural reform, with a view to the future. “It reduces the exposure of social security to demographic risk and, thus, improves the stability of the pension system. It creates savings, a significant part of which will be invested in the Greek economy, giving impetus to the development process. It provides strong disincentives for uninsured work and restores the new generation’s confidence in social security, “said the Undersecretary of State for Labor and Social Affairs. from the supplementary pensions of the current system. Finally, as he emphasizes, “the state guarantees for non-negative returns on investments for the pensioners of the new system and for the calculation of the pensions of the existing system without any change and, therefore, without any cuts, are a practical application of intergenerational solidarity”.
Specifically, for each new insured, an individual account is created (“piggy bank”) in which the insurance contributions paid by the employer for the employee or by him, if he is self-employed, will be recorded, as well as the return on investments corresponding to the contributions. of. So, instead of the new employees’ contributions financing the supplementary pensions of the current retirees, they will be saved and invested for the pensions of the insured themselves.
Also, at any time, the insured will be able to access the account of his personal “piggy bank” through the screen of the computer or mobile phone, as, for example, he can now control the movement of his bank account. The insured will have the opportunity to access his personal account, through a site and application for mobile phones, as well as through other mobile electronic devices, within 2022. The website of the new Fund, with all the necessary information, will operate at the teka internet address .gov.gr, while the application myteka.gov.gr will be activated, through which the insured will have access to their individual accounts.
Under the new auxiliary insurance system, the new public Auxiliary Capital Insurance Fund (TEKA) is established, which will have the sole responsibility for managing the contributions of the insured.
From January 1, 2022, all those who enter the labor market for the first time, regardless of age, will be subject to TEKA for their supplementary insurance, if they are employed in a sector for which there is a supplementary insurance obligation. It concerns, that is, public and private sector employees, engineers and lawyers and, from January 1, 2023, it will be possible to be subject to optional TEKA insurance:
– Insured in the auxiliary insurance branch of e-EFKA (former ETEAEP) who have been born from 1/1/1987 onwards and who wish to move from the aforementioned branch to TEKA. The specific category of insured can exercise its right to be included in the insurance of TEKA, until 31/12/2023.
– Employees who are employed in sectors for which there is no obligation to be covered by supplementary insurance (eg self-employed, farmers, self-employed health professionals) and who retain the right to join TEKA, until they reach the age of 35.
Auxiliary insurance contributions will be collected by e-EFKA and will be credited to the individual accounts of the insured. The amount of contributions does not differ from that of the current system, ie it is 3.25% for the employer and 3.25% for the employee, until May 2022 and at 3% for each one from now on.
At the same time, as the Ministry of Labor and Social Affairs has already announced, the new system provides four state guarantees, which are the following:
First, the pensions of existing retirees are not affected.
Second, the state guarantees the payment of a minimum compensatory monthly supplementary pension, which is calculated on the basis of the actual value of the contributions paid by the insured. Consequently, the insured are awarded a supplementary pension at least equal to that corresponding to the contributions they have paid, taking into account inflation. According to the ministry, in practice this means that the state guarantees non-negative returns and that TEKA policyholders will be protected against investment risk, as only returns are subject to market fluctuations and not their paid-up capital.
Thirdly, TEKA provides for a minimum supplementary pension in case of disability or death of an active insured person, which does not apply to the existing system of supplementary insurance of mental capitalization. In particular, if the balance of the individual account of the insured is less than the amount of the contributions of the insured with 15 years of insurance and remuneration equal to the statutory minimum wage of the full-time employee, the state budget covers the difference and then the amount of his pension is calculated insured or other legal persons.
Fourth, in cases where the right to a monthly supplementary pension is not established, ie if for any reason no main pension is awarded or 15 years of supplementary insurance are not completed, the contributions paid are reimbursed in real value to the insured upon reaching the general retirement age, which is not valid today. In case of transfer of an insured person from the auxiliary insurance branch of e-EFKA to TEKA, (ie in cases of optional affiliation), the supplementary pension consists of two parts: a part from the auxiliary insurance branch of e-EFKA and a part from TEKA for the contributions corresponding to each of the Funds. The 15-year period is calculated cumulatively for the insurance in the two Funds “.
Finally, the Ministry of Labor and Social Affairs in a recent information note states that the investment function of the Fund will be developed gradually in three phases (periods) and points out that the following will apply: “the level, structure and rating of placement risk of the savings of the insured, is the absolute responsibility of the board of TEKA.
During the first – transitional – period, the investments of the insured contributions will be invested in very low risk financial products (high interest deposits of the Joint Capital of Legal Entities under Public Law and Insurance Bodies managed by the Bank of Greece). The transitional period will last up to six months, after the election of the board of directors, so that it has the necessary time to formulate and parameterize the investment strategy of the Fund.
During the second period, the insured will be offered only the default portfolio with investments in an expanded and diversified securities portfolio, which will have a life cycle structure. In practice, at this stage, all policyholders will have the same type of portfolio, due to their uniform / similar age. The investment committee of EDEKT SA will support the board of directors in shaping the investment strategy of the Fund, while EDEKT SA will operate as an external manager and will support the implementation of the investment strategy of the Fund. The second phase is expected to last until the end of 2024. During this period, the Fund’s Investment Division will be staffed and will have operational competence.
During the third period (from the beginning of 2025 onwards), after the addition of the optionally insured in TEKA (born, after 1/1/1987), the life cycle structure in the default portfolio will acquire a functional dimension. That is, the portfolios of policyholders will vary in level of risk depending on their age. At the same time, the insured will be offered other suitably formulated retirement / investment risk-rated products for those insured who wish to choose and adjust the risk level of their retirement savings themselves.
At the same time, the Fund will set up its own Investment Committee, the Investment Directorate will take on a more active role, while EDEKT SA will continue to support the investment function of TEKA as an external manager.
Within two years from the beginning of the third period, TEKA will create a register of certified external managers, expanding the range of its investment options “.
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