The new model for the supplementary insurance of young people was activated, as from January 1, 2022 the new Supplementary Capital Insurance Fund (TEKA) started operating and welcomes young people entering the labor market for the first time from 1/1/2022 as employees with obligation to be covered by ancillary insurance. From 1/1/2023, all other insured under the age of 35 will be able to voluntarily join TEKA.
TEKA is the Fund that will manage the personal individual accounts of the new insured (“individual piggy banks”) and is the body implementing the provisions of the law “Insurance Reform for the Young Generation” (Law 4826/2021), which was passed last year. September. The central pillar of the new model is the introduction of “individual piggy banks” for the supplementary pensions of new entrants to the labor market, as well as those young people, up to 35 years old, who choose it. With this change, young people gain more control over their supplementary pension. Instead of giving their money to a general “corva”, young people will invest it on a personal basis, choosing between three investment profiles themselves.
With this reform, as mentioned in a statement of the Ministry of Labor and Social Affairs, Greece adopts the model that has been applied for many years in advanced European countries, which, among other things, reduces the risks posed to the social security system by the demographic problem. . The experience of these countries (Denmark, Sweden, the Netherlands, etc.) shows that young people can receive a supplementary pension higher than the one they receive today, through the professional management of the funds that will be invested. At the same time, the new system creates a culture of savings and has a clear growth sign, since, through the accumulation of capital, which will be channeled to the Greek economy, growth and employment will be enhanced.
The Minister of Labor and Social Affairs, Kostis Hatzidakis, stated: “The opening of the new TEKA Fund marks the beginning of the implementation of one of our basic pre-election commitments. We put auxiliary insurance on a European trajectory, introducing the capitalization system or in simple Greek the “individual piggy bank” for those who enter the labor market for the first time from January 1, 2022- and for those who are up to 35 years old and decide to join the new system from 1 January 2023. This intervention restores young people’s confidence in the insurance system, as the new insured will gain significant control over his pension and its final amount. No one else will decide for him without him. “The European experience we are following shows that the new model will lead to higher supplementary pensions from 43% to 68% for new policyholders.”
For his part, the Deputy Minister of Labor and Social Affairs, Panos Tsakloglou, noted: “With the new year, the new auxiliary capitalization insurance is implemented. The gradual conversion of supplementary insurance from distributive to capital is coming to meet the needs of the new generation, who will retire in a few decades. With the introduction of capital supplementary insurance, the exposure of social security to demographic risk is reduced, savings are created, a significant part of which will be used to finance investments in our country, boosting the growth dynamics of the Greek economy, creating strong disincentives for uninsured work. the basis for providing significantly higher pensions to the younger generation, without compromising the pensions of the existing system “.
More specifically, an information note of the Ministry of Labor and Social Affairs states the following:
«1. What is TEKA?
TEKA (Auxiliary Capital Insurance Fund) is a Legal Entity under Public Law, supervised by the Ministry of Labor and Social Affairs and is governed by a seven-member Temporary Steering Committee, until the appointment of the first BoD. within 2022. It is organized on the principles of modern governance and administration, transparency, accountability, meritocratic choice of the administration and its executives.
2. Which insured persons are included in TEKA
From 1/1/2022, 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 an obligation of supplementary insurance. It concerns, that is, public and private sector employees, and self-employed engineers and lawyers.
From 1/1/2023, it will be possible to optionally be covered by 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.
3. Contributions to TEKA
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.
4. Facilities
A condition for establishing the right to a monthly supplementary pension is the issuance of a main pension and the completion of 15 years of supplementary insurance. An important innovation of law 4826/2021 is the fact that, in cases where the right to a monthly supplementary pension is not established, the paid contributions are returned in real value to the insured upon reaching the general retirement age, which is not the case today.
Furthermore, TEKA provides for a minimum supplementary pension in case of invalidity or death of an active insured person, something that 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.
5. Individual accounts (“piggy banks”)
Each insured person has his own individual account, where the auxiliary insurance contributions he pays are accumulated and then invested in specific investment portfolios. When the time of retirement arrives, the supplementary pension of the insured is calculated on the basis of the accumulated amount of contributions and returns in his individual account. Savings are managed by TEKA with prudence, responsibility, transparency and professional competence.
The insured will be able to access his personal account, through a site and application for mobile phones, as well as through other portable electronic devices within 2022. During the first half of 2022, the content, duration and compliance process will be determined in detail. of individual accounts. The website of the new Fund – with all the necessary information for its operation – will operate at the internet address teka.gov.gr. Also, the application myteka.gov.gr will work, through which the insured will have access to their individual accounts.
6. Investment characteristics
TEKA policyholders will be offered a basic retirement-investment product (default) with a life cycle structure that will combine the appropriate mix of risk, return and insurance, for the entire working life of a typical insured, without him having to deal more by managing its contributions. The insured will be offered other pension-investment products, also with a life cycle structure, but with a different risk profile, for those who want to choose the risk rating they want to take. The insured will be automatically classified in the default portfolio and will be able, through an electronic platform, to choose a different portfolio or combination of portfolios. If he wishes, the insured will be able to change his portfolio every three years. In any case, the recommendation of TEKA to the insured will be to trust the professional managers of the Fund and to remain in the default portfolio, throughout their working life.
6. Guarantees
In TEKA, the protective function of the system against the insured is strengthened. In addition to the reimbursement of contributions in real terms in case of non-completion of fifteen years of insurance and the provision of a minimum pension in case of disability or death, mentioned earlier, the state guarantees non-negative returns to retirees of the new system. This is achieved through the explicit provision that 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. “At the same time, the state guarantees that the supplementary pensions of the ‘old’ system will continue to be calculated according to the existing rules, without any cuts at all.”
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