As Kyriakos Mitsotakis pointed out, with the new system “every employee can see through the MyTEKA application that this piggy bank is being filled month by month, year by year”, thanks to the transparent digital infrastructure
Prime Minister Kyriakos Mitsotakis had a discussion with working young people about the new insurance, in the context of the presentation of the Auxiliary Capital Insurance Fund (TEKA).
“The most important element of the new system is the concept of the “individual piggy bank”, and the young person himself will have a much greater interest in seeking not to work in the gray economy at all,” Kyriakos Mitsotakis emphasized initially and continued:
“With the new system that we have at our disposal, every young person who will work for even an hour without insurance will know that he is losing contributions from his own “personal piggy bank”, which, added together, will allow him after several decades, when he retires, to have a supplementary pension much better than the one he would have had”.
He also explained the strong disincentive against undeclared employment offered by the new capitalized supplementary insurance system.
As Kyriakos Mitsotakis pointed out, with the new system “every employee can see through the MyTEKA application that this piggy bank is being filled month by month, year by year”, thanks also to the transparent digital infrastructure that allows the insured to constantly check the their “personal piggy bank”.
The Prime Minister also highlighted the importance of a system that responds to the chronic demographic challenges faced by many countries. “The workers who support the pensions of the previous generation are constantly decreasing, the population in all Western countries is aging and there are fewer redistributive resources to be able to finance the insurance system of the previous generations,” he said.
“So, one of the most important elements of this system is precisely that it generates resources that now belong to the insured themselves. In other words, the contribution of the insured person is not directed to finance the pension of the father or the grandfather in terms of supplementary insurance, because in terms of the main insurance the system remains redistributive”, added Kyriakos Mitsotakis.
Mr. Mitsotakis underlined that the state guarantees the contributions of each insured person, which means that there is no risk of loss. “You have the guarantee that your money will not be lost. Very important. A private saver may not have it, this I think will create a proper investment culture,” said the Prime Minister.
During the discussion, four young people expressed their concerns about the consequences of “black” work on their insurance rights but also about the risks posed by the current age composition of the workforce in terms of securing their pension in the future. They also emphasized the importance of seamless digital access to the “individual piggy bank” but also the need for young people to acquire basic knowledge regarding investment products and strategies they could follow with the resources they will have at their disposal.
TEKA – The supplementary insurance system for young people, with an “individual piggy bank” and guaranteeing higher pensions
The reform of the supplementary insurance, which concerns new entrants to the labor market and will subsequently include, on a voluntary basis, workers up to 35 years of age, aims to ensure higher pensions for the younger generation, to deal with the consequences of the demographic problem, to stimulate growth dynamics of the economy and the restoration of the confidence of younger employees in the social security system.
In contrast to the existing distribution system, where young people’s contributions are channeled to pay the pensions of current retirees, TEKA takes care of the saving and investment of supplementary insurance contributions through the “personal piggy bank” of each insured person.
In this way, a large reserve is created which, through various investments and depending on the investment profile chosen by each beneficiary, will increase the benefits of the insured throughout their working life. At the same time, the system provides positive disincentives against undeclared work, since workers will have a personal benefit of not losing contributions which will be added to their “personal piggy bank”.
The experience of many countries shows that in the long run funded systems ensure higher pensions than distributed ones. At the same time, they allow the formation of a large savings capital that is channeled into investments, to the benefit of the entire economy.
TEKA is a public fund. The state guarantees that, in any case, when the insured members of the capitalization system retire, they will receive their contributions as a minimum, taking inflation into account.
In addition, the system is transparent, allowing the insured to check at any time electronically, via computer or app, the resources accumulated in their “personal piggy bank”. It does not affect the pensions of those who have already retired, nor does it affect the calculation of the supplementary pensions of the insured who remain in the current distribution system.
“The “individual piggy banks” for young people, in supplementary pensions, is a European reform. It is an opening of the state to young people, especially young workers. A reform that in any case deserves young people, who feel that the political system does not pay the necessary attention to their concerns. Today, 50 thousand young people have already joined the new system. And although by the end of the year we estimate that around 80,000 will have joined, it will be very interesting to see what will happen from January 1, 2023, when the rest of the young people up to the age of 35 will also start to join voluntarily,” he stressed during the presentation of the new system by the Minister of Labor and Social Affairs, Kostis Hatzidakis.
“The establishment of the public Subsidiary Capital Insurance Fund (TEKA) is a reform intervention of the government focusing on the new generation. The transformation of supplementary insurance from distributive to capitalized is important for four, mainly, reasons: it limits the exposure of social security to demographic risk and strengthens the stability of the insurance system, it creates resources, a significant part of which will be invested in the Greek economy, giving impetus to the development process, provides strong disincentives for uninsured work and strengthens young people’s confidence in the insurance system, and based on the experience of countries with mature funded pension systems, it is estimated that the pensions of the new system will be significantly higher than those of the existing one,” he noted the Deputy Minister of Labor and Social Affairs, Panos Tsakloglou.
“In July 2021, we tabled the bill for the youth capitalization subsidy. Today, exactly one year later, we have a functioning Fund, numbering 50,000 insured persons and increasing its dynamics with geometrical progress: 80,000 insured persons by the end of the year. In this first period of its operation, we put special emphasis on developing the basic applications for the service of the insured: register, detailed periodic statement, notices for self-employed professionals, website, inclusion in the service number 1555 and many more. In the next period, the MyTEKA application will be available, with which the insured can access their individual account. And within 2023, the basic investment product is being developed, while it is also the year that workers up to the age of 35 will be able to choose to join TEKA”, said the General Secretary of Social Insurance and head of TEKA’s Temporary Steering Committee, Pavlina Karasiotou.
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