Early retirement proposal a ‘white elephant’

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Trade unions claim Labour Minister Yiannis Panayiotou’s proposal to waive a 12% penalty on early pensions if the retiree has contributed at least 40 years of work and contributions at 63 is a white elephant.

Panayiotou announced last month that the government plans to drastically reduce or waive a 12% penalty on early pensions if the retiree has contributed at least 40 years of work and contributions at 63, up from the current 33 years.

The proposal comes after months of consultations between trade unions, employers, and government to address the issue raised by unions and retiree associations.

With the retirement age of 65, employees who have completed at least 33 years of work and contributions can retire at 63 but with an actuarial reduction of 12%.

AKEL-affiliated workers’ union PEO said: “The main criterion (40 years of contributions) is problematic” and does not do away with the injustice caused by the law in application.

PEO said the minister’s proposal directly results from the problematic spending margin for the penalty reduction set at an additional €13 mln annual increase.

“The fact that the ministry has predetermined the spending margin of the Social Insurance Fund essentially undermines the possibility of dialogue for a substantial improvement of the ministry’s proposal,” notes PEO.

The Minister of Labour confirmed the restriction, repeating that the government is open to suggestions “provided they are limited within the framework of the economic possibilities determined by the actuarial study”.

“The organisation will continue to strive for the reform of the pension system, in a way that everyone is guaranteed a sufficient and dignifying pension, and for the creation of a real reserve in the Social Insurance Fund,” said PEO.

DISY-affiliated union SEK argued that “the proposal does not treat all pensioners equally, creating further inequalities”.

In comments to news site Stockwatch, SEK General Secretary Andreas Matsas said the minister’s proposal is not consistent with the philosophy governing the Social Insurance Fund.

“We intend to submit a specific and comprehensive proposal based on the principle that the issue must be approached horizontally because contributors and beneficiaries have equal rights, and regulations should be equal for all,” said Matsas.

The government set the age of normal retirement in 2012 at 65, with legal provisions included so that for each month someone opts to collect their pension earlier, the pension is reduced by 0.5% for every month.

In recent years, Opposition parties and trade unions have contested the 12% penalty on early retirement, with demonstrations taking place.

The Opposition claims that faced with the pandemic, the rise in unemployment and the inability of many to re-enter the workforce after a prolonged period of inactivity, full pensions at 63 should be restored.

If someone retires at 63 and receives a €1,000 pension, when the penalty is scrapped, they will receive €1,120.

Panayiotou reiterated on Monday that his proposal, as it stands, will positively affect 25% of pensioners who have experienced an actuarial reduction from 2012, which is about 10,000 pensioners.

These retirees will immediately receive an increase in their pension by approximately €800 per year, to which another approximately 1000 beneficiaries will be added each year.