PensionReforms
Veritas propter investigationem [Truth through research]
 
TitlePathways to a universal basic pension in Greece (2011)
AuthorsManos Matsaganis
 Chrysa Leventi
InstitutionAthens University of Economics & Business
TopicsPublic pension reform
 Tier 1 pension
 Fiscal issues
 Income-tested benefits
CountryGreece
Date Published2011
Date posted on PR22 Jul 2014
  
  
 
Matsaganis, M Leventi, C, (2011). Pathways to a universal basic pension in Greece (2011) Athens University of Economics & Business,

PensionReforms’ summary and comments

Greece was forced to face some fiscal realities, starting in November 2009.  A “harsh austerity programme” started in May 2010, in return for a sovereign rescue package.  Part of the reforms saw the introduction of a ‘basic pension’, starting in 2015 and payable from age 67.  Without change, Greece faced an increase in pension costs to 19.4% of GDP in 2035 and on up to 24.1% by 2060.

 

“The [2011] paper attempts to explain why, paradoxically, the crisis made more realistic a universal basic pension in Greece.  We argue, firstly, that social insurance pensions may be ripe for path-breaking reform if heavily subsidised in a non-transparent way, and, secondly, that any progress towards basic income is likely to be gradual, uneven and specific to the national policy context.”

 

The report suggests that “Somewhat paradoxically, the severe economic crisis and the resulting fiscal squeeze have made a universal basic pension more realistic, not less, as part of a solution to a fairer, financially more sustainable pension system in Greece.”

 

As the report acknowledges, the new ‘basic pension’ is not a Universal Pension because of the ‘all or nothing’ income test.  The report suggests that it is a step “on the way to full universality”.  However, it sees it as a way to reduce elderly poverty, a significant problem in Greece (see here) – in the mid-2000s, about 21% of households headed by someone of retirement age were in poverty.

 

“While the Greek case is clearly exceptional, our paper offers at least two more general insights.  The first is that social insurance pensions may be ripe for reform if heavily supported by tax funding in a non-transparent way.  Under the circumstances, separating contributory components from non-contributory ones emerges as an obvious, fair and viable solution. From there, a universal basic pension could only be one short step away.”

 

The “second insight” suggests that circumstances can conspire to make the move towards a ‘basic income’ an “unchallengeable force”.

 

PensionReforms notes that the new basic pension is modest, well below the poverty line.  The income test eliminates individuals only if their personal income is greater than €450 a month (or if family income exceeds €900 a month), so the total retirement income of an individual who qualifies could be as high as €810 a month.  There apparently is no partial clawback of a basic pension: a person receives either the full €360 pension, or nothing.

 

Those with 15 or more years of contribution history are eligible for a basic minimum or ‘proportional pension’, not a basic pension.  The difference is important, because a minimum pension is equivalent to a basic pension with 100% clawback from other pension income.  Those with a contributory pension smaller than €496 a month are eligible for a top-up to lift their pension income to that level.  Those with pensions of €496 a month or more receive nothing.  A spouse’s pension apparently does not affect this calculation, but a widow(er)’s pension might.

 

PensionReforms suggests that these shortcomings will need to be addressed in due course.  (File size 188 KB; 18 pp) 691

 

 

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