Increasing the retirement age by 1.5 years by 2035

Raising the retirement age by almost 1.5 years by 2035 and by 2.8 years by 2050, due to the expected increase in life expectancy provided to Greece by the Organization for Economic Cooperation and Development (OECD) in its annual report on pensions (Pensions at a Glance 2021).

According to the report, the increase is due to the automatic adjustment mechanism, which the EU countries have voted for since 2010, and which mainly leads in the long term to a 2 percentage point reduction in pension spending in Greece, that is, from the highest level among EU countries to 15.7%. GDP in 2019 will decline to 14.2% in 2025 and fall to 12% in the distant 2070 (unless, of course, by that time, GDP will not fall even more. Editor’s note).

The OECD, once again, under the weight of the COVID-19 global pandemic crisis, insists that securing economically and socially sustainable pensions in the future remains the biggest challenge for its member countries. He explained that even though pensions were maintained during the pandemic, the financial situation of pensions deteriorated due to the loss of contributions (the deficit was mainly covered by the state budget) and the placement of pension systems on a stable basis for the future will require new painful political decisions. …

Increasing age restrictions

Especially for Greece, the report says the retirement age will increase by 2.8 years by 2050 due to their link to life expectancy. In practice, this means that from the current 62 years, after 40 years of work, the general age limit will jump to almost 65 years after 29 years. The increase will begin in 2035, as the age limit will increase by almost 1.5 years. In fact, as other OECD countries have made similar decisions to link retirement age to life expectancy, the report shows that the retirement age of a 22-year-old entering the labor market is expected to rise by 4.5 years in Denmark and Estonia, and from 2021 to 2050 and 2.5 years in Italy.

It should be noted that the current institutional structure in Greece (Law 3863/2010) stipulates that from 01.01.2021 the first process of adjusting the age limit should begin with a reference point of 65 years and based on the change in life expectancy from the decade 2010-2020. From 01.01.2024 the age limits will be revised every three years, always based on life expectancy.

As for Greece, the report specifically mentions the reforms of recent years, the peak of changes in replacement rates, restrictions on the employment of pensioners, as well as contributions from pensioners and self-employed.

Especially for the latter, the OECD points out that due to the change in the system and the separation of contributions from the level of wages of the self-employed, their future pensions will be lower than those of those with an average wage. The only time a freelancer voluntarily pays higher fees.

It is worrying that Greece is expected to see a significant reduction in its workforce in the coming decades.

The projected working-age population (20-64 years) will decline by 10% in OECD countries by 2060, or 0.26% per year. In Greece, as well as in Japan, Korea, Latvia, Lithuania and Poland, it will decrease by 35%, and in Estonia, Hungary, Italy, Portugal, Slovenia, Slovakia and Spain – by more than 25%.

Finally, with regard to demographic changes and our country’s pension system, the report reiterates that the coming years will be difficult. By 2050, the number of retirees for every 100 employees will double.

Thus, if in 1990 the ratio was 22.9 people over 65 per 100 employees, then in 2020 it was 37.8, and in 2050 it will reach an ominous 75.

However, this year, due to the coronavirus crisis and, most likely, raising the general retirement age to 67 years (Katrougalos law), the process has not started, but the OECD expects this to happen in the coming years.

PS Taking into account the deplorable state of the Greek economy, inflation, the continuing rise in prices for the national debt of 204% of GDP, and vague forecasts for the recovery of the tourism sector in the coming years, there is a fear that the authorities will resort to this increase in the retirement age much earlier, or again there will be cuts in pensions like it was in the last decade.

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