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Public pensions in Greece

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Greek police guard the National Bank of Greece during the imposition of capital controls

Public pensions in Greece are designed to provide incomes to Greek pensioners upon reaching retirement. For decades, pensions in Greece were known to be among the most generous in the European Union, allowing many pensioners to retire earlier than pensioners in other European countries. This placed a heavy burden on Greece's public finances which (coupled with an aging workforce) made the Greek state increasingly vulnerable to external economic shocks, culminating in a recession due to the 2008 financial crisis and subsequent European debt crisis. This series of crises has forced the Greek government to implement economic reforms aimed at restructuring the pension system and eliminating inefficiencies within it. Measures in the Greek austerity packages imposed upon Greek citizens by the European Central Bank have achieved some success at reforming the pension system despite having stark ramifications for standards of living in Greece, which have seen a sharp decline since the beginning of the crisis.

The Primary Pension Scheme

Public pensions in Greece are provided by public funds and pensioner's contributions during working years. Benefits are determined by a combination of factors: number of years worked (via contributions), and years of residency in Greece. The primary pension scheme consists of two components: a contributory component and a more supplemental residency-based component.

The first component of the scheme is funded entirely by pensioner's contributions. It incentivizes longer periods of contribution by providing higher accrual rates (the rate at which the pension accumulates annually) to pensioners who have worked for longer stretches of time. Pensioners with fifteen years or less worth of contributions only receive their pensions with an accrual rate of 0.77%, thus collecting less when reaching retirement age. This rate increases progressively based on the number of years worked to a maximum of 2% for those who have contributed a minimum of 40 years. These pensioners are rewarded by being able to retire at the minimum retirement age of 62 while collecting their pensions at the maximum aforementioned rate of 2%, instead of collecting full pension benefits at the normal retirement age of 67.

The other component is a state funded national pension based on years of residency. Pension amounts are determined by number of years of residency from age fifteen to the minimum age permitted to receive the pension (age 62). A maximum monthly payment amount of €384 is allocated to pensioners with forty years of residency and with a contribution history of twenty years. A minimum monthly payment of €345.50 is allocated to pensioners with a history of fifteen years of contributions. A 2% reduction (2% per year under 20 years spent contributing) to the maximum payment is applied to pensions collected by pensioners with histories between fifteen and twenty years spent contributing.