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Greeks to sink in insurance contributions: pension of 360 EUR and “compulsory life insurance”

Groundbreaking changes in Greece’s pension schemes are on the way as the social insurance funds are about to collapse due to high unemployment and liquidity shortage in the labor market. There are plans for a national pension of just 360 EUR and a ‘compulsory life insurance’ to cover the rest of a pensioners’ needs.

The plan is not new. The idea of a national pension of 350 EUR was announced by former Health Minister Andreas Loverdos (Socialist PASOK) in January 2010 and was supposed to go into effect as of 1.1.2015. In fact, the plan that was put on the rails before Greece sought the “rescue” of the International Monetary Fund in May 2010.

Loverdos’ calculations were foreseen a national pension of 350-400 EUR (equal to 15 years of social contributions) and above this amount according to years of work and paid contributions by the insured.

Now, the plan has allegedly gone one step further with German multinational insurance conglomerate Allianz Group to have proposed an additional compulsory life insurance for every laborer.

prepare a dynamic entrance in the new emerging social security market.

To make the long and complicated story short:

The plan foresees that employees and self-employed will pay their social security contributions to Greek social security funds and at the end of the day, i.e. of their labor life, they will receive 360 EUR per month.

At the same time, laborers will have to have contracts and pay contributions to a scheme called “compulsory life insurance” so that they will be able to receive a supplementary pension and will be able to come through the days until they die.

In the first pillar -“Greek social security funds”- , both employer and employee will pay contributions. In the second pillar, the private “compulsory life insurance” contributions will come only from the employee, employers will not have to pay any contributions to the pension of their employees. “A scheme like the vehicle insurance that it is imposed by law to vehicle owners,” note Proto Thema.

The private insurance will provide pensions for retirement, disability , death ( widow ) , invalidity and death by gradually decreasing costs, and compulsory retirement at the contract maturity.

There will be no possibility of early redemption.

The final decisions will be taken at the end of the first half of 2014 and after the relevant study conducted by a company selected by the Bank of Greece is complete.

According to Sunday newspaper Proto Thema, these two-pillars pension scheme was proposed by the German Allianz Group to Greece’s international lenders, the Troika, which gave its blessing to the proposal.

“In principle there is an agreement between [Greek] Labor Minister Yiannis Vroutsis and the group around Poul Thomsen [IMF’s man in Greece]. The plan bears the blessing of the Troika and the signature of German Allianz Group.”

The Troika plan is based on the proposal of the German Allianz Group for a “compulsory life insurance” that will cover the pension.

Four weeks ago, Proto Thema reported of EU Commissioner for Monetary Affairs, Olli Rehn, who was talking that pensions should go beloew 903 EUR per month.

Similar is the opinion of the Greek Union of Insurance Companies, predominantly consisting of foreign multinational insurance companies. In a closed meeting of GUIC last Wednesday, participants discussed that

Greece is a small market that cannot bear dozens of professional social security funds. In the perspective of social security funds collapse, the need to vest national pensions of 360 EUR per month was emphasized. A national pension will be guaranteed by the Greek State, while a supplementary pension will be provided by private insurance companies and banks.

Pensions Funds and “Debt Haircut”

Proto Thema reports of a rift between the insurance companies that oppose the establishment of “pension funds” like in the USA – most likely out of fear of “Greek debt haircut/haircuts” that caused economic damages to the funds. Insurance companies do not want mediation between them and the pension contributions.

Changes in Pensions Scheme will crash the Health Insurance

Of course, the two-pillars “national pension & compulsory life insurance” scheme has more than one dragon in it: the health care issue. The medical and pharmaceutical coverage of the insured.

Most probably, the employee/employers contributions will cover the average pension of 360EUR and some basic health care insurance like one medical check up per ten years, 5 meters gauze per year, one aspirin per month, one blood transfusion per 5 years.

I bet my last euro cent, that the rest of the health care needs will have to be covered by an extra “compulsory health care insurance”.

So far, there is no talk neither on decreasing the pension contributions, not on the future groundbreaking changes in the health care. Although some vague news about “abolishing EOPYY as national health care provider” are to be read now and then but without specific details.

Fact is that while we, Greeks, get poorer and more broke month in and month out, we will be obliged to make rich the multinational insurance companies. Compulsory.

Fact is also that the changes in the Greeks pensions were planned already before the unemployment had reached 27%, before recession reached 6.5-7%. It was planned in 2010, where not only the IMF but also the Greek government that agreed the bailout without negotiations knew that a ‘rescue package’ aims to economically destroy the country.

Fact is also that whether the Greek Labor Minister agrees or not is absolutely irrelevant. It’s Greece’s lenders who have a say in what’s happening in Greece and with the Greeks.

BTW: EOPYY was also a product of ex health minister Loverdos. A national health care system that sank in debts already in the first year of its operation.

PS I wonder about the “institutional” role of a foreign (German) insurance company to pension changes in another country. I suppose, Allianz Group prepares a dynamic entrance in the new emerging social security market.

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