Republish from special edition of Nextdeal (Issue 560)

By Mary Lambaditi

Greece is still lagging behind throughout EU, as far as the creation of Occupational Insurance Funds (OIF) is concerned. The total assets of the 33 existing Funds (29 voluntary and 4 mandatory insurance) represent only 1% of the GDP, while in other countries it reaches 233% of the GDP and the average in OECD member states is 105,1%.

On 31/12/2024, the 33 OIFs in Greece counted 222.671 insured persons, while their assets (property) were 2,5 billion Euros.

Representatives of institutional investors are sounding the alarm, pointing out that the demographic problem creates the need for funded insurance systems and supplementary pensions. According to economists' studies, in 2100 the inhabitants of Greece will be fewer by 3,7 million, while the whole population of Europe will decrease by 150 million.

But also in the report of the Institute for Economic and Industrial Research, concerning the OIFs, the multiple benefits to both the insurance system and the long-term course of the Greek economy through retirement savings, are highlighted. The report estimates that the OIDs can boost the Greek economy by 2,7 billion Euros annually.

At the same time, the report released by the OECD on the benefits of Occupational Insurance Funds, shows that Greece has lagged behind other countries where the institution of multi-employer pension funds is already developed, which facilitate the provision of pension programs with the participation of the employer.

It must be noted that multi-employer funds are created by groups of people who do not have any professional bond, do not belong to the same professional group, do not practice the same profession and are not employed by the same company.

The fact that a lot of countries have recently turned towards the creation of multi-employer OIFs, is indicative, as the benefits are multiple and mainly the reduction of administrative costs, the creation of economies of scale, the best investment choices and better governance.

These Funds would be the best solution for Greece, where small and medium-sized enterprises dominate and there is a large number of self-employed people. According to official data, over 88% of businesses employ up to 10 people and a total of 98,4% of businesses employ up to 50 people.

However, although the establishment of multi-employer funds was also legally established in our country with Law 5078/2023, the discussions between the various entities have not yet borne fruit, as for example the fund of the social partners, namely the General Confederation of Greek Workers and the Hellenic Federation of Enterprises, remains on the papers.

Let’s keep in mind that the law equated the taxation of the OIFs benefits with the taxation that already existed in group private insurance policies.

However, the Minister of Labor Mrs. Niki Kerameos, recently announced new institutional interventions and a supplement to Law 5078/2023 with the aim of developing a modern, sustainable and socially fair occupational insurance framework.

One of the main changes will provide that those insured through group occupational retirement insurance products, will have the same terms concerning their entitlement, establishment and receipt of pension benefits, as those that apply to those insured by Occupational Insurance Funds.

In any case, Mrs. Kerameos clarified the key role of the Bank of Greece, in collaboration with which, moreover, the ministry is working on improvements, and called all bodies involved for consultation.

The agenda of the dialogues will include the following issues:

• Facilitating the portability of insurance rights among the 2nd Pillar institutions (exchange of insured persons between OIFs and group contracts).
• Reducing the operating and management costs of the OIFs through special tax exemptions, as well as
• Creating of a pension information platform that will allow the interested parties to check (and compare) at any time their pension expectations from all pillars that have been included.

It is noted that, as of 1/1/2025, the supervision of Occupational Insurance Funds is exercised by the Bank of Greece, which, through its representatives, declares that it will support the efforts of the OIFs administrations to cope with the challenges they face, while pointing out the need for the existing legislation to be supplemented by certain provisions that will offer OIFs the capacity to introduce new pension benefit programs, without individual supervisory approvals and with greater flexibility.

According to the President of the Hellenic Union of Institutions for Occupational Retirement Provisions, Mr. Christos Nounis, the returns of the Occupational Insurance Funds are satisfactory at 4%-5%. He points out that for the development of Occupational Insurance Funds, a national strategy is necessary, including a reduction in social security contributions, mandatory registration in the 2nd Pillar, support with incentives and a reduction in operating costs through tax exemptions, as well as the establishment of tax incentives.

Indicatively, one of the mandatory insurance funds which is recording a positive trend, the Occupational Insurance Fund for Pharmaceutical Employees, has reduced the waiting time for the payment of a supplementary pension from nine to six months. In the investment field, the return on the Fund's portfolio is at 6,57%, with a prospect of reaching even 7% by the end of the year. Thus, the Occupational Insurance Fund for Pharmaceutical Employees has managed to dispose assets at the level of 440 million Euros.

The highest pension paid by the Fund amounts to 295 Euros per month, while it is estimated that approximately 200 insured persons have already submitted a retirement application.

The course of the Hellenic Auxiliary Pensions Defined Contributions Fund (TEKA) and the Single Social Security Entity (EFKA)

Although newly established  –it has only been in operation for 2,5 years–TEKA, the first public capitalized auxiliary fund, has already enrolled 546.000 insured persons, corresponding to 204.000 employers, while the savings-contributions of the insured persons amount to 210 million Euros.

Similarly, the reserves of EFKA have also been multiplied, recording significant returns through professional management. In 2024, the amounts mounted to more than 2-2,5 billion Euros, from 1 billion Euros in previous years. The goal of the Fund is to create an expanded framework, with greater flexibility, in cooperation with other Funds and the Ministry of Finance, in order to ensure higher profits in the future.

What is the situation in other European countries

In Belgium, sectoral pension plans benefit from the exemption of the 4,4% premium tax on contributions.

In Germany, employers who pay contributions of at least 240 Euros per year on behalf of a low-income employee to an occupational pension scheme, receive a tax deduction of 30% of the contribution, with a maximum contribution limit of 960 Euros.

In Spain, employers can deduct from corporate income tax 10% of their contributions to an occupational pension scheme for employees with annual gross earnings of less than 27.000 Euros.

Read below the article from special edition of Nextdeal (Issue 560) in electronic form page. 111 (click right below to zoom in)