Dorita Yiannakou
Labour and Social Insurance Minister Marinos Mousiouttas explains the government’s proposed pension reform to Kathimerini.
“The goal is simple: Pensioners should have an income that is enough to live on and remains sustainable over time,” he says.
“With this reform, we are building a pension system that is fairer, more modern and sustainable, while protecting the Social Insurance Fund for future generations.”
— What does the government’s pension reform bill provide?
— Let me start with the result. A total of 123,212 existing pensioners under the Social Insurance Fund will benefit, and more than 51,000 of them will see their monthly pensions increase by more than €100.
The goal is simple: Pensioners should have an income that is enough to live on and remains sustainable over time. Everything else is built around that objective.
We want to further reduce the risk of poverty in retirement, give greater weight to a lifetime of work and contributions, and make the system more flexible so that it can adapt when circumstances change.
At the same time, the fund must remain financially sustainable in the long term without placing additional pressure on public finances. It should also be aligned with international standards and draw on good practices from other countries.
We are building a new and simpler system on the structure already in place. It will involve targeted redistribution so that support goes to those who genuinely need it, along with a clear and reasonable state contribution to its financing.
At its heart is something simple: a decent pension for every insured person and greater fairness, adequacy and security for every generation.
— How exactly will the new basic pension be calculated?
— We are introducing a revised basic pension. Its value will depend on a person’s total insurance record—in other words, all the years credited to their Social Insurance account.
Two categories of years will count: those during which the insured person paid contributions and those for which the state paid contributions on that person’s behalf.
This essentially redefines the Social Insurance Fund’s basic pension. The philosophy is to provide more to those who have less by changing the calculation method and increasing the number of years for which the state can pay contributions.
Take, for example, a woman who stopped working to raise her children. There may also be someone providing unpaid care at home for a relative up to the second degree, a young person studying or another who is only just entering the labor market.
There may also be a person with a disability who never had the same opportunity to build a contribution record.
Until now, the years these people spent outside the labor market were lost when calculating their pensions. From now on, those years will count. Where the reason for their absence from employment can be documented, the state will pay the contributions.
The same enhanced protection will apply to people who worked for lower wages or had a limited contribution history.
We are also introducing a change to correct an inequality. Anyone who receives income but is not covered by any other obligation to contribute to the Social Insurance Fund will now pay contributions and receive a basic pension upon retirement.
Until now, people living on income from investments or property did not contribute and were not entitled to a pension.
Contributions will be calculated up to the annual basic insurable earnings, which stand at €11,480 for 2026.
Income taken into account will include earnings from holding public office, dividends, interest, rent, intellectual property or patent royalties, fees and other profits from property.
The retirement age will remain 65. Anyone who chooses to continue working until 67 will be able to receive a higher pension by continuing to pay contributions until that age.
The principle is simple: The longer someone remains in employment, the higher their pension will be.
The monthly basic old-age pension will be calculated using a coefficient that rises according to the age at retirement. It will begin at 1.1 for retirement at 63 and reach 1.5 at 67, increasing by 0.1 for each year in between—at ages 64, 65 and 66.
The coefficient will be applied for every registered month of insurance, based on 12 months per year.
— Who will benefit most, and who may see a smaller improvement under the reform?
— First and foremost, those currently receiving the lowest pensions will benefit.
The greatest support will go to people on the lowest pensions, but the contributory nature of the fund will not be disregarded. Increases will therefore vary according to the number of years a person paid into the system and the value of those contributions.
The increases will be introduced gradually over the next five years, with one important exception. People currently receiving the lowest pensions—up to €600—will not have to wait. They will receive a minimum increase of €30 from the first month of the reform.
If, for example, a person is entitled to a total increase of €250, that amount could be divided into different percentages and sums over several years.
The exact model will depend on how the reform is implemented and the fund’s financial capacity. The principle, however, is that each part of the increase will be added gradually and will remain part of the pension.
If someone receives one increase in the first year and another in the second, those increases will not be lost. They will accumulate and become the new basis of that person’s pension.
It is equally important that the reform creates a fairer and more modern pension system—one that is sustainable and protects the fund for future generations.
The substance of our proposal is not limited to the final amount. What matters is how pensions are increased and, above all, how people on low pensions are treated.
The new approach takes each insured person’s contribution history into account. Two people should not necessarily receive exactly the same pension simply because their pensions are currently at the same level.
If someone worked for more years and paid contributions throughout their working life, that should be reflected in their pension. That is the philosophy behind the formulas we have used.
— Will some people remain below the poverty line despite the reform?
— Yes, there will be some cases. That is precisely why protection from poverty cannot depend solely on the Social Insurance Fund pension.
The redesigned Low-Income Pensioner Allowance, provided by the state to eligible people as a supplement to their Social Insurance pension, offers more comprehensive and effective protection against poverty.
The fund will do what it can within its financial means, and the state will make up the difference.
However, I want to make one thing clear: No one’s pension will be reduced. The basic principle is that pensions will increase and pensioners’ overall income will improve.
— What will change for widows’ and widowers’ pensions, and what provisions are being made for women with shorter contribution histories because they cared for children?
— The new basic survivor’s pension will be equal to 60% of the deceased person’s basic pension entitlement.
If the deceased was under 65, it will be based on the corresponding incapacity pension. If the person was over 65, it will be based on the old-age pension.
State-funded insurance years will be credited from the person’s age at death until age 65. There will also be a one-third increase for each dependent child, up to a maximum of two children.
Likewise, the new supplementary survivor’s pension will equal 60% of the deceased person’s corresponding incapacity or old-age pension.
For women with shorter contribution histories because they spent time caring for children, the proposal provides for the state to pay contributions for those periods and credit them to their Social Insurance accounts.
This means that years devoted to raising children will no longer create a gap in their contribution record but will be recognised as insured time.
The government proposal similarly provides for insurance credits to be awarded to students before they enter the labour market.
When they begin working, they will already have accumulated some insurance rights and will be able to use those credits over the course of their working lives.
— The bill does not cover 4,300 men who were widowed before Jan. 1, 2018, something that has raised concerns among trade unions. How do you plan to address this?
— Male survivor’s pensions involve significant financial costs.
When extending this right was discussed in the past, specific cost estimates were presented. Applying the provision to everyone who could qualify would place an additional annual burden on the fund.
Based on the figures presented during those discussions, the cost of the existing categories amounts to tens of millions of euros a year. Fully extending the right would create another substantial expense.
A new cost cannot be added without explaining where the money will come from.
There are essentially three options before us: distribute the cost among all beneficiaries, increase contributions or find another solution that safeguards the fund’s sustainability.
Anyone proposing that we proceed must also explain how the cost will be covered. We cannot simply add expenditure without providing the corresponding financing.
— The government proposes reducing the 12% actuarial penalty for early retirement to 7.5% on the basic portion of the pension. Why can the penalty not be abolished entirely?
— We are providing meaningful relief, and it will apply for life.
The relief covers half of the early-retirement period, up to a maximum of nine months, and applies to the basic pension.
It will apply both to all existing pensioners and to those who retire by the final year of the transitional period in 2031.
A complete abolition of the penalty would effectively lower the retirement age to 63 and damage the fund’s long-term sustainability. That would not be in the interests of any pensioner.
— Do you believe the bill’s provisions will satisfy the social partners?
— The dialogue is continuing. The bill was presented to the social partners on Aug. 19, and we expect to hear their views, proposals and concerns at the next meeting of the Labour Advisory Board on Aug. 28 and at subsequent meetings.
Our objective is to achieve as much common ground as possible.
We are open to every evidence-based proposal that would improve the reform, provided it does not alter the philosophy of the system or create additional costs for either the Social Insurance Fund or public finances.
At the same time, I am determined to ensure that the pension increases take effect from Jan. 1.
— How will the new system be financed, and what will it cost the state budget?
— The reform will be accompanied by a restructuring of the Social Insurance Fund’s financing.
The most substantial change is that the government will stop borrowing from the Social Insurance Fund. Annual surpluses will no longer be lent to the state but will instead be deposited in the fund’s investment account.
Arrangements have also been made for the government’s existing debt to the fund to be repaid gradually over time.
The bill also clarifies that non-contributory benefits will be financed from the Republic’s Consolidated Fund and provides special state funding to cover part of the pension increases.
The reform therefore combines stronger social protection with a gradual expansion of the financing base. It also introduces mechanisms linking the development of benefits and contributions to the fund’s long-term sustainability.
I must make clear that we will not pursue an aggressive investment policy.
That is precisely why we took the time needed to develop a prudent and consistent investment management framework based on international standards and the principles of good governance.
— What will happen with the second pillar of the pension system? Will participation in provident funds become compulsory for employees, or will it remain voluntary?
— Reform of the second pillar has been and remains a priority.
The issue is being considered by a technical committee with the participation of the social partners, and discussions will resume in early September.
I believe there is room to reach agreement soon on the principles of the reform. We are working towards that with employers and trade unions.
Discussions can lead to better solutions, provided there is a clear framework and a shared direction.
