Pensions: Arresting a Race to the Bottom

Abstract

This chapter argues that reforming pensions can provide only partial fixes. It sheds light on why Greek pensions present special difficulties and maintains that reforms since 2010 have not disposed of pension problems, but in some respects seem to have made them worse. As such, this chapter outlines a reform that brings in elements of prefunding as well as providers other than the state. It sketches an explicit multipillar pension system, similar to that introduced in many European countries, which can establish a stronger link between contributions and pensions. Finally, this chapter deals with the transition period, which is thought to be the Achilles' heel of pension reform because of the “double payment contention,” and proposes a solution to the transition problem that spreads the costs of transition across all future generations.

The Greek Pension Reforms: Crises and NDC Attempts Awaiting Completion

“…"Pensions for the young": A radical proposal to exit the crisis A radical proposal for change, actuarially costed, was first compiled in December 2016, and published in in May 2018 (Nektarios, Tinios, and Symeonidis 2018). This proposal extended earlier suggestions to introduce a three-pillar system (e.g., Nektarios 2008Nektarios , 2012Panageas and Tinios 2017). The proposal has three key characteristics (see Box 5.1 for details):…”

“…introduced under protest and presented as short-term fiscal fixes unrelated to the reform effort. The last major law was passed in May 2017 -it preannounced further deep cuts to be implemented four months after the end of the last bailout, in January 2019 (Panageas and Tinios 2017;Tinios 2018).…”

“…18 Stergiou (2017) exhaustively covers legal aspects. For a critical economic reading, see Panageas and Tinios (2017). 19 Strictly, on all income since 2002, due to the absence of records.…”

“…Panageas and Tinios (2017) mention a number of possibilities, including a recall to the labor market of pensioners below certain ages.35 The "brain drain" since 2010 has meant half a million mostly highly educated younger people emigrated in search of work. Enticing these people back to Greece should be a priority.…”

Greece

“…New state pension calculations result from applying the same two-tier pension scheme (composed of a fixed rate 'national pension' with a portion proportional to career length) to all pension applications. Whereas previously different occupations faced very different arrangements, after 2019 very little occupational differentiation remained (Panageas and Tinios 2017). However, the way these changes were implemented created side effects and legacy issues that will mark the next two decades.…”