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Τime is imminent for supplementary social security through European/transnational Occupational Pension Funds (OPFs)
The substantial reduction in the national pension benefits of the first pillar of social security (main pension), which took place due to the prevalence of particularly low replacement rates and the change in the method of calculating pensionable earnings (see the recent Law 4387/2016) and, on the other hand, the exhaustive haircut in the supplementary benefits under the second pillar (supplementary pension) through their re-calculation, inevitably lead to the need for a radical review of the way, in which social security should operate, in order to be efficient and sustainable.
And if the “core” of the first Greek pillar of insurance, which constitutes the public/state insurance, is considered to be "intact" and not subject to substantial interventions, the second pillar, which is mainly financed by employers and employees, Is now urged, for its survival, to interconnect as soon as possible with more flexible and better-supervised insurance schemes, which present a European or transnational character and represent deservedly the institution of occupational insurance. So, indeed, the time is imminent for sustainable and guaranteed supplementary pension insurance through European or transnational OPFs, otherwise the risk of the complete collapse and disappearance of auxiliary benefits or the merge - as a last selection - of the second 'with the first pillar (incorporation of the supplementary pension in the main pension, as an insignificant added amount) will be more visible than ever!!
It is very obvious today that the merge of the former 11 viable auxiliary funds and branches into the general institution of supplementary insurance (ETEA) and the subsequent incorporation of the autonomous branches of lump-sum benefits, with the aim of creating a giant pension fund (renaming the ETEA In ETEAP) demonstrated in practice the absence of a targeted rescue strategy for supplementary pensions, the lack of a methodology for the elaboration and management of this brave movement and the incomplete economic assessment of each supplementary insurance separately. Given the current deficits in the super-fund, the high unemployment rate, coupled with the increasing spread of alternative forms of employment (part-time, rotation, on call etc.), deprive ETEAEP of considerable -for his survival and operation - rates of contributions, to the extent that they do not allow it to "breathe". Moreover, the statistics on ETEAP's supplies/expenses are extremely disappointing, given the very short life of this oversized new entity. If to the above-mentioned, we add the memorandum commitments agreed by all parties involved, according to which the state is bound to cease financing of supplementary insurance deficits, the suffocating conditions for supplementary insurance should now be taken for granted.
In Europe, for many years, the need to supplement the benefits of the main insurance has led to the development of specific bodies (sometimes at the level of multinational companies/companies and sometimes more expanded and “open”, in order to cover entire professional categories, regardless of local criteria, nationality and type of employment), which are primarily based on a mix of redistributive and capitalized schemes, providing additional insurance and, often, benefits higher than basic forms of insurance. It is worth noting that such occupational pension funds (European, transnational) operate in the considerable proportion of 25% of the active population in Europe and have occupied a large part of the insurance by displacing the other two pillars under the encouragement, of course, of the States, which do not want to participate in the relative burdens, nor guarantee the benefits to employees. Of course, the fact that the State does not take part in the contributions does not mean that it is also abstaining from their supervision.
In fact, in many European countries, the legislator has been quick to introduce tax incentives for both the worker and the employer for the amounts they deposit to these occupational pension Funds, enhancing workers' wealth and their actual annual returns. Indeed, the amount of tax exemptions did not concern these states, obviously because of the overpayment of lost revenues from the growth of the economy. In addition, the raising of funds in these institutions is intended to be made available - directly or indirectly - to investments in the participant (to the establishment and operation of these forms of insurance) states and this will, additionally, create new jobs and modernize the productivity. At the same time, the finances of both the public sector and the social security funds are reinforced.
Moreover, it is worth pointing out that Article 59 of the EC Treaty precludes the application of a Member State's tax legislation which restricts or excludes the possibility of deducting taxable income from the voluntary pension contributions paid to pension institutions established in other Member States and accepts the possibility of deducting such contributions where they are paid to bodies established in the first Member State. Even the Court of European Union has pointed out that, since it is possible to deduct contributions to professional insurance funds of a Member State, the possibility also applies to contributions which are made in other Member States.
In the light of the above, it is understandable that a comprehensive review of philosophy and technocratic criteria on which supplementary social security is built is not only necessary, but also inevitable, under the burden of the extremely unfavorable economic situation. Cross-border occupational insurance, as successfully implemented by European and transnational schemes and based on principles and values , arising from constantly up-to-date Community directives, should be the guide and the vehicle on which national supplementary insurance must be rebuilt and regain its lost viability.
George Koutsoukos
PhD, Attorney at Law
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