All pensioner annuity options

By Dimitris Katsaganis

The government has three main options available to it in relation to the payment of retroactive pensions to pensioners, i.e. the return of the cuts in supplementary pensions and gifts for the period June 2015 – May 2016 based on the 2011-12 legislation (after the decision of the Council of State).

Although the case of retrospectives is not directly related to the package that the government is working on for the TIF to support especially vulnerable social groups due to the energy crisis, Fund executives report to Capital.gr that obviously the return of the reduction in pensions would financially strengthen even more the pensioners, who largely belong to these groups. And this especially since, from January 1, 2023 (practically from the end of December 2022), both the upcoming unfreezing of increases and the abolition of the solidarity levy concern the “pocket” of a portion of pensioners only.

In more detail, the first option that the government is considering provides for retroactive payment of supplementary gifts only for those who appealed to the courts by July 31, 2020.

The second option provides for the payment of said retroactive payments to all pensioners (whether they appealed to the Court or not) and the third the offsetting of retroactive payments against the negative personal differences of the Katrougalou Law.

It is noted that the Supreme Court awarded the return of the cuts to the supplementary pensions and gifts for the 11 months of June 2015-May 2016 (based on the memorandum legislation of 2011-12), but only for those who have appealed to the courts until July 31, 2020, since their court cases have been finalized or will be finalized in the future.

Thus, those who did not go to court and also those who are not vindicated in the courts, based on the decision of the Supreme Court, are not entitled to retroactive refunds.

According to expert estimates (which, however, are not confirmed by competent officials of the funds) close to 300,000 pensioners, who suffered the cuts in question, had appealed to the courts until July 31, 2020.

On the contrary, close to 1,300,000 pensioners, although they suffered cuts, did not apply. Thus, based on what emerges from the decision of the Supreme Court, as long as the 300,000 who appealed are vindicated by the courts, they and not those who did not appeal to the Court will receive back their retrospectives.

Thus 3 out of 4 pensioners will be excluded from returning the cuts they suffered and only 1 out of 4 will receive retroactively.

This solution (i.e. retroactive payment to only 1 in 4), although fiscally it is much more favorable (around 600-650 million euros) in relation to the possibility of returning retroactive payments to all those who suffered cuts, it is estimated that politically it is too difficult, as they would be excluded from retroactive pensions, just because they did not go to court (until July 31, 2020), although based on the decisions of the SC this month, they are entitled to them.

However, the cost of returning retroactive benefits to all those who suffered cuts (1.6 million pensioners) is estimated at 2.5 billion euros.

In the government, however, according to Capital.gr information from executives of the funds, they do not rule out politically this possibility (that is, the payment of retroactive gifts for all pensioners), despite the gigantic fiscal cost.

It is recalled that in the summer of 2020, the government passed a law by which all public and private sector pensioners received retroactively for the cuts only in the main pensions for the 11 months of June 2015-May 2016, although the Supreme Court had vindicated only those who appealed to the justice and a relevant decision was pending from the Court of Auditors for the pensioners of the State.

Therefore, according to the same sources, there is no barrier (apart from the financial one) for the government to decide to follow the same path again, i.e. to return to all pensioners the reductions in benefits and gifts and not only to those who were vindicated by the Supreme Court . On the basis of the same option, consideration is given to paying the retroactives in two installments, ie, for example, first the gifts and then the ancillary ones (or vice versa), in order to avoid the heavy burden of paying both retroactive packages at once.

“Unfreezing” increases

A component of the extraordinary pension expense until the end of 2022, as reported to Capital.gr by executives with knowledge of the processes within the Ministry. Labour- includes the increases in all main pensions from 1 January 2023 (practically before the Christmas holidays of 2022).

The reason for the unfreezing of the nominal increases (5%-6% according to the basic scenario which is on the government’s table) in the main pensions after their 6-year (since 2017) freeze, as the same leadership of the Ministry. Work has been announced.

In particular, all new pensions will actually increase, i.e. those applied for by pensioners after May 13, 2016, and old pensions, i.e. those applied for by retirees up to and including May 12, 2016. Accounting increase means that it will decrease (or and will disappear) the negative personal difference of the old pensioners.

The possibility that concerns some executives of the funds, according to secure information from Capital.gr, is the offsetting of retroactive payments for all pensioners – and not only for those who are vindicated by the Supreme Court – with their negative personal difference, as has emerged since their recalculation based on the Katrougalou law and the Vroutsi law.

In this case, the new pensioners from January 1, 2023 (practically before the Christmas holidays of 2022) would normally receive, as already foreseen, their increases (5%-6% according to the base scenario), while the old pensioners would be divided into two categories:

– The first category would include those whose, after offsetting retroactive nominal increases with their negative personal difference for 2023 (on an annual basis), a positive difference would result, which they actually received as retroactive.

-In the second category, would belong those pensioners whose, after offsetting retroactive nominal increases with their negative personal difference for 2023 (on an annual basis) to the point of nullification of the latter.

For those whose personal difference was decisively reduced or eliminated through retroactive offsetting, the way would be opened for a real increase in pensions paid even in 2023.

This solution, although extremely difficult technically, according to the executives who are considering him could have three advantages.

The first is that all pensioners who suffered cuts in their allowances and gifts in the 11 months of June 2015-May 2016 (based on the 2011-12 legislation) would receive their retroactive benefits, even indirectly. On the contrary, if the government decides to return retroactives only to those who have resorted to justice, the large majority (which has not resorted to justice) will probably feel “wronged”, the same sources note. Moreover, in the event that the government decided to pay retroactive payments only to those who appealed to the courts, but only when their cases are finalized positively, these pensioners would probably take a long time to receive the amounts they are entitled to.

The second advantage would be that the elimination of the negative personal difference from 1 January 2023 for all old pensioners would pave the way for horizontal increases in pensions from 1 January 2024.

The third advantage would be that the immediate fiscal cost would be much lower than that of backdating all pensioners who suffered cuts in 2015-2016.