The operation of the Auxiliary Capital Insurance Fund has started

The new model for the supplementary insurance of young people was activated, as from January 1, 2022 the new Supplementary Capital Insurance Fund (TEKA) started operating and welcomes young people entering the labor market for the first time from 1.1.2022 as employees with the obligation to belong to auxiliary insurance, according to an announcement by the Ministry of Labor. From 1.1.2023, all other insured under the age of 35 will be able to voluntarily join TEKA.

TEKA is the Fund that will manage the personal individual accounts of the new insured (“individual piggy banks”) and is the body implementing the provisions of the law “Insurance Reform for the Young Generation” (Law 4826/2021) that was passed last September . The central pillar of the new model is the introduction of “individual piggy banks” for the supplementary pensions of new entrants to the labor market, as well as those young people up to 35 years old who choose it. With this change, young people gain more control over their supplementary pension. Instead of giving their money to a general “corva”, young people will invest it on a personal basis, choosing between three investment profiles themselves.

With this reform, Greece adopts the model that has been applied for many years in advanced European countries, which -among other things- reduces the risks posed to the social security system by the demographic problem. The experience of these countries (Denmark, Sweden, the Netherlands, etc.) shows that young people can receive a supplementary pension higher than the one they receive today, through the professional management of the funds that will be invested. At the same time, the new system creates a culture of saving and has a clear growth sign, since through the accumulation of funds that will be channeled to the Greek economy, growth and employment will be enhanced.

The Minister of Labor and Social Affairs, Kostis Hatzidakis, stated: “The launch of the new TEKA Fund marks the beginning of the implementation of one of our basic pre-election commitments. individual piggy bank “for those who enter the labor market for the first time from January 1, 2022- and for those who are up to 35 years old and decide to join the new system from January 1, 2023. This intervention restores the confidence of young people in the insurance system, as the new insured will gain significant control over his pension and its final amount, no one else will decide for him without him.The European experience we follow shows that the new model will lead to higher supplementary pensions from 43% to 68% for the new insured “.

Undersecretary of Labor and Social Affairs Panos Tsakloglou said: “With the new year, the new supplementary capital insurance is implemented. The gradual conversion of supplementary insurance from distributive to capital is coming to meet the needs of the new generation With the introduction of capital supplementary insurance, the exposure of social security to demographic risk is reduced, savings are created, a significant part of which will be used to finance investments in our country, boosting the growth dynamics of the Greek economy, creating strong disincentives for uninsured lays the groundwork for providing significantly higher pensions to the younger generation, without compromising the pensions of the existing system “.

With his informative note, the Ministry. Labor states the following:

1. What is TEKA?

TEKA (Auxiliary Capital Insurance Fund) is a Legal Entity under Public Law, supervised by the Ministry of Labor and Social Affairs and is governed by a seven-member Temporary Steering Committee until the appointment of the first BoD. within 2022. It is organized on the principles of modern governance and administration, transparency, accountability, meritocratic choice of the administration and its executives.

2. Which insured are included in TEKA

From 1/1/2022 all those who enter the labor market for the first time (regardless of age), will be subject to TEKA for their supplementary insurance, if they are employed in a sector for which there is a mandatory supplementary insurance. It concerns, that is, public and private sector employees, and self-employed engineers and lawyers.

From 1/1/2023 it will be possible to voluntarily be covered by TEKA insurance:

-Insured in the Auxiliary Insurance Branch of e-EFKA (former ETEAEP) who have been born from 1/1/1987 onwards and who wish to move from the aforementioned Branch to TEKA. The specific category of insured can exercise its right to be included in the insurance of TEKA until 31.12.2023.

-Employees employed in sectors for which there is no obligation to be included in the supplementary insurance (eg self-employed, farmers, self-employed health professionals) and who retain the right to join TEKA until they reach the age of 35.

3. Contributions to TEKA

The amount of contributions does not differ from that of the current system, ie it is 3.25% for the employer and 3.25% for the employee until May 2022, and at 3% for each one from now on.

4. Benefits

A condition for establishing the right to a monthly supplementary pension is the issuance of a main pension and the completion of fifteen (15) years of supplementary insurance. An important innovation of law 4826/2021 is the fact that, in cases where the right to a monthly supplementary pension is not established, the paid contributions are returned in real value to the insured upon reaching the general retirement age, which is not the case today.

Furthermore, TEKA provides for a minimum supplementary pension in case of invalidity or death of an active insured person, something that does not apply to the existing system of supplementary insurance of mental capitalization. In particular, if the balance of the individual account of the insured is less than the amount of the contributions of the insured with fifteen (15) years of insurance and remuneration equal to the statutory minimum wage of a full-time employee, the State Budget covers the difference and then calculates the amount of the insured or other licensed persons.

5. Individual Accounts (“piggy banks”)

Each insured person has his own individual account, where the auxiliary insurance contributions he pays are accumulated and then invested in specific investment portfolios. When the time of retirement arrives, the supplementary pension of the insured is calculated on the basis of the accumulated amount of contributions and returns in his individual account. Savings are managed by TEKA with prudence, responsibility, transparency and professional competence.

The insured will be able to access his personal account through a site and application for mobile phones as well as through other portable electronic devices within 2022. During the first half of 2022, the content, duration and procedure of keeping the personal data will be determined in detail. accounts. The website of the new Fund – with all the necessary information for its operation – will operate at the internet address teka.gov.gr. Also, the application myteka.gov.gr will work, through which the insured will have access to their individual accounts.

6. Investment characteristics

TEKA policyholders will be offered a basic retirement-investment product (default) with a life cycle structure that will combine the appropriate mix of risk, return and insurance for the entire working life of a typical policyholder without having to deal more with the management of its contributions. The insured will be offered other pension-investment products, also with a life cycle structure but with a different risk profile, for those who want to choose the risk rating they want to take. The insured will be automatically classified in the default portfolio and will be able to choose a different portfolio or combination of portfolios through an electronic platform. If he wishes, the insured will be able to change his portfolio every three years. In any case, the recommendation of TEKA to the insured will be to trust the professional managers of the Fund and to remain in the default portfolio, throughout their working life.

6. Guarantees

In TEKA, the protective function of the system against the insured is strengthened. In addition to the return of contributions at real prices in case of non-completion of fifteen years of insurance and the provision of a minimum pension in case of disability or death mentioned earlier, the State guarantees non-negative returns to retirees of the new system. This is achieved thanks to the explicit provision that the State guarantees the payment of a minimum compensatory monthly supplementary pension, which is calculated on the basis of the actual value of the contributions paid by the insured. Consequently, the insured are awarded a supplementary pension at least equal to that corresponding to the contributions they have paid, taking into account inflation. At the same time, the State guarantees that the supplementary pensions of the “old” system will continue to be calculated according to the existing rules without any cuts at all.