Unexpected injection into EFKA from the thousands of working pensioners

By Kostas Katikos

EFKA puts a positive sign in its income from the pensioners who declared their employment in the first 4 months of 2024 and according to the latest figures they reach 75,000.

This unexpected development activates the second of the three scenarios that had been elaborated in the Ministry of Labor according to which if the pensioners who will declare employment are twice as many as those who declared work under the old regime, then the revenues of the EFKA together with taxes are estimated to they may increase by 42.5 million euros to 201 million euros.

With the new law (5078/2023) so far 75,000 pensioners have declared their employment, while under the previous regime only 35,000 pensioners declared employment.

In other words, there is more than a 100% increase in pensioners who declared their work, while before apparently most of them hid it because if they declared it, 30% of their pension would be deducted. With the new law the pension penalty was abolished and replaced by an extra resource of 10% of the salary they receive from their employment, (if they are employed) while self-employed retirees give as an extra resource half the insurance contribution from the pension sector.

The second of the three scenarios made by the Ministry’s Expert Unit and which are included in the report of the Court of Auditors that accompanied the relevant provision of the law, states that if the number of pensioners who declare their employment to EFKA doubles, its annual income will increase from 42.5 million euros to 201 million euros.

The evolution of declarations by working pensioners (75,000 with the new law against 35,000 before) confirms the 2nd scenario. The large discrepancy in the scale of the increase in income (from 42.5 million to 201 million euros) has to do with the parameter of the income that pensioners earn from their work. With a low income, the profit in EFKA revenues is estimated at 42.5 million euros, while with a higher income it reaches 201 million euros.

The experts’ study has three scenarios for an increase in the number of pensioners who will declare themselves working by 50%, by 100% and by 200%. The three scenarios also include two parameters, which concern the pensioners’ income from their work.

The first parameter measures what fiscal effect will result if there are more retirees who will declare employment with the same incomes as those who declare that they are currently working.

The second parameter takes into account the fiscal effect if the increase in employed pensioners is combined with lower incomes from their work.

According to the study, removing the 30% penalty from pensions would return 102 million euros per year to pensioners who declared employment. By this amount, the revenues of EFKA are reduced. In the first year of implementation of the measure (2024), EFKA will have a loss of revenue of 82 million euros if the number of working pensioners remains at 35,000. This estimate is now withdrawn as 75,000 pensioners have declared employment.

According to the study, the first scenario foresees an increase of working pensioners by 50%, i.e. to 55,000, the second for an increase of 100%, i.e. to 70,000 or more and the third scenario speaks of an increase of 200%, i.e. for 105,000 working pensioners .

At the moment, the second scenario “comes out” with an increase in declarations from working pensioners by 100%.. With a fixed income, the total benefit from deductions and taxes reaches 201 million euros. If pensioners declare less income from work, the benefit drops to 42.5 million euros.

In the first scenario, EFKA balances the loss from the redistribution of pensions, while if it is combined with lower incomes from employment, then there is a loss of revenue of 8.1 million euros.

If the declarations increase even more in the next period and the third scenario is verified (increase to 105,000 pensioners with a declaration of work), the total benefit from deductions and taxes reaches 252 million euros with incomes in the range of 1,000-1,300 euros, while with a smaller income at the minimum of 830 euros and below, the benefit is estimated to rise to 170.9 million euros.