Indirect increase by 3-3.5% will bring in the new year to the 400,000 pensioners – with a main pension of more than 1,400 euros – the reform of the Pensioners’ Solidarity Contribution (EAS). The reform of the EAS will take place regardless of the increases that will be given to pensions on 1/1/2024. EAS finances the AKAGE account (Generation Solidarity Insurance Fund) in which it is estimated that around 14 billion euros have been accumulated. This is a hidden taxation of the 400,000 pensions of more than 1,400 euros. The measure was announced recently by the Deputy Minister of Labor P. Tsakloglou. The Ministry of Labor is working on two scenarios for the new structure of the EAS.
In the first scenario the change in the architecture of the EAS is being considered, so that it is not imposed by the “first euro” but only by the amount that exceeds the ceiling of each bracket, which is precisely what happens with the tax rates in income taxation (E1).
For example, a pension of 1,500 euros currently has a 3% VAT, which is imposed on the entire amount and is 45 euros. But if it is imposed only on the amount that exceeds 1,400 euros, i.e. 100 euros with a somewhat increased rate – e.g. 10% –, then the contribution amount is reduced to, for example, 10 euros.
Accordingly, in the next tier, from 1,701 euros to 2,000 euros, the reservation today is 6% and is imposed from the “first euro”.
Instead, if it is phased in to the excess amount, then it will be applied as follows:
The second scenario provides for a reduction of the EAS coefficients from the second tier and above. The logic in this scenario is that with the current system the rate doubles from the first to the second tier, i.e. it increases sharply from 3% to 6%.
The advanced setting provides a more proportional way of transitioning from rung to rung so that the cut is smoother and fairer.
It is emphasized that the pensioner solidarity levy established in 2010 and is the only memorandum reservation that was maintained even after the implementation of the Katrougalou law. It amounts to the main pensions that exceed 1,400 euros per month from 3% to 14%, and to the auxiliary pensions that exceed 300 euros from 3% to 10%, depending on the amount of the pension. The income from this reservation (EAS) ends up in AKAGE, the generational solidarity “piggy bank”, where funds of 14 billion euros have now accumulated.
However, legal and pension organizations point out that ultimately, the amount of the EAS “alters” as a result the reciprocity of contributions – pensions paid. It is characteristic that in many cases the 7.75% increase in pensions granted from 1.1.2023, although there was no positive personal difference, did not result in a corresponding benefit. One of the reasons for this is the Solidarity Levy, as the increase was offset by an increase in the levy’s withholding rate. And indeed it has been found that many pensioners, who exceeded €1,400 with the 7.75% increase, ended up pocketing less, as part of the pension is subject to EAS withholding. For example, a pensioner who used to get 1,390 euros and with 7.75% gets 1,497 euros, can earn 107 euros gross from the increase, however, due to the 3% withholding, the increase is limited to 62 euros.
Finally you should to emphasize that between 11 and 22 December 2023, 742,772 pensioners from all Funds will receive the Personal Difference Allowance of 200, 150 and 100 euros. The criterion for the payment of the aid is that pensioners have a personal difference of more than 10 euros and a pension or sum of main pensions before tax of up to 1,600 euros per month.
The same time slightly smaller, at 3% or 2.95% instead of 3.1%, due to a downward revision of the 2022 growth, will be the increase in pensions in 2024. According to EFKA data of the 742,772 pensioners who will receive allowance before the increase, an estimated 150,000 retain small personal difference amounts of €15 to €30, which will be zeroed out with the 2024 increase.