Auxiliary insurance: A new landscape from 2022 for new entrants to the labor market

The new supplementary insurance scheme for new entrants to the labor market comes into force on January 1, 2022.

The main characteristics of the new system are the creation of an individual account (“piggy bank”) for each new insured and the introduction of capitalization elements in the supplementary insurance with the creation of the Public Fund for Supplementary Capital Insurance. (TEKA), in order to effectively face the risk linked to the demographic aging of the population.

According to the Ministry of Labor and Social Affairs, the new insurance reform strengthens the viability of the insurance system, which involves the spread of insurance risk, maintains the public character, protects existing pensions – main and auxiliary – gives an impetus to the development process of the economy, through the investment of part of the contributions of the insured persons of the new system in the Greek economy, transparency in the management of the resources of the insured is favored, additional pensions more new policyholders are insured, their confidence in the social security system is restored and strong disincentives are created for “blacks” – undeclared work.

Addressing the APE-MPE, Deputy Minister of Labor and Social Affairs Panos Tsakloglou said that the gradual conversion of auxiliary insurance from distribution to funded is an important structural reform, with a view to of the future. “It reduces social security’s exposure to demographic risk and thus improves the stability of the pension system. It creates savings, a significant part of which will be invested in the Greek economy, giving a boost to the development process. discourage uninsured work and restore the confidence of the new generation in social security, ”said the Under-Secretary of State for Labor and Social Affairs. supplementary pensions from the current scheme. Finally, as he points out, “the state guarantees for non-negative returns on investments for retirees of the new system and for the calculation of pensions of the existing system without any changes and, therefore, without any cuts, are a practical application of intergenerational solidarity “.

Concretely, for each new insured, an individual account is created (“piggy bank”) in which will be recorded the insurance contributions paid by the employer for the employee or by him, if he is self-employed, as well as the return on investments corresponding to contributions. of. Thus, instead of the contributions of new employees financing the supplementary pensions of current retirees, they will be saved and invested for the pensions of the insured themselves.

Also, at any time, the insured will be able to access his personal “piggy bank” account via the screen of the computer or mobile phone, because, for example, he will now be able to control the movements of his bank account. The insured will have the possibility to access his personal account, via a site and an application for mobile phones, as well as via other mobile electronic devices, by 2022. The website of the new Fund, with all the information necessary, will operate at the teka internet address .gov.gr, while the myteka.gov.gr application will be activated, through which policyholders will have access to their individual accounts.

As part of the new auxiliary insurance system, the new Public Auxiliary Capital Insurance Fund (TEKA) is created, which will be solely responsible for managing the contributions of the insured.

From January 1, 2022, all those entering the labor market for the first time, regardless of their age, will be subject to TEKA for their supplementary insurance, if they are employed in a sector for which there is an obligation. supplementary insurance. It concerns, that is to say employees of the public and private sector, engineers and lawyers and, from January 1, 2023, it will be possible to be subject to the optional TEKA insurance:

– Insured in the auxiliary insurance branch of e-EFKA (ex ETEAEP) who were born from 01/01/1987 and who wish to move from the aforementioned branch to TEKA. The specific category of insured can exercise their right to be included in TEKA’s insurance, until 12/31/2023.

– Employees who are employed in sectors for which there is no obligation to be covered by additional insurance (for example the self-employed, farmers, self-employed health professionals) and who retain the right to ” join TEKA until the age of 35.

Auxiliary insurance contributions will be collected by e-EFKA and will be credited to the individual accounts of the insured. The amount of contributions does not differ from that of the current plan, i.e. it is 3.25% for the employer and 3.25% for the employee, until May 2022 and at 3 % for each now.

At the same time, as the Ministry of Labor and Social Affairs has already announced, the new system provides for four state guarantees, which are as follows:

“First, the pensions of current retirees are not affected.

Second, the State guarantees the payment of a minimum compensatory monthly supplementary pension, which is calculated on the basis of the real value of the contributions paid by the insured. Consequently, the insured are granted a supplementary pension at least equal to that corresponding to the contributions they have paid, taking account of inflation. According to the ministry, in practice this means that the state guarantees non-negative returns and that TEKA policyholders will be protected against investment risk, as only the returns are subject to market fluctuations and not their paid-up capital.

Thirdly, TEKA provides for a minimum supplementary pension in the event of invalidity or death of an active insured, which does not apply to the current system of supplementary mental capitalization insurance. In particular, if the balance of the individual account of the insured is lower than the amount of contributions of the insured with 15 years of insurance and remuneration equal to the legal minimum wage of the full-time employee, the budget of the State covers the difference and then the amount of his pension is calculated insured or other legal persons.

Fourth, in cases where the right to a monthly supplementary pension is not established, i.e. if for some reason no main pension is granted or if 15 years of supplementary insurance have not been completed , the contributions paid are refunded in real value to the insured when he reaches the general retirement age, which is not valid today. In the event of transfer of an insured person from the auxiliary insurance branch of e-EFKA to TEKA (i.e. in the event of optional affiliation), the supplementary pension consists of two parts: one part of the auxiliary insurance branch of the e-EFKA and part part of TEKA for the contributions corresponding to each of the Funds. The 15-year period is calculated cumulatively for insurance in the two Funds ”.

Finally, the Ministry of Labor and Social Affairs in a recent information note specifies that the investment function of the Fund will be gradually developed in three phases (periods) and specifies that the following will apply: “the level, the structure and rating of the risk investments of the insured’s savings, is the absolute responsibility of the board of directors of TEKA.

During the first – transitional – period, the investments of the insured contributions will be invested in very low risk financial products (high interest deposits of the common capital of legal entities under public law and insurance bodies managed by the Bank of Greece ). The transitional period will last up to six months, after the election of the Board of Directors, so that it has the necessary time to formulate and set up the Fund’s investment strategy.

During the second period, the insured will be offered only the default portfolio with investments in a broad and diversified securities portfolio, which will have a life cycle structure. In practice, at this stage, all policyholders will have the same type of portfolio, due to their homogeneous / similar age. The investment committee of EDEKT SA will assist the board of directors in developing the investment strategy of the Fund, while EDEKT SA will act as an external manager and will support the implementation of the strategy of the Fund. Fund investment. The second phase is expected to last until the end of 2024. During this period, the Fund’s Investment Division will be staffed and have operational skills.

During the third period (from early 2025), after the addition of optional policyholders in TEKA (born, after 1/1/1987), the life cycle structure in the default portfolio will acquire a functional dimension . That is to say that the level of risk of the portfolios of the insured will vary according to their age. At the same time, the insured will be offered other retirement / investment products with a risk assessment for policyholders who wish to choose and adjust the risk level of their retirement savings themselves.

At the same time, the Fund will set up its own investment committee, the Investments Department will play a more active role, while EDEKT SA will continue to support TEKA’s investment function as an external manager.

Within two years from the start of the third period, TEKA will create a register of certified external managers, expanding the range of its investment options ”.

SOURCE: RES-EBA


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