30 September 2008

Greece begins final phase of pension fund mergers

The Greek Ministry of Labor and Social Security is pushing through the third and last restructuring phase for the local public pension system tomorrow by merging the 133 current funds into 13 new ones.

This last phase of the merger is based upon a law pushed through parliament earlier this year and will affect approximately one million currently insured members and about 800,000 pensioners when it takes affect from Wednesday 1 October.

Several days of public strikes were staged after the government first announced plans to overhaul the pensions funds regime, in part because it meant the stronger pension funds would be required to support the weaker ones.

The Ministry issued a statement today (30 Sept) explaining the rationale behind the restructuring process, stating achieving economies of scale was high on its list of priorities.

Government officials believe the mergers will allow the state to lower administrative expenses, cut back on committees and reduce the need for separate pensions offices.

Investment decisions of pension fund assets will also be centralized under the new structure, and it is therefore hoped asset allocation will be more transparent and carry increased accountability.

The government is also looking to introduce a new and advanced IT system to link the funds, which to date has been lacking, and will assist them to keep accurate records, in part to reduce wasteful duplication, inefficiencies and fight against evasion of contributions by employers and employees to funds.

Fani Palli-Petralia, Labour and social security minister, met with unions on Monday but she was not persuaded by calls to delay the merger for another two months to facilitate what unions describe as further dialogue.

Unions are concerned their members’ pension rights and medical coverage may be seriously affected by the restructuring and have predicted the pensionable age will rise while pension benefits will fall, and coverage will shrink.

In response, the ministry said there will be no changes under these new fund structures to pension rights and levels, and employee representatives will be appointed to the pension fund boards to protect workers’ interests.

Unions have also argued the organisation and infrastructure for the new streamlined funds is not in place and the system will not work

They claim the changes will be chaotic, services to members will suffer, and will in the end increase bureaucracy, leading to even higher pension fund deficits.

The General Confederation of Workers (GSEE) and the Civil Servants Union (ADEDY) are expected to call for a 24-hour nation-wide strike on Tuesday 21 October 21 to protest the government’s move.

© IPE International Publishers Ltd.