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Tuesday, May 10, 2016

All Pensions Up To 1.820 Euros Net Are Protected From Cuts?

"Pensions are cut for most Greeks", the Ekathimerini reports. However, I was confused by the following sentence found in the middle of this article:

"Only main pensions of up to 1.820 euros net (or 2.000 euros gross) are protected from cuts".

I need some assistance here. The reverse of this statement would be: "Only main pensions over 1.820 euros net will be cut". How many Greeks have pensions of over 1.820 euros net per month? There certainly are not many Austrians with pensions over that amount (excluding public sector employees with special contracts).

And here is another thing: if 2.000 euros gross per month result in 1.820 euros net, that would represent in income tax rate of only 9%. Can that be true?

I would appreciate being enlightened here!

7 comments:

  1. The Gross/Net difference is because of social security contributions difference, not the income tax. or so I guess.

    On pensions, that paper is interesting:
    http://www.lse.ac.uk/europeanInstitute/research/hellenicObservatory/CMS%20pdf/HO%20staff%20in%20Prees/BRIEFING-NOTE-PT.pdf

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  2. Usually a pensioner receives the main pension (κύρια σύνταξη)and the supplementary pension (επικουρική σύνταξη).

    The supplementary pensions for all pensioners will be cut down, whereas the main pensions (up to 2000 euros gross) will not be cut down until 2018 for those who are currently pensioners (i.e. almost all pensioners).

    For new pensioners, there will be a new methodology to calculate the main pension, which will be lower than the main which current pensioners.

    As I have already told, the main pensions for current pensioners will not be cut down until 2018. In fact, their main pensions will be recalculated according to the new methodology, but they will still be receiving the difference (main pension calculated with the old methodology-main pension calculated with the new methodology). After 2018, the issue will be reconsidered.

    That’s my understanding on the issue.

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  3. The article is confusing, because SYRIZA's rhetoric is confusing on the matter, in order to support the political thesis of SYRIZA, which claims that "we don't touch the main pensions over 2000 euros". Which is false, but SYRIZA likes to make the black white.

    What happens, is that now SYRIZA said, that the maximum amount of pension (or more than 1), that one can have now, is 2000 gross (it was 2300). The net value isn't the value after income tax, but the value after "security contributes", "solidarity contributes" and "health care contributes". The income tax is then applied to the net value (of 1820). It matters not much, because these kind pensions are a minority, they concern people such as judges, bank directors etc.

    SYRIZA's official political position is "we don't cut the current pensions up to 1300 of main and auxiliary together and we aren't cutting the main, but only the auxiliary". This is a ridiculous political fabbrication for media purposes alone that SYRIZA came up with. 1) The "auxiliary pension", doesn't apply to all. It was an optional for various professions or semi-optional for others (for instance, one could choose to pay more or less additional contributes or in some professions none). So, for example, someone has 1250 main pension and 100 auxiliary. SYRIZA says that the cuts aren't on the main, but on the auxiliary. These are simply logistical tricks, but suit SYRIZA's policy where "we don't cut main pensions of medium and low class". SYRIZA says "we only cut 40% on the auxiliary pension, up to 1300 combined". This helps SYRIZA defend the social role of the "main" pension. Because the auxiliary, was for each worker, a sort of personalized piggybank, so claiming that you only cut from it, is less bad for a radical left party.

    Then of course, they have put a legal clause in the law, where from 2018, unless miracles happen, the reduction mechanism will kick in officially for the main pension too. But, SYRIZA will hold elections in 2017 if you ask me, so that all the bad things that they have postponed for 2018 (including the 3,5% primary surplus), will fall onto the shoulders of New Democracy and burn it, so that Tsipras can later return as a savior.

    What none of them calculates, is that in the meantime, the population may get fed up and prefer a clean cut with them, with the euro and with the EU and vote for others.

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  4. Addendum: Here is a practical example, that was successfully used from an opposition MP to demonstrate the ridiculous tactics of the goverment. "You say you put 1300 euros as limit. But let's say that someone is getting 1200 euro main pension and 250 auxiliary. Then what are you saying? That you are cutting 99% of the auxiliary?".

    Note: Officially, the goverment claims that cuts only up to 40% of the auxiliary. These are just SYRIZA games so that Tsipras can save face and say that "we didn't cut pensions". It is the same as with ticket to hospitals. Tsipras in last September, abolished the 5 euro ticket to hospitals. Instead, he increased 2% the health care contributions to the pensions. He then celebrated that he gave back to the people "free access to hospitals". The same story happens now. Tsipras wants to claim that he protected the gross pensions up to 1300. So, he isn't cutting the pensions. He is cutting the auxiliary pensions up to 40%. Even if it makes no sense, because the figures don't add up or even if someone doesn't have auxiliary pension.

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  5. After Tsakalotos told the EZ finance ministers how many billion EURO the pension reform would save, the Labor Minister today told the Greek taxpayers that 90% of them will end up receiving better pensions.
    The only ones with a viable solution are the train drivers of TRAINOSE. They have suggested employing more train drivers in order to replenish their social security fund. That, in turn, would mean higher pensions that would stimulate the economy. Their motto? Speeding to the future.
    PS. Don't forget Michel Friedman and Nikos Papas in the Conflict Zone, DW tonight and tomorrow.
    Lennard

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    1. Watched a recording of the interview. First time I had seen Pappas. Very, very poor performance by Friedman and rather smooth self-handling by Pappas. Friedman more or less gave a list of all his preconceived opinions and wanted Pappas to agree. Pappas argued that everything was basically ok, including the debt, until 2010 when they Troika involved itself, loaded Greece with debt and messed up everything. Friedman had no counterargument. Correct argument: most of today's debt was already there in 2010. It increased only through (a) cumulated primary deficits (perhaps 25 BEUR); (b) accrued interest expense and (c) bank recaps. Ratio of indebtedness increased significantly because GDP declined.

      Best quote by Pappas: "Up until now, the Greek pension systems has partially been a substitute for a welfare state".

      Good thing for Friedman that Yanis Varoufakis was not his opponent. Varoufakis would have eaten Friedman alive.

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  6. Yes, Friedman was disappointing. He gave the impression that he was unfamiliar with the whole issue.
    Lennard

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