When an individual enters the labour market and starts a career which will last 30-40 years, it is like standing on the penalty line and preparing to kick the ball. And the closer the retirement age gets, the closer the moment comes when they will kick the ball. The problem is that it is very difficult to score in a goal which continuously moves.
The recent financial report of the Bank of Greece, which was submitted, last month by Mr. Provopoulos, ‘changes the goal posts’ for those who are already in the labour market, by shifting the main responsibility for one’s pensionable income from the state to the employee and their employer. The development of occupational and private pensions is said to be necessary to cover the gap which is left by the main and additional state pensions.
But, Mr. Provopoulos, you are referring to individuals who have built their main and additional state pensions all their life. The problem is this: the creation of social security policy is only effective when it respects the existing ‘contract’ between the state and the citizen who is already in the process of making contributions, or based on the example above, in the process of getting ready to kick the ball. I am not discussing here whether the existing entitlements were acquired fairly or not, because everyone has their own view on that.
In Sweden, there is a system where its biggest part is able to adjust the pensionable income of the pensioners in a given year based on the characteristics of all pensioners during that year having at the same time the guarantee of a minimum pension from the state
However, it is important that any welfare state creates social security policy with a time horizon which is equal or greater than the average working life in that country, so that no inequality, insecurity and lack of trust is created. That means that any change in the calculation of the pension of today’s 65-year olds who have worked for 40 years should ideally have been voted through legislation 41 years ago. It sounds utopian in relation to the political cycle which requires elections every 4 years. I agree. Nevertheless, there is another way to create a pension system which does not change from one day to the next so dramatically.
In Sweden, there is a system where its biggest part is able to adjust the pensionable income of the pensioners in a given year based on the characteristics of all pensioners during that year (eg. life expectancy), having at the same time the guarantee of a minimum pension (above the poverty line) from the state. The system allows today’s working-age individuals to contribute during their working life a specific (and not adjustable) proportion of their salary to the fund, and to today’s pensioners to receive an (adjustable) pension which is calculated based on the characteristics of their ‘cohort’. At the same time, the system allows the possibility of more contributions and pension income. If a 65-year old is fortunate enough to be part of a cohort with a high life expectancy, but the misfortune for that to equal a lower pension due to the calculation, then they can work for 1 or 2 years longer in order to receive the pension that they were aiming for. One of the advantages of this system is that it combines the individual responsibility for the contributions during one’s working life with the collective profile of specific characteristics which determine the amount of the pension. However, the greatest advantage is that the individual in the labour market has full knowledge of their contribution rate, and the pensioner has choices which are based on the characteristics of their cohort.
Whether this system sounds fair or not, one thing is for certain: it is a system which is defined by transparency and which allows the person who is aiming at the goal, to move in the same way that the goal posts move during their working life.
