By tipping state officials, instead of pensions and lump sums, as is currently the case, it is expected that existing retirement benefits will be reduced between 65% and 70%, the Ministry of Finance argues.
The reduction will be due to the fact that, in case of approval of the bill submitted to the Finance Committee of the Parliament, the payment of pension to officials will be abolished entirely and they will only be granted a tip.
In a letter to the parliamentary committee, the Permanent Secretary of the Ministry of Finance, Andreas Zachariadis, stresses that the payment of a tip is a rational approach, since in this way the long-term payment of a pension is prevented, while, at the same time, the simultaneous payment of pension and salary is avoided.
According to the Ministry of Finance, compared to the pension benefits currently received by state officials, if the legislation submitted by the Government is approved, they will receive only a tip and the reduction that will occur in their incomes will be 80% for the President of the Republic, 37.5% to 45.2% for the President of the Parliament, 49% for Ministers and Deputy Ministers and for MPs 74.2% to 81.7%.
The comparison between officials
"F" presents in detail the pension benefits that some state officials currently receive and how they will be shaped if the government's proposal is approved.
- The President of the Republic, upon completion of a term under the existing legal status, receives an annual pension of €65,461, as well as a lump sum of €402,836. In case of approval of the bill, the President of the Republic will receive a tip of €366,869, after taxation. According to the explanations given by the competent ministry, the reduction in the retirement benefits of a President, comparing the current framework and the proposed one, taking into account the cuts made, is estimated at 80%. This percentage is based on the assumption that the existing pension will be paid for a period of 20 years.
- The President of the Parliament, when completing a term under the current legal framework, is entitled to an annual pension of €21,152 and a lump sum of €130,167. With the bill, according to the ministry's calculations, the amount of the tip after tax will be €291,803. In case President of the Parliament completes two terms, today his annual pension is €37,423 and the lump sum €230,300. Under the proposed legal framework, the President of the Parliament will receive only a tip, which after tax will amount to €583,800. Under the assumption scenario, for one term the cost reduction for the state would be 45.2% and for two terms 37.3%.
- Ministers, Deputy Ministers and the Government Spokesperson, under the current legal status, can receive a pension of €17,252 per year and a lump sum of €106,167. With the bill they will receive only a lump sum, which will be taxed at 15% and will amount to €238 thousand. Therefore, it is estimated that there will be a reduction in retirement benefits of 49%.
- Today, when MPs complete a term of office, they receive a lump sum of €89,166 and a €14,489 pension per year. With the bill, the tip they will receive will be in the order of €99,251. It is estimated that the reduction in their benefits will be 74.2%. If they serve as MPs for two terms, today they will receive a lump sum of €245,210 and an annual pension of €39,847. With the bill they will only receive a tip of €198,500, effectively recording a reduction in pension benefits of 81.75%.
In the event that the Parliament consents to the bills and only gratuities are granted to the next officials, the reduction of benefits for the President of the National Health Service will be 82.2%, for the members of the National Health Service 84.1%, for the President of the Education Service 82.5% and for the members of the Committee 84.7%.
Explanations for different criteria
The Ministry of Finance, in order to anticipate the reactions in Parliament regarding the differentiation of benefits per category of official, lists the criteria taken into account to determine the amount of gratuity.
According to the Permanent Secretary of the Ministry of Finance, the main parameters taken into account are the working time, the nature of the work and the degree of responsibility of each office.
In the case of ministers, according to Zachariadis, account has been taken of the fact that their employment is on a full-time basis, the length of their service is not given and, according to the law, ministers cannot take up work for a period of two years from the day of their departure, unlike MPs. Ministers are also compulsorily insured under the general Social Security Scheme. Therefore, their occupational pension is reduced by the amount of the proportional Social Insurance pension, which consists of the contributions paid by the employer to the proportional part of the Social Security Scheme.
On the other hand, it has been taken into account for Members that their office is not incompatible with the exercise of another profession, with the exception of certain professions, i.e. they have the option of being employed privately during their term of office. In addition, the duration of their term of office is a given from the beginning. Moreover, Zachariades notes, the proposed gratuity streamlines the current situation, in which the retirement benefits of MPs increase disproportionately between the first and second term.
The only constitutional solution
Meanwhile, the Permanent Secretary of the Ministry of Finance, responding to questions submitted by MPs, stressed that the proposed regulation would affect officials who will obtain the office or be appointed from now on, adding that any retroactivity to the proposed regulations would be contrary to the Constitution.
At the same time, it suggests that the complete abolition of the payment of any retirement benefit to state officials is considered an irrational arrangement, since state officials assume positions of public interest, involving risk and a significant degree of responsibility.
"Therefore, for reasons of public interest, it is appropriate to provide an incentive to take up government office, not excluding the payment of a benefit at the retirement stage," it adds. At the same time, the Ministry, responding to the reservations expressed if current officials, who under the current institutional framework have completed such a service that ensures the maximum amount of benefit, in case they assume office after the entry into force of the proposed bill will receive a tip, notes that this issue could be regulated by adding a reservation to the bill, which would provide that officials who have already secured the maximum amount of pension benefits under the current legal framework will be excluded from the scope of the bill.
What will the President get if re-elected?
The Permanent Secretary of the ministry, replying to a question whether the President of the Republic, if re-elected, will receive a salary for his new term and at the same time will receive a pension and a lump sum for the term that has been completed, said that he will not receive both a salary and a pension. At the end of his new term, the President of the Republic will receive a pension and a lump sum for the term he has completed (based on the previous institutional framework) and a gratuity for his new term, based on the proposed legal framework. All his benefits will be received at the completion of his successive terms," he adds.
Double choice for taxation
The note of the Permanent Secretary of the Ministry of Finance also states that the bill on the Income Tax Law provides the option of taxing the gratuity at a rate of 15% or alternatively taxing it with the rest of the income at normal rates. This has been deemed appropriate because the gratuity will be taxed in a special way of taxation (it is the only tip on retirement that will be taxed at a special rate of 15%, without providing a tax-free amount).
"Taking into account that the lowest tip, according to the calculation examples, was €45,000-€50,000, it means that the cases where it will be advantageous for the beneficiary official to be taxed at normal rates will be remote," he concludes.
