Occupational pension plans in Greece
What has changed?
The Greek Government's new 'Professional insurance reform, rationalizing of insurance legislation' is applicable to benefits earned in respect of occupational pension plan contributions made on or after 1 January 2024.
The purpose of the new legislation appears to be to offer the self-employed and contractors the ability to contribute to tax-efficient pension plans more easily. It is also expected to reduce the overall amount of tax relief available when an individual joins and/or contributes to a pension plan as they near retirement age, especially when then taking benefits as a partial surrender (i.e. taking a lump sum but remaining a plan member).
There are two key changes as part of this update
- The maximum total contribution (across all plans a member participates in) to defined contribution plans is limited to 20% of the Total Cash Compensation each calendar year. Within this limit, employee contributions are tax-deductible for income tax purposes and employer contributions are not taxed.
- Self-employed individuals and contractors may also participate in a group pension plan up to a maximum annual contribution of €20,000, adjusted each year in line with the Consumer Prices Index.
Tax rates applicable to benefit payments
| Length of plan membership | One- off Payment | Periodic Payments | Partial Surrender1 (one-off payment) | Partial Surrender (periodic payments)1 |
|---|---|---|---|---|
| Up to 5 years | 20% | 10% | 30%2 | 15%2 |
| 5-10 years | 15% | 7.5% | 22.5% | 11.25% |
| 10-20 years | 10% | 5% | 15% | 7.50% |
| Over 20 years | 5% | 2.5% | 7.5% | 3.75% |
What does this mean for employers and pension plans?
Employers are expected to restrict contributions to occupation pension plans to be compliant with the new limits.
These changes will make it less attractive to use a pension vehicle to reduce tax where benefits are taken early, especially as a partial surrender (i.e. taking some benefits while remaining in the plan especially after having recently joined the plan), or when joining the plan just a few years before retirement age.
Footnotes
- Not applicable for employees aged 60 or over, or if a payment is made as a result of involuntary dismissal (including voluntary redundancy programs), or as a result of the insolvency of the employer.
- For employees whose membership commences on or after their 55th birthday, the percentage tax rate increases by 5% simple for each year that the plan membership is less than 5 years (e.g. the 10% rate increases to 12% in the first year, 11.5% in the second year, 11% in the third year, and 10.5% in the fourth year).