Pensions: Exit up to 9 years before 67 with notional years of insurance - Guide

With the «passport» of the redemption or recognition of notional years, thousands of insured persons in the public and private sector can retire up to 9 years earlier than 67. 

Insured persons may choose what what kind of notional years they will recognise or buy back, such as time for the children, studies, insurance gaps and military service of men.

In this way, they can more easily complete their pension conditions and avoid being trapped in the labour market until 67.

The categories of notional years of insurance

Big winners are the mothers as - under certain conditions - they can open the exit door up to 9 years earlier, while men retire up to 6.5 years earlier than the general retirement age.

The cheaper cost of buying back notional years may, under certain conditions, affect the calculation of the contributory part of the pension, since the earnings taken into account in determining the amount are those resulting from the insurance contribution paid. In detail:

1. Plastic times recognised without redemption: They are only used for foundation purposes, they are not included in the amount of the contributory pension, i.e. they are not taken into account for replacement rates and pensionable earnings. They are taken into account for the calculation of the national pension.
2. Plastic times recognised by acquisition: They count towards replacement rates, pensionable earnings and the national pension.

Who benefits from the acquisition

The use of notional years benefits insured persons in all insurance institutions who are about to become entitled to a pension by buying back or recognising time from the respective categories.

This option is available to insured persons:

• either to establish retrospectively with provisions and age limits of 2011 and 2012 in order to complete the respective age limits after the changes of Law No. 4336/2015 to retire or
• to complete the full 40 years and at the same time reach the age of 62 to retire.

Attention is needed for insured persons private sector since the use of fictitious elements must combine the basis and increase of the pension. Recognition cannot be made only for the purpose of increasing the pension and in this case, i.e. if they cannot be used for the foundation, the money paid for the recognition of notional pension is lost and not refunded.

On the other hand, for insured persons insured by the State, the redemption to be made only to increase the pension and especially in the case of three-parent families, it is an option that is considered particularly advantageous.

The following categories are particularly benefiting from applying for the redemption of notional years:

• Parents of minors in the public sector who use them to build up retroactive pension rights in 2010, 2011 or 2012.
• Mothers of minors in IKA who complete 5,500 days retroactively in 2010 or 2011 for the acquisition of the right.
• Mothers of minors in PPOs - Banks who reach 25 years retroactively in 2011 or 2012.
• Men civil servants on the completion of 35 years.
• Men insured in IKA and OAEE who, with the redemption, reach 35 years (10,500 days of insurance) by 31/12/2012.
• Insured in EBRD or OAEE for the completion of 35 years retroactively in 2011 or 2012.
• Insured persons of all funds and the OGA who complete 40 years with the acquisition.

The acquisition cost

The monthly surrender cost for the main insurance branch for all notional years shall be determined at a rate of 20% on the insured person's earnings during the last month of full-time employment prior to the submission of the request. In fact, a 2% deduction applies for each qualifying year in the case of a one-off payment of the total amount of the purchase price.

The cost was equalized to 20% from 1/1/2020 and for civil servants who had the privilege in previous years to redeem fictitiously cheaper.

However, the privilege of the cheapest acquisition remains for civil servants who have applied in previous years, as they have vested the acquisition at the cost applicable in the year of application.

Those who retire with more than 30 years of insurance will also benefit significantly from the buy-back as the longer the employee's insurance record, the greater the increase he will receive in his expected pension.

In particular, in the case of employees, for each recognised month of insurance, a contribution equal to the amount of the total main pension premium (insured and employer), as it applies at the time of submission of the application, is paid on the insurable earnings during the last month of full-time employment prior to the submission of the application for recognition.

According to lawyer Aspasia Papathanassopoulou, an expert in social security matters, two illustrative examples are as follows:

Example 1

• an employee who will apply for retirement in July 2021 and includes in his/her application a request for recognition of 36 months of notional time for children.
• The monthly insurable full-time earnings for June is EUR 1 850.
• You will pay a contribution of EUR 370 for each month of recognition (1,850 X 20%).
• The total amount of the acquisition amounts to 13.320 euros (370 monthly costs x 36 recognised months) and can be paid either in 36 instalments or by deducting ¼ of the pension.
• There is also the possibility of a one-off payment, in order to obtain a total discount of 6% (2% for each full 12 months), bringing this amount to €12,520.

Example 2

• Employee with 2 employers, full-time employment and monthly insurable earnings 2.820 euros (1,720 from the first employer and 1,100 from the second employer),
• the amount of the recognition contribution is EUR 564 for each month of recognition (€2,820 x 20%).
• The total amount of the surrender is 20,304 euros (564 monthly costs x 36 recognised months) and can be paid either in 36 instalments, by deducting ¼ of the pension, or in a lump sum.
• In the case of a one-off payment, a total discount of 6% will be applied (2% for each full 12 months), which will amount to EUR 19.085,76.

What applies to non-employees

As regards the non-employees insured under the e-EFKA, for each month of credited notional time, pay the contribution corresponding to the insurance category they have chosen in the year in which the application for recognition is submitted.

As Ms Papathanasopoulou states:

• freelancer-insured member of the former OAEE who chose the 2nd insurance category for the year 2021 will apply in May for recognition of 4 years of notional study time.
• will pay for each month recognised 186 euros.
• The total cost of recognition for 48 months - if paid in instalments or deducted from the pension - amounts to €8,928.
• If paid in a lump sum with a 8% discount the amount is 8.213,76 euros.

Note that:

• If, on the date of submission of the application for recognition, compulsory insurance has been discontinued, but the insured person has declared an insurance category during the year (either due to the resumption of an activity involving compulsory insurance or due to inclusion in voluntary insurance), then recognition is based on the insurance category chosen for compulsory or voluntary insurance.

 It also provides for:

• If during the year there is no affiliation to the insurance, neither compulsory nor voluntary, then the insured person chooses, when submitting the application for recognition of notional time, the insurance category on the basis of which he/she wishes to calculate the recognition contribution. This is done with a minimum contribution of the 1st insurance category, i.e. a minimum amount of EUR 155 for each recognised month, based on current data.

It is possible that more than one application for recognition of insurance periods may be submitted. For example, one application for the recognition of study time and a second application for the recognition of children's time.

The recognition contribution for the total number of years of insurance applied for in the same year is calculated on the basis of the category chosen by the insured person at the time of submitting the application for recognition, which is the year before the year in question.

Finally, special arrangements apply in the case of establishing entitlement to a supplementary pension with the recognition of redemption of notional years of insurance. In particular, the total amount due for redemption, provided that it does not exceed EUR 3 000, is offset or deducted from the total amount of the supplementary pension to which the person is entitled. If the outstanding surrender amount is higher than this amount, the following shall apply:

• The excess amount of EUR 3,000 is paid in one lump sum before the pension decision is issued.
• The remaining part is offset or withheld in instalments from the total amount of the supplementary pension entitlement.

As noted Mrs Papathanasopoulou on the methods of payment of the amounts «although there is an incentive to buy more notional insurance time, since the more time is bought, the higher the deduction rate, the more likely it is that it will not be possible for the insured persons to accumulate these high amounts, with the result that most of them will resort to paying the redemption amounts either in instalments or by deduction from the pension».»

What applies to the redemption of notional years in the public sector

The notional years are particularly useful and necessary for those who wish to establish pension rights at ages 55 to 62 under the various provisions on 35, 25 and 37 years. in the public sector. Even after 2022, when all limits are harmonised at 62 and 67, those who have built up their pension within the transition period will be able to retire earlier based on the limit they have built up.

In this context, the «hunt» for the shortest possible completion of 35 or 37 years becomes easier with the acquisition of notional years, so that not to trap the staff member in long retirement ages. The same applies to the special retirement case of teachers who can choose to retire on the basis of when they reach 30 years of pensionable service.

The civil servants can recognise up to 5 years from children and up to 7 years from other categories:

• time of military service
• notional childbearing time up to 5 years. For children it can be identified on a case-by-case basis:

for one child, a notional insurance period of 300 days or 1 year

for two children, a notional insurance period of 900 days or 3 years and, finally,

from three children or more, notional insurance time of 1500 days or 5 years.

• one year of study for a single degree from a higher or higher education institution in Greece or abroad,
• parental leave time. Law 4488/2017 added as a new notional time, the time of unpaid leave taken by an employee for the upbringing of his/her children. The maximum recognized parental leave time is 6 years and in order to be recognized and calculated as pensionable, the employee must pay the surrender contribution.

The total amount of the redemption is paid in as many monthly instalments as the number of months recognised. Alternatively, it is paid in one lump sum within three months of the notification of the recognition decision, in which case a discount of 2% is granted for each year of redemption (i.e. 4% for 2 years, 6% for 3 years and so on).

The use of notional years is in the interest of staff who need the additional years to build up pension rights. This option can be used by insured persons either to retroactively build up pension rights under the provisions of 2011 and 2012 in order to retire by completing the respective age limits of Law No. 4336/2015 or to complete the full 40 years and retire at 62.

The following categories are particularly benefiting from applying for the redemption of notional years:

• Parents of minors in the public sector who use them to build up retroactive pension rights in 2010, 2011 or 2012.

Parents of minors (men and women) and insured persons with three or more children who had a vested pension right and wished to retire at 50, 52 or 55, depending on the year of foundation, must as a rule have reached these age limits before 18 August 2015, as the age limit for parents is particularly high and is close to the general age limit of 62.

For example:

A third-generation civil servant who was entitled to 52 in 2011 with 20 years of service and reached 52 in 2/2015 can retire immediately.

The father of a minor civil servant who had established his entitlement with 25 years of service and a minor child in 2011 turned 52 in 2018. This person can retire at age 60 years and 2 months.

• Employees for the completion of 35 or 37 years.

State insured persons who wish to retire at 35 years of age can buy back notional years to complete 35 years.

Also, insured persons of the State, if they had completed 25 years by 31/12/2010, retain the possibility to retire with 37 years and the corresponding limit of the law. 4336/2015.

• Men and women who want to retire with a reduced pension.

They can retroactively recognise older years to complete 25 years of insurance by 31/12/2012. Under this method, women who completed 25 years in 2010 can retire at 55. Similarly, women and men who completed 25 years in 2011 can retire at 56. Women and men who reached 25 years of age in 2012 can retire from 57.