Greece is a country which does not have a domicile QROPS available to individuals. The normal route to transfer UK pensions overseas is to use a jurisdiction such as Guernsey. Thus subject to normal QROPS rules, cash and income can be paid without tax deductions and the QROPS fund will continue to grow tax exempt.

Historically Greece has provided an exceptionally generous set of rules for early retirement, especially for women, and this has put a significant strain on the pension system and the country‘s finances as a whole.

It has a pension system which at the moment provides high statutory replacement rates. Other plans, such as voluntary occupational and private are in existence, but these are in the minority. Now Greece is facing a huge budget deficit, mainly driven by these pension demands. Reform of the whole pension system is vital. Experts have predicted that unless quick action is taken, the system will collapse by 2025.

The Government has made attempts to address the problems. Draft proposals to reduce the burden on the state were issued in November 2007 and passed by parliament in March 2008.

Plans were outlined to increase the early retirement age, provide incentives to work for longer, and to bring the age of retirement into line for both men and women.

Such was the sweeping opposition from the public and labour unions, that the government were forced to review their strategies, yet failure to fully engage in this reforming process is now unavoidable.

The pension structure in Greece is primarily divided into 3 bands.

The first band in general consists of Earnings-Related Pensions, Earnings-Related Supplementary Pensions and Minimum Pension Benefits. This broadly covers self-employed individuals and the private sector. Contributions come from employees and the employer with rates that vary depending on types of occupation. There are in excess of 130 different funds covering the primary and supplementary pension demands. Significant savings could be made if changes to simplify the complexity and administrative costs associated with running these funds were implemented.

The primary pension offers a replacement rate of approximately 80%. A further 20% are provided by the supplementary pension; full supplementary pension entitlement is available to beneficiaries with a contribution record of 35 years. Presently, public-sector workers are paid direct from the national budget when they retire, and an additional minimum pension is available for those who have not met the contribution requirements or have limited means.

New legislation concerning the second band was introduced in 2002, and took the form of occupational pensions. These can be either funds or a group insurance scheme and are arranged as a separate legal entity. Companies can often offer these schemes to employees on a voluntary basis, with optional contributions from the employer. All benefits on retirement from such as plan can be taken tax-free up to certain levels.

Valuations must be undertaken annually and a minimum contribution imposed to ensure that specific funding levels are met.

Should a deficit look likely, the fund must present a three-year plan to the National Actuarial Authority outlining measures to correct the shortfall. Varying risk preferences are available but these are required to be adequately insured against poor returns. This has lead to group insurance schemes as a whole remaining rather under-developed in Greece.

The third band is based on retirement indemnities which all employees are entitled to. Levels are dependent on length of service and are paid in a lump sum. These are taxed at 20% after the first EUR 20,000.

Greece presently runs the most generous pension system in Europe, with it’s population aging relatively fast compared with other European countries. This will increase the pressure on the system itself and the public finances. Expenditure on pension provision will be very much above the EU average in relation to GDP by 2050.

By addressing the financial deficit through pension reform now, together with growth in the funded pension sectors, a balanced and sustainable system can be implemented.

Gerard Associates Ltd advises expats and people considering living abroad on the technical and currency options available for Pensions, QROPS, QNUPS and investments in a clear format allowing all customers to make an informed choice. Our service encompasses Pensions, investments, currency exchange and guidance on taxation in most popular ‘sunnier’ climates. This with the re-assurance and security of UK authorised and regulated advice – essential tools for your security.