bobscott wrote:Thanks Warwick. I have never understood the terms basic pension and auxiliary pension here in Greece. Are we talking Basic State Retirement pension and Works Pension (using UK terminology)?...
Not really. There isn't a single State Pension in Greece although IKA is probably the nearest equivalent. Each group of workers have tended to have their own pension fund. Engineers have a pension fund; the military have a pension fund etc. For the people in that group that is their only pension. They don't pay into another State Fund as is done with NI in the UK. The concept of occupational pensions in addition to a State Pension doesn't really exist here although a few people do contribute to private insurance funds.
A better comparison in the UK would be to the Basic State Pension and the various contribution related additions to the Basic State Pension, like Graduated Retirement Benefit, Additional State Pension and SERPS, to which people who retired before April 2016 were entitled. Your NI contribution was a percentage of your income. If you were a low wage earner and simply paid the basic NI stamp each week you would only qualify for the Basic State Pension. If you paid in more than the basic stamp you became entitled to an additional state pension related to how much extra you paid in. If, however, you worked for a company that had an occupational pension/superannuation scheme that additional NI contribution was usually paid into the occupational scheme and you lost the right to the additional state pension, called contracting out. For example, I worked for companies with occupational schemes and was contracted out virtually all my life but my state pension statement on retirement was for a basic state pension of £102.15 plus a Graduated Retirement Benefit of £4.87 plus an Additional State Pension of £3.21. The former accrued from casual work that I did during holidays as a student. The latter was because I worked for one company with an occupational scheme for only 18 months and they enforced their right to repay me my contributions because I worked less than 2 years. The contracted out NI contribution was deducted from what I was repaid and returned to NI.
IKA works pretty much the same way. In my case the auxiliary part is smaller than the basic part. For many workers who had decent paid jobs and worked in Greece all their adult lives the auxiliary part could be the majority of their pension. In many cases cuts have been applied mostly to the auxiliary part. I guess the thinking is that someone can live on the basic part and the auxiliary part is just a luxury they can do without.
I don't like the phrase "the State Retirement pension (SRP) is paid tax-free". It gets misinterpreted as "the State Retirement pension (SRP) is not liable for tax" and that is not true. Also, I don't think it is really fair to describe the way UK income tax is deducted as "devious". It doesn't really matter what sort of income you have, if you have more than one income stream HMRC will always try to issue code numbers so that they need to deduct tax from the minimum number of sources. They will deduct each income stream from your personal allowance until they run out of allowance. All the ones deducted from the allowance will be non-taxable. Tax will then be deducted from whatever sources are left but with a small code number and hence a high tax rate. The tax that is due on your entire income is deducted from the remaining sources. The Basic State Pension is always less than the tax free allowance and so, if a person only received that pension, they would not be liable for income tax. HMRC simply include the State Pension first in their calculation.