Significant pension increases from 5% to 10% await new pensioners with the new calculation method that will come into effect from 2026. According to a report by the newspaper “Apogevmatini”, this significant reform, which is included in the upcoming social security bill, provides that the calculation of pensionable income and consequently the contributory pension will be based on wage increases rather than inflation.
Read: Retirement age limits: New changes from 2027 based on life expectancy
Pensions: How the new calculation mechanism will work
The new mechanism is based on an index that will be compiled by ELSTAT and will reflect the average wage increase across the entire economy. If, for example, the average wage increase for 2025 is set at 4.5%, then the pensionable income of insured persons will be adjusted accordingly, with a direct positive impact on the final pension amount.
Overall, the reform promises positive developments for future pensioners, with pension increases that in some cases may reach or even exceed 10%. However, its success depends on the broader course of the economy, maintaining healthy wage growth and the ability of the pension system to respond to the new conditions.
Implementation timeline and expected results
The differences, as experts emphasize, will be negligible in the first years, but after 5-6 years of implementation, pensions for new retirees are expected to increase by 5% to 10%. The final result depends on the course of wages, which is a function of the growth rate.
The higher the wage increases, the greater the percentage increase in pensionable income, with part of the increase passing to the contributory pension. This is a change that can lead to significant increases, especially for those retiring in the coming years.
Impact on freelancers and self-employed workers
According to government officials, the new index is expected to more accurately reflect the real purchasing power of workers and future pensioners. The implementation of the new formula does not only concern pensioners, but also freelancers, self-employed workers and farmers.
Their social security contributions will be readjusted based on the same wage index, which may lead to higher obligations, especially during periods of strong wage increases in the private sector. Until today, contributions increased based on inflation, a milder approach than what is provided in the new model.
This change, while theoretically strengthening the sustainability and fair redistribution of the pension system, has already caused concern among freelance professional circles. Many of them express fears of additional financial burden, at a time when they already face pressure from high taxation and general increases in the cost of living.
Legislative framework and implementation example
The legislative basis of this reform has been established by law 4387/2016, which provides that pensionable income will be calculated based on the change in the wage index. However, until today this mechanism had not been activated. The expected amendment to the autumn social security bill will finalize the relevant change.
For example, an insured person in 2026 completes the requirements for full retirement (age at least 62 years and 40 years of insurance). If in 2002 they received 800 euros salary and in 2025 they received 1,300 euros salary:
• With the old calculation method: If in 2025 inflation closes at 2.8%, pensionable income will be 1,280 euros, and the main pension 1,075 euros (gross)
• With the new calculation method: If the wage index increase is 4%, pensionable income will be 1,300 euros, and the pension they will receive will be 1,082 euros, i.e., increased by 0.7%
Greater benefits for new pensioners
Based on calculations by Ministry of Labor officials, those who retire at the end of 2025 and beginning of 2026, the new pensioners, will benefit more, as the changes for calculating increases based on the average wage index, and not inflation, will lead to further increase of their contributory pension with annual benefit up to 1,200 euros.
The increase in the national pension, which will be at the same rate as the contributory one, will also apply to new pensioners who will submit applications in 2026, while their contributory pension will have the increase from the new system of determining pensionable salary and from the years of insurance.
Actuarial projections show that from the abolition of personal difference there will be long-term gain, as the granting of allowance will stop for the next three years, which exceeded 450 million euros for the past three years.
