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Pension Schemes in EU central governments - Survey results -

Pension Schemes in EU central governments - Survey results -. Item 7 of the agenda. Hystorical Background (1/2). June 2010 : decision at Art. 83 WG meeting to launch a questionnaire on pension schemes in central governments of EU Countries ( QPSCG )

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Pension Schemes in EU central governments - Survey results -

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  1. Pension Schemes in EU central governments- Survey results - Item 7 of the agenda WG on Article 83 of the SR. Doc. 20150629 Art83_08

  2. Hystorical Background (1/2) • June 2010: decision at Art. 83 WG meeting to launch a questionnaire on pension schemes in central governments of EU Countries (QPSCG) • Sept-Oct 2010: 26 out of the 27 MS sent their replies to Eurostat • June 2011: A report with a first comparative analysis of all the pension schemes involved was submitted to the Art.83 WG at its 2011 meeting WG on Article 83 of the SR. Doc. 20150629 Art83_08

  3. Hystorical Background (1/2) • Oct/Nov 2011: a slightly modified questionnaire sent to the MS for validation of their answers as understood by Eurostat: 16 MS validated their questionnaires. • Sept 2012: in accordance with decision taken at 2012 meeting of the Art. 83, new questionnaire sent to MS: 19 MS replied. • Sept 2014: following the decision taken at 2014 meeting of the Art. 83, an updated questionnaire sent to MS: 19 MS replied. WG on Article 83 of the SR. Doc. 20150629 Art83_08

  4. Target Population The target population of the survey are permanent statutory staff of the sub-sector “central governments” (S.1311 of ESA95) of the EU Member States WG on Article 83 of the SR. Doc. 20150629 Art83_08

  5. Aim of the survey • Identify the main features of the pension schemes applicable to national civil servants working in the central governments of the EU MSs • Deepen the comparative analysis of the different pension schemes WG on Article 83 of the SR. Doc. 20150629 Art83_08

  6. Structure of the latest questionnaire • The updated form has been split into nine sections for a total of 38 items • It prompted for the selection among several mutually exclusive answers to facilitate the understanding and the comparison of the different pension schemes WG on Article 83 of the SR. Doc. 20150629 Art83_08

  7. Methodological traps (1/2) • Inherent complexity of the subject • Political sensitivity of the topic • Absence of a real harmonisation so far WG on Article 83 of the SR. Doc. 20150629 Art83_08

  8. Methodological traps (2/2) • Definition of the target population (in certain MSs more than one pension scheme exists to the benefit of the target population) • Need to select only a single scheme to simplify the comparative analysis, selection criteria questionable • Absence of replies WG on Article 83 of the SR. Doc. 20150629 Art83_08

  9. PS Seniority • Date of entry into force of the current PS in the MS is very variable (1834 to 2010) • Date of the last revisions to the provisions of the PS is generally very recent (8 updates in 2014) • Only two MSs have not updated their provisions in the last decade WG on Article 83 of the SR. Doc. 20150629 Art83_08

  10. PS Coverage • The target population of the survey are permanent statutory staff of the sub-sector “central governments” of MS. • In some countries the relevant pension schemes also cover a larger share of population. • Those PS aremandatoryfortheconcernedpopulation. WG on Article 83 of the SR. Doc. 20150629 Art83_08

  11. PS Type • Most of the PS (18) offer defined benefit (benefits on retirement are determined by a set formula and do not depend on investment returns) • On the opposite, 1 MS offer a "defined contribution" system where pay-out at retirement will depend on contribution made and investments performance. • Three MS provide for a hybrid pension's scheme. WG on Article 83 of the SR. Doc. 20150629 Art83_08

  12. Funding scheme • The majority of the PS are unfunded (pension contributions are not transferred to a fund) • Conversely three countries have a funded scheme • In the middle stay those MS offering either a notional fundedor a partially fundedscheme. WG on Article 83 of the SR. Doc. 20150629 Art83_08

  13. Contribution Rate (CR) • Pension contributions usually shared between the employer and the official. • The quotaof CR chargedtoofficialsislessthanonethird, in themajorityofcases. • In 4 MS no pension contributions are charged to the officials. • In 2 MSs, the CR ishigherthan 15% ofthebasicsalary. WG on Article 83 of the SR. Doc. 20150629 Art83_08

  14. Sustainability • The update of the CR to be paid by officials, is in most of the cases updated by ad-hoc political decisions at irregular intervals of time. • An indicator of the sustainability of the pension scheme, is represented by the ratio between contributors and beneficiaries: • The majority of schemes present a ratio over 80%, indicating either good health of the system or the young age of the scheme. • A ratio below 50% is presented in the case of three MS. WG on Article 83 of the SR. Doc. 20110627 Art83_05

  15. Pensionable ages (1/2) • Maximumpensionable age: not defined in 8 MS. It ranges from 61 to 68, the mode being 65. A bonus for extra-years after the normal pensionable age is the rule. • Normal pensionable age: ranges from 55 to 67, the most frequent cases being 60 to 63. • Early retirement: not defined in 3 MS, between 56 and 60 in most MS, penalties are generally applied.In sevaral MSs, no specific legal provisions exist for those who reach their full contribution rights before the normal pensionable ages WG on Article 83 of the SR. Doc. 20150629 Art83_08

  16. Pensionable ages (2/2) • Pensionable age by gender: in the case of 6 MSs pensionable ages differ between men and women, or according to the applicable scheme (if more than one is applicable to the target population). • Update of pensionable ages: in the majority of MSs pensionable ages are updated in line with the evolution of life expectancy: updates occur either regularly or occasionally. WG on Article 83 of the SR. Doc. 20150629 Art83_08

  17. Accrual rates • The annual accrual rate for pensions ranges from (1%-1,5%) to (2,5% or more) of the basic salary in 16 MSs. • Consequently the maximum contribution period accounted for, ranges from 30 to 40 or more. WG on Article 83 of the SR. Doc. 20150629 Art83_08

  18. Pension calculation methods (1/3) • Calculation of the retirement pensions done differently in the various MS. • Remuneration, service seniority and contributions paid influence computation. • For officials of most MS, remunerations of the whole career are considered. In the case of six MSs, only the latest (or most recent) remunerations enter into calculations. WG on Article 83 of the SR. Doc. 20150629 Art83_08

  19. Pension calculation methods (2/3) • When the calculation of the retirement pension uses yearly wages as parameter of reference, salaries can be indexed or not. • If an indexation is made, the reference parameter is generally the inflation rate, the salary growth, or the salary growth and the individual salary progression. • The retirement pension amounts to 75% or more of the basic salaries (7 MSs); complex formulas encompassing service seniority or contributions paid are used in other cases (7 MS). WG on Article 83 of the SR. Doc. 20150629 Art83_08

  20. Pension calculation methods (3/3) • Pensions are usually indexed: either on both salaries and price index indicators (in 9 MSs) or on a single indicator (in 12 MSs); no indexation in a few MSs. • When the retirement pension is computed with reference to the basic salary, its max percentage accounted for, ranges from 69 (or less) to 79% (or more). • The average replacement rate (pension over pre-retirement income) is quite variable and goes from 40% to 80% of the salary. WG on Article 83 of the SR. Doc. 20150629 Art83_08

  21. Invalidity pension • The invalidity pension is usually calculated based on remuneration • Grade of invalidity, years of service, contributions paid also influence the computations • The average replacement rate for the invalidity pension ranges from 20% to 29% in Latvia to a maximum of 60% to 69% in Austria. WG on Article 83 of the SR. Doc. 20150629 Art83_08

  22. Reversion pension • Conditions for entitlement to a reversion pension differ in the MS. • A key parameter is the widow's number of children. • The average replacement rate for the reversion pension ranges from 30% in BE and SI to more than 80% in Portugal WG on Article 83 of the SR. Doc. 20150629 Art83_08

  23. Orphan's pension • Orphan's pension is granted till ages ranging from 16 to 27. In the case of one MS no limit of age for orphans is set. • Special provisions in case of handicapped orphans. • Usually doubles if the beneficiary is full orphan. • Average replacement rate for the orphan's pension is extremely variable (from 10% to 85%). WG on Article 83 of the SR. Doc. 20150629 Art83_08

  24. Conclusions • Four surveys operated since 2011. • Overview of the existing PS in the EU MS has been improved. • Eurostat will yearly send the MS an updated questionnaire to refine the comparative analyses of national PS. • Feedbacks on potential improvements in the structure of the updated questionnaire, very welcome. WG on Article 83 of the SR. Doc. 20150629 Art83_08

  25. The Working Group is asked to express its views on this document Thank you for your attention WG on Article 83 of the SR. Doc. 20150629 Art83_08

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