Actuarial assumptions for the 2015 PSEO assessment

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Actuarial assumptions for the 2015 PSEO assessment Item 6.1 of the agenda 29.06.2015 WG on Article 83 of the SR. Doc. 20150629Art83_05

Update of assumptions (1/2) 29.06.2015 WG on Article 83 of the SR. Doc. 20150629Art83_05

Update of assumptions (2/2) 29.06.2015 WG on Article 83 of the SR. Doc. 20150629Art83_05

The Real Discount Rate (RDR) It is computed as 18-years moving average of 1997 – 2014 RDR, compliant with art. 10.2 & 11a of Annex XII of the SR Nominal rate (Euro area zero-coupon (government bonds) yield with a maturity of 21 years): 4.8% Deflator index (HICP): 2.1% Real discount rate: 2.7% 29.06.2015 WG on Article 83 of the SR. Doc. 20150629Art83_05

RDR and 18 years average evolution 29.06.2015 WG on Article 83 of the SR. Doc. 20150629Art83_05

WG on Article 83 of the SR. Doc. 20150629Art83_05 NDR, IR and RDR evolution 29.06.2015 WG on Article 83 of the SR. Doc. 20150629Art83_05

General Salary Growth (GSG) (1/2) GSG is computed as the 18-years moving average of 1997 – 2014 Specific Indicators (SI), as per art. 11.2 and 11a in Annex XII of the SR. However no salaries adjustment in 2011, 2013 and 2014. Salaries adjusted by +0.8% from 1st July 2012. The Specific Indicators (SI) capture the changes in the purchasing powers of salaries of national civil servants in central government. The 2011, 2012, 2013 and 2014 SI, calculated by Eurostat, respectively -1.8%, -1.1%, -1.4% and -1.3% were not applied. Implicit SI of -3.5%, -1.9%, -1.5%, and -0.9%, respectively for 2011, 2012, 2013 and 2014 have been used for the GSG computation. 29.06.2015 WG on Article 83 of the SR. Doc. 20150629Art83_05

General Salary Growth (GSG) (2/2) GSG as 18-years moving average of the 1997–2014 Specific Indicators (SI) 29.06.2015 WG on Article 83 of the SR. Doc. 20150629Art83_05

Specif Indicators and 18 years average evolution 29.06.2015 WG on Article 83 of the SR. Doc. 20150629Art83_05

WG on Article 83 of the SR. Doc. 20150629Art83_05 The Individual Salary Progression (ISP) ISP refers to the salary increase due to seniority steps advancement and promotions Officials, Temporary Agents and Contract Agents advance to the next seniority step after two years, unless unsatisfactory performance or incompetence procedure (art. 44 & 51 of the SR). Promotions are decided by the appointing authority in accordance with Article 45 of the SR. ISP is calculated by function group, grade and number of years remaining till the assumed retirement age. 29.06.2015 WG on Article 83 of the SR. Doc. 20150629Art83_05

Average ISP rates by function groups 29.06.2015 WG on Article 83 of the SR. Doc. 20150629Art83_05

WG on Article 83 of the SR. Doc. 20150629Art83_05 Turnover definition Active staff may terminate activity one day for a number of reasons, and thus leave the PSEO scheme Turnover T1 refers to end of contract validity Turnover T2 is due to voluntary and unexpected departures Turnover is influenced by the contract type 29.06.2015 WG on Article 83 of the SR. Doc. 20150629Art83_05

Turnover by contract type 29.06.2015 WG on Article 83 of the SR. Doc. 20150629Art83_05

WG on Article 83 of the SR. Doc. 20150629Art83_05 2014 Invalidity table Invalidity rate take into account the observed invalids over a 5-years period Invalids by year Extract from the Invalidity table 29.06.2015 WG on Article 83 of the SR. Doc. 20150629Art83_05

WG on Article 83 of the SR. Doc. 20150629Art83_05 Life Table (1/2) A first version of the ICSLT had been developed by Eurostat and ISRP and used by Eurostat in the 2008 to 2012 pension assessments A provisional version of the ICSLT2013 used in the 2013 pension assessment, and Eurostat had committed to replace it once the final version been available (decision taken in the June 2013 meeting of the Art83WG). Final version of the ICSLT2013 has been used for the 2014 and 2015 pension assessments. The Life Table is updated on the occasion of the five years assessment. The ICSLT2013 includes a future life expectancy trend over 30 years 29.06.2015 WG on Article 83 of the SR. Doc. 20150629Art83_05

Life Table (2/2) Extract of the ICSLT2013 (1st year rates) 29.06.2015 WG on Article 83 of the SR. Doc. 20150629Art83_05

WG on Article 83 of the SR. Doc. 20150629Art83_05 Other assumptions (1/2) Compared to the 2014 assessment, the other assumptions used for calculations have remained unchanged. At meeting held on 27 June 2014, the Art. 83 WG members agreed on a 5-yearly updating of those assumptions. No new legal provisions nor inexpected new observations would justify the use of different values for those parameters. Those assumptions are: 29.06.2015 WG on Article 83 of the SR. Doc. 20150629Art83_05

WG on Article 83 of the SR. Doc. 20150629Art83_05 Other assumptions (2/2) The assumed retirement age (63 to 65), Bonus for late retirement, Pension reduction for early retirement, The loading factor for orphan’s and divorced spouse’s pension (13%Further assumptions remain the same compared to the 2014 assessment: The difference of age between a member and his partner at retirement (2y) The probability of being married at retirement (81% for men and 49% for women) 29.06.2015 WG on Article 83 of the SR. Doc. 20150629Art83_05

The Working Group is asked to express its views on this document Thank you for your attention 29.06.2015 WG on Article 83 of the SR. Doc. 20150629Art83_05