Actuarial assumptions for the 2014 PSEO assessment Item 6.1 of the agenda 27.06.2014 WG on Article 83 of the SR. Doc. 20140627Art83_06

WG on Article 83 of the SR. Doc. 20140627Art83_06 Yearly change in assumptions (1/2) 27.06.2014 WG on Article 83 of the SR. Doc. 20140627Art83_06

WG on Article 83 of the SR. Doc. 20140627Art83_06 Yearly change in assumptions (2/2) 27.06.2014 WG on Article 83 of the SR. Doc. 20140627Art83_06

WG on Article 83 of the SR. Doc. 20140627Art83_06 The 2013 Real Discount Rate (RDR) It is computed as 16-years moving average of 1998 – 2013 RDR Nominal rate (Euro area zero-coupon (government bonds) yield with a maturity of 21 years): 4.9% Deflator index (HICP): 2.2% Real discount rate: 2.7% 27.06.2014 WG on Article 83 of the SR. Doc. 20140627Art83_06

WG on Article 83 of the SR. Doc. 20140627Art83_06 Real Discount Rate evolution 27.06.2014 WG on Article 83 of the SR. Doc. 20140627Art83_06

RDR and 16 years average evolution 27.06.2014 WG on Article 83 of the SR. Doc. 20140627Art83_06

The General Salary Growth (GSG) computation (1/2) It is computed as a 16-years moving average of 1998 – 2013 Specific Indicators (SI), but The 2011, 2012 and 2013 SI as calculated by Eurostat, respectively -1.8%, -1.1% and -1.4% have not been applied Salaries have been adjusted by +0.8% from 1st July 2012 Consequently, implicit SI of -3.5%, -1.9% and -1.5%, respectively for 2011, 2012 and 2013 have been used for the GSG computation 27.06.2014 WG on Article 83 of the SR. Doc. 20140627Art83_06

WG on Article 83 of the SR. Doc. 20140627Art83_06 The General Salary Growth (GSG) computation (2/2) GSG as 16-years moving average of the 1998–2013 Specific Indicators (SI) 27.06.2014 WG on Article 83 of the SR. Doc. 20140627Art83_06

Specif Indicators and 16 years average evolution 27.06.2014 WG on Article 83 of the SR. Doc. 20140627Art83_06

WG on Article 83 of the SR. Doc. 20140627Art83_06 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 each two years (Article 44 of the SR). Promotions shall be decision of 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 27.06.2014 WG on Article 83 of the SR. Doc. 20140627Art83_06

Average ISP rates by function groups 27.06.2014 WG on Article 83 of the SR. Doc. 20140627Art83_06

WG on Article 83 of the SR. Doc. 20140627Art83_06 Turnover definition Active staff might terminate activity one day for one reason or another, 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 27.06.2014 WG on Article 83 of the SR. Doc. 20140627Art83_06

Turnover by contract type 27.06.2014 WG on Article 83 of the SR. Doc. 20140627Art83_06

WG on Article 83 of the SR. Doc. 20140627Art83_06 2014 Invalidity table Invalidity rate has been updated to take account the observed invalids in years 2009 to 2013 Invalids by year Extract from the Invalidity table 27.06.2014 WG on Article 83 of the SR. Doc. 20140627Art83_06

WG on Article 83 of the SR. Doc. 20140627Art83_06 Life table (1/2) First version of the ICSLT was developped by Eurostat and ISRP and it has been used by Eurostat in the 2008 to 2012 pension assessments The Life Table is updated on the occasion of the five years assessment. Provisional version of the ICSLT2013 used in the 2013 pension assessment, Eurostat 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 used for the 2014 pension assessment. The new ICSLT includes a future life expectancy trend over 30 years 27.06.2014 WG on Article 83 of the SR. Doc. 20140627Art83_06

Life table (2/2) Extract of the ICSLT2013 (1st year rates) 27.06.2014 WG on Article 83 of the SR. Doc. 20140627Art83_06

Other assumptions used for calculations Compared to the 2013 assessment, some assumptions have been updated to reflect new legal provisions in force from 1s January 2014 and past observations. Those assumptions are: 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%) (previously 10%) 27.06.2014 WG on Article 83 of the SR. Doc. 20140627Art83_06

Other assumptions used for calculations (2/2) Other assumptions remain the same compared to the 2013 assessment: the difference of age between a member and his partner (2y) the probability of being married at retirement (81% for men and 49% for women) 27.06.2014 WG on Article 83 of the SR. Doc. 20140627Art83_06

The Working Group is asked to express its views on this document Thank you for your attention 27.06.2014 WG on Article 83 of the SR. Doc. 20140627Art83_06