Actuarial Assumptions Art83 WG Meeting Actuarial Assumptions Item 5 of the Agenda 26.06.2007 Art83WG / Doc.20060626 Art83_05

Summary of assumptions Real Discount Rate (RDR) Content Assumptions update Summary of assumptions Real Discount Rate (RDR) General Salary Growth (GSG) Individual salary progression (ISP) Invalidity table 26.06.2007 Art83WG / Doc.20060626 Art83_05

Frequency of changes (in years) Assumptions update Overview of actuarial assumptions used in 2007 assessment Updating of assumptions according to Annex XII Assumptions Frequency of changes (in years) Discount rate (RDR) 1 General Salary Growth (GSG) Individual Salary Progression (ISP) Not defined Life table (EU-2004 Life table) 5 Average retirement age   Invalidity table (EU-2007 Inv. Table) Other assumptions 26.06.2007 Art83WG / Doc.20060626 Art83_05

Summary of assumptions 26.06.2007 Art83WG / Doc.20060626 Art83_05

Real Discount Rate (RDR) 12-year moving average : 1995 - 2006 deflator index (2.2%): - no problem nominal rate (5.6%): data not available from August 2005 until December 2006 ECB will not publish 2006 annual average before the 1st September Eurostat estimate of 2006 rate (4.2%) is based on 30 years Euro area benchmark government yields produced by ECB RDR (3.4%): This estimated RDR will be used in the final assessment 26.06.2007 Art83WG / Doc.20060626 Art83_05

Nominal Discount Rate 26.06.2007 Art83WG / Doc.20060626 Art83_05

RDR – Moving average 26.06.2007 Art83WG / Doc.20060626 Art83_05

RDR 2004 to 2011 26.06.2007 Art83WG / Doc.20060626 Art83_05

General Salary Growth (GSG) GSG = yearly update of pay scale 26.06.2007 Art83WG / Doc.20060626 Art83_05

Specific Indicator (SI) GSG = yearly update of pay scale 26.06.2007 Art83WG / Doc.20060626 Art83_05

General Salary Growth (GSG) 2006 net SI = 0.2% 2006 GSG (12-year moving average 1995-2006) = 0.5% 2005 GSG (12-year moving average 1994-2005) = 0.3% → GSG increase (+0.2%) 26.06.2007 Art83WG / Doc.20060626 Art83_05

Individual Salary Progression (ISP) The ISP table has been updated to take account of: Decisions taken at the 19.06.2006 meeting of Art83 WG The use of new salary scale (Former categories A*, B*, C* D* have been replaced by function groups AD and AST) The 2006 observed promotion rates ISP refers to promotions and seniority steps 26.06.2007 Art83WG / Doc.20060626 Art83_05

ISP – Population by ISP groups ISP refers to promotions and seniority steps 26.06.2007 Art83WG / Doc.20060626 Art83_05

ISP – Population changes ISP refers to promotions and seniority steps 26.06.2007 Art83WG / Doc.20060626 Art83_05

ISP – Promotion rates 26.06.2007 Art83WG / Doc.20060626 Art83_05 ISP refers to promotions and seniority steps 26.06.2007 Art83WG / Doc.20060626 Art83_05

ISP – Average 26.06.2007 Art83WG / Doc.20060626 Art83_05 ISP refers to promotions and seniority steps 26.06.2007 Art83WG / Doc.20060626 Art83_05

Invalidity Table Invalidity rates have been checked according to Art83WG delegates requests (2006 Art83 WG. Action 2) The result of the test showed that the EU-2004 Invalidity table overestimated real invalidity An updated table (EU-2007 Invalidity table) has been used in the calculation 26.06.2007 Art83WG / Doc.20060626 Art83_05

New invalids A new category of invalids according to Staff Regulations in force from 01.05.2004: New invalids continue to contribute to the PSEO The invalidity allowance = 70% of the current BS while former invalidity pension = 70% of the BS at the normal retirement age Invalidity allowance is converted into a retirement pension at the normal retirement age (65 years old) 26.06.2007 Art83WG / Doc.20060626 Art83_05

Invalids by age 26.06.2007 Art83WG / Doc.20060626 Art83_05

The 2007 EU-Invalidity table 26.06.2007 Art83WG / Doc.20060626 Art83_05

The 2007 EU-Invalidity table 26.06.2007 Art83WG / Doc.20060626 Art83_05

Invalidity changes 2004 and 2007 Invalidity tables refer to different populations: The 2004 invalidity table is not as reliable as the 2007 one, since the earlier one was based on: a smaller population (only data from the EC instead all institutions and agencies), an invalidity table from the Coordinated Organisations (in which population structure and invalidity conditions are different from the European Institutions). 26.06.2007 Art83WG / Doc.20060626 Art83_05

Invalidity changes Delegates are invited to give their advice on: the new 2007 EU-Invalidity table the proposal on updating the table each year, using as input a moving average of 5 years of invalidity observation. 26.06.2007 Art83WG / Doc.20060626 Art83_05

Conclusions The Working Group is asked to express its views on the issues discussed in this paper Thank you for your attention 26.06.2007 Art83WG / Doc.20060626 Art83_05