Meeting of the Article 83 of the Staff Regulations Working Group

Transcription

1 Luxembourg, June 2007 Eurostat. Unit D-5 Remuneration and Pensions Document: Doc Art83_05 Meeting of the Luxembourg 26th June 2007 at 09:30 Quételet Room BECH Building / Luxembourg Pension Scheme of European Officials (PSEO) Actuarial assumptions used in the 2007 assessment of the PSEO (Item 5 of the agenda)

2 Table of contents 1 Introduction Summary of main variables Discount rate General salary growth Individual salary progression (ISP) Invalidity table Inputs Base population Observed invalidity Observed invalidity rate by officials' age (unisex rate) Update of the unisex invalidity rates Update of the invalidity table by sex and officials' age The new 2007-EU Invalidity table Comparison between 2004 and 2007 invalidity tables. Graph Regular update of the Invalidity table Other assumptions Conclusions / 22

3 1 Introduction The aim of this document is to present an overview of the actuarial assumptions used in the 2007 actuarial assessment. Some elements (tables or explanations) described below are also included in the document entitled "Actuarial assessment of the PSEO Provisional results" presented under item 6 of the agenda. This document aims to complete the information and to provide further explanations about the methodological choices. In this way, it constitutes a complementary information source with regard to item 6. Indications about the updating of some actuarial assumptions are given in articles 9 to 12 of the Staff Regulations Annex XII but rules are not clearly fixed for all of the assumptions. As mentioned at yearly meetings of the Article 83 of the Staff Regulations Working Group, the real discount rate (RDR)and the general salary growth (GSG) must be calculated each year. The frequency and the computation rule are regulated by articles 10 and 11 of Annex XII. The life table (EU-2004 life table) and the average retirement age have clearly to stay unchanged till the second actuarial assessment in The frequency of changes is not defined for the individual salary progression (ISP), the invalidity table (EU-2004 invalidity table) and other assumptions, like the age difference by gender, the marital status, the probability to be married, etc. 3 / 22

4 2 Summary of main variables The following tables show the values of the main parameters (see Table I) and actuarial assumptions (see Table II) used on the 2007 actuarial assessment of the PSEO. Please note that these tables only present an overview of the main variables and are not exhaustive. Please refer to the Staff Regulations and its annexes for precise and complete information. Table I Staff Regulations parameters used in the actuarial assessment Legal source Parameter Value Staff Regulations in force from Reference date for the population (Annex XII Article 1) Maximum official retirement age (Staff Regulations Article 52) Minimum official retirement age (Staff Regulations Article 52 and Annex XIII Article 22) Minimum age for early retirement (Staff Regulations Article 52, Annex VIII Article 9 and Annex XIII Article 23) Category and grade for the minimum subsistence figure (Annex VIII Article 6) Maximum retirement pension (Staff Regulations Article 77) Annual accrual rate (Article 77 of the Staff Regulations and Article 21 of Annex XIII) Bonus for officials in service after the normal retirement age (Annex VIII Article 5 and Annex XIII Article 22) Minimum retirement pension (Staff Regulations Article 77) Invalidity allowance (Staff Regulations Article 78) Minimum invalidity allowance (Staff Regulations Article 78) Reversion pension (Staff Regulations Article 79 and Annex VIII Article 18) Minimum reversionary pension (Staff Regulations Article 79 and Annex VIII Article 18) Survivor's pension (Staff Regulations Article 79 and Annex VIII Article 17) Minimum survivor's pension (Staff Regulations Article 79) or before for officials in service before or before for officials in service before first step of grade 1 70% of the basic salary at the retirement date 1.9% or 2% for officials recruited before Barcelona incentive 4% of the minimum subsistence figure per year of service 70% of the basic salary 100% of the minimum subsistence figure 60% of the retirement pension 35% of the last basic salary 60% of the retirement pension that would have been payable to the official 35% of the last basic salary or minimum subsistence figure 4 / 22

5 Table II Actuarial assumptions Actuarial assumption Average age difference between men and women Value 3 years Probability of being married for men 90% Probability of being married for women 60% Marital status status at evaluation date Coefficient for orphan's and divorced spouse's pension 10% Annex VIII coefficient (correction coefficient) 0.0% Assumed retirement age 63 or 64 years of age (see Doc Art83_03) Real discount rate (RDR) 3.4% (See point 2) General salary growth (GSG) 0.5% (See point 3) General pension revaluation (GPR) Individual salary progression (ISP) Mortality table Invalidity table 0.5% (equal to the GSG) ISP rates by grade and step, and years to retire (See point 4) EU-2004 life table (same as for 2006 calculation) EU-2007 invalidity table Main of these actuarial assumption s are explained at the next points 5 / 22

6 3 Discount rate Annex XII, article 10 of the Staff Regulations specifies that: 1. The interest rates to be taken into consideration for the actuarial calculations shall be based on the observed average annual interest rates on the long-term public debt of Member States as published by the Commission. An appropriate consumer price index shall be used to calculate the corresponding interest rate net of inflation as needed for the actuarial calculations. 2. The effective annual rate to be taken into consideration for the actuarial calculations shall be the average of the real average interest rates for the 12 years preceding the current year. Consequently, real discount rates (RDR) from 1995 until 2006 have to be used in the 2007 assessment of the PSEO. The Euro zero-coupon yield curve with a maturity of 21 years is no longer produced by the Commission as production of all Euro zero-coupon yield curves has been transferred to the ECB (European Central Bank). Because the ECB has not yet produced the 2006 Euro zero-coupon yield curve with a maturity of 21 years Eurostat estimated it using as input the 30-year Euro area benchmark government yield as produced by the ECB and adjusting the rates to 21 years of maturity. Eurostat used the same methodology when estimating the RDR used in the 2006 pension assessment. The 12 years moving average of real discount rates (RDR) that has been calculated this time (3.4%), will be used in the final assessment of the PSEO to be published by 1 September, as it is not expected that the ECB will publish the annual average 2006 of the Euro zero-coupon yield curve with a maturity of 21 years by this date. 6 / 22

7 Table III Real discount rate (RDR) Year Nominal rate Deflator index Real discount rate (1) (2) (3) (4) (4) Avg Avg (1) (2) (3) (4) Till 1998: long-term government borrowing rates. Since 1999: Euro zero-coupon government bond curve with a maturity of 21 years. Till 1998: National Accounts private consumption deflator. Since 1999: Harmonised Index of Consumer Prices (HICP). The values in column 3 are obtained using the common formula for deflation i.e.: col.3 = 100 * (100 + col.1) / (100 + col.2) Nominal rate estimated by Eurostat (data not available at ECB) This decrease of the RDR (3.4% in 2006, instead 3.6% in the previous year), combined with the effect of changes on other actuarial assumptions, explains why the pension rate is closet to the one calculated in It should be remembered that the sensitivity of the contribution rate for pension is about 2.5 times the change of the RDR (see point 5.1 in the document Art83_06). The trend of the RDR observed till now will continue in the near future as the expected yearly slight increase in interest rates probably will not be enough to compensate for the disappearance of former yearly interest rates when calculating the 12-year moving average. The following graph shows the progressive decrease of the 12-year moving average from 2004 (3.8%) to 2007 (3.1%) despite the fact that the yearly RDR has increased from 2005 (1.8%) to 2007 (2.0%). The graph shows also that the 12-year moving average could decrease more, up to 2.5% in 2011, if yearly RDRs continue to increase as slowly as in the past, leading to a yearly RDR of 2.4% in If the future reality corresponds to this trend and if other actuarial assumptions remain unchanged, the contribution rate for pension would increase to 12% in / 22

8 Graph I Real discount rate from 2004 and projection to 2011 RDR from 2004 and projection to RDR Yearly rates 12 years average Years ACTION: Delegates are invited to comment on this point. 8 / 22

9 4 General salary growth As for the discount rate, Annex XII gives specific rules to calculate the general salary growth. Article 11 says on the one hand, that the annual change in salary scales to be used for the actuarial calculations shall be based on the specific indicator (SI) and on the other hand, that the effective annual rate shall be the average of the net SI for the 12 years preceding the current year. As the net specific indicator obtained in 2005 is 0.2%, the 12-year moving average from 1995 to 2006 is 0.5% (see Table IV). The estimate of the general salary growth (GSG) increases consequently between 2005 and 2006 from 0.3% to 0.5%. This increase of the GSG, combined with the effect of changes on other actuarial assumptions, explains why the pension rate is close to the one calculated in It should be remembered that the sensitivity of the contribution rate for pension is about 2.5 times the change of the GSG (see point 5.2 in the document Art83_06). Table IV General Salary Growth Year Specific Indicator , , , , , , , , , , , , ,2 Avg ,3 Avg ,5 The trend of the GSG (12 yearly average Specific Indicators) is even less predictable than the RDR (see previous point). Specific Indicators depend on salary increase of officials in Central government of members states, while the RDR depends on ECB policy on interest rates. The next graph shows that there is a strong variation in yearly SIs. 9 / 22

10 Graph II SI from 1994 to SI Years If the five most extreme IS values are excluded, an averaged GSG of 0.3% could be considered as short term prediction for next years. ACTION: No methodological changes are proposed by Eurostat. The computation rules are clearly fixed by the Staff Regulations and no problems have been encountered to apply them. 10 / 22

11 5 Individual salary progression (ISP) The individual salary progression (ISP) refers to the salary increase due to the career of the EU officials, i.e. promotions and seniority steps. The ISP has a great impact on the contribution rate, but not as much as the RDR and GSG. Furthermore, with the introduction of the new Staff Regulations on , the career of EU officials has been completely reviewed. Annex XIII of these Staff Regulations includes transitional measures which made the determination of this assumption quite complicated. This issue was discussed last time at the meeting of the Article 83 Working Group and the following actions were decided: Eurostat will calculate a new version of the ISP table ("2006 ISP v1 table") to be used in the final 2006 assessment of the Pension Scheme of European Officials. ISP rates concerning officials and temporary staff from agencies (ISP groups 1 and 2) will be based on a 12-year moving average of observed promotion rates and one year of theoretical promotion rates promotion rates will be calculate as the simple average of 2005 observed promotion rates and a year of theoretical promotion rate. A fix ISP rate of 0.4% will be applied to temporary staff from Institutions (ISP groups 3 and 5). A fix ISP rate of 1% will be applied to contractual agents (ISP group 5) as in the past. A new weighted ISP table of the five ISP group above mentioned will be calculated for publication purposes. ISP rates used in the 2006 final assessment were calculated according to these decisions and they have been updated to be used in the 2007 assessment of the PSEO. This update takes account of the following elements: The use of the new salary scale. Provisional categories A*, B*, C* and D* have definitively been replaced by function groups AD (Administrators) and AST (Assistants). The population structure change (situation at ). The 2006 observed promotion rates. 11 / 22

12 The population structure at can be summarized in the following table: Table V Weight of the active population by ISP group and grade at the Grades Population groups for ISP calculation (1) Total x x x x 0.2% 0.2% 17 x x x x 0.1% 0.1% % 0.0% 0.0% x 0.5% 0.7% % 0.0% 0.1% 0.0% 0.4% 1.3% % 0.1% 0.1% 0.0% 1.8% 3.9% % 0.0% 0.1% 0.0% 1.4% 2.3% % 0.2% 0.3% 0.1% 0.1% 9.0% % 0.1% 0.2% 0.1% 0.1% 8.2% % 0.1% 0.3% 0.1% 0.5% 6.4% 9 3.2% 0.4% 0.1% 0.1% 1.0% 4.8% 8 5.7% 0.3% 0.3% 0.1% 1.0% 7.4% 7 4.1% 0.8% 0.3% 0.2% 0.3% 5.6% 6 9.3% 1.8% 0.3% 0.2% 0.7% 12.4% 5 6.5% 3.4% 0.3% 1.5% 2.1% 13.8% 4 6.0% 0.1% 0.2% 0.2% 2.2% 8.6% 3 4.3% 1.3% 0.3% 0.7% 0.0% 6.6% 2 0.9% 0.3% 0.2% 0.1% 0.0% 1.4% 1 1.0% 2.9% 0.4% 1.0% 1.8% 7.1% Total 66.2% 11.9% 3.4% 4.4% 14.2% 100.0% (1) ISP Groups: 1. Officials, together with temporary staff of agencies, recruited before Officials, together with temporary staff of agencies, recruited from onwards 3. Temporary staff of institutions recruited before Temporary staff of institutions recruited from onwards 5. Contract staff recruited from onwards (x) Grades 17 and 18 concern exclusively Contract staff (ISP group 5) 12 / 22

13 The following table shows the change in population structure at compared to the previous year. Table VI. Comparison of population weight at to weight at ISP groups 1. Officials, together with temporary staff of agencies, recruited before Population weight by ISP group Change % 66.2% 71.7% 2. Officials, together with temporary staff of agencies, recruited from onwards 2.5% 11.9% 9.4% 3. Temporary staff of institutions recruited before % 3.4% 4.8% 4. Temporary staff of institutions recruited from onwards -0.9% 4.4% 5.3% 5. Contract staff recruited from onwards 5.3% 14.2% 9.0% Total 0.0% 100.0% 100.0% The most important changes (-5.4% in ISP group 1 and +5.3% in ISP group 5) are logical since most new retired officials come from former officials (ISP group 1) and a considerable number of Contract agents have been recruited in 2006 (ISP group 2). Most of these contract agents are replacing former Auxiliary staff who were not contributing members of the pension scheme. 13 / 22

14 As mentioned above, the 2006 observed promotion rates have been considered when updating the ISP rates. This time, the promotion rate to be used in the ISP calculation is the mean of the theoretical promotion rates and the 2005 and 2006 observed promotion rates (see table VII). Table VII. Promotion rates used on ISP rate calculation Category and Grade Promotion rate Theoretical promotion rates (2) Observed promotion rates (3) (average) (1) AD 16 0% (x) 0% 0% AD 15 0% (x) 0% 0% AD 14 4% (x) 3% 4% AD 13 1% (x) 1% 0% AD 12 5% 5% 5% 4% AD 11 18% 25% 14% 15% AD 10 24% 25% 28% 19% AD 09 10% 25% 0% 6% AD 08 27% 33% 29% 20% AD 07 27% 33% 26% 22% AD 06 13% 33% 7% 0% AD 05 14% 33% 8% 0% AST 11 0% (x) 0% 0% AST 10 6% 5% 6% 6% AST 09 7% 20% 0% 0% AST 08 19% 25% 16% 15% AST 07 20% 25% 17% 19% AST 06 9% 5% 12% 10% AST 05 20% 22% 20% 19% AST 04 20% 22% 20% 18% AST 03 23% 24% 19% 25% AST 02 30% 24% 38% 29% AST 01 9% 20% 5% 3% (1) Moving average in accordance with the decision of the Art83 Working Group' at its meeting (2) Theoretical rate based on Annexes IB and XIII (Articles 9 and 10) of the Staff Regulations (3) A promotion is observed when the grade in a year (N) is higher than in the previous year (N-1) (x) No theoretical rate (x) have been calculated The 2006 ISP table (rates by grade and step and number of years to retirement) has been updated to be used in the 2007 pension assessment. This update concerns exclusively ISP groups 1 and 2. The fixed ISP concerning groups 3 and 4 (0.4%) and 5 (1%) that 14 / 22

15 were decided at the June 2006 meeting of the Article 83 Working Group remains unchanged. The following table shows weighted ISP rates for publication purposes as decided at the meeting mentioned above. Table VIII. Weighted ISP by group of active population and grade Grades Population groups for ISP calculation (1) Average x x x x 1.0% 1.0% 17 x x x x 1.0% 1.0% % 0.0% 0.4% x 1.0% 0.7% % 1.2% 0.4% 0.4% 1.0% 0.8% % 1.3% 0.4% 0.4% 1.0% 1.0% % 0.6% 0.4% 0.4% 1.0% 1.0% % 1.2% 0.4% 0.4% 1.0% 1.0% % 1.4% 0.4% 0.4% 1.0% 1.2% % 1.6% 0.4% 0.4% 1.0% 1.6% 9 1.9% 1.9% 0.4% 0.4% 1.0% 1.6% 8 2.0% 2.1% 0.4% 0.4% 1.0% 1.7% 7 2.3% 2.2% 0.4% 0.4% 1.0% 2.0% 6 2.3% 2.1% 0.4% 0.4% 1.0% 2.1% 5 1.8% 2.0% 0.4% 0.4% 1.0% 1.5% 4 2.2% 1.9% 0.4% 0.4% 1.0% 1.9% 3 2.3% 2.0% 0.4% 0.4% 1.0% 2.0% 2 2.5% 2.2% 0.4% 0.4% 1.0% 2.0% 1 2.1% 2.1% 0.4% 0.4% 1.0% 1.5% Average 1.8% 2.0% 0.4% 0.4% 1.0% 1.6% (x) No weighted average for ISP is calculated (grey cells in the table) where nobody is present in the reference population for the corresponding grade and ISP group. In particular, grades 17 and 18 concern only contract staff. (1) See detail of ISP groups in table V: The change in the global weighted ISP (1.6%) compared to that published last year (1.8%), is explained by the changes of average ISP of groups 1 and 2 and to a large extent by the change in population structure described above, particularly by the decrease of group 1 population and the increase of group 5 population, the last having a fixed ISP of 1%. This slight overall decrease of ISP rates should produce an slight decrease of the contribution rate for pension, but it is not enough to compensate for the significant increase of the pension rights due to the decrease of the RDR (see point 3) and the increase of the GSG (see point 4). ACTION: No action is proposed since Eurostat implemented decisions taken at the meeting of the Article 83 Working Group and no problems have been encountered. 15 / 22

16 6 Invalidity table 6.1 Inputs The 2004-EU Invalidity table that has been used in the 2004, 2005 and 2006 valuations of the PSEO was based on observations of the former beneficiaries of invalidity pension (a category of population according to the former Staff Regulations) and the invalidity table used in the Co-ordinated Organisations (OECD, NATO, ESA, etc). This invalidity table was presented to the Art83 Working Group at its 7 th June 2004 meeting (see document " Art83 WG 07 Assumptions " available on CIRCA and it was considered, at these time to be the best actuarial assumption concerning invalidity, even though was going to be used to predict the future evolution of beneficiaries of invalidity allowance (a new category of population according to the new Staff Regulation in force from the 1 st May 2004). The main differences between the old and new Staff Regulations are the following: new invalids continue to contribute to the pension scheme the invalidity allowance is calculated as 70% of the last basic salary, while the invalidity pension, according to the old Staff Regulations, was based on the basic salary which the official would have received in his grade if he had still been in the service at the time of payment of the pension (65 years old) the invalidity allowance is converted to a retirement pension at the normal age of retirement. This year, Eurostat has decided to check if predictions according to the 2004-EU Invalidity table correspond to invalidity recorded in years 2004 to The result of this test is that the 2004-EU Invalidity table overestimates the real invalidity of the new category of invalids and consequently the invalidity table should be updated. The next points describe the method used and the new 2007-EU Invalidity table Invalidity table Base population Observed invalidity 6.2 Base population The base population comprises all individuals at 31st December of the year N-1 that could have become invalid at 31 December of the year N. This base population concerns exclusively officials, temporary staff or contractual staff in one of the following statuses: activity, leave on personal grounds or parental or family leave. 16 / 22

17 If the person has not become invalid at 31 December of the year N, he or she should have been classified in one of following categories: Actives - Contributing members Retired officials - Contributing members Actives - Non contributing members Retired officials - Non contributing members Deferred (Art 9 of Annex VIII and 10 annuities or more) Deceased officials Officials who left the institutions before the of the year N are excluded from the base population since there is no possibility of becoming invalid according to the Staff Regulations and no information about his or her state of health is collected after the leaving date. The population at 31 December of years 2003, 2004 and 2005 have been aggregated to have a base population higher than individuals which is considered the minimal population size to calculate a reliable invalidity table. The total of these three years represent individuals, of which (49.1%) are men and (50.8%) are women. 6.3 Observed invalidity As explained in the previous point, some individuals from the base population in the year N-1 could have become invalid at 31 December of the year N. These individuals are 1 year older than at of the year N-1. The new invalids at 31 December of years 2004, 2005 and 2006 (officials who were active in the previous years 2003, 2004 and 2005) have been counted. The number of these new invalids by year has decreased over this period of time: 64 invalids (103 when projected to 12 months) in 2004, 122 invalids in 2005 and 108 invalids in 2006, despite the increase in the active population each year. The number of invalids by year has been aggregated to be compared to the base population. The total of invalids of these three years is / 22

18 The following graph shows the repartition of these invalids by age. A considerable increase of invalidity occurs between ages 44 and 60. Invalidity is near null before age 34. Graph IV New invalids by age 2004 to 2006 total 25 New invalids by age (2004 to 2006 total) Number of invalides Invalid' ages 6.4 Observed invalidity rate by officials' age (unisex rate) The invalids have been compared to the base population by age, irrespective of sex, to calculate the observed unisex invalidity rate by officials' age. A global observed invalidity rate ( ) has also been calculated by comparing the total of invalids (333) with the total of base population ( ) Update of the unisex invalidity rates Despite calculating over three years, the invalidity rate of ages from 20 to 26 years old has not been obtained due to the lack of invalid records (the probability of becoming invalid is very small at these ages). Also, significant differences in invalidity rates can be observed in some cases between consecutive ages due to the reduced number of recorded invalids. The following calculations have been performed to solve these problems: 1. Invalidity rate calculation average. The observed invalidity rate by age has been replaced by an average rate over an age range of 5 years. This invalidity rate is the ratio between the sum of invalids recorded in ages "a-2" to "a+2" ( a being 18 / 22

19 the reference age to which the invalidity rate is calculated), and the sum of individuals in the basic population in ages "b-2" to "b+2" ( b being equal to a-1 because the invalid is 1 year older in year "N" than in "N-1"). 2. Filling gaps: Where an averaged invalidity rate by age has not been obtained after the computation detailed in point 1, an invalidity rate by age has been calculated as the product of the invalidity rate from the former 2004-Invalidity table times the global change on invalidity rates (see next point) 3. Global change in invalidity rates: This is the ratio between the global observed invalidity rate mentioned above ( ) and the global invalidity rate corresponding to the former 2004 invalidity table ( ). This global change has been only used to fill gaps in the ages between 20 and 26 where an observed invalidity rate has not been calculated. 4. Smoothed rates: The results of steps 1 to 3 gives an invalidity table that is a mixture of adjusted 2004 invalidity rates (ages 20 to 26) and 2004 to 2006 observed rates (ages 27 to 66). These rates are smoothed to reduce the extreme values further. These smoothed rates by age are the result of a moving average of rates over a five-year age range. 6.6 Update of the invalidity table by sex and officials' age An invalidity table by sex and officials' age must be calculated for use in actuarial calculations. This table is based on the former 2004 invalidity table and on the 2006 unisex invalidity rates explained above: 5. Calculation of the ratio between 2004 and 2007 invalidities: The ratio by age between the 2004 unisex invalidity rates and the 2007 updated unisex invalidity rates is calculated to update the 2004 invalidity rates by sex. As information, a global ratio between 2004 and 2007 table shows that invalidity has decreased globally by 49% in 2007 table compared to Calculation of the 2007 invalidity rate by sex and age: This rate is the product of the 2004 Invalidity rate by sex and age multiplied by the unisex invalidity ratio by age mentioned above. 19 / 22

20 6.7 The new 2007-EU Invalidity table The following unisex invalidity table is only used for presentation, it is based in the new 2007-EU Invalidity table by sex that has been used in the present valuation of the pension scheme: Table IX EU Invalidity table Unisex version Age Invalidity (probability of becoming an invalid) Age Invalidity (probability of becoming an invalid) x q' x x q' x Comparison between 2004 and 2007 invalidity tables. Graph A graph shows that: Invalidity rates are in general lower in the 2007 EU-Invalidity table compared to 2004 (-49% overall) Invalidity increases progressively by age in the 2004 table, most strongly from 48 to 65 years old Invalidity increases in the 2007 table are similar to those in the 2004 table up to the age of 50. After this age, the invalidity in the 2007 table increase less strongly than in the 2004 table until age 60, after which, invalidity rates decrease progressively in the new invalidity table. 20 / 22

21 Graph IV Comparison between 2004 and 2007 Invalidity Tables and 2006 In validity tables rates 2006 updated rates Invalidity Years old Two reasons could explain the change between 2004 and 2007 invalidity tables: Each table refers to different population: Beneficiaries of an invalidity pension (2004 table) and beneficiaries of an invalidity severance according to the new Staff regulations in force from (2007 table). The 2004 invalidity table is not as reliable as the 2007 invalidity table, since the earlier one was based on a smaller population (only data from the European Commission were used in calculation, since Eurostat had not yet collected data from other institutions and agencies), an invalidity table from the Coordinated Organisations (in which population structure and invalidity conditions are different from the European Institutions). 21 / 22

22 6.9 Regular update of the Invalidity table The experience shows that this actuarial assumption should be revised periodically to take account of the reality. This is particularly necessary due to beneficiaries of invalidity allowance is a new category of population available from the 1 st May 2004 only and its trend is not yet stabilised. In the other hand, yearly significant changes in this assumption should be avoided due to the sensibility of the contribution rate to it. A moving 5 years of invalidity observation could be used on computation to update the invalidity table. ACTIONS Delegates are invited to give their advice to: the new 2007 EU-Invalidity table the proposal on updating each year the table, using as input a moving average of 5 years of invalidity observation. 7 Other assumptions The other actuarial assumptions which must be considered are the age difference by gender, marital status, the probability to be married and the weight of orphan and divorced spouse pensions. The contribution rate is not sensitive to these assumptions as the impact on the final result is marginal (see sensitivity analyses in the 2004 Eurostat Report). As agreed by the Working Group during its meeting in June 2005, these assumptions will be only reviewed on the occasion of the five-yearly actuarial assessment except if some elements show a need for more frequent update. ACTION: After analysis of the situation, Eurostat proposes to use the same assumptions as in 2004, 2005 and 2006 for the 2007 actuarial assessment of the PSEO. 8 Conclusions The Working Group is invited to give its opinions on Eurostat s proposals. 22 / 22