EUROPEAN COMMISSION EUROSTAT Directorate F: Social statistics Unit F-5: Education, health and social protection Luxembourg, 24 March 2017 DOC SP-2017-09 https://circabc.europa.eu/w/browse/26803710-8227-45b9-8c56-6595574a4499 ESSPROS Expert Group (1486): https://circabc.europa.eu/w/browse/96adef83-8ee4-4c76-8c37-83502f932ec9 Working Group Social Protection 4-5 April 2017 Use of EU-SILC for data on pension beneficiaries Item 9a of the Agenda Meeting of the Working Group Social Protection Luxembourg, 4-5 April 2017 BECH Building (Eurostat) Room Quetelet
1. BACKGROUND AND INTRODUCTION ESSPROS data on pension expenditure and the numbers of pension beneficiaries are demanded for policy analysis, for instance to study sustainability of pension schemes or the adequacy of pensions. This requires more detailed data than are currently collected in ESSPROS, for example to facilitate analysis in relation to persons above and below the pension age, or more generally analysis of the distribution by age of beneficiaries of the various types of pensions. Other characteristics of pensioners could be of interest for policy purposes. At the moment, ESSPROS only collects data on the number of pension beneficiaries for the seven types of pensions and by sex of the beneficiary. A distinction is also made between beneficiaries of means tested and beneficiaries of non-means tested pensions. In 2015, the Working Group Social Protection discussed a document on the possible uses of EU-SILC for deriving data on the characteristics of persons receiving different types of benefit that could then be applied to the figures collected by ESSPROS in order to derive estimates of pension beneficiaries according to certain characteristics. The document provided an overview of the social benefits recorded in EU-SILC and clarified the most important links and differences between the variables and definitions used in ESSPROS and in EU-SILC. It also contained a first analysis of some of the issues that need be investigated in order to assess the validity of such an approach. The discussion at the working group also indicated that, in some countries at least, SILC or other national sources allow to distinguish between persons receiving pensions and persons receiving other types of benefits, while this breakdown is not collected in EU SILC. Countries were invited to inform on their national sources and generally on their experience on collecting data for beneficiaries. At the WG meeting of April 2016, one country (Italy) presented a study based on national sources (pensioners register and SILC) regarding various characteristics of pension beneficiaries such as age, level of education attained and sex, as well as an analysis on income. The other working group members were invited to inform Eurostat about similar studies in their country, but no feedback has been received since then. Eurostat has continued to analyse these issues in more detail, as concerns EU-SILC benefits in the functions old age, disability, survivors and unemployment. The main results are presented in the rest of this document, after a short summary of the most important conclusions from previous documents and discussions on this issue. 2. SUMMARY OF MAIN CONCLUSIONS FROM PREVIOUS MEETINGS The main elements deriving from previous working group meetings (see in particular document SP 2015-08.1) can be summarised as follows. EU-SILC is an annual survey on income and living conditions carried out in all EU Member States. It includes information on gross and net income covering also information on social benefits received by individuals and households. In particular, five types of social benefits are related to ESSPROS functions and are collected at individual level: 1 1 In addition, benefits in family/child (HY050), housing (HY070) and benefits not included elsewhere (HY060) are collected at household level. In EU-SILC data are also collected for Pensions from individual private plans (PY080), but these pensions are not within the scope of ESSPROS (see as a reference ESSPROS Manual Part 1 28). Similarly, EU-SILC also covers education benefits (PY140) that are out of the scope of ESSPROS. 2
Unemployment benefits (PY090) Old-age benefits (PY100) Survivors benefits (PY110) Sickness benefits (PY120) Disability benefits (PY130) Gross data for all these income items are nearly complete for all countries, with just a few exceptions, while the data on net income are considered less reliable and are available only for ten countries. EU-SILC records income from the different types of social benefits broken down by function and the respective number of beneficiaries can be estimated. However, data cover cash benefits only (except for housing allowances), while ESSPROS includes both cash and inkind benefits. Starting from data collections from 2015 onwards new variables have been added in EU-SILC to distinguish between benefits which are contributory and means-tested, contributory and non means-tested and those which are non-contributory and means-tested and non-contributory and non-means tested 2. These are collected initially on a voluntary basis. In addition, there are some differences in reporting. In the EU-SILC the reference year for Ireland is 12 months prior to the interview while in the UK is 12 months around the time of the interview instead of the calendar year as in ESSPROS. For other countries, the EU-SILC data also relate to the calendar year. Concerning the possibilities of using EU-SILC data to estimates characteristics of ESSPROS pension beneficiaries, the key difference that has been identified is that EU-SILC collects data at function level for all cash benefits and there is no breakdown by detailed type of benefit inside each function. Therefore the population recorded as receiving each of the types of benefit in EU-SILC will include persons receiving pensions but also persons receiving other forms of non-pension cash benefits and the characteristics of pension and non-pension beneficiaries could be quite different. In ESSPROS, four functions (old age, survivors, disability and unemployment) contain pension and non-pension benefits. ESSPROS records data for detailed cash and in kind benefits, but data on beneficiaries only for pension benefits. The rest of this document focuses on the comparison (between EU-SILC and ESSPROS) of the definitions and of the treatments used for benefits and beneficiaries in the 4 functions that include pension benefits, in order to asses more precisely the feasibility of the objective introduced at the beginning. Besides definitions, already described in the document of 2015, it is also important to compare in particular the treatments in the two systems of survivors and disability beneficiaries above the standard retirement age. Furthermore, using ESSPROS data on detailed benefits, it is possible to have an assessment of the differences in the scope of the benefits considered in the various functions that derive from the non-pension benefits included indistinguishably in EU-SILC. 3. CASH BENEFITS IN OLD AGE, SURVIVORS, DISABILITY AND UNEMPLOYMENT: COMPOSITION AND THE CASE OF BENEFICIARIES ABOVE RETIREMENT AGE The following types of cash benefits are given in the EU-SILC definitions for the various functions and they include pension benefits (PB, in bold) as well as non-pension benefits (NPB). 2 Methodological guidelines and description of EU-SILC target variables, 2015 operation (Version November 2014): https://circabc.europa.eu/sd/a/afb4601b-4e5c-4f40-86bb- 0c3d0d94aa12/DOCSILC065%20operation%202015%20VERSION%20November%202015.pdf 3
Old age old age pensions (PB) anticipated old age pensions (PB) partial retirement pensions (PB) care allowances (NPB) lump-sum payments at the normal retirement date (NPB) other periodic or lump-sum cash benefits related to old age (NPB) disability cash benefits paid after the standard retirement age (PB and NPB) The definitions of the first 6 detailed benefits listed above are the same as ESSPROS definitions. The last category, disability cash benefits paid after the standard retirement age, may include any type of disability benefit (see below under disability). This allocation in EU-SILC to old-age of disability cash benefits that are paid to beneficiaries above the standard retirement age coincides with the treatment prescribed by the ESSPROS manual 3. The practical application of this principle is however still under review by the ESSPROS Task force, in particular as concerns the concept of standard retirement age (see point 8.2 of the agenda). Evidence on the treatment applied in EU SILC has not yet been collected. A preliminary screening of the data nevertheless indicates that about two thirds of countries record disability benefits under disability for beneficiaries above 65. Information on the standard retirement age considered is not available. Apart from this issue linked to the disability function, ESSPROS data on detailed cash benefits can help for an evaluation by country of the possible distortions linked to the inclusion in EU SILC of non-pension benefits and beneficiaries. In table 1, the average for the most recent five years of data is presented showing that, for about two thirds of the countries, the proportion of pension is above 95% of total cash benefits. The most important case of non-pension benefits in the old age function is represented by lump sum benefits. Table 1 - Percentage of pensions on total cash benefits in the function Old age (source ESSPROS) average 2010-2014 DK IE NL IS NO LV SE DE HR FI LU EE FR BG PL 100.0 100.0 100.0 100.0 100.0 100.0 99.8 99.8 99.8 99.8 99.7 99.3 99.2 98.8 97.2 RO PT SK ES SI EL AT LT HU IT MT CZ BE UK CH CY 97.2 97.1 97.0 96.5 95.4 95.0 94.7 94.2 93.6 93.4 91.8 91.8 91.7 90.9 90.9 80.1 These numbers indicate that, for most of the countries, non-pension cash benefits in the function old age should not substantially undermine the representativeness of EU-SILC beneficiaries as a source for characteristics of old-age pensioners. 3 See 110C of part I "For practical purposes it is decided, by convention, that all disabled people above pensionable age are receiving the benefit under the Old age function." 43E of part II refers to pensions only and uses the wording standard retirement age as established in the reference scheme, rather than pensionable age as in 110C: "For reasons of comparability, and in order to respect the principle of the functional classification of the ESSPROS, disability pensions paid to beneficiaries over the standard retirement age as established in the reference scheme must be recorded under the item old age pension.". The ESSPROS task force discussed the issue in 2015 and 2016. 4
However, another factor that may have a negative impact on representativeness for old-age is the treatment of survivors' beneficiaries above the standard retirement age, which is considered below in the part on survivors. Survivors Survivors' benefits in EU-SILC are defined as follows: periodic survivor's pension (PB); single-payment death grant (NPB); other periodic or lump-sum payments made by virtue of a derived right of a survivor (NPB). The situation concerning the proportion of pension benefits on total cash benefits in the survivors function is similar to the case of old age (see table 2), although there are few countries in which non-pension benefits are above 20% and one in which they are predominant. Table 2 - Percentage of pensions on total cash benefits in the function Survivors (source ESSPROS) average 2010-2014 AT LU NL SE EE HU DK IT EL IS DE FR ES CZ SK 100.0 100.0 100.0 100.0 100.0 100.0 100.0 99.8 99.7 99.2 99.0 98.9 98.8 98.3 98.3 FI IE CY UK NO BE HR PT CH PL MT SI LT RO LV BG 97.9 97.9 97.8 97.2 96.2 95.2 95.0 93.6 91.6 90.2 89.9 88.1 79.6 78.7 69.4 36.4 The treatment required in the ESSPROS manual for survivors pensioners above the standard retirement age is the opposite of the treatment described above for disabled, namely they are to be recorded under the function survivors and not under the function old-age. In addition, data are required for the number of pension beneficiaries obtained as aggregation of old-age and survivors' beneficiaries and treated for double counting at interfunction level, meaning that a beneficiary is counted only once if receiving pensions in both the old-age and the survivors function. Finally, countries may send optionally data for pensions paid to survivors above the standard retirement age 4. Regarding the treatment in EU-SILC for beneficiaries above the standard retirement age, a more detailed analysis of country practices would be needed. Data for several countries showing no survivors' benefits for beneficiaries above 65 seem to indicate that these countries reclassify to the old-age function the survivors that are more than 65 year-old, probably following national classifications. More information would also be needed about the treatment of beneficiaries above 65 receiving both old-age and survivors benefits. The remaining majority of countries appear to apply the opposite approach of not reclassifying survivors, which would be consistent with the ESSPROS treatment summarised in the previous paragraph. 4 For 2014, six countries provided these optional data. 5
Disability EU-SILC includes the following benefits: disability pensions (PB); early retirement benefits in the case of reduced ability to work (PB); care allowances (NPB); allowances for integration into work (NPB); other periodic or lump-sum payments related to disability (NPB). For disability, the proportion of ESSPROS pension benefits on total cash benefits by country is given in table 3, showing that the importance of non-pension benefits increases in disability as compared to old-age and survivors. As mentioned already, ESSPROS disability function should include, for cash benefits, only beneficiaries that are below the standard retirement age. Table 3 - Percentage of pensions on total cash benefits in the function Disability (source ESSPROS) average 2010-2014 IS IE PT BE CH MT SE ES FR AT HR UK LV CZ LT 100.0 99.2 98.5 94.9 93.5 91.6 91.2 87.4 86.6 86.3 86.0 84.1 83.2 82.5 81.8 PL NL SK DK FI EL EE RO BG LU DE NO CY SI IT HU 81.0 80.9 80.7 80.1 79.8 77.4 77.0 73.9 69.4 66.8 64.9 62.8 58.7 49.7 42.8 33.9 Unemployment In the function unemployment, EU-SILC considers the following 8 types of benefit, of which only one type is a pension benefit according to ESSPROS definitions. Mobility and resettlement payments are included, but these are classified in ESSPROS as benefits in kind rather than as benefits in cash (see 71 of part II of the manual). full unemployment benefits (NPB); partial unemployment benefits (NPB); early retirement for labour market reasons (PB); vocational training allowances (NPB); mobility and resettlement payments (NPB); severance and termination payments (NPB); redundancy compensation (NPB); other types of cash benefit related to unemployment (NPB). ESSPROS data show that unemployment pensions exist in 17 countries only and that in these countries the proportion of pension on total cash benefits for unemployment is generally very low (see table 4). 6
Table 4 - Percentage of pensions on total cash benefits in the function Unemployment (source ESSPROS) average 2010-2014 SK LU MT BE PL LT HU FI IT DE EL PT AT FR IE 29.7 13.6 12.5 12.2 11.3 6.6 6.4 5.2 5.0 4.6 3.7 3.2 2.7 1.6 0.9 NO ES DK NL SE UK CY CZ EE LV SI BG RO HR IS CH 0.7 0.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4. CONCLUSIONS AND POSSIBLE WAY FORWARD Enriching the detail of data on pension beneficiaries in the context of ESSPROS data collection would be probably feasible without major efforts for a limited number of characteristics, such as age, normally available from administrative sources at least for the population receiving the most important categories of pensions. This would require increasing the transmission burden in ESSPROS, but would also directly ensure consistency with other ESSPROS data. The use of EU-SILC data has been proposed as an alternative that would not increase transmission requirements. In addition, it could make it possible to characterise the population of persons receiving social benefits by a range of socio-economic characteristics. Four of the EU-SILC income variables include social benefits considered as pensions in ESSPROS: oldage benefits (PY100), survivors benefits (PY110), disability benefits (PY130) and unemployment benefits (PR090). However, data from EU-SILC for each of these categories of income aggregate together pension and other cash non-pension benefits. In the case of old-age and survivors benefits, data from ESSPROS show that, for a high number of countries, pensions constitute the whole or a very high percentage of total cash benefits, so that the difference in the scope of benefits would not introduce a bias. For other countries, identification in EU-SILC of pension benefits would be required. Nevertheless, the treatments used by countries for allocating beneficiaries above the standard retirement age between old-age, survivors and disability would require a review of country practices in order to have comparability or, at least, to allow a correct interpretation of data by country. In this context, the approach and treatment used for persons receiving benefits in more than one function should also be clarified. Concerning disability and, especially, unemployment benefits, the identification of pension benefits in EU-SILC would appear as a precondition for work on the characteristics of the populations receiving these types of pension benefits. Coming to possible ways forward, one area for further work that can be identified consists in the reinforcement of the links between ESSPROS and EU-SILC as concerns beneficiaries above the standard retirement age, and their allocation to old-age, survivors and disability. Following the work of the ESSPROS Task force, clarifications to the ESSPROS manual may be introduced concerning the standard retirement age (see item 8.2 of the agenda) and additional practical tools adopted to foster comparability. In parallel, a review of country information to clarify the treatment adopted for beneficiaries above standard retirement age may be conducted in EU-SILC. The next step could be an analysis of how ESSPROS practice could be linked to the allocation of beneficiaries by function and by age in EU-SILC in order to strengthen the links between the two systems. Another possible action related to EU-SILC regards the possibility of identifying pension benefits among the other cash benefits, in particular for the disability and the unemployment functions. 7
As a summary, to facilitate the distribution of ESSPROS pension beneficiaries' data according to characteristics of persons receiving these benefits as shown through SILC, three actions are needed: - Implementation in ESSPROS data of clarifications on standard retirement age as proposed in document 8.2 - Review of country information to clarify the treatment adopted for beneficiaries above standard retirement age in EU-SILC - Identification of pension benefits among cash benefits, in particular for disability and unemployment functions in SILC data. Members of the Working group are invited to: - Provide comments on the document - Support actions towards the use of both ESSPROS and SILC data to make available distribution of pension beneficiaries' data - If conclusions on provisions for standard retirement age are agreed, agree on asking the WG SILC to work in order to identify pension benefits among cash benefits. It is planned to have this item again on the agenda of the 2018 Working Group "Social protection". 8