Pension Scheme of European Officials (PSEO)

Eurostat Unit C3 - Statistics for administrative purposes Luxembourg, 29 June 2015 Doc. 20150629 Art83_06 Meeting of the Working Group on Article 83 of the Staff Regulations Luxembourg, 29 June 2015, 9:30 a.m.,bech Building, Quételet Room Pension Scheme of European Officials (PSEO) Actuarial assessment at 31.12.2014 - Provisional results Documents will be made available via CIRCABC Item 6.2 of the agenda

Doc. 20150629 Art83_06 Table of contents 1. Introduction... 2 2. Contribution rate... 3 3. Update of the assessment of the actuarial balance... 4 4. Computation System... 4 4.1. Variables used in the assessment... 4 4.2. Economic parameters... 5 4.3. Demographic parameters... 5 5. Analysis of the contribution rate change... 5 6. Technical implementation of Annex XII... 6 7. Independent examination... 6 8. Annex I Computation system... 7 8.1. Relevant figures concerning the contribution rate calculation... 7 8.2. Reference population... 8 8.3. Parameters and actuarial assumptions... 10 1

1. Introduction Article 83a and Annex XII of the Staff Regulations of Officials and Condition of Employment of Other Servants of the European Community (Staff Regulations hereinafter) state the rules to guarantee the actuarial balance of the PSEO (Pension Scheme of European Officials). Article 83a point 3 stipulates that on the occasion of the five-yearly actuarial assessment, in accordance with Annex XII and in order to ensure the balance of the scheme, the Council shall decide on the rate of contribution and any change to the pensionable age. Point 4 stipulates that each year the Commission shall present to the Council an updated version of the actuarial assessment, in accordance with Article 1.2 of Annex XII. Finally, Article 83a point 5 stipulates that for the purposes of paragraphs 3 and 4 of this article, the Council shall act by a qualified majority on a proposal from the Commission as provided for in the first indent of Article 205.2 of the EC Treaty. For the purposes of paragraph 3, the Commission's proposal shall be presented after consultation of the Staff Regulations Committee. Annex XII defines the rules for implementing Article 83a of the Staff Regulations. In particular: "Eurostat shall be the authority responsible for the technical implementation of this Annex" (see Article 13 (1.)), "Eurostat shall be assisted by one or more qualified independent experts in carrying out the actuarial assessments" (see Article 13 (2.)), "each year on 1 st September Eurostat shall submit a report on the assessment and updating referred to in Article 1 of this annex Annex"(see Article 13 (3.), "any questions of methodology raised by the implementation of this Annex shall be dealt with by Eurostat in cooperation with national experts from the relevant departments of the Member States and the qualified independent expert or experts" (see Article 13 (4.). Eurostat has carried out a provisional actuarial assessment of the pension scheme based on the population at 31.12.2014. The aim of this document is to inform national and independent experts about the result of this provisional update and the parameters and actuarial assumptions that were used. Eurostat will calculate a final assessment to be included in the report foreseen in Article 13.3 of Annex XII, taking account of remarks from national and independent experts if these remarks lead to a result different from the one presented in this report. 2

2. Contribution rate The provisional actuarial assessment of the Pension Scheme of European Officials (PSEO) at 31.12.2014 indicates that, in order to guarantee the equilibrium of this pension scheme, the contribution rate necessary to finance one third of the benefits payable would be 10.2% of the basic salary (or of the invalidity allowance). Article 83a.4 of the Staff Regulations reads "where it is shown that there is a gap of at least 0.25 points between the rate of contribution currently applied and the rate required to maintain actuarial balance, the rate shall be adapted, in accordance with arrangements laid down in Annex XII". The following contribution rate is calculated from the 1 st July 2015: 10.2% The calculated contribution rate indicated above is one third of the ratio between the total of the service cost (1 256 million Euros) and the total of the annual basic salaries (4 124 million Euros) (see Table I). This rate is 0.1% higher than the pension contribution rate calculated for the preceding exercise (10.1%): however in accordance with art. 83a.4, being the difference of the two contribution rates lower than 0.25% no update of the pension contribution rate will be implemented. The above calculation takes account of the fact that the EU officials' salaries: for 2011, 2013 and 2014 have not been adjusted, for 2012 have been adjusted by a 0.8% increase in accordance with Regulation (EU) Nº 423/2014 of 16 April 2014. 3

3. Update of the assessment of the actuarial balance The PSEO was assessed on the basis of the computation method set out in chapter 2 of Annex XII of the Staff Regulations. A document concerning the calculation methodology used by Eurostat can be provided on request. The main elements considered for the PSEO assessment at 31.12.2014 were: the recalculation of the Real Discount Rate (RDR) using a 18 years moving average (2.7% both in 2014 and 2015), the recalculation of the General Salary Growth Rate using a 18 years moving average (GSG) (-0.2% both in 2014 and 2015), the population of contributing members at 31.12.2014. Please refer to the section below and to document "20150629 Art83_05 Actuarial assumptions for the assessment of the PSEO at 31.12.2014" for supplementary information. 4. Computation System 4.1. Variables used in the assessment Two kinds of variables are used in the actuarial calculation: Parameters - These are values mainly linked to the application of the Staff Regulations. These values change according to certain conditions related to the individual situation of each official (e.g. the annual accrual rate is 1.8% for staff recruited after 01.01.2014, 1.9% for staff recruited between 01.05.2004 and 31.12.2013, and 2% for those recruited before 30.04.2004 ). These values can be clearly established. Actuarial assumptions - These are values that are not known and cannot be established exactly, such as the invalidity table, the ISP (individual salary progression) table, the probability of being married at the retirement date, the coefficients for orphans and divorced spouses, etc. The values of these actuarial assumptions were estimated according to general actuarial practices and were discussed with national experts from the relevant departments of the Member States at the yearly meetings of Article 83 Working Group. A summary of the main variables used (parameters and actuarial assumptions) is detailed in document 20150629 Art83_05. 4

4.2. Economic parameters The RDR and GSG assumptions have been calculated as moving averages of the 18 previous yearly rates, in accordance with Article 11a of Annex XII of the SR in force from 1 st January 2014 (a period length of 16 years had been used in the 2014 computation). Other assumptions like the turnover, the ISP Table, and the Invalidity Table, have remained the same as for the previous exercise in line with the decision of a five-yearly update taken by the members of the Art. 83 WG at their 27 June 2014 meeting. The document 20150629 Art83_05 contains the analysis of assumptions used for the PSEO assessment at 31.12.2014 with their impact on the pension contribution rate. 4.3. Demographic parameters The observed population are the contributing members of the PSEO, namely: active officials, members whose pension contribution is optional (e.g. officials who have taken leave on personal grounds or parental leave), invalids who receive invalidity allowance according to Article 78 of the Staff Regulations, beneficiaries of an allowance for termination of service. 59 375 contributing members were recorded at 31.12.2014, which represents a net increase of 650 participants compared to the previous year (+1.1 %). Table VI of the present document provides further details. The same Life Table (ICSLT2013) used in the previous assessment, has been used this year. This life table is the outcome of an inter-institutional project led by the International Service for Remunerations and Pensions (ISRP) in OECD: mortality observed from 2008 to 2012 and the former table ICSLT2008 were the two key factors used for adjustment; in addition a trend model was incorporated in the study so to take into account the effect of increasing longevity with time. The Invalidity Table used for the previous assessment has been employed for the present assessment: it incorporates the observed invalidity rates from 2009 to 2013 (2014 EU- Invalidity table). 5. Analysis of the contribution rate change As indicated in point 1, the pension contribution rate for officials calculated this year (10.2%) is slightly higher than the previous one (10.1%). The 0.1% increase comes from changes in the population. In compliance with the relevant legal provisions, taken also into account the decision taken at the 2014 meeting of the Art. 83 WG, for most of the assumptions used for the assessment of the PSEO, a five-yearly frequency of update has been agreed upon: consequently the concerned values remained unchanged. 5

6. Technical implementation of Annex XII Technical questions raised by the implementation of Annex XII are dealt with by Eurostat in cooperation with national and independent experts Furthermore Eurostat regularly exchanges knowledge and actuarial best practices with several international organisations like the ISRP (International Service for Remunerations and Pensions), EPO (European Patent Office) and Euro-control. 7. Independent examination According to Annex XII, Article 13, of the Staff Regulations, Eurostat is assisted by a qualified independent expert (Ernst & Young Actuaires-Conseils, Tour First, 1, place des Saisons, 92037 Courbevoie) with regard to the methodological implementation and to the definition and calculation of the corresponding actuarial assumptions. Ernst & Young has conducted an actuarial examination of the PSEO assessment carried out by Eurostat. The conclusion of E&Y review was that " This examination consisted in confirming the relevance and the reliability of the actuarial processes and assumptions used in accordance with the methodology described in Annex XII to evaluate the contribution rate of officials. For the aspects explicitly mentioned in Annex XII, we did not detect any elements likely to cast doubt that the calculations determined by Eurostat are not compliant with the rules of Annex XII. For the aspects not described explicitly in Annex XII, we have checked their compliance with the generally accepted actuarial practices and we did not detect any significant difference with the methodology and the assumptions we would have chosen ourselves to perform the calculations. EY has no reason to doubt that the official s contribution rate (10.2%) calculated by Eurostat is a sufficiently accurate estimate of the reality of the Pension Scheme of European Officials (PSEO)." Remarks from both Ernst & Young and the art83 Working Group will be considered for the final contribution rate calculation which will be available by 1st September, in accordance with art. 13.1 of Annex XII of Staff Regulations. ACTION: The Working Group is invited to give its opinion on this Eurostat s assessment of the PSEO at 31.12.2014. 6

8. Annex I Computation system 8.1. Relevant figures concerning the contribution rate calculation Table I Service cost and total of annual basic salaries at 31.12.2014 Service cost Total (EUR million) % - Service cost for retirement 1 164.8 92.7% - Service cost for invalidity 52.5 4.2% - Service cost for death 38.8 3.1% Total service cost 1 256.1 100.0% Total annual basic salaries and invalidity and termination allowances 4 123.7 Table II Breakdown of the contribution rate at 31.12.2014 Service cost Total contribution rate (3/3) Staff contribution rate (1/3) Service cost for retirement 28.2% 9.4% Service cost for invalidity 1.3% 0.4% Service cost for death 0.9% 0.3% Total service cost 30.5% 10.2% Table III Change of the service cost and total of annual basic salaries between 31.12.2013 and 31.12.2014 Total (EUR million) Service cost 31.12.2013 31.12.2014 Change - Service cost for retirement 1 150.1 1 164.8 1.3% - Service cost for invalidity 50.7 52.5 3.6% - Service cost for death 37.0 38.8 4.9% Total service cost 1 237.8 1 256.1 1.5% Total annual basic salaries and invalidity and termination allowances 4 065.4 4 123.7 1.4% 7

8.2. Reference population Art. 1 of the Annex XII of the Staff Regulations stipulates that the actuarial assessment of the balance of the pension scheme "shall be carried out in each year n, on the basis of the population of active members of the pension scheme at 31 December of the previous year (n- 1)". On the other hand art. 9 of this Annex says that the population of participants in the scheme "shall be collected annually by the Commission using information received from the different institutions and agencies whose staff are members of the scheme". Based on what above, the reference population are the members of the PSEO from the 59 institutions and agencies at 31 st December 2014 as detailed in Table V. Table IV Institutions and Agencies members of the PSEO Abbr. Institutions or assimilated organisations Abbr. Agencies (next) COR COMMITEE OF THE REGIONS EFSA EUROPEAN FOOD SECURITY AUTHORITY CONSIL COUNCIL OF THE EUROPEAN UNION EUROFOUND EUROPEAN FOUNDATION FOR THE IMPROVEMENT OF LIVING AND WORKING CONDITIONS CDCE COURT OF AUDITORS GSA EUROPEAN GNSS AGENCY COJED COURT OF JUSTICE OF EUROPEAN COMMUNITIES EIGE EUROPEAN INSTITUTE FOR GENDER EQUALITY CSC ECONOMIC AND SOCIAL COMMITTEE EIT CEC EUROPEAN COMMISSION EIOPA EUROPEAN INSTITUTE OF INNOVATION AND TECHNOLOGY EUROPEAN INSURANCE AND OCCUPATIONAL PENSION AUTHORITY EDPS EUROPEAN DATA PROTECTION SUPERVISOR EMSA EUROPEAN MARITIME SAFETY AGENCY EO EUROPEAN OMBUDSMAN EMCDDA EUROPARL EUROPEAN PARLIAMENT EFRA Abbr. Agencies ENISA ACER FRONTEX AGENCY FOR THE COOPERATION OF ENERGY REGULATORS AGENCY FOR THE MANAGEMENT OF OPERATIONAL CO-OPERATION AT EXTERNAL BORDERS OF MEMB CEPOL EUROPOL EUROPEAN MONITORING CENTRE FOR DRUGS AND DRUG-ADDICTION EUROPEAN MONITORING CENTRE FOR RACISM AND XENOPHOBIA EUROPEAN NETWORK AND INFORMATION SECURITY AGENCY EUROPEAN POLICE COLLEGE EUROPEAN POLICE OFFICE ECSEL ECSEL JU ERA EUROPEAN RAILWAYS AGENCY SKY CLEAN SKY JOINT UNDERTAKING ERC EUROPEAN RESEARCH COUNCIL EXECUTIVE AGENCY CFCA COMMUNITY FISHERIES CONTROL AGENCY ESMA EUROPEAN SECURITIES AND MARKET AUTHORITY CPVO COMMUNITY PLANT VARIETIES OFFICE ETF EUROPEAN TRAINING FOUNDATION EACEA LISA EDUCATION, AUDIOVISUAL AND CULTURE EXECUTIVE AGENCY EU AGENCY FOR THE OPERATIONAL MANAGEMENT OF LARGE SCA LE IT SYSTEMS EACI EAHC ESA EURATOM SUPPLY AGENCY IMI FCH EXECUTIVE AGENCY FOR COMPETITIVENESS AND INNOVATION EXECUTIVE AGENCY FOR THE PUBLIC HEALTH PROGRAM FUEL CELLS AND HYDROGEN JOINT UNDERTAKING INNOVATIVE MEDICAMENTS INITIATIVE JOINT UNDERTAKING OSHA EMEA EUROPEAN AGENCY FOR SAFETY AND HEALTH AT WORK EUROPEAN AGENCY FOR THE EVALUATION OF MEDICAL PRODUCTS BBI EUROJUST OHIM BIO BASED INDUSTRIES JU JUDICIAL COOPERATION OFFICE FOR HARMONISATION IN THE INTERNAL MARKET EASO EUROPEAN ASYLUM SUPPORT OFFICE REA RESEARCH EXECUTIVE AGENCY EASA EUROPEAN AVIATION SAFETY AGENCY SESAR SESAR JOINT UNDERTAKING EBA EUROPEAN BANKING AUTHORITY BEREC ECDC CEDEFOP EUROPEAN CENTRE FOR DISEASE PREVENTION AND CONTROL EUROPEAN CENTRE FOR THE DEVELOPMENT OF VOCATIONAL TRAINING ECHA ITER/F4E THE BODY OF EUROPEAN REGULATORS FOR ELECTRONIC COMMUNICATIONS THE EUROPEAN CHEMICALS AGENCY THE EUROPEAN JOINT UNDERTAKING FOR ITER AND THE DEVELOPMENT OF FUSION ENERGY AEE EUROPEAN ENVIRONMENT AGENCY TENEA THE TRANS-EUROPEAN TRASNPORT NETWORK EXECUTIVE AGENCY TRANSLATION CENTRE FOR BODIES OF THE EEAS EUROPEAN EXTERNAL ACTION SERVICE CDT EUROPEAN UNION 8

As approved by the Working Group Art83 during its meeting of 7 th June 2004, the term active members of the PSEO is considered in a wide sense as a synonymous with contributing members of the PSEO. Consequently, the reference population includes not only the officials in active employment but also the officials assigned in one of the other administrative statuses detailed in article 35 of the Staff Regulations, plus invalids who receive an invalidity allowance and beneficiaries of an allowance for termination of service. Personnel data was collected from the NAP 1 (New Application for the Pay), PMO 2 and directly from Institutions and Agencies, and then imported to the Eurostat database. The data have been checked to guarantee a higher level of quality. The actuarial assessment is based on the best output from the Eurostat database at the calculation date. Table V Reference Population at 31.12.2013 and 31.12.2014, (Contributing members by Institution/Agency) Institution or Agency 31.12.2013 31.12.2014 Total % Total % European Commission 31 090 53% 31 265 53% European Parliament 9 023 15% 9 176 15% Council of the European Union 3 112 5% 3 081 5% Court of Justice of the European Communities 2 210 4% 2 133 4% Court of Auditors 946 2% 920 2% Economic and Social Committee 762 1% 748 1% Committee of the Regions 542 1% 537 1% Other institutions and decentralised Community agencies 11 040 19% 11 515 19% Total 58 725 100% 59 375 100% 1 The NAP application is a centralised database that has been created to produce the monthly salary and pension forms for all institutions and agencies. This database contains a large amount of personal data; particularly amounts paid and pension contributions 2 PMO use the Sysper database of the Commission to store data about transfers of pension rights of the staff from the Commission and agencies, and data about pensioners. 9

Ages Art83WG meeting Graph I Reference Population at 31.12.2014 by age & sex >64 60-64 55-59 50-54 45-49 40-44 35-39 30-34 25-29 20-24 Men: 26491 Women: 32884 Number of people Table VI Changes in the reference population at 31.12.2014 compared to the population at 31.12.2013 Changes Reference population used in the 2014 assessment (contribuiting members as at 31.12.2013) Contributing members who left the pension scheme or became pensioners Total 58 725-2 772 New contributing members as at 31.12.2014 3 422 Reference population used in the 2015 assessment (contribuiting members as at 31.12.2014) 59 375 Net change 650 8.3. Parameters and actuarial assumptions The main parameters and actuarial assumptions used in the actuarial assessment at 31.12.2014 are detailed in document 20150629 Art83_05. 10