Commission staff working document - Document accompanying the Communication from the Commission to the Council on the rate of contribution to the pension scheme of officials and other servants of the European Communities - {COM (2006) 681 final} - Articles 83 and 83a and Annex XII of the Staff Regulations - Report on the 2006 update of the 2004 actuarial assessment of the Pension Scheme for European Officials (PSEO) - Reference date: 31 December 2005 - Eurostat, Unit D-5 Remuneration and Pensions Luxembourg, 1 September 2006
Date: 2006-11-14
Institutions: European Commission
Subjects: European official, pension scheme, regulations for civil servants, servant (EU), social-security contribution













EUR-Lex - 52006SC1441 - EN






Important legal notice




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52006SC1441

Commission staff working document - Document accompanying the Communication from the Commission to the Council on the rate of contribution to the pension scheme of officials and other servants of the European Communities - {COM (2006) 681 final} - Articles 83 and 83a and Annex XII of the Staff Regulations - Report on the 2006 update of the 2004 actuarial assessment of the Pension Scheme for European Officials (PSEO) - Reference date: 31 December 2005 - Eurostat, Unit D-5 Remuneration and Pensions Luxembourg, 1 September 2006  /* SEC/2006/1441 final */  








[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |Brussels, 14.11.2006SEC(2006) 1441COMMISSION STAFF WORKING DOCUMENTDocument accompanying theCOMMUNICATION FROM THE COMMISSION TO THE COUNCILon the rate of contribution to the pension scheme of officials and other servants of the European Communities{COM (2006) 681 final} Articles 83 and 83a and Annex XII of the Staff Regulations Report on the 2006 update of the 2004 actuarial assessment of the Pension Scheme for European Officials (PSEO) Reference date: 31 December 2005 Eurostat, Unit D-5 Remuneration and Pensions Luxembourg, 1 September 2006TABLE OF CONTENTS1. CONTRIBUTION RATE 42. UPDATE OF THE ASSESSMENT OF THE ACTUARIAL BALANCE 43. COMPUTATION SYSTEM 43.1. VARIABLES USED IN THE ASSESSMENT 43.2. ECONOMIC PARAMETERS 53.3. DEMOGRAPHIC PARAMETERS 53.4. TECHNICAL IMPLEMENTATION OF ANNEX XII TO THE STAFF REGULATIONS 63.5. INDEPENDENT EXAMINATION 64. ANNEX I – COMPUTATION 84.1. RELEVANT FIGURES FOR CALCULATING THE CONTRIBUTION RATE 84.2. SUMMARY OF MAIN VARIABLES 94.3. REFERENCE POPULATION 104.4. REAL DISCOUNT RATE (RDR) 144.5. GENERAL SALARY GROWTH (GSG) 154.6. INDIVIDUAL SALARY PROGRESSION (ISP) 154.7. ASSUMED RETIREMENT AGE 194.8. ANNUITIES 204.9. LIFE AND INVALIDITY TABLES 224.10. ANALYSIS OF THE SENSITIVITY OF THE CONTRIBUTION RATE TO ACTUARIAL ASSUMPTIONS 244.10.1. Sensitivity of the contribution rate to RDR changes 244.10.2. Sensitivity of the contribution rate to GSG changes 244.10.3. Sensitivity of the contribution rate to ISP changes 255. ANNEX II – INDEPENDENT EXAMINATION 266. ANNEX III – MINUTES OF THE ARTICLE 83 WORKING GROUP MEETING 27INTRODUCTIONArticle 83a and Annex XII of the Staff Regulations set out rules to guarantee the equilibrium of the pension scheme of the European civil service.Article 83a(3) stipulates that in order to ensure the balance of the scheme, the Council is to decide on the contribution rate and any change to the pensionable age following the five-yearly actuarial assessment in accordance with Annex XII. Paragraph 4 of the same Article requires the Commission to present to the Council an updated version of the actuarial assessment every year, in accordance with Article 1(2) of Annex XII.Finally, Article 83a(5) stipulates that for the purposes of paragraphs 3 and 4 of this Article, the Council is to 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 is to be presented after consultation of the Staff Regulations Committee.Annex XII lays down rules for implementing Article 83a of the Staff Regulations. In particular, it stipulates that:-  Eurostat is the authority responsible for the technical implementation of this Annex (see Article 13(1)),-  Eurostat will be assisted by one or more qualified independent experts in carrying out the actuarial assessments (see Article 13(2)),-  each year on 1 September, Eurostat is to submit a report on the assessment and updating referred to in Article 1 of the Annex (see Article 13(3)),-  any methodological questions raised by the implementation of this Annex are to be dealt with by Eurostat in cooperation with national experts from the relevant bodies of the Member States and the qualified independent expert or experts (see Article 13(4)).Eurostat has drawn up the present report in accordance with the above legal requirements. This report sets out the results of the 2006 update of the 2004 actuarial assessment of the pension scheme of the European civil service, based on the population of European officials as at 31.12.2005.The present report provides the information needed by the Commission to propose, if necessary, changes to the staff contribution rate and to the pensionable age in order to ensure the balance of the scheme.For any further information concerning this report, please contact Eurostat in Luxembourg:Eurostat, Unit D-5 SecretariatBECH - B3/304L-2920 Luxembourgtel: (352) 4301-34191Contribution rateThe provisional 2006 update of the 2004 actuarial assessment of the Pension Scheme for European Officials (PSEO) indicates that, in order to guarantee the equilibrium of the scheme, the contribution rate necessary to finance one third of the benefits payable would be 10.4% of the basic salary (or invalidity allowance).Under Article 83a of the Staff Regulations, where it is shown that there is a gap of at least 0.25 points between the contribution rate currently applied (10.25%) and the rate required to maintain actuarial balance ( 10.4% ), the Council has to consider whether the rate should be adapted in accordance with the arrangements laid down in Annex XII.Consequently, as the gap is less than 0.25 points, the following contribution rate should be applied from 1 July 2006 :10.25%The contribution rate indicated above (10.4%) is one third of the ratio of the total “service cost” (820 million Euros) to the total amount of annual basic salaries (2.628 million euros) (see Table I in Annex I). This rate is higher ( +0.1%) than that calculated for 2005 (10.3%), mainly because of the combined effect of the decrease in the real discount rate (RDR) (3.6% as against 3.8% in the 2005 calculation), the increase in General Salary Growth (GSG) (0.3% as against 0.2% for the 2005 calculation), changes in the population structure and the use of the new Individual Salary Progression (ISP) table (see point 4.6).UPDATE OF THE ASSESSMENT OF THE ACTUARIAL BALANCEThe PSEO was assessed on the basis of the method set out in Chapter 2 of Annex XII to the Staff Regulations.Compared to the 2004 assessment, just a few minor changes were made to the methodology:-  some formulae were adapted to take into account new population categories introduced by the Staff Regulations in force since 01 May 2004,-  new ISP (Individual Salary Progression) tables were used, in line with the experts’ recommendations.An updated document concerning the calculation methodology is available at Eurostat and can be obtained on request.COMPUTATION SYSTEMVARIABLES USED IN THE ASSESSMENTIn general, 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 vary depending on the individual situation of each official (e.g. the annual accrual rate is 1.9% for staff recruited after 01.05.2004 and 2% for those recruited before this date). They can thus be established clearly.Actuarial assumptions - These are values that are not known and cannot be established exactly, such as the life and 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 bodies of the Member States at the yearly meetings of the Article 83 Working Group.A summary of the main variables used (parameters and actuarial assumptions) is given in Annex I.Economic parametersAccording to Articles 10 and 11 of Annex XII to the Staff Regulations, the Real Discount Rate (RDR) and the General Salary Growth (GSG) are calculated (in the 2006 update) as the average of the corresponding rates for the 12 preceding years (see points 4.4 and 4.5 and Tables IX and X for more information).The value of the RDR is 3.6% compared to 3.8% in the 2005 actuarial assessment. On the other hand, the GSG is 0.3% instead of 0.2% in 2005. The combined effect of these changes is an increase in the pension contribution rate of +0.7% (+0.5% due to the RDR decrease and +0.2% due to the GSG increase) (see Tables XVII and XVIII in Annex I for a sensitivity analysis of the contribution rate). This effect is partly offset by other effects related to the population structure (see points 3.3 and 4.3) and the use of the new ISP table (see point 4.6).Demographic parametersThe observed population is made up of contributing members of the PSEO, including:-  members whose contribution is optional,-  invalids who receive invalidity allowance according to Article 78 of the Staff Regulations,-  beneficiaries of an allowance for termination of service.40 497 contributing members were recorded as at 31.12.2005, which represents a net increase of 5 869 participants compared to the previous year (34 628 as at 31.12.2004 was the figure used in the 2005 update of the 2004 actuarial assessment).This considerable increase in the population is mainly due to the recruitment of "Contractual Agents" (new population category under the Staff Regulations) and officials and temporary agents from the new Member States.There were 3 550 "Contractual Agents" among contributing members as at 31.12.2005, compared with 524 on 31.12.2004, which represents an increase of 577%. Most of these new contributing members replaced "Auxiliary Staff" (former non-contributing staff category).If the RDR, the GSG and the ISP were the same as in the 2005 assessment, the pension contribution would decrease by 0.3% (10.0% instead of 10.3%, the rate calculated in the 2005 assessment). The demographic impact can thus be estimated at -0.3%. This effect is mainly explained by the fact that new officials have a lower accrual pension right (1.9% instead of 2%), are younger and are expected to retire later.A breakdown of the reference population by type of contributing member and by Institution or Agency, along with the EU-2004 life table and the assumed retirement ages, is included in Annex I.Technical implementation of Annex XII to the Staff RegulationsTechnical questions raised by the implementation of Annex XII to the Staff Regulations are dealt with by Eurostat in cooperation with national experts from the relevant bodies of the Member States participating in the Working Group on Article 83 of the Staff Regulations. The minutes of the meeting held in Luxembourg on 19 June 2006 (Doc. 20060619 Art83_10) are in Annex III.Eurostat also exchanges relevant information on actuarial issues with international organisations such as the JPAS (Joint Pensions Administrative Section of the Co-ordinated Organisations), EPO (European Patent Office) and Eurocontrol.Independent examinationIn accordance with Article 13 of Annex XII to the Staff Regulations, Eurostat is assisted by independent experts (for this report by Ernst & Young Actuaires-Conseils, 11, allée de l’Arche, 92037 Paris La Défense cedex), in implementing the methodology described in Annex XII and with the definition and calculation of the corresponding actuarial assumptions.Ernst & Young Actuaires-Conseils then conducted an actuarial examination of the contribution rate calculated by Eurostat. This examination consisted in confirming the relevance and reliability of the actuarial processes and assumptions used in accordance with the methodology described in Annex XII to the Staff Regulations. For those elements not described explicitly in this Annex, Ernst & Young Actuaires-Conseils checked their compliance with generally accepted actuarial practices. Regarding actuarial assumptions, Ernst & Young Actuaires-Conseils carried out investigations to ensure that the underlying data provided by Eurostat were used correctly.An extract of the assessment by Ernst & Young Actuaires-Conseils is included in Annex II.Annexes to the report on the 2006 update of the 2004 actuarial assessment of the Pension Scheme for European Officials (PSEO)Annex I ComputationAnnex II Independent examinationAnnex III Minutes of the Working Group on Article 83 of the Staff RegulationsAnnex I – COMPUTATIONRelevant figures for calculating the contribution rateTable I Breakdown of the contribution rate[pic]Table II Service cost and total amount of annual basic salaries[pic]Summary of main variablesThe following tables show the values of the main parameters (see Table III) and actuarial assumptions (see Table IV). 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 III Parameters used in the actuarial assessment[pic]  Table IV Actuarial assumptions[pic]Reference populationArticle 1 of Annex XII to the Staff Regulations stipulates that the actuarial assessment has to be carried out in each year n on the basis of the population of active members of the PSEO as at 31 December of the previous year ( n-1 ). Furthermore, Article 9 of this Annex says that the details of this population are to be collected annually by the Commission using information received from the different institutions and agencies whose staff are members of the scheme.Accordingly, the reference population is the staff of the 26 institutions and agencies whose officials are members of the PSEO as at 31 December 2005.Table V Institutions and Agencies in the PSEO[pic]As approved by the Art83 Working Group at its meeting of 7 June 2004, the term “active members of the PSEO” is considered in the wide sense to be synonymous with “contributing members of the PSEO”. Consequently, the reference population includes not only officials in “active employment” but also officials in one of the other administrative statuses set out 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 were collected from the NAP[1] (New Application for Pay), PMO[2] and directly from Institutions and Agencies, and imported into the Eurostat database. The data were checked to guarantee a high level of quality. The actuarial assessment is based on the best output from the Eurostat database at the calculation date.Table VI Reference population by administrative status[pic]Table VI I Reference population by institution or agency[pic]Table VIII Change in the population of contributing members as at 31.12.2004 compared to the population as at 31.12.2003[pic]This considerable increase in the population is mainly due to the recruitment of "Contractual Agents" (new population category under the Staff Regulations) and officials and temporary agents from the new Member States.Real discount rate (RDR)In accordance with Article 10 of Annex XII to the Staff Regulations, the discount rate is based on the observed average annual interest rates on the long-term public debt of Member States as published by the Commission. The 2005 yearly average of interest rates (4.0) was calculated by Eurostat using estimated nominal rates from August to December 2005 because these five monthly rates were not available on the calculation date for this provisional assessment. This estimate is based on the 30-year Euro area benchmark government yield as produced by the ECB (European Central Bank), adjusting the rates to 21 years of maturity. A new 2005 yearly average rate will be used in the final assessment to be published by 1 September if the nominal rates from August to December 2005 are available by this date. To obtain the RDR (discount rate net of inflation), an appropriate consumer price index is used. The effective annual rate to be taken into consideration for the actuarial calculations (RDR) is the average of the real average interest rates for the 12 years before the current year.Compared to the previous exercise, data relating to 1993 were excluded from the moving average while data for 2005 were included.Table IX Real discount rate (RDR)[pic]General salary growth (GSG)The general salary growth (GSG) is calculated according to the rules in Article 11 of Annex XII to the Staff Regulations. The effective rate is based on the specific indicators referred to in Article 1(4) of Annex XI and is the average of the net specific indicators for the European Union for the 12 years preceding the current year.Compared to the previous exercise, data relating to 1993 (-1.3%) were excluded from the moving average while data for 2005 (0.0%) were included. Consequently, the result for the 12-year moving average is 0.3%.Table X General Salary Growth (GSG)[pic]Individual Salary Progression (ISP)Individual salary progression (ISP) refers to salary increases linked to the career of EU officials (promotions and seniority steps).Annex XII to the Staff Regulations does not provide precise indications for calculating this actuarial assumption. Consequently, it is calculated taken into account rules relating to the careers of officials (e.g. promotion rates). The methodology was discussed with independent and national experts at the regular meetings of the Art83 Working Group.The ISP table used for the 2005 update was calculated according to expectations under the rules of the new Staff Regulations, without taking into account observations. The reason is that past promotions were based on different rules in the old Staff Regulations. This time, as decided by the Art83 Working Group at its 19 June 2006 meeting (see minutes in Annex III), the ISP table used in this 2006 update of the 2004 assessment takes into account individual promotions and seniority step progressions observed in 2005 (first year where the new promotion rules were applied). The promotion rates are the mean between the theoretical promotion rates and those actually observed in 2005Table XI Promotion rates used in the ISP calculation[pic]The use of these averaged promotion rates results in a general decrease in the ISP rates to be used in the 2006 update of the pension assessment. If the overestimated ISP rates used in the 2005 update were used in this 2006 evaluation, the calculated contribution rate would be 10.7% instead of 10.4% (see table on the sensitivity of the contribution rate to ISP changes).An ISP rate is calculated by group of population, grade and years to retirement. The ISP corresponding to the individual situation of each active member of the population was used in the calculation at individual level.Table XIII was calculated from this detailed ISP table in order to facilitate the presentation in this report. This table shows the average ISP rate by grade and ISP group as well as the overall average ISP rate. Table XII shows the population weights used to calculate Table XIII.Table XII Weight of active population by ISP group and grade[pic]Table XIII Weighted ISP by group of active population and grade[pic]The change in the overall average ISP rate, 1.8% instead of 2.3% the previous year, is due to population changes and the use of averaged promotion rates as explained above.Assumed retirement ageAs stipulated in Article 4 of Annex XII to the Staff Regulations, it is assumed that all retirements will occur at a fixed average age ( r ). The average retirement age may be different by group of staff.Table XIV Assumed retirement age and Barcelona incentive by age group of officials[pic]AnnuitiesArticles 6 to 8 of Annex XII to the Staff Regulations refer to the annuities used in the calculation. The values of these annuities according to age are presented below.In order to comply with Commission policy on equal opportunities, values are not presented by sex. However, Eurostat conducted its analyses taking into account all relevant features of the population, including sex. The figures are aggregated by weighted averages only for presentation in this report.The table below was calculated using:-  the real discount rate (RDR) from Table IX,-  the general salary growth (GSG) from Table X,-  an assumed retirement age ( r ) equal to 64 years of age for officials younger than 35 on the reference date (31/12/2003) and equal to 63 years of age for the others,where:x is the age of the official,y is the age of the official’s spouse,m = r – x (number of years between the official’s age and the assumed retirement age),y = x ( 3 according to the sex of the official.Table XV Annuities according to Articles 6 to 8 of Annex XII to the Staff Regulations[pic]Life and invalidity tablesIn accordance with Article 9 of Annex XII to the Staff Regulations, a life table and an invalidity table were drawn up based on observation of the population of participants in the scheme, pensioners included.As was the case for the annuities, the life and invalidity figures are not presented by sex in order to comply with the Commission policy on equal opportunities, although that information was used in the calculation.Table XVI EU-2004 life and invalidity[pic][pic]Analysis of the sensitivity of the contribution rate to actuarial assumptionsSensitivity of the contribution rate to RDR changesThe following table shows that a RDR change of 0.2 percentage points (e.g. 3.8% instead of 3.6%) leads to a change in the staff contribution rate of 0.50 percentage points in the opposite direction (e.g. 9.93% instead of 10.41%). Consequently, the ratio between these two changes is around 2.5.Table XV II Sensitivity of the contribution rate to RDR changes[pic]Sensitivity of the contribution rate to GSG changesThe following table shows that a GSG change of 0.1 percentage points (e.g. 0.4% instead of 0.3%) leads to a change in the staff contribution rate of 0.25 percentage points in the same direction (e.g. 10.65% instead of 10.41%). Consequently, the ratio between the two changes is 2.4 to 2.5.Table XVI II Sensitivity of the contribution rate to GSG changes[pic]Sensitivity of the contribution rate to ISP changesThe following table shows that an average change of 0.1 percentage points in the ISP of the population as at 31.12.2005 (e.g. 1.9% instead of 1.8%) leads to a change in the staff contribution rate of 0.11 to 0.12 percentage points in the same direction (e.g. 10.17% instead of 10.05%). Consequently, the ratio between the two changes is 1.1 to 1.2.Table XIX Sensitivity of the contribution rate to ISP changes[pic]The effect of the ISP (≈ 1.2) is not as strong as the GSG effect (≈ 2.5) because the ISP affects the participants of the PSEO only during their periods of service, whereas the GSG continues to affect the amounts of the pension received by pensioners until their death or the death of their survivors.Annex II – Independent examinationErnst & Young Actuaires-Conseils conducted an actuarial examination of the contribution rate calculated by Eurostat. This examination consisted in confirming the relevance and reliability of the actuarial processes and assumptions used in accordance with the methodology described in Annex XII to the Staff Regulations. For the elements not described explicitly in this Annex, Ernst & Young Actuaires-Conseils checked their compliance with generally accepted actuarial practices. Regarding the actuarial assumptions, Ernst & Young Actuaires-Conseils carried out investigations to ensure that the underlying data provided by Eurostat were used correctly.The executive summary from the Ernst & Young report on the actuarial examination is reproduced below:In accordance with its assignment entrusted by Eurostat, Ernst & Young Actuaires-Conseils, as an independent expert, has conducted an actuarial examination of the 2006 update of the actuarial assessment of the pension scheme referred to in Article 83a (3) of the new Staff Regulations for which Eurostat endorsed the technical responsibility towards the Commission according to the Annex XII “Rules for implementing Article 83a of the Staff Regulations”. 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.Ernst & Young Actuaires-Conseils has no reasons to doubt that the official’s contribution rate (10. 4%) calculated by Eurostat and presented in the Eurostat report is a sufficiently accurate estimate of the reality.The complete Ernst & Young report on the actuarial examination of the contribution rate is available from Eurostat.ANNEX III – MINUTES OF THE ARTICLE 83 WORKING GROUP MEETINGLuxembourg, June 2006[pic]Eurostat. Unit D-5Remuneration and PensionsDocument: | Doc. 20060619 Art83_10 |Meeting of the Article 83 of the Staff Regulations Working GroupLuxembourg 19th June 2006 at 09:30Ampère RoomBECH Building / LuxembourgMinutes of the 19.06.2006 meeting of the Art83 Working GroupLIST OF PARTICIPANTSCountry delegatesBOROWSKI Remigiusz Ministry of Social Policy POLANDHEHN Ludovic Représentation Permanente de la France FRANCELORENTZ Kai Statistisches Bundesamt DEUTSCHLANDLOVRECIC Ines Sarazin Pension and Disability Insurance Institute SLOVENIAMITREVA, Hristina National Social Security Institute BULGARYPAPPENSCHELLER Thomas Bundeskanzleramt ÖSTERREICHREILLY, John Ministry of Finance IRLANDSAVOLA Risto Ministry of Finance SUOMI/FINLANDSKYVOVA, Daniela Czech Social Security Office CZECH REPUBLICOLEXA, Milan Slovak Statistical Office SLOVAK REPUBLICWICTOR Jean-Paul Ministère de la Sécurité Sociale, IGSS LUXEMBOURGIndependent expertsCHEVALIER Franck Ersnt & YoungLEGRAND Nicolas-Michel Ernst & YoungEuropean InstitutionsDE COSTER, Jean Marie EC - ADMINDE JONG, Shira EC – ESTAT / D5BRONKHORST Jan EC - PMOLEMAIRE Guy EC – ESTAT / D5LIOTTI Amerigo EC – ECFINALEXAKIS, Gorge EC - ECFINMONTAIGNE Fabienne EC – ESTAT / D5MOSSAY-PIRROTTE Martine EC – ESTAT / D5OLIVARES José Maria EC – ESTAT / D5ROMAN Jean-Claude EC – ESTAT / D5VIDAL Paulo CONSEILSUMMARY OF ACTIONSItem 4 Personnel data collection processAction 1: Eurostat will inform Delegates where they can find figures about the liability of the Pension Scheme of European Officials (number of the Official Journal).Item 5 Actuarial assumptionsAction 2:-  Discount rate will be updated for the final assessment of the pension scheme if observed nominal rates from August 2005 to December 2005 are available by 1 st September 2006 and if calculation shows any change in the 12-year moving average (3.6%).-  Eurostat will use the same invalidity table as in the previous actuarial assessment. In the future, Eurostat will complete the information sent to delegates with figures on the yearly invalidity.-  No changes are proposed concerning other actuarial assumptions, except about the GSG, which will be updated according to the 12-year moving average (to 0.3%), and about the ISP table (see next item). Consequently, the same assumptions as in 2004 and 2005 will be used in the final 2006 assessment.Item 6 Individual Salary Progression (ISP)Action 3:-  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 recruited before 01.05.2004 (ISP group 1) will be based on a 12-year moving average of observed promotion rates. One year of theoretical promotion rates will be used until 12 years of observations are available. This year promotion rates will be calculated per grade as the simple average of 2005 observed promotion rate and 2006 theoretical promotion rate.-  A fixed ISP rate of 0.4% will be applied to temporary staff from Institutions (ISP groups 3 and 4).-  A fixed 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 groups above mentioned will be calculated for publication purposes (plus an additional table on the population concerned).Item 7 Mortality tablesAction 4:-  Eurostat will continue to work on the project of creation of an “International official’s life table” and will keep Delegates informed.Item 8 2006 update of the 2004 actuarial assessment of the Pension Scheme of European Officials (PSEO) - Provisional resultsAction 5:-  Eurostat will carry out the final 2006 update of the actuarial assessment of the PSEO by 1 st September 2006.-  The new "2006 ISP v1 table" will be used in this final 2006 update.-  This final update made by Eurostat will be checked by independent experts from Ernst & Young.-  A copy of the Eurostat’s report concerning this final update will be uploaded on CIRCA.Item 9 Dependence InsuranceAction 6: Delegates will be informed about the development of this project.ITEMSItem 1 Chairman’s introduction statement and adoption of the agendaThe chairman welcomed the participants. He presented the agenda and informed that the documents were sent to participants and uploaded on CIRCA. In addition, copies of documents and slides that were going to be presented were also available in the meeting room. The Chairman asked the Delegates if some problems were encountered with the documents. All participants were satisfied by the process.The Chairman reminded the delegates that their presence is of utmost importance as the Commission (Eurostat) is obliged to run the WG according to the Staff Regulations.The main goals of this meeting are to present the provisional results of the actuarial assessment of the PSEO (Pension Scheme of European Officials), to discuss about some actuarial assumptions, particularly about the discount rate and the ISP (Individual Salary Progression) table.All action points were done except Non-marital partnership. Except Czech Republic, other Member States do not have information to provide. For this reason it was agreed to abandon the action point.The agenda was adopted.Item 2 Minutes of the 08.06.2005 meeting of the Art83 Working GroupThe minutes were adopted.Item 3 2005 update of the 2004 actuarial assessment of the pension scheme: 2005 Eurostat ReportThis report was published on 1st September 2005 and a copy was uploaded on CIRCA. The goals of the presentation were to give the opportunity to participants to ask questions and to comment about the final 2005 results.Eurostat underlined that no major changes existed between the provisional and the final 2005 update of the actuarial assessments. ISP (Individual Salary Progression) was improved according to recommendations of the June 2005 Art83 WG meeting which led to the construction of a new ISP table "2005 ISP v1" table). The new total service cost was 721 million Euros instead of 724 million Euros in the provisional 2005 assessment. This change had no effect on the computed contribution rate, which remained the same as in the provisional calculation, namely 10.3%.Item 4 Personal data collection processEurostat reminded that according to Annex XII of the Staff Regulations, the yearly update of the pension scheme at year "n" must be based on the population at 31st December of year "n-1". The goal of this item was to inform Delegates about the process of data collection implemented by Eurostat.Eurostat answered to the Delegates' questions. Particularly Eurostat pointed out that, in addition to data collection on contributing members, Eurostat also collected data on beneficiaries in order to calculate the total liability of the pension scheme. The latter is included in the "Final Annual Accounts of the European Communities" and is published in the Official Journal no later than 31 st October .Action 1: Eurostat will inform Delegates where they can find figures about the liability of the Pension Scheme of European Officials (number of the Official Journal).Item 5 Actuarial assumptionsSome of these assumptions were the subject of other items in the agenda, particularly the ISP table (item 6) needed a more detailed analysis.Concerning the discount rate, Eurostat informed that the zero-coupon Euro yield curve with a maturity of 21 year was not available since August 2005 to December 2005 and these five missing months were estimated using the 30 years Euro area benchmark government yield as produced by the ECB (European Central Bank). The 2005 nominal rate (4.0%) was calculated as the average of the 7 available plus 5 estimated monthly interest rates.DG ECFIN supported Eurostat proposal and pointed out that the observed nominal rates from August 2005 to December 2005 should not be very different from Eurostat’s estimate. The small differences that could appear when the observed rates will be available, will most probably not produce any change in the 12-year average of nominal rates (5.9%) and consequently, the RDR (3.6%) used by Eurostat in the provisional assessment could be considered as a reliable figure.Delegates agreed on the Eurostat solution to estimate the 2005 yearly nominal discount rate (4.0%).Concerning the invalidity table, some delegates asked to have figures about yearly invalidity among the EU staff.Action 2:-  Discount rate will be updated for the final 2006 assessment of the pension scheme if observed nominal rates from August 2005 to December 2005 are available by 1 st September 2006 and if calculation shows any change in the 12-year moving average (3.6%).-  Eurostat will use the same invalidity table as in the previous actuarial assessment. In the future, Eurostat will complete the information sent to delegates with figures on the yearly invalidity.-  No changes are proposed concerning other actuarial assumptions, except about the GSG, which will be updated according to the 12-year moving average (to 0.3%), and about the ISP table (see next item). Consequently, the same assumptions as in 2004 and 2005 will be used in the final 2006 assessment.Item 6 Individual Salary Progression (ISP)Eurostat explained the development of this complex actuarial assumption and the subsequent improvements from 2004 till now.Eurostat proposed now to integrate past observations on promotion rates and to update the fixed ISP rate of Institutions’ temporary staff (ISP groups 3 and 4).For officials, concerning the integration of past observations of promotion rates in the model, Eurostat listed three options and suggested the 3rd as the best one, namely progressive replacement of theoretical promotion rates by past observed rates and use of a 12-year moving average. The 2005 promotion rate would be calculated per grade as the simple average of 2005 observed promotion rate and a year of theoretical promotion rate.For temporary staff (ISP groups 3 and 4) , Eurostat analysed the effect of career interruptions according to recommendations of the June 2005 Working Group (action point 2) and concluded that the theoretical fixed ISP rate for Institutions’ temporary staff (2%) had wrongly not taken into account of the career interruptions. Consequently the period of 6 years (as indicated in the Staff Regulations) should be introduced into the mathematical computation, leading to a theoretical fixed rate of 0.4%.Delegates suggested that the theoretical arguments detailed in document "Doc.20060619 Art83_06" should be completed with some figures to see the impact of the ISP proposed changes, e.g. the summary table (similar as Table II in the document) of the detailed ISP table based on Eurostat’s proposals could be calculated . Eurostat informed that proposed changes would lead to a decrease of ISP rates. Eurostat agreed on calculating the summary table based on the final decision taken in this meeting (plus an additional table on the population concerned) and underlined that a decrease of ISP rates would lead to a decrease of the calculated contribution rate (see table XVII in "Doc 20060619Art83_08").The Working Group agreed on:-  integrating past observations on promotion rates in the model and considering the 3 rd option above detailed as the most appropriated,-  using a fixed ISP rate of 0.4% for Institutions’ temporary staff (ISP groups 3 and 4).Action 3:-  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 recruited before 01.05.2004 (ISP group 1) will be based on a 12-year moving average of observed promotion rates. One year of theoretical promotion rates will be used until 12 years of observations are available. This year promotion rates will be calculated per grade as the simple average of 2005 observed promotion rate and 2006 theoretical promotion rate.-  A fixed ISP rate of 0.4% will be applied to temporary staff from Institutions (ISP groups 3 and 4).-  A fixed 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 groups above mentioned will be calculated for publication purposes (plus an additional table on the population concerned).Item 7 Mortality tablesEurostat and the Joint Pension Administrative Section of Coordinated Organisations (JPAS) continued to work on the project of creating an “International official’s life table” as it was decided in the June 2005 meeting of Article 83 Working Group (action 5 of the 2005 minutes). The document presented in this meeting aimed to inform Delegates about the state of progress of the project.Eurostat answered questions from Delegates and stressed that according to Annex XII of the Staff Regulations; the current life table (“EU-2004”) could be updated only on the occasion of the five-yearly actuarial assessment of the pension scheme. The "International official's life table" could replace the current "EU-2004" table in 2008 if the result of the project is available and satisfactory by then. Concerning the solution to create a sample of at least 100 000 subjects, Ernst & Young confirmed that the aggregation of two successive years of population is a current actuarial practice if no other alternative solution exists.Action 4:-  Eurostat will continue to work on the project of creation of an “International official’s life table” and will keep Delegates informed.Item 8 2006 update of the 2004 actuarial assessment of the Pension Scheme of European Officials (PSEO) - Provisional resultsEurostat stressed that results presented under this item were provisional. The final update of the actuarial assessment would be carried out by 1st September 2006. This final update would include decisions taken in this meeting, mainly concerning ISP rates update.Eurostat informed that the increase of computed contribution rate was mainly due to the combined effect of the Real Discount Rate decrease and the General Salary Growth increase.Eurostat also informed that according to Annex XII of the Staff Regulations, the current applied contribution pension rate of 10.25% would be updated if it is shown that there is a gap of at least 0.25 point compared to the final calculated rate. It is expected that this gap will be small since the final calculation of contribution rate will be based on the new "2006 ISP v1 table" (see item 5).Action 5:-  Eurostat will carry out the final 2006 update of the actuarial assessment of the PSEO by 1 st September 2006.-  The new "2006 ISP v1 table" will be used in this final 2006 update.-  This final update made by Eurostat will be checked by independent experts from Ernst & Young.-  A copy of the Eurostat’s report concerning this final update will be uploaded on CIRCA.Item 9 Dependence InsuranceDelegates stressed that the cost associated with this new service could be expensive. They would like to know who will pay for it and what political level decisions will be taken at.Eurostat explained that no decisions about this project will be taken in this Working Group, since this group is only responsible for technical questions related to Article 83 of the Staff Regulations. The project is only presented for information. Eurostat would like to know if similar projects exist in the Member States and the experience of Delegates in this matter.Action 6: Delegates will be informed about the development of this project.Item 10 Miscellaneous – Methodology on the actuarial assessment of the pension schemeEurostat informed that a new version of the methodology on the actuarial assessment of the pension scheme had been uploaded on CIRCA. The methodology has not changed. This updated version of the document includes specific formulae for staff receiving an invalidity allowance or an allowance for termination of service according to special measures, as article 50 of the Staff Regulations (see more details about changes in point 2 of the document).[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 part of the personnel 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 of the Commission and agencies, and data about pensioners.