Report from the Commission to the Council on Annex XII to the Staff Regulations
Date: 2008-09-26
Institutions: European Commission
Subjects: European official, pension scheme, regulations for civil servants, report, servant (EU)

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 26.9.2008 
COM(2008) 592 final 

REPORT FROM THE COMMISSION TO THE COUNCIL 

on Annex XII to the Staff Regulations 

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REPORT FROM THE COMMISSION TO THE COUNCIL 

on Annex XII to the Staff Regulations 

1. 

LEGAL BASIS 

The  aim  of  this  report  is  to  present  to  the  Council  an  assessment  of  the  Pension 
Scheme of European Officials (PSEO), as provided for by Article 14 of Annex XII to 
the Staff Regulations. 

Article 83 stipulates that benefits paid under this pension scheme shall be charged to 
the budget of the Communities, that Member States shall jointly guarantee payment 
of  such  benefits  in  accordance  with  the  scale  laid  down  for  financing  such 
expenditure and that officials shall contribute one third of the cost of financing this 
pension scheme.  

Article  83a  and  Annex  XII  of  the  Staff  Regulations  set  out  the  actuarial  rules  for 
computing  the  contribution  rate  in  order  to  guarantee  the  balance  of  the  pension 
scheme.  

2. 

BASIC CONCEPTS OF THE PSEO (PENSION SCHEME OF EUROPEAN OFFICIALS)  

2.1. 

Actuarial balance of the pension scheme 

2.1.1.  The Staff Regulations: actuarial balance principle  

The  PSEO  (Pension  Scheme  of  European  Officials)  follows  the  actuarial  balance 
principle. The annual contribution paid by the staff has to cover 1/3 of the rights the 
staff have acquired during the year. The rights acquired during the year are the future 
pensions  the  staff  will  obtain  after  retirement,  as  well  as  entitlement  (under  certain 
conditions) to an invalidity allowance, a survivor's pension, and an orphan's pension. 
In other words, the annual contribution is designed to finance one third of the service 
cost under the pension scheme, i.e. a string of payments arising in the future. In order 
to make this computation possible the string of payments for European civil servants 
has  to  be  evaluated  at  its  present  value  (using  a  discount  rate).  The  computation  is 
thus an actuarial evaluation.  

In  technical  terms,  the  method  used  in  the  computation  of  the  pension  contribution 
rate is the one prescribed by international standard IAS19 and called “projected unit 
credit”. The sum of the actuarial values of rights acquired by active members of staff, 
called  “service  cost”  in  actuarial  practice,  is  compared  to  the  annual  total  of  their 
basic salaries in order to obtain the rate of contribution. 

It is necessary to adopt various actuarial hypotheses to evaluate the service cost, such 
as  real  interest  rate,  mortality  rates  or  salary  progressions.  The  real  values  of  these 
hypotheses may turn out to be slightly different from the predicted values estimated 
at  the  time  of  the  computation.  Such  differences  may  produce  slight  annual 

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imbalances (positive or negative). These small, theoretical annual imbalances tend to 
cancel  each  other  out  over  the  long  term  as  the  actuarial  hypothesis  values  are 
adjusted  periodically  upwards  or  downwards  to  take  account  of  corresponding 
observed values. 

The contributions paid during the current year are not calculated so as to cover the 
pension payments for the current year: they could be higher or lower. The actuarial 
balance principle guarantees a balance in the long term, not a yearly balance: it is a 
different concept from a yearly cash-flow balance. 

The PSEO is in balance if the annual contributions paid by the staff cover one 
third  of  the  rights  acquired  during  the  year,  i.e.,  according  to  the  Staff 
Regulations,  1.9%  or  2%  of  the  final  basic  salary  before  retirement,  as  regards  the 
retirement pension. 

2.2. 

Pension contribution and benefits 

Chapter 3 of Title V of the Staff Regulations, developed further in Annex VIII and 
Annex  XIII,  sets  out  rules  for  entitlement  to  a  pension  or  invalidity  allowance. 
Article 83 specifies that officials are to contribute one third of the cost of financing 
the pension scheme. The current pension contribution for officials is 10.25% of the 
basic salary. 

This  contribution  rate  could  increase  to  10.9%  from  1  July  2008  according  to  the 
result  of  the  2008  calculation  and  subject  to  Commission's  proposal  and  Council's 
approval. 

The  calculation  of  the  contribution  rate  and  pension  benefits  is  based  on  a  certain 
number of parameters and actuarial assumptions. Some of these are detailed below. 

2.2.1.  Pension rights 

Pension rights are rights that the official acquires up to retirement age. Pension rights 
are  expressed  as  a  percentage  of  the  basic  salary  used  to  calculate  the  pension. 
Pension  rights  are  acquired  each  year  by  the  staff  as  a  counterpart  to  the  pension 
contribution, according to the following rules of the Staff Regulations1. 

According  to  Article  77  of  the  Staff  Regulations,  the  maximum  retirement  pension 
shall  be  70%  of  the  final  basic  salary  earned  in  the  last  grade  in  which  the  official 
was  classified  for  at  least  one  year.  1.9%  of  the  basic  salary  at  the  retirement  age 
shall be payable to an official for each year of service reckoned in accordance with 
Article 3 of Annex VIII. 

Notwithstanding the second sentence of the second paragraph of Article 77, officials 
who  entered  the  service  before  1  May  2004  shall  be  entitled  to  2%  of  the  salary 
referred  to  therein  for  every  year  of  pensionable  service  calculated  in  accordance 
with Article 3 of Annex VIII. 

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There are two other ways of acquiring pension rights: transferring pension rights from another scheme, 
or buying pension rights. 

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The  maximum  number  of  years  of  pensionable  service  which  may  be  taken  into 
account  for  the  calculation  of  the  retirement  pension  rights  shall  be  the  number 
necessary  to  achieve  the  maximum  pension,  within  the  meaning  of  the  second 
paragraph of Article 77 of the Staff Regulations (Article 2 of Annex VIII to the Staff 
Regulations). 

In  summary,  the  pensionable  service  necessary  to  obtain  the  maximum  retirement 
pension (70% of the basic salary) is 35 years (“old” officials) or 36.84 years (“new” 
officials). 

2.2.2.  Pension benefits 

Pension benefits are equal to the pension rights multiplied by the basic salary at the 
age  of  retirement.  Beneficiaries  of  an  invalidity  allowance  shall  automatically  be 
retired  on  the  last  day  of  the  month  in which  the  appointing  authority  recognises  a 
permanent  incapacity  to  perform  their  duties  (Article  53  of  the  Staff  Regulations). 
Reversionary and survivor’s  pensions  are  based on  the retirement pension and they 
are calculated according to Chapter 4 of Annex VIII to the Staff Regulations. 

2.2.3.  Retirement age 

The  Staff  Regulations  stipulate  that  the  normal  retirement  age  for  officials  is  63 
years,  but  Annex  XIII  provides  for  a  transitional  period.  However,  in  the 
computation of the contribution rate it is necessary to estimate the so-called assumed 
retirement  age.  In  general,  staff  retire  a  little  after  the  minimum  retirement  age. 
Different  tables  are  used  for  the  calculation,  depending  on  the  date  when  they 
became EU staff. 

3. 

PROCEDURE FOR THE REPORT ON THE PENSION SCHEME 

3.1. 

Article 83 Working Group 

Technical  questions  raised  by  the  implementation  of  Annex  XII  are  dealt  with  by 
Eurostat  in  cooperation  with  national  experts  from  the  relevant  departments  of  the 
Member  States  participating  in  the  Working  Group  on  Article  83  of  the  Staff 
Regulations. The Article 83 Working Group met each year as required by the Staff 
Regulations.  Meetings  were  held  in  Luxembourg  on  7  June  2004,  8  June  2005,  19 
June 2006, 26 June 2007, and 27 June 2008. 

The  group  discussed  the  methodological  documents  drawn  up  by  Eurostat.  The 
Article 83 Working Group received all the documentation necessary to validate the 
work done by Eurostat. The documents  distributed to the Working Group provided 
all  necessary  details.  The  documentation  is  kept  available  in  CIRCA  (website  of 
Eurostat),  to  which  members  of  the  Working  Group  have  access.  The  Working 
Group makes suggestions or asks for explanations. There has always been agreement 
on the decisions. 

Eurostat  also  exchanges  relevant  information  on  actuarial  issues  with  international 
organisations  such  as  the  JPAS  (Joint  Pensions  Administrative  Section  of  the 
Coordinated  Organisations,  which  include  the  OECD,  NATO,  ESA,  the  Council  of 
Europe, NAMSA and others), the EPO (European Patent Office) and Eurocontrol. 

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3.2. 

Qualified independent expert 

In accordance with Article 13(4) of Annex XII to the Staff Regulations, Eurostat is 
assisted  by  a  qualified  independent  expert  (Ernst  &  Young  Actuaires-Conseils,  11, 
allée de l’Arche, 92037 Paris La Défense cedex) with regard to the methodological 
implementation  and  to  the  definition  and  calculation  of  the  corresponding  actuarial 
assumptions. 

Concerning  actuarial  assumptions,  Ernst  &  Young  Actuaires-Conseils  carried  out 
investigations  to  ensure  that  the  underlying  data  provided  by  Eurostat  were  used 
correctly. 

Reports  from  E&Y  (available  on  CIRCA)  validated  the  Eurostat  contribution 
rates.  On  several  occasions  they  made  remarks  which  Eurostat  took  into  account 
where possible. 

4. 

PARAMETERS AND ACTUARIAL ASSUMPTIONS 

4.1.  Main variables  

4.1.1. 

Statutory 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 1.9% for staff recruited from 1 May 2004 
and 2% for those recruited before this date). These values can be clearly established.  

4.1.2.  Actuarial assumptions 

These  are  values  that  are  not  known  and  cannot  be  established  exactly.  The  main 
actuarial  assumptions  are  the  mortality  and  invalidity  tables,  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. 

4.1.3.  Economic parameters 

Pursuant  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  as  the 
average of the corresponding rates for the 12 preceding years. 

In  the  2008  update,  the  value  of  the  RDR  is  3.1%  compared  to  3.4%  in  the  2007 
actuarial assessment. The GSG is 0.4% instead of 0.5% in 2007. Combined with the 
effect  of  changes  in  other  actuarial  assumptions,  these  changes  explain  why  the 
calculated pension rate increases to 10.9%. 

4.1.4.  Demographic parameters 

The observed population is made up of contributing members of the PSEO including: 

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–  active officials as well as officials on parental leave, 

–  members  whose  pension  contribution  is  optional  (e.g.  officials  who  have  taken 

leave on personal grounds), 

–  invalids  who  receive  invalidity  allowance  under  Article  78  of  the  Staff 

Regulations, 

–  beneficiaries of an allowance for termination of service. 

47 596 contributing members were recorded at 31 December 2007, which represents 
a net increase of 2 643 participants compared to the previous year. 

This significant increase in the population is mainly explained by the recruitment of 
contract  agents  (a  new  category  of  population  defined  in  the  Conditions  of 
Employment  of  Other  Servants)  and  officials  and  temporary  agents  from  the  new 
Member States. 

There were 7 037 contract agents among the contributing members at 31 December 
2007,  as  against  6  404  at  31  December  2006,  which  represented  an  increase  of 
9.88%.  Most  of  these  new  contributing  members  are  replacing  auxiliary  staff  (a 
former non-contributing staff category). 

4.2. 

Summary of the main parameters used in the last pension assessment 

The  following  tables  show  the  values  of  the  main  parameters  and  actuarial 
assumptions.  Please  note  that  these  tables  only  present  an  overview  of  the  main 
variables and are not exhaustive. Please refer to the Staff Regulations for precise and 
complete information. 

Statutory parameters used in the actuarial assessment 

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Parameter

Legal source

Value
Staff Regulations in force from 
01.05.2004

Reference date for the population (Annex XII Article 1)

31.12.2007

Maximum official retirement age (Staff Regulations 
Article 52)
Minimum official retirement age (Staff Regulations Article 
52 and Annex XIII Article 22)

65 (67 on an exceptional basis)

63 or before for officials in service 
before 01.05.2004

Minimum age for early retirement (Staff Regulations 
Article 52, Annex VIII Article 9 and Annex XIII Article 23)

55 or before for officials in service 
before 01.05.2004

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)
Reversionary pension (Staff Regulations Article 79 and 
Annex VIII Article 18)
Minimum reversionary pension (Staff Regulations Article 
79 and Annex VIII Article 18)

first step of grade 1

70% of the basic salary at the 
retirement date
1.9% or 2% for officials recruited before 
01.05.2004

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

Survivor's pension (Staff Regulations Article 79 and 
Annex VIII Article 17)

60% of the retirement pension that 
would have been payable to the official 

Minimum survivor's pension (Staff Regulations Article 
79)

35% of the last basic salary or minimum 
subsistence figure

Actuarial assumptions2 

Actuarial assumption

Average age difference between married men and 
women

Probability of being married at retirement age for men

Probability of being married at retirement age for women

Value

3 years

84%

38%

Marital status

status at evaluation date

Coefficient for orphan's and divorced spouse's pension

Annex VIII coefficient (correction coefficient)

Assumed retirement age

Real discount rate (RDR)

General salary growth (GSG)

10%

0,0%

63 to 64

3.1% (see point 2)

0.4% (see point 3)

General pension revaluation (GPR)

0.4% (equal to the GSG)

Individual salary progression (ISP)

Mortality table (healthy people)

Mortality table (invalids)

Invalidity table

2008 ISP table

2008 ICSLT

Mortality rate corresponding to a person 3 
years older than healthy person

2008 EU invalidity table

2 

2008 Assessment. 

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5. 

RESULTS: EVOLUTION OF THE PENSION CONTRIBUTION RATE 

5.1. 

Evolution of the contribution rate for pensions 

Pension contribution by year 

Items

2004

31/12/2003

2005

Pension assessments
2006
Reference date
31/12/2005

31/12/2004

31/12/2006

2007

2008

31/12/2007

Service cost for retirement

25,9%

25,4%

25,9%

26,9%

29,6%

Service cost for invalidity

3,8%

3,8%

3,7%

2,3%

2,2%

Service cost for death

1,6%

1,6%

1,6%

1,7%

1,0%

Ratio service cost / BS 

31,29%

30,8%

31,2%

30,9%

32,8%

Officials' contribution rate 
(1/3 of total ratio)

Applied officials' 
contribution rate

10,4%

10,3%

10,4%

10,3%

10,9%

9,75%

10,25%

10,25%

10,25%

10,90%

During  the  period  2004-2008,  in  order  to  guarantee  balance  of  the  scheme,  the 
pension contribution rate was calculated as 1/3 of the ratio between the total service 
cost and the total annual basic salaries. 

5.2. 

Results of the last pension assessment 

The  calculated  contribution  rate  indicated  above  (10.9%)  is  one  third  of  the  ratio 
between  the  total  of  the  service  cost  (€1  002  m illion)  and  the  total  of  annual  basic 
salaries (€3 056 million). This rate is  higher (+0.6%) than the one calculated in 2007 
(10.3%) 

The  provisional  2008  actuarial  assessment  of  the  Pension  Scheme  of  European 
Officials  (PSEO)  indicates  that,  in  order  to  ensure  the  balance  of  this  pension 
scheme, the contribution rate necessary to finance one third of the benefits payable 
would be 10.9% of the basic salary (or of the invalidity allowance). 

Pursuant to Article 83a of the Staff Regulations, where it is shown that there is a gap 
of  at  least  0.25  points  between  the  rate  of  contribution  currently  applied  (10.25%) 
and  the  rate  required  to  maintain  actuarial  balance  (10.9%),  the  Council  is  to 
consider  whether  the  rate  should  be  adapted,  in  accordance  with  the  arrangements 
laid down in Annex XII. 

In accordance with Article 2(2) of Annex XII, the adjustment taking effect on 1 July 
2008 shall not lead to a contribution being more than one percentage point above or 
below the applied rate of the previous year (10.25%). 

Consequently, in order to guarantee the balance of the pension scheme, the following 
contribution rate should be applied from 1 July 2008: 10.9% 

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6. 

BALANCE OF THE PENSION SCHEME 

As  explained  in  part  2.1.2  of  this  report,  the  PSEO  is  in  balance  if  the  annual 
contributions paid by the staff cover one third of the rights acquired during the year, 
i.e., according to the Staff Regulations, as regards a retirement pension, 1.9% or 2% 
of  the  final  basic  salary  before  retirement.  As  the  pension  contribution  rate  is 
calculated to guarantee that the scheme is in balance, the scheme is in balance when 
the calculated rate is applied. 

During the reference period of this report indicated in Article 14 of Annex XII to the 
Staff Regulations, the Commission proposed and the Council adopted the Eurostat's 
calculated rate of contribution after taking into account the specific provisions of the 
Staff Regulations: 

–  Article 2(1) of Annex XII to the Staff Regulations (any adjustment shall not lead 
to a contribution being more than one percentage point above or below the valid 
rate of the previous year); 

–  Article 2(2) of Annex XII to the Staff Regulations (the adjustment taking effect on 
1 July 2004 shall not lead to a contribution higher than 9.75% and the adjustment 
taking effect on 1 July 2005 shall not lead to a contribution higher than 10.25%); 

–  Article  83a(4)  of  the  Staff  Regulations  (the  adaptation  of  the  rate  should  be 
considered if 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 following table summarises the calculated and applied contribution rates: 

Summary of calculated and applied contribution rates for pension 

Calculated and applied staff's contribution rates from 01.01.2004

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12,0

11,5

11,0

10,5

10,0

9,5

9,0

8,5

8,0

7,5

7,0

6,5

6,0

10,43

9,75

9,64

9,25

10,30

10,25

10,40

10,25

10,30

10,25

10,90

10,90

Calculated staff's contribution rates (%)

Applied staff's contribution rates (%)

Update at 01.01.2004

Update at 01.07.2004

Update at 01.07.2005

Calculation at 01.07.2006

Calculation at 01.07.2007

Calculation at 01.07.2008

Events

The chart shows that the applied pension contribution rate was very close to the one 
calculated by Eurostat. Please note that small differences between the rates due to the 

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application  of  the  above  mentioned  provisions  of  the  Staff  Regulations  can  be 
positive or negative; these differences tend to cancel each other out in the long term. 

Therefore,  the  method  has  fulfilled  its  specific  aim  to  guarantee  that  the  pension 
contribution paid by staff to the budget covers one third of the cost under the pension 
scheme,  as  specified  in  Article  1(1)  of  Annex  XII  to  the  Staff  Regulations,  and, 
hence, the scheme is in balance. 

7. 

PROBLEMS ENCOUNTERED, SOLUTIONS AND FURTHER WORK  

7.1. 

ISP 

Usually, past observations are used when calculating actuarial assumptions (e.g. life 
table, GSG). This was not the case in 2004 when defining the ISP (Individual Salary 
Progression).  The  new  Staff  Regulations  in  force  from  1  May  2004  created  a  new 
category of personnel (contract agents) and introduced major changes in salary scale 
and  promotion  rules  relating  to  officials  and  temporary  agents.  All  these  changes 
made  using  past  observations  on  individual  salary  progression  when  defining  this 
assumption not practicable. 

In 2004-2005 the method was based on indicative promotion rates using Table B in 
Annex  I  to  the  Staff  Regulations.  For  the  2006  assessment  a  new  method  was 
presented  to  the  Article  83  Working  Group.  This  method  is  based  on  a  moving 
average  of  the  indicative  promotion  rate  and  the  observed  promotion  rate  (as  from 
2005) by category of personnel, grade, step and years to retirement up to a maximum 
of 12 years of observations. The same observation period is used for calculating the 
RDR and GSG rates. 

Proposed solution: 

It  is  proposed  to  continue  with  this  method.  This  method  takes  the  observed 
promotions increasingly into account as their weight in the average will grow larger 
and  larger  compared  to  the  indicative  promotion  rates.  The  ISP  calculated  in  this 
manner  takes  the  step  increase  of  staff  throughout  their  career  fully  into  account. 
Some  improvements  to  the  current  method  could  be  envisaged  if  necessary,  in 
agreement with national experts of Member States. 

7.2. 

Invalidity 

A  new  invalidity  table  (2008  EU  invalidity  table)  has  been  used  in  the  2008 
assessment of the pension scheme. As explained above, four years only of invalidity 
observations (2004, 2005, 2006 and 2007) have been used to estimate invalidity rates 
in the context of the new Staff Regulations in force from 1 May 2004 (beneficiaries 
of invalidity allowance were accounted for). This new invalidity table was presented 
at the 27 June 2008 meeting of the Article 83 Working Group. 

This  short  period  of  observation  to  estimate  invalidity  rates  does  not  lead  to  as 
accurate a set of estimates as a longer period would. Consequently, future updates of 
the  invalidity  rates  could  be  necessary.  This  approach  is  also  supported  by  the 
independent expert. 

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Proposed solution: 

To continue to observe invalidity each year and calculate the invalidity rates based 
on  a  moving  average  of  available  observations  up  to  a  maximum  of  12  years  of 
observations (the same observation period is used for calculating the RDR and GSG 
rates). 

7.3. 

Life table 

The  same  life  table  (2004  EU  life  table)  has  been  used  as  in  the  2004  pension 
assessment.  The  real  mortality  rate  in  the  period  2004-2007  was  analysed  and 
compared to the expected mortality according to the EU-2004 life table. The result of 
this analysis is that mortality in ages 30 to 69 is lower and mortality for ages above 
70 is higher compared to EU-2004 life table. 

Eurostat  and  the  Joint  Pension  Administrative  Section  for  the  six  Coordinated 
Organisations  have  launched  a  common  project  which  aims  to  draw  up  a  common 
life  table  based  on  a  large  population  of  civil  servants  based  in  Europe:  the  2008 
ICSLT (International Civil Servants Life Table). This life table has been certified by 
an  external  actuarial  expert  who  also  recommended  the  regular  updating  of  life 
tables. It was used in the 2008 calculation. 

Proposed solution: 

To use the 2008 ICSLT life table instead of the 2004 EU Life table. 

7.4. 

Discount rate 

Eurostat  encountered  difficulties  in  obtaining  the  2005  and  2006  interest  rate  to  be 
used for the pension assessment. The origin of the problem, as explained above, was 
that  the  euro  zero-coupon  yield  curve  with  a  maturity  of  21  years  was  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 had not yet 
produced  the  euro  zero-coupon  yield  curve  with  a  maturity  of  21  years,  Eurostat 
estimated  the  2005  and  2006  rates  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.  

The ECB implemented the euro yield curve in the summer of 2007 and Eurostat has 
disseminated  “daily”  data  for  the  maturities  1  to  30  years  since  then  as  well.  In 
addition, annual 2007 data have been available on the Eurostat website since January 
2008. 

The  2007  annual  nominal  rate  for  21  years  maturity  for  zero-coupon  government 
bonds is 4.5% (the real rate is 2.2%). Consequently, the moving average (1996-2007) 
of  the  real  rate  which  has  been  used  in  the  2008  provisional  pension  assessment  is 
3.1%. 

Proposed solution: 

Article  10  of  Annex  XII  to  the  Staff  Regulations  gives  the  framework  for 
determining the interest rate: “1. The interest rates to be taken into consideration for 

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the  actuarial  calculations  shall  be  based  on  the  observed  average  annual  interest 
rates  on  the  long-term  public  debt  of  Member  States…”.  As  the  problem  of 
availability  of  data  has  been  solved  (the  ECB  now  produces  the  euro  zero-coupon 
yield curve with a maturity of 21 years), Eurostat will continue using it in actuarial 
calculations.  Thus,  the  above-mentioned  nominal  rate  of  4.5%  will  be  used  in  the 
2008 pension assessment. 

8. 

BUDGETARY IMPACT OF THE COMMUNITY PENSIONS SCHEME 

Pursuant to the second paragraph of Article 83 of the Staff Regulations, officials pay 
one third of the cost of the Community pension scheme. In accordance with the first 
paragraph  of  the  same  Article,  benefits  paid  under  this  pension  scheme  are  to  be 
charged to the budget of the Communities. Member States jointly guarantee payment 
of such benefits. 

As explained above, the contributions paid during the current year are not calculated 
so as to cover the payment of pensions and other benefits for the current year. The 
actuarial  balance  principle  guarantees  a  balance  in  the  long  term,  not  a  yearly 
balance. This means that the rate of contribution is based on the payments to be made 
in the future when the contributing civil servants retire. The rate is not connected to 
or  influenced  by  the  current  budgetary  expenditure  to  finance  pensions  for  retired 
civil servants. 

Pension  contributions  finance  one  third  of  the  future  obligation.  The  contributions 
are paid to the Community budget as revenue. The total obligation is covered by the 
Member States at the moment of payment. 

The  chart  below  shows  the  impact  of  increasing  pension  contribution  rates  and  the 
increasing  number  of  contributing  members.  The  revenue  collected  from  the 
pension  contribution  more  than  doubled  during  the  shown  period  (2000–2007) 
from 154 million euros in 2000 to 340 million euros in 2007. 

350 000 000

300 000 000

250 000 000

Revenue from the pension contribution

10,25

10,25

10,25

9,75

200 000 000

8,25

8,25

8,25

8,25

150 000 000

100 000 000

50 000 000

0

2000

2001

2002

2003

2004

2005

2006

2007

This increase is mainly determined by: 

–  the increasing pension contribution rate (from 8.25% in 2000 to 10.25% in 2005, 

2006 and 2007); 

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–  the increasing number of contributing members of the pension scheme (e.g. from 

34 511 in 2004 to 47 297 in 2007). 

9. 

CONCLUSIONS 

The  method  has  fulfilled  its  specific  aim  to  guarantee  that  the  Community  pension 
scheme  is  in  balance,  as  the  pension  contribution  paid  by  the  staff  to  the  budget 
covers one third of the rights acquired every year due to the following reasons: 

–  the contribution rate calculated by Eurostat covered one third of the pension rights 

acquired that year; 

–  the calculated contribution rate was validated by a qualified independent expert; 

–  the applied contribution rate was very close to the calculated one; 

–  small differences between the calculated and applied rates were due to the specific 
provisions  of  the  Staff  Regulations.  As  these  differences  can  be  positive  or 
negative, they tend to cancel each other out in the long term. 

The  budget  revenue  from  the  pension  contribution  has  increased  following  the 
increases in the contribution rate and in the number of contributing members. 

For  the  above  reasons,  the  Commission  takes  the  view  that  the  Pension  Scheme  of 
European  Officials  is  in  balance.  The  problematic  issues  were  addressed  without 
implying  a  revision  of  Annex  XII.  The  Commission  therefore  considers  that  no 
modification of the Staff Regulations is needed. 

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