Commission Staff Working Document accompanying the Proposal for a Council Regulation adjusting, from 1 July 2011, 1 July 2012 and 1 July 2013, the rate of contribution to the pension scheme of officials and other servants of the European Union - Report on the 2013 actuarial assessment of the Pension Scheme for European Officials (PSEO)
Date: 2014-07-16
Institutions: European Commission
Subjects: European official, interest, pension scheme, servant (EU), social-security contribution, transfer of pension rights













EUR-Lex - 52014SC0239 - EN











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52014SC0239

Commission Staff Working Document accompanying the Proposal for a Council Regulation adjusting, from 1 July 2011, 1 July 2012 and 1 July 2013, the rate of contribution to the pension scheme of officials and other servants of the European Union - Report on the 2013 actuarial assessment of the Pension Scheme for European Officials (PSEO) /* SWD/2014/239 final */









 || EUROPEAN COMMISSION ||   
Brussels, 16/7/2014 
SWD(2014) 239 final
COMMISSION STAFF WORKING
DOCUMENT
{COM(2014)
462 final}
{SWD(2014)
237 final}
{SWD(2014)
238 final}
{SWD(2014)
240 final}
Articles 83 and
83a and Annex XII of the Staff Regulations
Report on the 2013 actuarial assessment of the
Pension Scheme for European Officials (PSEO)
Reference date: 31 December 2012
REPORT
Luxembourg, 1 September 2013
TABLE OF CONTENTS
1.       Introduction. 2
2.       Contribution rate. 3
3.       Update of the assessment
of the actuarial balance. 3
4.       Analysis of the
contribution rate change. 3
4.1.        Real Discount Rate (RDR) 4
4.2.        General Salary Growth (GSG) 4
4.3.        Individual Salary Progression (ISP) 4
4.4.        Invalidity table. 4
4.5.        Life Table (healthy persons) 4
4.6.        Life table (invalid persons) 5
4.7.        Assumed retirement age. 5
4.8.        Average difference between men and women. 5
4.9.        Probability of being married for men and
women. 5
4.10.     Loading factor for orphan’s and divorced
spouse’s pension. 5
4.11.     Methodological changes. 6
4.12.     Population change effect 6
5.       Computation system.. 6
5.1.        Variables used in the assessment 6
5.2.        Demographic parameters. 6
5.3.        Economic parameters. 7
5.4.        Technical implementation of Annex XII to
the Staff Regulations. 7
5.5.        Independent examination. 7
APPENDIX
I - COMPUTATION.. 9
6.       Relevant figures for
calculating the contribution rate. 9
7.       Summary of main variables. 10
8.       Demographic parameters. 12
8.1.        Reference population. 12
8.2.        Assumed retirement age. 15
8.3.        Invalidity Table. 16
8.4.        Life table of healthy persons. 17
8.5.        Life table of invalids. 17
8.6.        Average age difference between men and
women. 18
8.7.        Probability of being married for men and
women. 18
8.8.        Turnover 18
9.       Economic parameters. 18
9.1.        Real Discount Rate (RDR) 18
9.2.        General Salary Growth (GSG) 20
9.3.        Individual Salary Progression (ISP) 21
9.3.1        Population groups. 21
9.3.2        ISP rates. 21
9.4.        Turnover 21
9.4.1        Turnover definition. 21
9.4.2        T1. Turnover due to
contract validity expiration. 22
9.4.3        T2. Turnover due to
voluntary and unexpected losses. 23
9.5.        Loading factor for orphan’s and divorced
spouse’s pension. 23
10.    Impact of changes in
demographic and economic parameters in the calculation of the pension
contribution rate  24
APPENDIX
II – INDEPENDENT EXAMINATION.. 25

1.      
Introduction

Article 83a and Annex XII of the Staff
Regulations set out rules to guarantee the equilibrium of the PSEO (Pension
Scheme of European Officials). 
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 the 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 questions of methodology raised by the
implementation of the 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)). 
Certain articles of
Annex XII expired on 30 June 2013. Eurostat has drawn up the present report in
accordance with the above legal requirements. 
The first and the
second five-yearly actuarial assessments of the pension scheme of the European
civil service were carried out in 2004 and 2008 respectively. 
This report sets
out the results of the 2013 five-yearly actuarial assessment, based on the
population of European officials as at 31 December 2012. 
The report provides
the information needed by the Commission to propose, if necessary, changes to
the staff contribution rate in order to ensure the balance of the scheme. 
For any further
information concerning this report, please contact Eurostat in Luxembourg: 
Eurostat, Unit C-3 Secretariat
BECH – A2/003
L-2920 Luxembourg
Tel.: (352) 4301-34821

2.       Contribution rate

The 2013 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 10.3% of
the basic salary (or invalidity or termination of service allowance). This
actuarial assessment has been made in accordance with the agreed methodology. 
The 10.3% calculated
contribution rate is one third of the ratio between the service cost (1 166
million Euros) and the annual basic salaries (3 755 million Euros) (see
Appendix I, Tables I and II). This rate is 0.4% higher than the one calculated
in 2012 (9.9%) but not implemented: the change is analysed in point 4. 
Moreover the new
RDR and GSG update and pension assessment,  have been reviewed and approved by
independent actuarial consultants. 

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[1]. 
The following
elements have been considered in the 2013 assessment: 
–     
the population of contributing members at 31.12.2012,
–     
the update of the Real Discount Rate (RDR),
–     
the update of the General Salary Growth Rate
(GSG),
–     
the update of the Individual Salary Progression
rates (ISP),
–     
the update of the Life Table,
–     
the update of the Invalidity Table.
More details about
these updates are given in Appendix I. 

4.       Analysis of the contribution rate change

Changes to the
pension contribution rate result from the combined effect of changes in the
population structure and in actuarial assumptions. The separate impact of these
changes in the officials' contribution rate change is not easy to determine due
to their interdependency, although analysis of the actuarial assumptions allows
a better understanding of the changes in contribution rate and its sensitivity
to the various actuarial assumptions. 
As indicated in
point 2, the official’s pension contribution rate calculated this year (10.3%)
is higher than the one calculated in 2012 (9.9%). This 0.4% increase is
mainly explained by the combined effect of the population evolution and actuarial
assumptions update, the most important of which being the RDR increase (2.6% in
2012 to 2.7% in 2013) and the Life Table update. 
Changes in
actuarial assumptions and their impact on the contribution rate were presented
in detail at the 28 June 2013 meeting of the Article 83 Working Group (see
document 20120628 Art83_05). Further details are given in Appendix I.

4.1.       Real Discount Rate (RDR)

The RDR (2.7%) used
in 2013 calculation is higher than the one used in 2012 assessment (2.6%). The
observed effect was a -0.3% decrease of the calculated pension contribution
rate. 

4.2.       General Salary Growth (GSG)

The GSG (-0.2%)
used in 2013 calculation is the same than the one used for the 2012 assessment.
Consequently no impact was observed on the calculated pension contribution
rate. 

4.3.       Individual Salary Progression (ISP)

ISP rates have been
updated to take account of the observed promotion rates from 2005 to 2012 in
accordance with methodology agreed at the June 2006 Art83 WG meeting. This
update is further explained in Appendix I.
The ISP update had
no material impact on the pension contribution rate.

4.4.       Invalidity table

The invalidity table
was updated with the most recently observed invalidity rates (2012). The new
invalidity table (2013 EU Invalidity table) is thus an average of 5 years
invalidity rates (2008–2012). The use of this updated table made the pension
contribution rate decrease by 0.2% (see further explanation in appendix I,
point 8.3). 

4.5.       Life Table (healthy persons)

According to the
Staff Regulations the life table can only be updated on the occasion of the
five-yearly actuarial assessment[2]. Despite the fact that the related article of the Staff Regulations
is no longer in force since 1 July 2013, it was considered appropriate to move
from the 2008 ICSLT (International Civil Servants Life Table) to the ICSLT2013
Provisional Life Table which is a dynamic table better reflecting the new trend
of life expectancies. 
The life table update
led to a 0.6% increase of the calculated contribution rate. 

4.6.       Life table (invalid persons)

It is normal
actuarial practice to consider life expectancy of invalids as slightly shorter
than that of healthy persons (e.g. EuroControl applies the mortality rate
corresponding to a healthy person 3 years older than an invalid’s age).
Eurostat has applied this actuarial practice since the 2008 pension assessment.

The observed impact
on the calculated pension contribution rate due to a change in the table is
included in the 0.6% increase described in the preceding paragraph. 

4.7.       Assumed retirement age

Assumed retirement
ages by staff category groups were first estimated for the 2004 pension
assessment, and presented at the June 2004 meeting of the Article 83 Working
Group. As provided for in paragraph 3 of Article 83(a) of the Staff Regulations
these assumed retirement ages were checked in 2008, on the occasion of the
second five-yearly actuarial assessment, and no change was proposed for the
following five-year period. 
The assumed
retirement ages are identical to those used since 2004 and will be updated
following an eventual amendment of the related legal provisions; no impact on
the calculated contribution rate due to a change in assumed retirement age was
observed. 

4.8.       Average difference between men and women

The average age
difference between married men and women has been updated (2 years compared to
3 years applied since 2004) to reflect observations made. The test showed that
on average married men are 1.9 years older than their partners and married
women 2.6 years younger than their partners. 
The update of the average
difference in age had no material impact on the calculated pension contribution
rate. 

4.9.      
Probability of being married for men and women

The probabilities
of being married at retirement for officials and ex-officials aged more than 59,
have been reassessed in 2013 and updated probabilities were presented at the
June 2013 meeting of the Article 83 Working Group. The changes proposed involve
passing from 84% to 81% for males, and from 38% to 49% for females. 
The update of the probability
of being married had no material impact on the calculated pension contribution
rate. 

4.10.   Loading factor for orphan’s and divorced spouse’s pension

Current actuarial
practice is to add 10% to a payable reversion pension to allow for the pension
payable to orphans after the death of the surviving spouse (or of the official
if there is no surviving spouse) and any pension payable to divorced spouses.
Eurostat estimates that the impact of this factor on the contribution rate is
minor and does not consider an update to this assumption necessary at the
present time. 
Since the loading
factor for pensions payable to orphans and divorced spouses is unchanged, no
impact on the calculated pension contribution rate due to a change in the
loading factor was observed. 

4.11.  
Methodological changes

No methodological
changes have been implemented in the occasion of the 2013 pension assessment,
thus no impact on the pension contribution rate was observed.

4.12.   Population change effect

The yearly
population change had a material impact (+0.3%) on the pension contribution
rate calculated this year. 

5.       Computation system
5.1.       Variables used in the assessment

In 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 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 01.05.2004 and 2% for those recruited before this date).
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 table,
the probability of being married at the retirement date, the loading factor for
orphans and divorced spouses. The values of these actuarial assumptions are
estimated in accordance with general actuarial practices. They were discussed
with national experts from the Member States at the annual meetings of the
Article 83 Working Group, and reviewed by independent actuarial consultants. 
A summary of the
main variables used (parameters and actuarial assumptions) is given in Appendix
I, Tables III and IV. 

5.2.       Demographic parameters

The reference
population is made up of contributing members of the PSEO including: 
§ 
active officials, 
§ 
members whose pension contribution is optional
(e.g. officials who have taken leave on personal grounds or parental leave), 
§ 
invalids who receive an invalidity allowance
under Article 78 of the Staff Regulations, 
§ 
Beneficiaries of an allowance for termination of
service. 
57 024 contributing members were recorded at 31.12.2012, which represents
a net increase of 785 participants compared to the previous year (56 239 contributing
members recorded at 31.12.2011). 
The contributing
members increase is the net effect of the increase due to the new contributing
members (+3 268) and the decrease linked to members who have left the scheme or
became pensioners (-2 483). 
A breakdown of the
reference population by Institution or Agency is included in Appendix I, Table
VII and a pyramid of ages in Figure I. 

5.3.       Economic parameters

Due to the expiry
of articles 10 and 11 of Annex XII to the Staff Regulations on 30 June 2013,
the Real Discount Rate (RDR) and the General Salary Growth (GSG) have been
calculated in compliance with best actuarial practices. A moving average of the
corresponding rates for the 16 preceding years has been used to make those two
assumptions more stable and in line with the proposal on the Staff Regulations
reform[3]. Considered their strong impact on the pension contribution rate,
this latest will also be less variable (more details are provided in Appendix I,
points 9.1 and 9.2 and Tables XII and XIII). 

5.4.       Technical implementation of Annex XII to the Staff Regulations

Technical questions
raised by the implementation of Annex XII were 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. 
Eurostat also
exchanges relevant information on actuarial issues with international
organisations such as the ISRP (International Service for Remunerations and
Pensions of the Coordinated Organisations), EPO (European Patent Office) and
EuroControl. 

5.5.       Independent examination

In accordance with
Annex XII, Article 13, of the Staff Regulations, Eurostat was assisted by a
qualified independent expert with regard to the methodological implementation
and the definition and calculation of the corresponding actuarial assumptions. 
The independent
expert 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 aspects not
described explicitly in Annex XII, the independent expert checked their
compliance with generally accepted actuarial practices. Concerning actuarial
assumptions, the independent expert carried out investigations to ensure that
the underlying data provided by Eurostat were used correctly. 
A summary of the
assessment by the independent expert is included in Appendix II to this report.

APPENDIX I -
COMPUTATION

6.       Relevant figures for calculating the contribution rate

Table I.           Breakdown
of the contribution rate
 
Table II.          Service cost and total
amount of annual basic salaries
 


7.      
Summary of main variables

The following
tables show the values of the main parameters (see Table III) and actuarial
assumptions (see Table IV). Please note that the tables only present an
overview of the main variables and are not exhaustive. Please refer to the
Staff Regulations and their annexes for precise and complete information.
 
Table III.        Parameters used in the
actuarial assessment 
Table IV.         Actuarial assumptions
Some of the
assumptions have changed compared to the 2012 actuarial assessment. The
following table summarises these changes: 
Table V.         Changes in actuarial assumptions
 

8.       Demographic parameters
8.1.       Reference population

Annex XII, Article
1 of the Staff Regulations stipulates that the actuarial assessment shall be
carried out in each year n, on the basis of the population of active
members of the PSEO at 31 December of the previous year (n-1). Moreover,
Article 9 of Annex XII provides that the population of participants in the
scheme is to be collected annually by the Commission using information received
from the different institutions and agencies whose staff are members of the
scheme. 
In accordance with
these rules, the reference population is taken to be the staff at 31 December
2012 of the 51 institutions and agencies (same number recorded at 31 December
2011) whose officials are members of the PSEO. 
Table VI.        Institutions and Agencies in the PSEO 
As approved by the
Article 83 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[4],
from Sysper2[5]
and directly from institutions and agencies, and imported into the Eurostat
database. The data were checked to ensure a high level of quality. The
actuarial assessment is based on the output from the Eurostat database at the reference
date. 
Table VII.       Reference population by
institution or agency 
Figure I.          Reference population by
age 

8.2.       Assumed retirement age

As 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 according to the group of staff. 
Table VIII.      Assumed retirement age and
  Barcelona incentive by age group of officials
Please note that
pension incentives (called Barcelona incentive since 2004) are based on
acquired pension rights in groups 1 and 2 above (Old Staff Regulations), while
they are based on the last basic salary for groups 3 to 5 (New Staff
Regulations).
The assumed retirement ages detailed in the two
right columns in the table VIII were estimated on the occasion of the 2004
pension assessment and were presented at the June 2004 meeting of the Article
83 Working Group. These assumed retirement ages have been used in pension
assessments since 2004.
As no changes were made to this assumption, no
impact could be observed to the pension contribution rate.

8.3.      
Invalidity Table 

A first invalidity table (2004-EU Invalidity
table) was used in the 2004 assessment. According to decision taken at the
Art83 Working Group at its 26th June 2007 meeting, this table must
be updated each year to take account of the evolution of beneficiaries of an invalidity
allowance (category of population created with the new Staff Regulation in force
from the 1st May 2004). 
A moving average of 5 years of invalidity
observation is used: the number of invalids recorded in 2007 (88) has been
replaced by the number recorded in 2012 (116) in the 5 years moving average of
invalidity observations. Thus the total of invalids in this 5-year period increased
from 471 to 499 invalids.
The following table
shows the number of invalids from 2008 to 2012. 
Table IX. Invalids by year
The 2008 to 2012
invalidity observations have been used to update the invalidity table by sex
(EU-2013 Invalidity Table). The table below is an extract from the unisex
version of the table for presentation purposes only, whereas the complete table
by sex was used in computations. 
Table X. EU-2013 Invalidity Table (Extract) 
The use of
the EU-2013 Invalidity Table made the pension contribution rate decrease by 0.1%,
maintained unchanged the other assumptions.

8.4.       Life table of healthy persons

The life table used
for the calculation was updated in 2013 (ICSLT2013 Provisional Life Table) on
occasion of the five-yearly assessment of the actuarial balance of the pension
scheme, last five-yearly update having been done in 2008. 
The methodology
used to set up this life table was presented to the Article 83 Working Group at
the 28 June 2013 meeting (document 20130628 Art83_05, available from
Eurostat). 
This new Life Table
has replaced the 2008 ICSLT Life Table which had been used in 2008 to 2012
pension assessments 2008 to 2012. 
A future life
expectancy trend has been introduced thus moving from a periodic (static) to a
prospective (dynamic) Life Table.
The following table
is an extract from this table.
Table XI.         ICSLT2013 Provisional
The use of the ICSLT2013Prov made the pension
contribution rate increase by 0.6%, maintained unchanged the other assumptions.
The 0.6% variation is explained by the increase in life expectancies and the
inclusion of a future life expectancy trend.

8.5.       Life table of invalids

It is normal
actuarial practice to consider life expectancy of invalids as slightly shorter
than that of healthy persons (e.g. EuroControl applies the mortality rate
corresponding to a healthy person 3 years older than an invalid’s age). Eurostat
has applied this actuarial practice since the 2008 pension assessment. 

8.6.       Average age difference between men and women 

A difference of age
at retirement between married men and women of 2 years, has been applied in the
present actuarial calculations.
The 2 years figure
has replaced the 3 years which had been be used in past assessments, as a result
of observations made: the test showed that married men are 1.9 years on average
older than their partners and married women 2.6 years younger than their
partners. 
This change had no significant impact on the
pension contribution rate.

8.7.       Probability of being married for men and women

Eurostat has analysed
the recent population of officials and ex-officials older than 59 years and
calculated their probability of being married: results were 81% probability for
men and 38% for women.
These updated
probabilities have been used in the present pension assessment, however their
impact on the pension contribution rate, was not material.

8.8.      
Turnover

Active members of the PSEO will definitely stop
activity one day and eventually leave the pension scheme.
Turnover has been divided in two types:
§  
Turnover due to end of contract validity (T1),
§  
Turnover due to voluntary and unexpected
losses (T2).
Turnover ratios have
been updated for the present pension assessment leading to a -0.1% decrease of
the pension contribution rate.

9.       Economic parameters
9.1.       Real Discount Rate (RDR)

Article 10 in Annex
XII of the Staff Regulations has expired on 30 June 2013.
In the absence of a
compelling legal basis, Eurostat made reference to the best actuarial practices
and opted for a 16 years moving average for the computation of the RDR: the
rationale for this choice was to make the RDR more stable which would also
grant less variability of the pension contribution rate which is strongly
affected by this parameter.
Furthermore the
choice of a 16 years moving average, keeps into account recent developments as
regards the relevant articles in the new text of the Staff Regulations which
will represent the compelling legal basis since 1 January 2014[6].
Consequently, real
discount rates (RDR) from 1997 until 2012 have to be used in the 2013
assessment of the PSEO. 
Nominal discount
rate (NDR): 5.0%. This is the average of 1997
to 2012 nominal rates of euro area zero-coupon (government bonds) yield with a
maturity of 21 years, 21 years being the duration of the scheme. 
Inflation rate
(IR): 2.2%. This is the average of 1997 to
2012 of an appropriate consumer price index
Real discount
rate (RDR): 2.7% (2.6% in the assessment at
31.12.2011). It is the average of 1992 to 2012 real discount rates, the
latest being calculated as "100*(100+NDR)/(100+IR)-100)".
Table XII. Real Discount Rate (RDR) 
The 0.1% increase of the RDR (2.7% used in this
assessment instead of 2.6% used in the assessment at 31.12.2011) made the
contribution rate decrease by 0.3%, assumed stable the other assumptions.

9.2.       General Salary Growth (GSG)

Article 11 in Annex
XII of the Staff Regulations has expired on 30 June 2013.
Article 11 of the Annex
XII contained specific rules for calculating General Salary Growth, in
particular stipulating that the annual change in salary scales to be used for
the actuarial calculations must be based on the specific indicator (SI) and on
the other hand that the effective annual rate is the average of the net SIs for
the 12 years preceding the current year. 
In the absence of a
compelling legal basis, Eurostat made reference to the best actuarial practices
and opted for a 16 years moving average for the computation of the GSG: this
choice was made in an attempt to render the GSG more stable and so the pension
contribution rate which is highly dependent on this parameter.
Furthermore the
choice of a 16 years moving average, keeps into account recent developments as
regards the relevant articles in the new text of the Staff Regulations which
will represent the compelling legal basis since 1 January 2014[7].
The 16-year moving
geometric average from 1997 to 2012 (GSG) is -0.2% (the same value was
used in the 2012 assessment). 
Table XIII.     General Salary Growth 
As the GSG did
not change compared to the PSEO assessment at 31.12.2011, no impact on the contribution
rate occurred.

9.3.       Individual Salary Progression (ISP)
9.3.1            
Population groups

The Individual
Salary Progression (ISP) refers to the salary increase due to the career
advancement of EU officials, i.e. promotions and seniority steps. 
The ISP may have a
significant impact on the contribution rate, though lower than that of the RDR
and GSG. 
With the
introduction of the new Staff Regulations on 1.5.2004, the career progression
of EU officials has been completely reviewed. Annex XIII of these Staff
Regulations includes transitional measures which made the determination of this
assumption quite complicated. 
The active population is divided into five homogeneous
groups according to their status.

9.3.2            
ISP rates

The following table shows ISP rates used in the
2011 and 2012 assessments: 
Table XIV.
Average ISP rates by group of population 
ISP rates in the
table above are the average of ISP rates weighted by the population in each
group. These average rates are calculated for publication purposes only, the
detailed rates by grade and years to retire being used in computation at
individual level. 
ISP of officials changed slightly in comparison
with these used in the assessment at 31.12.2012. 
This change had no material impact on the
pension contribution rate.

9.4.       Turnover
9.4.1            
Turnover definition

Active members of the PSEO (officials, temporary
staff, contract staff and parliamentary assistants) will definitely stop
activity one day for several reasons and eventually leave the pension scheme.
To facilitate computation, turnover has been
divided in two types:
§  
Turnover due to end of contract validity (T1),
§  
Turnover due to voluntary and unexpected
losses (T2). This mainly concerns resignation before the end of a
contract, dismissal for incompetence and disappearance.
Losses due to other unexpected reasons
(invalidity and death) and voluntary decisions (mainly secondment, retirement, inactive
status according to Article 41 of SR, leave on personal grounds, leave for
military service, parental or family leave) are excluded from the definition of
turnover (these causes of leaving are already computed in another way).

9.4.2            
T1. Turnover due to contract validity expiration 

Two assumptions have been used:
§  
The ratio of indefinite contracts to
fixed-length contracts. 
§  
Average duration of contracts in years. 
The following table shows the rates of both
assumptions above by contract type, these rates being based on observations: 
Table XV. T1
rates by contract types 
 

9.4.3            
T2. Turnover due to voluntary and unexpected
losses 

The number of active staff who left
institutions due to resignation, dismissal for incompetence and disappearance
in the year N has been compared to the active population in the year N-1 to
obtain the yearly T2 by contract type. The rate to be used in the actuarial
calculation has been computed as the average of the losses in the last seven
years (2006 to 2012) compared to active staff in 2005 to 2011.
Table XVI. T2
rates by contract types 
 
The change of T1 and T2 turnover rates had a
low impact (-0.1%) on the pension contribution rate.

9.5.      
Loading factor for orphan’s and divorced
spouse’s pension 

Current actuarial
practice is to add 10% to a payable reversion pension to allow for the pension
payable to orphans after the death of the surviving spouse (or of the official
if there is no surviving spouse) and any pension payable to divorced spouses.
Eurostat estimates that the impact of this factor on the contribution rate is
minor and the same assumption has been used in the 2013 actuarial assessment. 

10. 
Impact of changes in demographic and economic
parameters in the calculation of the pension contribution rate

The yearly change in the calculated
contribution rate is explained by the combined effect of changes in population,
methodology, assumptions and other variables used. The calculated change +0.3% (10.3%
obtained in the present assessment against 9.9% in the assessment at 31.12.2011)
is mainly explained by the RDR increase, and Life Table update. 
The following table summarises the impact of
these changes.
Table XVIII. Explanation of the change in calculated
pension contribution rates
at 31.12.2012 and 31.12.2013 
APPENDIX
II – INDEPENDENT EXAMINATION 
An independent
expert conducted an actuarial examination of the contribution rate calculated
by Eurostat. This examination confirmed 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, the independent expert checked their compliance with
generally accepted actuarial practices. Regarding the actuarial assumptions,
the independent expert carried out tests to ensure that the underlying data
provided by Eurostat were used correctly. 
The independent
expert report concluded that: 
"… as an
independent expert, has conducted an actuarial examination of the 2013 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. 
… has no reason
to doubt that the official’s contribution rate (10.3%) calculated by Eurostat
is a sufficiently accurate estimate of the reality of the Pension Scheme of the
European Officials (PSEO)".
The complete
independent expert report on the actuarial examination of the contribution rate
is available from Eurostat. 
[1]  The methodology is further explained in a separate document
available at Eurostat
[2]               Article 9(2) of Annex XII to
the Staff Regulations.
[3] It is proposed setting to 30 the number of
years mentioned in Article 4(6), 10(2) and 11(2) of the Annex XII of the SR,
This change being implemented in a transitional period starting by 16 years in
2014 in accordance with Article 11a of the Annex XIII. 
[4]     The NAP (New Application for Pay) 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.
[5]     Sysper2 is the IT system to manage personal data of the
Commission staff. It is also used by PMO (Pay Master Office) to manage pensions
and transfers of pension rights of the staff of EU institutions and agencies
[6] It is proposed to set to 30 the number of
years mentioned in Article 4(6), 10(2) and 11(2) of the Annex XII of the SR, In
accordance with Article 11a of the Annex XIII, this change will be implemented
with a transitional period starting with 16 years in 2014
[7] It is proposed to set to 30 the number of
years mentioned in Article 4(6), 10(2) and 11(2) of the Annex XII of the SR, In
accordance with Article 11a of the Annex XIII, this change will be implemented
with a transitional period starting with 16 years in 2014.