REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the application of Annex XII to the Staff Regulations
Date: 2018-12-14
Institutions: Directorate-General for Human Resources and Security, European Commission
Subjects: European official, pension scheme, social-security contribution, staff regulations (EU)

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 14.12.2018  COM(2018) 829 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the application of Annex XII to the Staff Regulations  
 
 
INTERIM REPORT FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT AND THE COUNCIL 

on the application of Annex XII to the Staff Regulations 

1. 

LEGAL BASIS 

Pursuant to Article 14(2) of Annex XII to the Staff Regulations (SR), in 2018 the Commission 
shall submit an interim report to the European Parliament and the Council on the application 
of Annex XII to the Staff Regulations. 

The aim of this interim report is to present an overview of the implementation of the rules for 
keeping  in  balance  the  Pension  Scheme  for  EU  Officials  (PSEO)  in  the  period  2014-2018. 
Those rules are laid down in Article 83a of the SR and Annex XII thereto1. 

2. 

2.1. 

BASIC FEATURES OF PSEO 

Legal basis of PSEO 

Pursuant to Article 83 of the Staff Regulations: 

  The benefits paid under the pension scheme2 are to be charged to the Union budget; 

  Member States are to jointly guarantee the payment of the benefits; and 

  Officials are to contribute one third of the cost of financing the scheme. 

Article  83a  provides  that  the  balance  of  the  pension  scheme  shall  be  ensured  by  the 
pensionable age and the rate of contribution to the scheme. It also lays down procedures for 
annual and five-yearly updates of the rate of contribution to the pension scheme. 

Annex XII to the SR sets out the actuarial rules for computing the contribution rate in order to 
ensure that the scheme is in balance.  

2.2. 

Notional (virtual) fund principle 

The  PSEO  is  a  notional  (virtual)  fund  with  defined  benefits,  in  which  staff’s  contributions 
serve  to  finance  their  future  pensions.  Although  there  is  no  actual  investment  fund,  the 
amount that would have been collected by such a fund is considered to have been invested in 
the Member States’ long-term bonds and is reflected in the pension liability that is registered 
in the annual accounts of the European Union. Member States jointly guarantee the payment 
of the benefits pursuant to Article 83 of the Staff Regulations and Article 4(3) of the Treaty on 
European Union. 

As  the  PSEO  is  designed  as  a  notional  fund,  staff  contributions  serve  to  finance  the  future 
pensions of those contributing. The contributions actually cover the cost of the pension rights 
acquired in a given year and are in no way linked to that year’s pension expenditure. EU case-

1  

2  

Pursuant to Article 83a of the SR, Annex XII thereto sets out detailed rules for keeping in balance the 
Pension Scheme of the European Officials (PSEO). 
The benefits to be paid under PSEO are laid down in Chapter 3 of Title V and Annex VIII SR. Benefits 
under  the  PSEO  include  retirement  pensions,  transfers  of  pension  rights,  severance  grants,  survivor's 
pensions and invalidity allowances. 

1 

 
 
 
 
                                                           
law has confirmed that the PSEO is a notional fund, despite finding that it also displays some 
features of a solidarity scheme3.  

The PSEO is different from most Member State pension schemes for public officials, in which 
the  contribution  rate  or  benefits  are  adjusted  so  as  to  ensure  a  balance  each  year  between 
contributions collected and pension expenditure. In this type of schemes, if it is not possible to 
achieve a balance, the difference is covered from the budget (taxes).  

The  notional  PSEO  fund  is  assessed  both  annually  and  every  five  years  as  if  a  real  fund 
existed; thus further guaranteeing its long-term sustainability. 

2.3. 

Actuarial balance principle 

The balance of the PSEO is ensured regularly through updates  of the contribution rates and, 
where relevant, pensionable age. 

The PSEO follows an actuarial balance principle whereby annual staff contributions have to 
cover one third of the rights acquired in the year in question4, which correspond to the future 
pensions  that  the  same  staff  will  receive  after  retirement,  plus  (under  certain  conditions) 
invalidity  allowances  and  survivor’s  and  orphans’  pensions.  In  order  to  make  this 
computation5  possible,  the  contributions  are  evaluated  at  present  value  using  an  interest 
(discount) rate. The computation is thus an actuarial valuation.  

The pension contribution rate is the mechanism that keeps the scheme in balance from year to 
year.  It  is  automatically  updated  if  the  actuarial  assessment  foreseen  by  Article  83a  of  the 
Staff  Regulations  shows  that  this  is  necessary  in  order  to  fully  cover  the  pension  rights 
acquired  in  a  given  year.  Consequently,  when  staff  members  pay  the  updated  contribution 
rate, they acquire pension rights for a given year protected by the principle of acquired rights. 

3. 

2013 REFORM OF THE SR 

In  recent  years,  the  European  public  administration  has  undergone  two  successive  far-
reaching reforms. The 2013 reform of the Staff Regulations included a number of measures 
which impacted the functioning of PSEO and resulted in significant savings: 

 

Increased retirement age (up to 66 years),  

  Reduction of the pension accrual rate (from 1.9% to 1.8%),  

  Two-year  freeze  of  all  salaries,  pensions  and  allowances  in  2013  and  2014  and 
retroactive decision to reduce salary adjustments to a minimum in 2011 and 20126. As 

3  

4  

5  

6  

See, for example, Case F-105/05 Wils v Parliament, point 85 and Case T-439/09 Purvis v Parliament, 
point 45. 
Article 83(2) SR. 

The pension contribution rate is computed according to the ‘projected unit credit’ method, as prescribed 
by international accounting standard IPSAS 25 (replaced by IPSAS 39 with effect on 1 Jan 2018). The 
sum  of  the  actuarial  values  of  rights  acquired  by  active  members  of  staff  (referred  to  in  actuarial 
practice as ‘service cost’) is compared with the annual total of their basic salaries in order to calculate 
the contribution rate. 
Salary  adjustments  were  reduced  to  respectively  0%  and  0.8%  in  2011  and  2012  pursuant  to 
Regulations (EU) No 422/2014 and No 423/2014 of the European Parliament and of the Council of 16 
April 2014. 

2 

 
 
 
 
 
                                                           
 
a  result  of  the  non-application  of  the  salary  update  method,  the  parallel  evolution  of 
purchasing power with national civil servants was not maintained during these years,  

  Reduced  career  progression  for  AD  and  AST  staff,  with  limited  access  to  highest 

grades, 

  Creation of a lower salary scale for secretarial and clerical jobs, effectively reducing 

their remuneration by 13 to 40%,  

 

Increase  of  working  time  for  all  staff  by  2.5  hours  a  week  to  40  hours,  without  any 
financial compensation. 

In  addition,  the  2013  reform  of  the  Staff  Regulations  introduced  a  number  of  measures 
designed to improve the functioning of the system: 

 

 

In  line  with  the  relevant  accounting  standards7  and  best  actuarial  practices  which 
require  a  period  of  past  observations  in  line  with  the  estimated  term  of  post-
employment benefit obligations to be used for interest rates and salary growth with a 
view to ensuring the balance of pension schemes, the moving averages for observing 
PSEO  interest  rates  and  salary  growth  were  extended  to  30  years  with  a  transitional 
period of seven years, 

In order to remedy the difficulties with the application of the adjustment method in the 
past, provisions were made for a method allowing for an automatic annual update of 
the  pension  contribution  rate.  To  this  end,  the  pension  contribution  rate  is  updated 
regularly without the intervention of a legal act.  The Commission then publishes the 
updated rate within 2 weeks after the update in the C series of the Official Journal of 
the European Union for information purposes, 

  The  2013  reform  of  the  Staff  Regulations  established  pensionable  age  as  the  second 
variable for balancing the system, in order to take due account of future demographic 
changes.  In  particular,  the  Commission  was  mandated  to  carry  out  a  five-yearly 
assessment  of  pensionable  age,  taking  into  account  developments  affecting  Member 
States’  civil  servants  and  EU  staff’s  life  expectancy8.  The  Commission  is  due  to 
deliver its first report to the European Parliament and the Council in 2019. 

4. 

TECHNICAL  IMPLEMENTATION  OF  THE  RULES  FOR  KEEPING  PSEO  IN  BALANCE 
(2014-2018) 

Eurostat  is  the  authority  responsible  for  the  technical  implementation  of  Annex  XII  to  the 
Staff Regulations. It is assisted by one or more qualified independent experts in carrying out 
the actuarial  assessments of PSEO. Methodology questions raised by the  implementation  of 
the Annex are dealt with by Eurostat in cooperation with national experts from the Member 
States, which convene in a group (the Article 83 Working Group) at least once each year.  

7  
8  

IPSAS 25, Articles 91 and 96. 
Article 77(6) and 77(7) of the Staff Regulations. 

3 

 
 
 
 
 
 
                                                           
 
4.1. 

Activity of the Article 83 Working Group in the period 2014-18 

In the 2014-2018 period, the Article 83 Working Group met each year as required by the Staff 
Regulations. The group discussed and validated the methodological documents drawn up by 
Eurostat. 

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,  including  the  OECD,  NATO,  ESA,  the  Council  of  Europe,  and 
others), the European Central Bank, the European Investment Bank, the European Investment 
Fund, the European Patent Office and Eurocontrol. 

4.2. 

Assessments by the qualified independent expert 

In accordance with Article 13(2) of Annex XII to the Staff Regulations, Eurostat is assisted by 
a qualified independent  expert with  regard to  the methodological  implementation  and to  the 
definition and calculation of the corresponding actuarial assumptions. 

Following the outcomes of open call for tenders, Eurostat was assisted by: 

  EY Actuaires Conseils for the PSEO assessments 2014 to 2016; 

 

the Consortium of Agilis S.A. and Prudential Ltd. for the PSEO assessments 2017 and 
2018. 

Both actuaries reviewed and validated the methodology, calculations and reports related to the 
PSEO assessment. In particular, the input for calculations, such as the PSEO population and 
actuarial assumptions, were agreed with those external experts. 

The final assessment reports delivered by Eurostat incorporate the recommendation of those 
actuaries.  

The actuaries perform independent parallel calculations of the PSEO pension contribution rate 
and  deliver  an  actuarial  opinion,  which  can  be  either  "unqualified”  or  "qualified"  (the  latter 
happens when the actuaries’ results differ from Eurostat's results by more than the tolerated 
materiality threshold of 3%). 

In the case of all the PSEO assessment reports issued between 2014 and 2018, the actuaries 
released an "unqualified" opinion.  

5. 

PARAMETERS AND ACTUARIAL ASSUMPTIONS 

5.1. 

Statutory parameters 

These are values mainly linked to the application of the Staff Regulations, including the rules 
on calculating pension benefits.  

Some  of  these  parameters  change  according  to  certain  conditions  related  to  the  individual 
situation of each official9, e.g.: 

  The annual accrual rate is 1.8% for staff recruited from 1 January 2014, 1.9% for staff 
recruited between 1 May 2004 and 31 December 2013 and 2% for those recruited till 
30 April 2004, 

  The  "normal"  pensionable  age  when  staff  may  retire  without  reduction  of  pension 

benefits varies from 60 to 66, 

9  

See Annex XIII to the Staff Regulations. 

4 

 
 
 
 
 
                                                           
  Compensations  are  foreseen  for  staff  members  who  remain  in  service  after  reaching 
their  pensionable  age  (Barcelona  incentive),  whereas  penalties  apply  in  the  case  of 
early retirement before reaching pensionable age. 

Table 1 provides the list of the main statutory parameters used for the last pension assessment 
in 2018. 

Table 1 - Main statutory parameters used in the actuarial assessment in 2018 

Parameter 

Value 

Legal source 

Staff Regulations in force from 01.01.2014 

Reference date for the 

population (Annex XII Article 
1) 

Maximum official 

retirement age (Staff 
Regulations Article 52) 

Normal retirement age 
(Staff Regulations 
Article 52 and Annex XIII 
Article 22) 

Minimum retirement age 

(Staff Regulations 
Article 52(b), Annex VIII 
Article 9 and Annex XIII 
Article 23) 

Category and grade for the 
minimum subsistence figure 
(Annex VIII Article 6) 
Maximum retirement 
pension (Staff Regulations 
Article 77) 

31.12.2017 

65 (automatically - officials in service before 
01.01.2014), 66 (automatically new officials) or 
67 (at the staff' request) or until 70 
(exceptionally) 

60 to 66 depending on years' service, age and 
entry date in service 

58 

first step of grade 1 

70% of the basic salary at the retirement date 

Annual accrual rate (Article 
77 of the Staff Regulations 
and Article 21 of Annex XIII) 

1.8% (officials in service from 01.01.2014), 1.9% 
(officials in service from 1.05.2004), or 2% 
(officials in service before 01.05.2004), of BS 

Bonus for officials in 
service after the normal 
retirement age (Annex VIII 
Article 5 and Annex XIII 
Article 22) 

1.5% (new officials) or 2.5% of the BS, or 5% of 
the amount of the pension rights acquired at 60, 
depending on the entry date in service, the years 
of service at 01.05.2004 and the age on 
01.05.2004 of the official 

Minimum retirement 
pension (Staff Regulations 
Article 77) 

Invalidity allowance (Staff 

4% of the minimum subsistence figure per year 
of service 

70% of the basic salary 

5 

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

100% of the minimum subsistence figure 

60% of the retirement pension 

35% of the last basic salary 

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

35% of the last basic salary or minimum 
subsistence figure 

5.2. 

Actuarial assumptions 

These  are  values  that  must  be  forecasted  in  accordance  with  the  provisions  of  the  Staff 
Regulations and the best commonly accepted actuarial practices. 

The  values  of  these  actuarial  assumptions  were  estimated  according  to  general  actuarial 
practices and were agreed with national experts from the relevant departments of the Member 
States at the meetings of the Article 83 Working Group. 

In accordance with the provisions of Annex XII to the Staff Regulations and decisions taken 
by the Working Group, some of these assumptions (e.g. the mortality table) are only updated 
on the occasion  of the five-yearly  assessment of  the scheme while others are updated every 
year. The latest five-yearly assessment took place in 2018. 

5.3. 

Demographic assumptions 

The main demographic actuarial assumptions are as follows: 

  The  mortality  tables:  The  2018  EU  Life  Table  (EULT),  developed  by  Eurostat,  is  a 
prospective table which incorporates a trend of life expectancies over a 20 years' time 
horizon (same time length as the PSEO duration) based on the evolution of mortality 
of  the  PSEO  population.  The  2018  EULT  is  thus  a  life  table  built  on  a  population 
entirely relevant to PSEO. 

Table 2 is an extract from the EULT. 

6 

 
 
 
 
 
 
 
 
 
 
  The invalidity tables developed by Eurostat based on past observations, 

  The assumed retirement age; in accordance with Article 4(3) of Annex XII to the Staff 
Regulations, it is assumed that retirements will occur at a fixed average rate that varies 
based on the date of entry into service of each staff member, 

  The probability of being married at the retirement date,  

  The coefficients for orphans and divorced spouses, etc.  

Table 3 provides the list of demographic assumptions used for the last pension assessment in 
2018. 

Table 3 – Demographic assumptions used for the actuarial assessment in 2018 

Demographic assumptions 

31/12/2017 

Life Table (healthy members) 

2018 EULT 

Life Table (disabled members) 

2018 EULT+3y 

Invalidity Table 

2018 Invalidity Table 

Current Marital Status 

Current marital status 

Probability of being married at retirement age,  
for men 

Probability of being married at retirement age,  
for women 

Average age difference between an official 
and his/her partner 

82% 

52% 

1 year 

7 

Probability to die at age xLife expectancyProbability to die at age xLife expectancy400.00052220440.0004025147450.00089611390.0006912942500.00151059350.0011871637550.00254589300.0020383432600.00428923250.0034987427650.00691083210.0060023223700.01268196170.0092317319750.02321581130.0156191015800.04230976100.0297782411850.0764806170.056400008900.1332285150.107712405MenWomenAge 
 
 
 
 
 
 
 
 
Assumed Retirement Age 

63 to 66 

Turnover 

2018 Turnover 

5.4. 

Financial and economic assumptions 

Pursuant  to  Articles  10  and  11  of  Annex  XII  to  the  SR,  the  Real  Discount  Rate  (RDR  – 
interest  rates  of  long  term  public  debt  of  Member  States)  and  the  General  Salary  Growth 
(GSG – the rate of annual change in the salary scales) are calculated as the moving average of 
the corresponding rates for the 30 preceding years. However, until 2020, pursuant to Article 
11a of Annex XII the moving average shall be calculated on the basis of a specific time scale.  

In 2018, the RDR and the GSG were calculated as the average of the relevant rates for the 24 
previous years from 1994 to 2017: as a result in the 2018 update the values of the RDR and 
GSG were respectively 2.9% and - 0.1%. 

Another  important  economic  assumption  is  the  ISP  (individual  salary  progression)  table 
which  refers  to  the  salary  increase  reflecting  the  career  advancement  of  EU  officials  (i.e. 
promotions and seniority steps). With the entry into force of the new Staff Regulations on 1 
January 2014, the career progression of EU officials evolved and the link between grade and 
function was reinforced; access to the highest grades in function groups AD and AST is now 
limited under certain conditions. In addition, the AST/SC function group was introduced. 

Table  4  provides  the  list  of  economic  and  financial  assumptions  used  for  the  last  pension 
assessment in 2018. 

Table 4 – Economic and financial assumptions used for the actuarial assessment in 2018 

Financial Assumptions 

Salary Grid 

Duration 
Nominal Discount Rate (NDR) 
Inflation Rate (IR) 
Real Discount Rate (RDR) 
General Salary Growth (GSG) 

31/12/2017 
In force from 
01.07.2017 
20 years 
4.8% 
1.8% 
2.9% 
-0.1% 

General Pension Revaluation (GPR) (equal to GSG) 

-0.1% 

Individual Salary Progression (ISP) 

2018 ISP Table 

Coefficient for orphan's and divorced spouse's pension 

13% 

Correction coefficients  
(Art. 3(5) of Annex XI & art. 20 of Annex XIII) 

0.0% 

8 

 
 
 
 
 
 
 
 
 
6. 

6.1. 

RESULTS: EVOLUTION OF THE PENSION CONTRIBUTION RATE 

Pension assessments between 2014 and 2018 

During  the  period  2014-2018,  in  order  to  guarantee  balance  of  the  scheme,  the  pension 
contribution rate was calculated as one third of the ratio between the total service cost and the 
total annual basic salaries, in accordance with Article 83(2) of the Staff Regulations.  

Table 5 provides the results of every assessment since 2014. 

Table 5 – Pension contribution by year between 2014 and 2018 

Pension assessments 

2014 

2015 

2016 

2017 

2018 

Items 

Reference date 

Service cost for 

retirement 

Service cost for 

invalidity 

Service cost for 

death 

Ratio service 

cost / BS 
Officials' 

contribution rate 
(1/3 of total 
ratio) 
Applied officials' 
contribution rate 

31-12-
2013 

31-12-
2014 

31-12-
2015 

31-12-
2016 

31-12-
2017 

28,3% 

28,2% 

27,2% 

27,1% 

27,4% 

1,3% 

1,3% 

1,3% 

1,3% 

1,7% 

0,9% 

0,9% 

1,0% 

0,9% 

0,9% 

30,4% 

30,5% 

29,5% 

29,3% 

30,0% 

10,1% 

10,2% 

9,8% 

9,8% 

10,0% 

10,1% 

10,1% 

9,80% 

9,80% 

10,0% 

6.2. 

Results of the last pension assessment 

The 2018 actuarial assessment of the 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 is 10.0% of the basic salary (or of the invalidity allowance). 

The calculated contribution rate indicated above (10%) is one third of the ratio between the 
total of the service cost  (€ 1 424.8 million) and the total of annual basic salaries (€ 4 749.2 
million). This rate is higher (+0.2%) than the one calculated in 2017 (9.8%). 

In  accordance  with  Article  83a(3)  of  the  Staff  Regulations,  the  reference  figure  set  out  in 
Article  83(2)  shall  be  updated.  The  Commission  shall  publish  the  resulting  updated  rate  of 
contribution (10.0%) within two weeks after the update in the C series of the Official Journal 
of the European Union for information purposes.  

9 

 
 
 
 
 
 
  
  
  
 
 
The  update  shall  take  effect  at  the  same  time  as  the  annual  update  of  remuneration  under 
Article 65 of the Staff Regulations, i.e. it will take retroactive effect on 1 July 2018. 

7. 

BALANCE OF THE PENSION SCHEME 

As explained in part 2.3 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,  1.8%,  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,  based  on  the  Eurostat's  calculated  rate  of 
contribution, the pension contribution rate was updated after taking into account the specific 
provisions of the Staff Regulations: 

  Article  2(1)  of  Annex  XII  to  the  Staff  Regulations  (any  update  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 difference established between 
the  update  of  the  contribution  rate  which  would  have  resulted  from  the  actuarial 
calculation and the update resulting from the variation referred to in the last sentence 
of paragraph 1 shall not be recovered at any time, or, consequently, taken into account 
in subsequent actuarial calculations); 

  Article 83a(4) of the Staff Regulations (on the occasion  of the  yearly updates of the 
five-yearly actuarial assessment, the rate of contribution shall only be updated 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.  This  limit  does  not  apply  on  the 
occasion of a five-yearly assessment such as the 2018 assessment). 

Graph 1 summarises the calculated and applied contribution rates. 

Graph 1 – Summary of calculated and applied contribution rates for pension 

10 

 
 
 
 
 
 
10,30

10,20

10,10

10,00

9,90

9,80

9,70

9,60

Update at
01.07.2014

Calculation at
01.07.2015

Update at
01.07.2016

Calculation at
01.07.2017

Update at
01.07.2018

Calculated rate

Applied rate

The  chart  shows  that  the  applied  pension  contribution  rate  was  very  close  to  the  one 
calculated by Eurostat. It should be noted that small differences between the rates due to the 
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  PSEO  scheme  is  in 
actuarial balance. 

8. 

BUDGETARY IMPACT OF PSEO 

In the 1960s the Council decided that staff contributions would  not  be set aside in  an actual 
pension  fund,  but  would  instead  be  credited  to  the  EU  budget  at  the  time  when  they  are 
collected  and  spent  in  accordance  with  the  decisions  of  the  budgetary  authority,  i.e.  not 
assigned  to  any  particular  policy  field.  At  the  same  time,  the  Council  decided  that  the 
employer’s  share  of  the  contribution  would  not  be  collected.  Instead,  the  EU  institutions 
undertook to pay future pension benefits (to be charged to the Union budget) when staff retire.  

In budgetary terms the EU pension scheme has thus produced net revenue in the past, as it is 
not  yet  mature,  i.e.  the  contributions  from  active  staff  acquiring  pension  rights  have 
outweighed the benefits drawn by a limited  number of retirees. Pension scheme revenue has 
consisted  of  staff  and  employer  contributions;  the  latter  were  not  paid  into  a  fund,  but  only 
reflected in the pension liability. In this way, the EU budget was actually borrowing money 
from scheme members in return for a guarantee to pay future benefits. 

Due to the growth of the EU and its workforce since the creation of the pension scheme in the 
1960s,  the  net  number  of  pensioners  (difference  between  number  of  staff  retiring  and 

11 

 
 
 
 
 
 
 
pensioners  passing  away)  has  increased  and  will  keep  increasing  over  the  next  Multiannual 
Financial  Framework  (MFF).  Although  in  the  long-term  pension  expenditure  will  be 
substantially  reduced  thanks  to  the  successive  reforms,  these  reforms  were  subject  to 
transitional provisions given that pension rights are protected under the principle of acquired 
rights. Therefore, the budgetary effects of the reform on pension expenditure only appear 
progressively  over  time.  As  a  consequence,  due  to  the  lack  of  maturity  of  the  PSEO,  the 
increasing trend of pension expenditure is due to continue until the 2040s. 

The  considerable  pension  savings  that  will  be  generated  by  the  reform  (see  graph  2)  was 
confirmed  in  2016  by  a  Eurostat  study  of  the  long-term  budgetary  implications  of  pension 
costs10.  This  study  was  welcomed  by  the  Member  States  as  an  objective  and  realistic 
assessment of the situation. Eurostat found that the 2013 reform would reduce the long-term 
pension  bill  by  approximately  30%,  on  top  of  savings  from  the  previous  overhaul  of  the 
pension  scheme  in  2004.  Following  this  Eurostat  study,  several  Member  States  stressed  the 
importance of pension provisions when ensuring that the EU remains an attractive institution 
for  applicants  from  all  Member  States  and  especially  those  with  relatively  high  per  capita 
incomes. 

Furthermore, the two successive far-reaching Staff Regulations reforms were put in place in a 
very  short  period  (i.e.  as  of  2004  and  2014),  which  also  imposed  the  legal  necessity  to 
introduce transitional measures in their implementation that concern large parts of the staff 
currently in service. In addition to these legal constraints, further changes to the existing rules 
at this point in time would additionally undermine the certainty and predictability concerning 
working  conditions  and  pension  benefits.  This  would  likely  further  hinder  the  institutions’ 
capacity to address the significant geographical imbalances observed.  

Graph 2 – Evolution of long-term pension costs (figures in EUR million at constant 
prices) according to 2016 Eurostat study 

Without 2013 reform 

With 2013 reform 

 2.600

 2.400

 2.200

 2.000

 1.800

 1.600

 1.400

2010

2020

2030

2040

2050

2060

2070

10    

SWD(2016) 268 

12 

 
 
 
 
 
 
 
                                                           
9. 

CONCLUSIONS 

The  implementation  of  Annex  XII  to  the  Staff  Regulations  by  the  Commission  ensured 
stability  of  the  PSEO  and  the  balance  of  the  notional  fund  while  the  2004  and  2013  Staff 
Regulations reforms are successfully implemented, increasing progressively yearly savings.  

In view of the above, the application of Annex XII to  the Staff Regulations has fulfilled its 
specific aim to guarantee that the PSEO 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  national  experts  and  qualified 
independent experts; 

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  co-legislators  decided  that  the  present  report  should  focus  on  the  2014-2018  actuarial 
balance  of  the  pension  scheme  and  not  on  the  future  evolution  of  pension  expenditure.  By 
contrast, it should be mentioned that in its proposal for a Council Regulation laying down the 
next  MFF  the  Commission  presented  the  expected  expenditure  for  the  period  2021  –  2027 
based notably upon the yearly growth of pension expenditure as presented in part 8. On this 
occasion,  the  Commission  also  undertook  to  reflect  on  the  feasibility  of  the  creation  of  a 
capital-based pension fund for EU staff in the framework of the mid-term review of the MFF 
in 2023. 

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