Technical compilation guide for pension data in national accounts : 2020 edition.
Date: 2020-09-11
Institutions: Eurostat
Subjects: EU statistics, data collection, national accounts, pension scheme, user guide

Technical compilation 
guide for pension data  
in national accounts

2020 edition

M A N U A L S   A N D 
G U I D E L I N E S

MANUALS AND GUIDELINESTechnical compilation guide for pension data in national accounts 2020 editionTechnical compilation  
guide for pension data 

 in national accounts  2020 edition 

 
 
 
Manuscript completed in August 2020  

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KS-GQ-20-008-EN-N 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acknowledgements 

Acknowledgements 

Editors 

Filippo Gregorini and Giuliano Amerini (Eurostat) 

Contributors 

We are thankful to all the contributors to the manual, in particular Mr Per Eckefeldt from the 
Directorate General for Economic and Financial Affairs of the European Commission, Mr Patrick 
Grussenmeyer, Mr Andreas Hertkorn, Ms Linda Kezbere and Mr Rafael Quevedo from the European 
Central Bank, and Mr Costas Stavrakis from the Actuarial Association of Europe. Also Mr Sheldon 
Warton-Woods, Mr John Verrinder and Mr Nicola Massarelli from Eurostat contributed to the drafts of 
the manual. 

We want also to mention Mr. Bernd Raffelhüschen and Mr. Christoph Müller, Forschungszentrum 
Generationenverträge of the University of Freiburg, who provided the first draft of the first edition of 
the manual in 2011. Mr. Peter Parlasca and Mr. Ismael Ahamdanech-Zarco, both from Eurostat, and 
Mr. Reimund Mink, from the European Central Bank, also contributed to the preparation of the first 
edition. 

Technical compilation guide for pension data in national accounts 

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Contents 

Contents 
Acknowledgements .................................................................................................... 1 

Abbreviations .............................................................................................................. 4 

1  Introduction ............................................................................................................ 6 

2  Estimating pension entitlements and obligations in national accounts ............ 9 

2.1  Concepts of pension entitlements and obligations........................................................... 9 

2.2  Actuarial assumptions following ESA 2010  .................................................................... 15 

2.2.1  Discount rate ................................................................................................................. 15 
2.2.2  Wage growth ................................................................................................................. 15 
2.2.3  Demographic assumptions ........................................................................................... 18 

3  Pension schemes in social insurance covered by the supplementary table ... 19 

3.1  Classification of pension schemes ................................................................................... 19 

3.2  Social insurance schemes in Table 29 ............................................................................. 23 

3.3  Defined contribution, defined benefit and other pension schemes............................... 25 

3.4  Core and non-core accounts ............................................................................................. 26 

3.5  Pension manager, multi-employer pension scheme and pension administrator  ........ 26 

4  Columns and rows in the supplementary table.................................................. 28 

4.1  Columns of the supplementary table ................................................................................ 30 

4.2  Rows in the supplementary table ...................................................................................... 31 

5  Key assumptions in measuring pension entitlements ...................................... 37 

5.1  Economic assumptions ..................................................................................................... 38 

5.1.1  Discount rate ................................................................................................................. 38 
5.1.2  Wage growth ................................................................................................................. 44 
5.1.3  Inflation ......................................................................................................................... 47 
5.1.4  (Un)employment rates .................................................................................................. 48 

5.2  Demographic assumptions ................................................................................................ 48 

5.2.1  Life expectancy ............................................................................................................. 49 
5.2.2  Fertility rate ................................................................................................................... 49 
5.2.3  Migration ....................................................................................................................... 50 

5.3  Other assumptions ............................................................................................................. 50 

5.3.1  Future prevalence of disability ...................................................................................... 51 
5.3.2  Retirement rates ........................................................................................................... 51 
5.3.3  Distribution of past insurance credits and insurable earnings ...................................... 51 
5.3.4  Family structure statistics ............................................................................................. 51 
5.3.5  Pensions-in-payment indexation ................................................................................... 52 

6  Data sources for compiling pensions entitlements ........................................... 53 

6.1  Accounting data for private employer-sponsored pension schemes ........................... 53 

A. 

International Accounting Standard (IAS) for private businesses .................................. 54 

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Contents 

B. 

National accounting standards for private businesses ................................................. 55 

International standards, administrative data and actuarial calculations for 

6.2 
government-managed pension schemes ................................................................................. 55 

6.2.1 International Public Sector Accounting Standard (IPSAS) ............................................. 55 
6.2.2 Pension data directly obtained from administrative data ................................................ 56 
6.2.3 Pension data to be estimated by an actuarial approach: all rows except 2.1, 2.3 and 4  58 

6.3  Regulatory data – ECB Pension funds statistics ............................................................. 59 

7  Description of the approaches to estimating pension entitlements for 

government-managed pension schemes ........................................................... 61 

7.1 

Introduction ......................................................................................................................... 61 

7.2  Actuarial methodological framework using simulation modelling techniques ............ 61 

7.2.1  Overview of methodological approach .......................................................................... 61 
7.2.2  Other methodological considerations ........................................................................... 64 
7.2.3  Key methodological features of pension model ............................................................ 64 

7.3  Step-by-step estimation approach using typical agent modelling techniques ............ 65 

7.3.1  Overview ....................................................................................................................... 65 
7.3.2  Estimating individual pension entitlements ................................................................... 68 
7.3.3  Estimating individual pension entitlements for current retirees ..................................... 69 
7.3.4  Estimating individual pension entitlements for current contributors .............................. 74 

References .............................................................................................................. 101 

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Abbreviations 

1 

Abbreviations 

AAE 

ABO 

ADL 

Actuarial Association of Europe 

Accumulated benefit obligations 

Accrued-to-date liabilities 

AWG 

Ageing Working Group — EPC Working Group on ageing populations and sustainability 

BHPS 

British Household Panel Survey 

COFOG 

Classification of the functions of government 

CWL 

Current workers’ and pensioners’ liabilities 

DB 

DC 

Defined benefit 

Defined contribution 

DeStatis 

German Federal Statistical office 

DG ECFIN  Directorate General for Economic and Financial Affairs 

DRV 

ECB 

EPC 

ESA 

Deutsche Rentenversicherung (German statutory pension insurance)  

European Central Bank 

Economic Policy Committee 

European System of Accounts 

ESSPROS  European System of Social Protection Statistics 

EU-SILC 

European Union Statistics on Income and Living Conditions 

EVS 

Einkommens- und Verbrauchsstichprobe (German Income and Expenditure Survey) 

GAAP 

Generally accepted accounting principles 

hetCC 

Heterogeneous contribution careers 

homCC 

Homogeneous contribution careers 

IAS 

International accounting standards  

IPSAS 

International Public Sector Accounting Standards 

NA 

NDC 

National Accounts  

Notional defined contribution 

OECD 

Organisation for Economic Co-operation and Development 

OSGL 

Open-system gross liabilities 

OSL 

Open-system liabilities  

OSNL 

Open-system net liabilities 

PAYG 

Pay-as-you-go 

PBO 

Projected benefit obligation 

SHIW 

Survey on Household Income and Wealth 

Technical compilation guide for pension data in national accounts 

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Abbreviations 

1 

SKK 

SNA 

Slovakian Koruna (Slovakian national currency before 1 January 2009) 

System of National Accounts 

SOEP 

Sozio-oekonomisches Panel (German Socio-Economic Panel) 

ZUS 

Zaklad Ubezpieczen Spolecznych (Polish social insurance institution) 

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Introduction 

1 

1 Introduction 

There is high public and policy interest in how people are providing for their future retirement, and the 
impact that it has on their consumption and saving behaviour now. As populations age in many 
European countries, and the choice of available pension schemes widens, the availability of statistics 
on pensions is increasingly important. 

The 2008 SNA and the ESA 2010 provide detailed guidelines for compiling supplementary data on 
pension entitlements under defined contributions and defined benefit schemes. They cover schemes 
managed by non-general government units and schemes managed by the general government and 
also social security schemes1. Since the implementation of these standards, pension entitlements of 
households (and pension obligations of the schemes) are recorded in national accounts (NA), 
although not all in the central framework of the national accounts2. The international standards define 
a set of rules which provide compilers with guidance on when to include pension schemes in the core 
system of accounts and when to include the outstanding amounts of pension entitlements only in the 
supplementary table on pension schemes in social insurance3. Pension data on defined benefit 
schemes for employees and on social security pension schemes are based on actuarial estimates. In 
order to obtain high quality actuarial estimates, ensuring reasonable consistency with the actuarial 
valuation of the social security pension scheme, compilers of national accounts should cooperate 
with the social security institution responsible for managing the above scheme and are strongly 
recommended to seek the input of the actuary. Actuarial estimates are broadly applied in the 
insurance and pension fund business and are also described and discussed in this manual. 

The supplementary table (ESA 2010 Transmission Programme Table 29) records all positions and 
flows in pension obligations of all pension schemes in social insurance. Table 29 provides 
information on both private and public schemes4. Pensions paid irrespective of contributory history 

1   The dynamics of general government-managed pension schemes in Europe are usually based on the 

pay-as-you-go principle whereby current contributions finance current benefits. 

2   According  to  the  SNA  2008,  paragraph  11.107:  ‘pension  entitlements  show  the  extent  of  financial 
claims both existing and future pensioners hold against either their employer or a fund designated by 
the employer to pay pensions earned as part of a compensation agreement between the employer and 
employee.’ 

3   The supplementary table on pensions in social insurance is described in  chapter 17 of the 2008 SNA 
and in chapter 17 of the ESA 2010. It is also part of the ESA 2010 Transmission Programme Table 29. 
4   According to ESA 2010, paragraph 4.88: ‘social insurance schemes are schemes in which participants 
are  obliged,  or  encouraged,  by  their  employers  or  by  general  government,  to  take  out  insurance 
against  certain  eventualities  or  circumstances  that  may  adversely  affect  their  welfare  or  that  of  their 
dependants. In such schemes social contributions are paid by employees or others, or by employers 
on behalf of their employees, in order to secure entitlement to social insurance benefits, in the current 
or subsequent periods, for the employees or other contributors, their dependants or survivors. 

Technical compilation guide for pension data in national accounts 

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Introduction 

1 

are termed “social assistance” and are not included in Table 295. The scope of table 29 in discussed 
in detail in Chapter 3. 

Table 29 reports on accrued-to-date pension entitlements / liabilities (ADL) in social insurance, which 
are not suitable as a measure of the sustainability of social security and unfunded government 
employer pension schemes. Also as it is stipulated in the relevant EU regulation, “accrued-to-date 
pension entitlements in social insurance are not as such a measure of the sustainability of public 
finances”6. 

These entitlements are not considered part of government debt. Sustainability analysis of a pension 
scheme should be linked to the scheme’s financing approach and usually requires different, more 
forward-looking calculation approaches, notably considering future flows of social contributions. ADL 
figures include future pensions of people already retired and future pensions of people working at 
present, corresponding to accrued rights, but exclude future pensions of people working at present 
corresponding to rights to be accrued over the rest of their career and future pensions of people not 
yet working/born. 

In order to compile appropriate indicators of the sustainability of pension schemes, future pension 
and contribution information on an open system basis is necessary.  In contrast, ADL figures should 
be simply interpreted as the amount of resources that would have to be set aside today in order to 
finance all pension rights which have been earned up to a given year. The above  is sometimes 
referred to as a “scheme closure” scenario, representing the additional resources needed if the social 
security pension scheme was to be closed (e.g., in order to start a new scheme) while honouring all 
past accruals. In concept, this is similar to a termination reserve in a private pension plans, which 
could be terminated for various reasons and therefore, as most pension regulatory frameworks 
provide, they must be fully funded7. 

In the context of the ESA 2010, it is therefore mandatory for European countries to record a full set of 
position and flow data on pension obligations of all social insurance pension schemes (as defined in 
Chapter 3) including the schemes managed by general government for its own employees and social 
security pension schemes. The first Table 29 data transmission took place in December 2017 with 
2015 as the reference year, with following transmissions each three years for data relating to the 
year t-2. Since the end of 2018 Eurostat has disseminated Table 29 statistics on its website. 

The 1st Pension Expert Group meeting after data transmission took place in April 2019: 
representatives from 25 EU MSs, 2 EFTA countries, DG ECFIN, ECB, OECD and the AAE actively 
participated to its work by presenting and discussing Table 29 methodological issues and compilation 
experiences. The group also endorsed the revision of the Technical Compilation Guide for Pension 
Data in National Accounts (Technical Compilation Guide) in July 2020 before the 2nd Table 29 data 
transmission. 

The Technical Compilation Guide helps countries compile pension entitlements and obligations to be 
included in the supplementary table as described above. It covers: 

 

 

the main methodological concepts to be applied to estimate pension entitlements and obligations 
(Chapter 2); 

the definition and classification of pension schemes covered in the supplementary table 
(Chapter 3); 

5   According  to  ESA  2010,  paragraph  17.04:  “Social  assistance  is  not  part  of  social  insurance.  Social 
assistance  benefits  are  payable  independently  of  participation  in  a  social  insurance  scheme,  i.e. 
without qualifying contributions having been made to a social insurance scheme.” 

6   Refer to recital (21) of the EU regulation 549/2013. 
7   A  detailed  discussion  on  different  concepts  of  pension  entitlements  and  obligations  -  including  their 

reliability as sustainability indicators - can be found in Section 2.1. 

Technical compilation guide for pension data in national accounts 

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Introduction 

1 

 

 

 

 

the design and use of the supplementary table (Chapter 4); 

the core assumptions to estimate pension entitlements and obligations (Chapter 5); 

the data sources for compiling and estimating pension entitlements and obligations (Chapter 6); 

the approach to estimate defined benefit pension entitlements and obligations (Chapter 7). 

Technical compilation guide for pension data in national accounts 

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Estimating pension entitlements and obligations in national accounts 

2 

Estimating pension 
entitlements and 
obligations in national 
accounts 

2 

2.1  Concepts of pension entitlements and obligations 

Pension entitlements of households can be recorded either as financial assets in the national 
accounts or as contingent assets. Those treated as financial assets constitute financial claims that 
beneficiaries have vis-à-vis either their employer or a pension manager designated by the employer 
to pay pension benefits earned as part of a compensation agreement concluded between the 
employer and the employee. Those treated as contingent assets usually represent “conditional 
claims” on defined benefit schemes managed by general government for its employees and social 
security pension schemes. As counterparts, they are recorded as contingent liabilities of the 
government (see as a reference ESA 2010, paragraph 5.184).  

The aim of Table 29 is to give an overview of pension obligations (of general government but also of 
other institutional sectors) vis-à-vis households covering all pension schemes in social insurance (as 
defined in chapter 3). The figures in the supplementary table present the perspective of the debtor 
(the pension scheme) indicating pension obligations (either liabilities or contingent liabilities) as well 
as that of the creditor (households) showing pension entitlements (either assets or contingent 
assets). In Table 29, the positions and flows of the pension obligations always correspond to the 
positions and flows of pension entitlements8. 

The Table 29 pension reporting exercise is undertaken based on the Accrued-to-Date Liability (ADL) 
method, which is consistent with the closed-group approach. By contrast, the other major EU 
pension reporting exercise of the Ageing Working Group of the Economy Policy Committee is 
undertaken based on the open-group approach.9 A comprehensive description of the closed and 
open group approaches is provided in chapter 4 of the publication of the Social Security Committee 
of the International Actuarial Association (IAA, 201810), an overview of which is presented on Box 1. 
Table 1 and Box 2 refer to the terminology more commonly used by national accountants. 

8  When the text refers to positions or flows of pension obligations, it corresponds to positions or flows of 

pension entitlements and vice versa. 

9  The results of this exercise are presented in  the triennial Ageing Report; the latest available report is 

the 2018 Ageing Report. 

10  IAA.  Measuring  and  Reporting  Actuarial  Obligations  of  Social  Security  Systems.  2018.  Ottawa, 

International Actuarial Association – Social Security Committee. 

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Estimating pension entitlements and obligations in national accounts 

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Box 1: Closed and open group approaches 

The figure below compares graphically the closed and open-group approaches, through the means 
of a balance sheet, for a social security pension scheme (SSPS). 

Note:  PV = Present Value 

1. Closed-group without future accruals: This approach includes only current pensioners and 
contributors of the SSPS, with no future entrants (contributors) taken into account. Under this 
approach, the scheme’s reserves (assets) are compared to the future benefits of current pensioners 
and of current contributors resulting from past service (obligations). There are no future contributions 
and no future accrual of new benefits.  

2. Closed-group with future accruals: This approach includes only current pensioners and 
contributors of the SSPS, with no future entrants (contributors) taken into account. Under this 
approach, the scheme’s reserves and future contributions from current contributors (assets) are 
compared to the future benefits of current pensioners and of current contributors resulting from past 
and future service (obligations). 

3. Open-group: This approach takes into consideration all current pensioners and contributors as 
well as future contributors of the SSPS, including their future contributions and associated benefits, 
to determine whether current scheme’s reserves and future contributions (assets) will be sufficient to 
pay for all future benefit expenditures (obligations). 

Technical compilation guide for pension data in national accounts 

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Open-groupClosed-group withoutfuture accrualsReserveFuture contributions fromfuture contributorsFuture benefitsoffuture contributorsFuture benefitsof currentcontributors(fromfuture service)Future benefitsof currentcontributors(frompastservice)Future contributions fromcurrentcontributorsFuture benefitsofcurrentpensionersPV of AssetsPV of ObligationsClosed-group withfuture accruals 
 
 
 
 
 
 
 
Estimating pension entitlements and obligations in national accounts 

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Table 1: Concepts of pension obligations 

Pension entitlements in national accounts are measured on a gross basis; that is, these entitlements 
are not netted against expected revenue of government or expected household social contributions. 
No assets or accumulated social contributions are taken into account to compile any type of net 
entitlements. Only pension entitlements due to actual and future pension benefits are covered.  

Box 2: Three concepts of pension obligations 

In the literature (see Franco, 1995, pg. 2) three main concepts of pension obligations have been 
introduced: the concepts of (a) accrued-to-date liabilities (ADL); (b) current workers and pensioners 
liabilities (CWL); and (c) open-system liabilities (OSL)11. Box 2 gives a detailed description of these 
concepts. All pension obligations of pension schemes or pension entitlements of households are 
assessed as part of extended balance sheets of pension schemes or households in the national 
accounts (showing assets and contingent assets or liabilities and contingent liabilities) at a certain 
point in time, usually at the year-end. The pension entitlements or obligations under defined benefit 
social insurance pension schemes are recorded in gross terms, meaning that no accrued-to-date 
obligations reflecting future social contributions to finance the pension entitlements are taken into 
account; instead only the accrued-to-date pension entitlements for current and future pension 
benefits (ADL) are covered, i.e. the pension entitlements accrued by current workers (including 
deferred pension entitlements) and the remaining pension entitlements of existing pensioners. As for 
all national accounts data, the data are measured ex post, as they include only the current values of 
the entitlements that arise from already accrued pension rights. The method is based on observable 
past events and transactions, such as membership of the pension scheme and contributions paid. 
However, these ex post measures also rely on some assumptions in the modelling process. The 
probability that current contributors may die or become disabled before reaching pensionable age 
needs to be estimated. The approach also covers future changes to the (defined) pension benefits 
owing to any legislation enacted prior to the year for which pension entitlements are calculated. 
Finally, the method requires assumptions about future developments, notably the development of the 
discount rate for future pension disbursements. As with all other assets, the pension entitlements 
(corresponding to the pension schemes’ obligations, on the liability side of the accounts) are entered 
into the extended household balance sheet at their value on the balance sheet date. Since actuarial 
values for pension entitlements or obligations related to defined benefit pension schemes in social 
insurance in the EU countries are typically not made available by the manager of the pension 

11   The  concepts  of  ADL,  CWL  and  OSL  correspond  to  the  Box  1  approaches  of  Closed-group  without 

future accruals, Closed-group with future accruals and Open-group respectively. 

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Estimating pension entitlements and obligations in national accounts 

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scheme, compilers of national accounts have to estimate the above actuarial values and ideally 
should refer to actuaries who will provide the relevant estimated values. 

a)  Accrued-to-date liabilities (ADL): These pension entitlements or obligations contain the 

present value of pensions to be paid in the future on the basis of accrued rights. Accrued 
pension rights are due to already paid social contributions by current members and 
remaining pension entitlements of existing pensioners. No rights accrued after the current 
year — by present or by future workers — are considered. The time horizon of this concept 
is, therefore, somewhat limited. As shown in Figure 1 ADL covers only integral amounts 
below curve B (also taking a discount rate into consideration). 

b)  Current workers’ and pensioners’ liabilities (CWL): For CWL, allowance is made for the 

pension scheme to continue until the last current contributor dies. However, new entrants 
are not included. This concept covers ADL and the present value of pension entitlements 
that will be accrued by current contributors due to their future contributions. CWL 
corresponds to the integral amounts below curve C (considering additionally a discount rate) 
in Figure 1. 

c)  Open-system liabilities (OSL): In addition to CWL, this liability concept also includes the 
present value of pensions of new workers entering the respective pension scheme. It is 
assumed that the pension scheme will be continued under current rules for a relatively long 
time horizon. The present value of OSL may be compiled over an infinite time horizon. For 
practical reasons, however, a perspective, e.g. 200 years, is usually chosen. 

Figure 1: Alternative definitions of implicit liabilities 

Source: European Commission Public Finance Report 2006. 

Applying one of the three liability concepts depends on the specific purpose of the analysis. To 
assess the fiscal sustainability of a social insurance defined benefit pension scheme managed by 
government for its employees, for example, it is natural to apply the widest possible time horizon. 
This means using the OSL concept to examine long-term fiscal sustainability. By contrast, policy 
issues concerning the possible termination of an existing defined benefit pension scheme or 
changing the financing from PAYG to advance funding should be addressed on the basis of the ADL 
or the CWL concept, depending on the remaining time horizon of the scheme. Finally, only the ADL 
concept complies fully with the methodology used in national accounts. 

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Estimating pension entitlements and obligations in national accounts 

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The ADL concept is appropriate for national accounts purposes. It includes the present value of 
pension entitlements arising from already accrued pension rights. For example, it covers the pension 
entitlements accrued by current employees, including deferred pension entitlements, and the 
remaining pension entitlements of existing pensioners. 

As for all national accounts data, the data are measured ex-post, as they include only the current 
values of the entitlements that arise from the accrued pension rights at the balance sheet date. The 
method is based on observable past events and transactions, such as membership of the pension 
scheme and paid contributions. However, such ex-post measures also rely on a number of 
assumptions in the modelling process.  

In fact, estimating position and flow data for defined benefit pension schemes for government 
employees and for social security pension schemes to fill in the corresponding cells of the 
supplementary table involves projecting historical data into the future. For this purpose, actuarial 
estimates have to be carried out. These actuarial calculations require a number of careful 
assumptions to be made. They include assumptions about future life expectancy (through the use of 
mortality rates), which determine the payout period of future pensions and probability of current 
contributors dying or becoming disabled before reaching the pensionable age. In particular, 
assumptions on future wage growth and on an appropriate discount rate play a crucial role in 
projecting pension entitlements or obligations accrued-to-date. 

It is also important to stress that pension entitlements (derived as accrued-to-date and applied in 
national accounts) do not allow any conclusions to be drawn as to the fiscal sustainability of a 
pension scheme. Large pension entitlements do not necessarily mean unsustainable pension 
schemes, and by the same token small pension entitlements do not mean that the respective 
pension schemes are fiscally stable in the long term (for a detailed discussion see Box 3). 

Box 3: Pension entitlements are not sustainability 

indicators 

Measures of pension entitlements accrued-to-date are the appropriate data to be reported in the 
system of national accounts in the context of economic and policy analyses of households’ pension 
wealth. They provide an estimate of the cost of a hypothetical termination of a pension scheme 
without reneging on accrued entitlements. In concept, this is similar to a termination reserve in a 
private pension plan. As measures of household wealth (assets and contingent assets), they are also 
valuable statistical information to understand positions and flows in household wealth also in relation 
to saving and consumption. Furthermore, ADL help in assessing some pension reforms, such as 
establishing a new system for new contributions or new contributors, while maintaining the current 
system for already accrued entitlements. 

Pension entitlements accrued-to-date are not an appropriate indicator of fiscal sustainability or 
assessing impacts of the reforms that impact both current and future entitlements, such as increase 
in retirement age. They can be interpreted as the amount of resources which has to be set aside 
today in order to finance all pension rights which have been earned up to a given year. Entitlements 
that will accrue after that year are not included. In contrast to other liability concepts such as OSL, 
therefore, the time horizon of ADL is somewhat limited. As illustrated in Figure 2 for the German 
statutory pension scheme, the ADL represent only one part of the OSL. Moreover, the ADL are 
compiled gross without including any assets set aside nor the net present value of future social 
contributions. To assess fiscal sustainability it is vital to compare (future) pension obligations with the 
cash inflows arising from the corresponding future pension-related assets. In this context, the 2018 
special issue of the International Social Security Review “Actuarial and financial reporting of social 

Technical compilation guide for pension data in national accounts 

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Estimating pension entitlements and obligations in national accounts 

2 

security obligations” provides comprehensive reference material. 

Figure 2 outlines the difference between ADL and sustainability indicators for the German statutory 
pension scheme. It shows that a considerable amount of ADL (equivalent to about 280% of GDP in 
2006) is accumulated in this scheme. If future entitlements are also considered — applying the open 
system gross liability concept (OSGL) — pension obligations add up to more than 600 percent of 
GDP. However, it is only possible to draw conclusions about the sustainability of a pension scheme 
by comparing these pension obligations with the respective assets, comprising of any current assets 
set aside and future social contributions. The resulting residual amount of obligations and assets 
represents the open-system net liabilities (OSNL), also known as the sustainability or fiscal gap. In 
contrast to the ADL, it represents the stock which has to be set aside today to sustain the present 
pension system (in its legal status quo) in the long term. While the ADL only take into account a 
fraction of the future demographic development, namely the change in the number of retirees 
including the development of mortality rates, the OSNL consider the long-term development of the 
overall population. Figure 2 also illustrates that the ADL estimates can indeed be extended to 
measure open system gross and net liabilities, provided that a longer time horizon is used and the 
corresponding assets are included12. 

Figure 2: Accrued-to-date liabilities and related sustainability indicators 

Source: Müller et. al. (2010), p. 117. 

12 For a description of extending the ADL approach, see Müller et al. (2010). 

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Estimating pension entitlements and obligations in national accounts 

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2.2  Actuarial assumptions following ESA 2010 13 

2.2.1  DISCOUNT RATE 

The discount rate applied to estimates of future pension benefits in the case of accrued-to-date 
entitlements is one of the single most important assumptions to be made in the modelling of pension 
schemes, since its accumulated impact over many decades can be very large. The discount rate 
from a chosen approach may change over time, which would lead to revaluations in the accounts. 

The discount rate can be seen as equivalent to the expected risk-free rate of return on assets held by 
a pension scheme. In the case of pension entitlements to be paid in the future, the discount rate can 
also be seen as the cost of capital in a sense that the future payments have to be financed by 
government, via the usual sources: 

(a) 

(b) 

(c) 

Net acquisitions of liabilities, such as loans and debt securities; 

Net sales of assets; and 

Government revenue. 

A discount rate can be derived from this cost of financing. 

The discount rate should be a risk-free rate. Some criteria for identifying suitable rates are given in 
the following sentences. The discount rate on high quality government and corporate bonds, e.g. of 
"AAA"-rating provides an appropriate reference. Yields for high quality corporate bonds are only used 
where the markets are broad. The bonds are to be of a residual maturity of the same order as the 
pension entitlements. The use of a discount rate based on a long-term maturity, where long-term is 
taken to be 10 years or longer, is recommended. The average of several years of the discount rate, 
linked to the length of the economic cycle, can be applied to smooth the time series of the discount 
rate. The assumption on the discount rate and the future development of wages should be 
consistent. Member States are required to provide the elements demonstrating the validity of the 
discount rate used for pension entitlements in the light of the various criteria mentioned above. 

The same discount rate has to be used for all pension schemes where government is the pension 
manager (including social security pension schemes) at whatever level of government since the 
desired result should approximate risk-free yields. 

2.2.2  WAGE GROWTH 

Defined benefit pension schemes often apply a formula to the member's salary - whether it be the 
final salary, an average of a period of years, or lifetime earnings - to determine the level of pension. 
The final pensions paid are affected by the average growth of members' salaries, notably through 
promotions and career progression. 

It is, therefore, appropriate to consider what assumptions are made for the future development of 
wages. The assumed long-term development of wages should correspond with the observed 
discount rate. Both variables are, in the long-term, interdependent. 

The accounting profession uses two actuarial methods to measure the impact of wage increases. 
The accrued benefit obligation (ABO) records only the benefits actually accrued to date. It represents 
the amount an employee could walk away with if he left the firm tomorrow, and may be the basis for 
assessing a person's net worth in the case of a divorce settlement, for example. 

A projected benefit obligation (PBO) is a more prudent measure of what the eventual level of 
entitlement is likely to be. For an individual, the PBO makes assumptions about how many future 

13   This section replicates ESA 2010 text (paragraph 17.165 to paragraph 17.183). 

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promotions the person is likely to receive and calculates his final salary accordingly. Then, if that 
individual has in fact only worked 20 out of an expected 40 years, it halves the final salary and 
calculates pension entitlement for the individual as if this were his current salary. Where an 
individual's ABO increases in steps as he is promoted, the PBO increases steadily over time. For the 
individual, PBO is always higher than ABO until the moment of retirement when the ABO catches up 
with the PBO. 

The impact of wage increases needs to be reflected in transactions, because awarding a wage 
increase is a conscious economic decision taken by the employer. Moreover, in concept the ABO 
and PBO approaches lead, in the long run, to the same transactions being recorded, even if the 
timing of those transactions differs depending on the demographics of the scheme. 

Changes to assumptions of future wage changes, which are generally made every few years in 
response to a general review of pension modelling assumptions or due to a major restructuring of the 
workforce, are recorded as other flows (revaluations). 

A number of possible variants in the application of the ABO and PBO methods are observed in 
practice depending on how price and wage effects are treated. 

One important factor is the treatment of indexation arrangements on pensions, where the pension to 
be paid will increase in line with nominal wage growth after retirement. 

Given the importance of wage effects, it is recommended that the choice of an ABO or PBO 
approach be based on the underlying benefit formula in the pension scheme. Where this formula 
includes implicitly or explicitly a factor for wage increases (before or after retirement) then a PBO 
approach is followed. Where such a factor is not present, an ABO approach is used. 

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Box 4: ABO or PBO? 

The choice between the two concepts may have a significant impact on the projected level of 
pension entitlements. Results are usually 10 to 20% higher when applying PBO instead of ABO.  
Therefore, clear guidelines have to be applied as to which of the two approaches should be chosen, 
to ensure comparability of results across pension schemes and also across EU countries. 

Each method has its advantages and disadvantages. The probability of a termination or of a freezing 
of the respective pension scheme (before the end of a worker’s career) should determine which 
method to apply. If the pension scheme is likely to exist until the end of a worker’s career, his or her 
future wage growth needs to be taken into account, applying the PBO method. This approach is 
often recommended for pension schemes established for government employees (see Reinsdorf 
2010). The International Public Sector Accounting Standards (IPSAS39) also recommend applying 
the PBO approach to measure pension obligations of defined benefit plans. In fact, the IPSAS39 
requires an entity to use the Projected Unit Credit Method, which is equivalent to the PBO approach. 
Business accounting standards, in particular the International Accounting Standards 19 (IAS 19), 
also recommend the PBO approach. For social security pension schemes, the PBO approach seems 
the appropriate valuation method, since, in normal circumstances, an early termination of these 
schemes is not expected.  

Furthermore, the PBO approach is a more suitable way of reflecting certain pension reforms. While 
an extension of the contribution periods relevant for the benefit formula (e.g. from best 25 income 
years to lifetime earnings), for example, may have no effect in the case of the ABO approach, it can 
change the entitlements when the PBO approach is applied. The PBO approach is also the most 
appropriate method to take into account the different indexation rules of pension schemes. 

In conclusion, most arguments are in favour of the PBO approach rather than the ABO approach to 
estimate pension obligations of pension schemes.  

For the estimation of pension obligations of defined benefit schemes for government employees and 
of social security pension schemes, which are not assumed to be terminated in future, to maintain 
consistency in Table 29 calculations across those schemes, it is recommended to apply the PBO 
approach. 

In practice, various modifications of the PBO approach are applied, depending on how indexation 
effects are taken into account. These are the PBO approach with: 

1) no future indexation of pensions (this is equivalent to an ABO approach); 

2) price indexation; 

3) wage indexation; 

4) pensions indexed in accordance with indexation rules.  

To estimate defined benefit pension obligations, the PBO approach as described under 4) should be 
applied. This would allow country-specific differences in indexation policies to be reflected in the 
estimations. 

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2.2.3  DEMOGRAPHIC ASSUMPTIONS 

Future pension payments are subject to demographic effects, in terms of the age/ gender balance of 
members and their longevity. Demographic tables are well established for the modelling of pension 
and life insurance schemes. 

In the case of employment-related pension schemes, the membership of the scheme is well defined 
and, therefore, the data should be available. In the case of social security schemes, recourse is 
made to general population data if no specific data are available on social security membership. 

In the use of longevity tables, also known as mortality tables, tables which are specified with regard 
to gender and groups of employees are preferred. The group of members receiving a disability 
pension should be modelled with different longevity assumptions, if possible. 

Longevity assumptions should include the increase of longevity over time. 

The modelling of pension schemes may involve the use of demographic assumptions other than 
longevity, for example future fertility rates, labour participation rates or migration rates in the case 
where the pension benefit or indexation formula is based on a "dependency ratio" or similar type of 
approach. 

Where early retirement within a scheme is actuarially neutral, modelling is unaffected. Non-
actuarially neutral early retirements have an effect, and they frequently arise given the way in which 
different interest rates are usually applied at early retirement. Therefore, the appropriate modelling of 
early retirement behaviour is important, particularly where a reform raises the future pensionable 
age. 

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Pension schemes in social insurance covered by the supplementary table 

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3 Pension schemes in social 

insurance covered by the 
supplementary table 

3.1  Classification of pension schemes 

Pension benefits are predominantly old-age pensions. However, survivors’ pensions — consisting of 
widows' and orphans’ pension benefits — and disability and early retirement pensions also fall under 
the term pension benefits. Pensions can be provided to beneficiaries in the form of (i) social 
insurance pension schemes; (ii) social assistance; and (iii) individual insurance policies related to 
pensions (see Figure 3). 

Figure 3: Social insurance, social assistance and individual insurance policies 

(1) “Other social insurance benefits, or non-pension benefits, are benefits which beneficiaries receive, directly or 
indirectly, depending on specific events and usually under predetermined legal or contractual terms. Excluding income 
in retirement, a number of other contingencies may be covered such as health insurance, unemployment insurance 
and long-term care insurance benefits.” [ESA 2010, paragraph 17.15] 
(2) “Elements of social assistance within pension schemes generally organised as social insurance may not be 
separable, and so occur in the supplementary table” [ESA 2010, paragraph 17.122]. In this case, Table 29 may 
include also elements of social assistance. 
(3) Individual insurance policies are not included in Table 29 (ESA 2010, paragraph 17.122), unless participation in the 
scheme is compulsory, the scheme is organized collectively or employers make imputed or actual contributions to the 
scheme [ESA 2010, paragraph 17.06]. Therefore individual insurance policies in this context are not necessarily only 
“traditional” insurance products, and may be products which benefit from a government incentive (such as a tax 
reduction). 
(4) Not recorded as assets/liabilities in core national accounts. Unfunded defined benefit schemes for general 
government employees are also not recorded in the core national accounts. 

The supplementary table on pension schemes in social insurance as reflected in the 2008 SNA and 
in the ESA 2010 covers positions and flows of pension obligations in all pension schemes regarded 
as social insurance.  

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Pension schemes in social insurance covered by the supplementary table 

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Social insurance schemes are schemes in which participants are obliged, or encouraged, by a third 
party to take out insurance against certain social risks or circumstances that may adversely affect 
their welfare or that of their dependants. In such schemes, social contributions are paid by 
employees or others, or by employers on behalf of their employees, in order to secure entitlement to 
social insurance benefits, in the current or subsequent periods, for the employees or other 
contributors, their dependents or survivors. Contributions to social insurance schemes can also be 
paid by, or on behalf of, self-employed or non-employed persons14. 

There are two types of social insurance schemes: 

The first consists of social security schemes covering the entire community, or large sections of the 
community, that are imposed, controlled and financed15 by government units16. 

The second type consists of other employment related schemes. Such schemes derive from an 
employer-employee relationship17 in the provision of pension, and possibly other, entitlements that 
are part of the conditions of employment and where responsibility for the provision of benefits does 
not devolve to general government under social security provisions18. Employment-related social 
insurance pension schemes may be managed by general government or by non-government entities, 
and they may operate either on a funded or unfunded basis. Funded schemes finance pension 
benefits by drawing down segregated and earmarked assets. Their design requires them to hold 
assets equal to their liabilities. These schemes can be exactly funded, under-funded or over-funded, 
depending on the size of the accumulated assets in relation to the pension entitlements. Unfunded 
schemes finance current pension payments with the ongoing contributions paid by future pensioners 
and/or other ongoing revenue, such as taxes or transfers; unfunded schemes may nevertheless hold 
assets (for liquidity reasons, for example, or as buffer funds)19. 

14   ESA 2010, paragraph 17.01. 
15   Sometimes,  a  social  security  scheme  might  be  financed  only  by  employee  and  employer  social 

contributions. 

16   ESA 2010, paragraph 17.02 (a). 
17   Schemes organised by trade unions (described in ESA 2010, paragraph 17.03(d) ) are also included in 
this  category  of  social  insurance  schemes,  even  though  they  are  not  necessarily  employer  related. 
Pension  schemes  for  certain  occupational  groups,  such  as  self-employed  professionals,  should  be 
included  if  the  participation  in  the  scheme is  obligatory  or a  substitute  for  participation  in  compulsory 
social security pension schemes and these schemes are collectively organized for the specific group. 

18   ESA 2010, paragraph 17.02 (b). 
19   Sometimes, a social security scheme operates on a partially funded basis, by holding a reserve fund, 
the level of which is equal to a multiple of annual scheme’s expenditure, for example, three times the 
annual expenditure. 

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Figure 4: Social insurance schemes 

Type of insurance 

Characteristics 

Social security 

Employment-
related social 
insurance schemes 
other than social 
security 

The participants are 
obliged by general 
government to insure 
against certain social 
risks. 

Employers can make it 
a condition of 
employment that 
employees insure 
against certain social 
risks 

Form of 
organisation 

Organised by 
general government 
via social security 
funds 

Organised by 
employers on behalf 
of their employees 
and their 
dependents or by 
others on behalf of a 
specified group 

Sector/Subsector 

Social security funds  

Sector or subsector of 
employer, insurance 
corporations and 
pension funds or non-
profit institutions 
serving households 

In contrast to social insurance benefits, social assistance benefits are payable without qualifying 
contributions having been made to a social insurance scheme. Usually all resident households are 
entitled to apply for social assistance but the conditions under which it is granted are often restrictive. 
Generally, benefits are means-tested, including an assessment of available income and property. 
Only those households falling below a given income/property threshold may be granted this type of 
social assistance. 

Sometimes it may not be feasible (or not sufficiently important) to separate elements of social 
assistance within pension schemes organised as social insurance. In these exceptional cases, social 
assistance benefits might be included in the data recorded by countries in the supplementary table, 
accompanied by suitable metadata for users. 

Box 5: Social insurance or social assistance ? An example 

Under social insurance, participants are obliged, or encouraged, by their employers or by general 
government, to take out insurance against certain eventualities or circumstances (ESA 2010, 
paragraph 4.88). In contrast, social assistance benefits in cash are current transfers payable to 
households by government units or Non Profit Institutions Serving Households to meet the same 
needs as social insurance benefits but which are not made under a social insurance scheme 
requiring participation (ESA 2010, paragraph 4.105).  

In Country A the basic pension granted independently of contributions history is excluded from Table 
29 – being classified as social assistance, whereas topping-up to the minimum pension has been 
retained, being based on specific conditions. 

In Country B the social security pension consists of both a flat-rate part and a contributory part. The 
flat-rate part (basic pension) is partially contributory in the sense that a certain amount is granted 
only if a contribution record of at least X years can be proved (independently of the amount of the 
contributions paid) and additional conditions (citizenship, for example) also need to be satisfied. In 
this case, the whole flat-rate part might be included in Table 29 since, as mentioned also in ESA 
2010, paragraph 17.122 “in practice, it may not be feasible, or sufficiently important, to completely 
separate the non-pension social insurance elements. Elements of social assistance within pension 
schemes generally organised as social insurance may not be separable, and so occur in the 
supplementary table.” 

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Individual insurance policies related to pensions are policies that beneficiaries take out in their 
own names – as individual pension plans - without being members of a scheme organized 
collectively for groups of employees, as in the case of social insurance. They are based on contracts 
which are (generally) made with individuals and which are not organised collectively. They may 
benefit from government incentives. These individual insurance policies are not employment related 
and therefore are not recorded in the supplementary table. 

Box 6: Individual or collective policy? An example 

ESA 2010 (paragraph 17.122) specifies that individual pension schemes are not part of social 
insurance and therefore should not be included in Table 29. It explains the background for their 
exclusion as follows: 

For a life insurance policy the benefits from the policy are treated as changes in wealth, 
recorded in the financial account. For a policy qualifying as social insurance, the benefits in the 
form of pensions are recorded as income in the secondary distribution of income account. The 
reason for the different treatment is that a policy other than social insurance is entered into 
entirely on the initiative of the policyholder. Policies that qualify as social insurance reflect the 
intervention of a third party, usually the government or the employer, to encourage or oblige the 
policyholder to make reserve for income in retirement. [ESA 2010, paragraph 16.68] 

However, the practical classification of single schemes into one category or another may be 
quite difficult in some cases; following example illustrates this:  

AAAs pension plans characteristics: “AAAs plans offer more flexibility. They are known as 
“contract-based DC plans” and operate on a different basis to occupational DC plans”. (OECD, 
2008); “In a AAA, the scheme is run by a pension provider that your employer chooses, but your 
pension is an individual contract between you and the provider”. (National source) 

BBBs pension plans characteristics: “Contributions are made by individuals, employers, or both. 
... Employees who participate in a company pension plan may only make contributions to a BBB 
if company pension plan rules prohibit them from making additional voluntary contributions”. 
(OECD, 2008); “Employers that do not provide an occupational pension scheme for their 
employees are obliged to provide access to at least one BBB”. (National source) 

They are similar for several reasons. (1) In both cases, pensions are contracts between an 
individual and a provider. (2) In both cases, the role of employer is the one of a “facilitator”, 
setting a contact between the individual and the provider. (3) Both the schemes seem to be 
“portable” – i.e. from one job to another. Concerning portability in particular under AAAs, if a 
person changes jobs, his or her group personal pension is normally automatically converted into 
a personal pension and the worker continue paying into it independently. However, it is 
necessary to check to see if the new employer offers a pension scheme. A worker may be 
better off joining the new employer’s scheme. Under BBBs, if a worker’s new job allows him or 
her to become a member of an occupational pension scheme, the worker may transfer their 
BBB into that scheme. Alternatively, if the new job is not pensionable or if the worker becomes 
self-employed, the worker can continue to contribute to their BBB. (4) AAA is a personal 
scheme but it is related to employment, while BBBs are more flexible and are available to 
everyone regardless of job or employment status. However, BBBs can be seen also as an 
occupational scheme supplement since an employer who has an occupational pension scheme 
that does not allow employees to make additional voluntary contributions, must make a BBB 
available, either as part of the existing occupational pension scheme (this requires an 

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amendment to the scheme rules) or as a separate additional voluntary contributions scheme. 

It is apparent that the two schemes presented above are very similar. However, due to their 
slight differences in terms of their relation to employment status they are treated differently: AAA 
is included and BBB is excluded from Table 29. 

Another interesting topic is that of “fully portable” schemes where a worker who changes job 
can choose to bring his or her “pot” into the next employer’s scheme or put the money to 
another use. There are currently a few schemes designed in this way across Europe, and it is 
questionable whether or not they should be identified as pension schemes. If a worker moves 
his or her resources each time into a new employer’s scheme, then at retirement there is a 
substantial resource to be used for retirement (thus the scheme could be considered a pension 
scheme). However, this may not be the case, in which case the scheme is a type of saving 
scheme. Only observation of the operation of the scheme in practice can determine if members 
use it as a pension scheme. 

A presentation was devoted to this issue at the 2019 Pension Expert group meeting. The 
presentation and the following discussion showed that it is important to differentiate between an 
employer’s administrative arrangements and its obligation to contribute. If contributions are 
voluntary and the employer is only responsible for administrative collection arrangements, then 
such a scheme should be excluded from Table 29. 

3.2  Social insurance schemes in Table 29 

The supplementary table covers social insurance-type pension schemes but not schemes 
based on social assistance-type benefits and private savings benefits. To draw a clear line between 
these different types of schemes, the following definitions are essential: 

Social insurance - according to ESA 2010, paragraph 17.01 - refers to a contractual insurance 
scheme in which participants are obliged, or encouraged, by a third party to take out insurance 
against certain social risks or circumstances that may adversely affect their welfare or that of their 
dependants. 

The benefits received are conditional on participation in the scheme, and at least one of the three 
following conditions is met: 

  Participation in the scheme is obligatory either by law or under the terms and conditions of 

employment of an employee, or group of employees. 

 

It is a collective scheme operated for the benefit of a designated group of workers, whether 
employed or non-employed, participation being restricted to members of that group. 

  An employer makes a contribution (actual or imputed) to the scheme on behalf of an employee, 

regardless of whether the employee contributes. 

There may be some borderline cases where there are so-called “second pillar” compulsory schemes 
which have been subject to reform, and participants are thereafter obliged to remain as members of 
the scheme (for some proportion of their accumulated entitlements), or must choose between 
continuing to participate in the scheme and participating in a social security scheme. These schemes 
can be interpreted for statistical purposes as remaining of an obligatory nature, and therefore 
included in social insurance as part of Table 29. In case of doubt, the cases can be directly 
discussed with Eurostat to determine the most appropriate statistical treatment. It is important that 
suitable metadata is provided for these cases, to inform users. 

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Pension schemes in social insurance covered by the supplementary table 

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Social insurance pensions are broken down into benefits provided by general  government — so-
called social security pensions — and pensions provided by employers, namely employment-related 
pensions (other than social security pensions).  

  Social security pension schemes20 are contractual insurance schemes where the 

beneficiaries, as participants of a social insurance scheme, are obliged or encouraged by 
government to insure against old age, unemployment and so forth. Social security pensions are 
provided to beneficiaries by general government. 

Contributions towards a social security pension scheme are often compulsory for a large part of 
the population. Furthermore, social security pension schemes are generally defined benefit 
schemes and are typically unfunded, operating on a pay-as-you-go basis21. 

Social security pension benefits might be very basic or more generous, depending on specific 
characteristics.  

In some cases, the benefits is fixed independently of the size of contributions and/or might 
depend on additional conditions (years of contributions, citizenship…). In other cases, countries 
have earnings-related social security pension schemes, where the level of future pensions 
depends on the earnings history of contributors. 

In any case, universal flat-rate benefits funded by means other than contributions must be 
excluded from Table 29. This is the case, for example, of the Danish Folkepension financed 
through general taxation. 

No pension entitlements for social security pension schemes are recognised in the core 
system of national accounts. They are only displayed in Table 29. 

  Employment-related pension schemes22, other than social security pension schemes, are 

seen as part of the compensation package for employees. Negotiations between employees and 
employers may focus on pension entitlements as much as on current conditions of service and 
pay scales.   

The relative importance of social security pension schemes relative to other social insurance 
schemes varies quite considerably across Europe. Since each national pension system has its 
own history and its own uniqueness, Table 29 figures published show heterogeneity in terms of 
both levels and composition of future pension entitlements, where levels refer to total pension 
entitlements as percentage of a country's GDP and composition refers to the share of private 
pensions in total pension entitlements.  

Most positions in pension obligations of employment-related pension schemes are recorded in 
the core system of national accounts and in the supplementary table. For government employee 
pension schemes, however, the classification is not so straightforward. Based on a convention, 
positions in unfunded pension obligations of defined benefit pension schemes for 
government employees in EU countries are typically to be recorded in Table 29 only. 

20   Defined in paragraph 17.43 of the ESA 2010 regulatory framework. 
21   Some social security schemes are partially funded, holding some reserves. 
22   Defined in paragraph 17.49 of the ESA 2010  regulatory framework. To be noted that ESA 2010 also 

provides for schemes established by non-employers, see paragraph 17.03. 

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3.3  Defined contribution, defined benefit and other 

pension schemes 

The supplementary table distinguishes between two types of pension schemes: defined contribution 
schemes and defined benefit schemes. 

According to ESA 2010, paragraphs 17.54 & 17.55, a defined contribution scheme is a pension 
scheme where the benefits are defined exclusively in terms of the level of the fund built up from the 
contributions made over the employee's working life and the increases in value that result from the 
investment of such funds by the manager of the pension scheme23. The entire risk of a defined 
contribution scheme to provide an adequate24 income in retirement is borne by the employee. 

An underfunded defined contribution scheme from the perspective of the pension provider is 
impossible by definition. Measuring pension obligations of defined contribution schemes is relatively 
straightforward; their development is determined by the development of the assets attributed to the 
fund, thus ensuring that scheme’s obligations are equal to assets at any given time. 

A defined benefit scheme – ESA 2010, paragraphs 17.57 & 17.58 - is a pension scheme where the 
benefits payable to the employee on retirement are determined by the use of a formula, either alone 
or in combination with a guaranteed minimum amount payable. The risk of a defined benefit scheme 
to provide an adequate25 income in retirement is borne by the employer or a unit acting on his behalf.  

Generally, the factors considered to estimate the defined benefits are the years of service, the salary 
over a defined period of time, the age at retirement and the indexation rule. 

Unlike in a defined contribution scheme, the manager26 of the pension scheme bears the risk of 
providing a prescribed pension in defined benefit schemes. Defined benefit schemes can be, but are 
not necessarily, based on a pension fund. Social security pension schemes are usually designed as 
defined benefit schemes which are unfunded and arranged as pay-as-you-go or partially funded 
arrangements. Therefore, pension entitlements need to be estimated using actuarial methods, 
described later in Chapter 7 of this technical guide. 

Other non-defined contribution schemes are recorded together with defined benefit schemes in 
the supplementary table; they are often described as hybrid schemes in that they combine the 
characteristics of defined contribution schemes and those of defined benefit schemes. In these 
schemes, the risk of providing a prescribed retirement income is shared between the pension 
manager and the beneficiary of the scheme. The most important forms of such hybrid schemes in the 
area of social security are notional defined contribution (NDC) schemes, which “are similar to 
defined contribution schemes but with a guaranteed minimum amount payable” [ESA 2010, 
paragraph 17.60]. In notional defined contribution schemes, contributions (from both, employees and 
employers) are credited to, and accumulated on, individual accounts. These individual accounts are 
notional in the sense that the contributions to the schemes are used to pay pension benefits to 
current pensioners. 

23   A  pension  fund  can  be  defined  as  a  pool  of  assets  that  is  used  to  pay  pension  benefits.  It  can  be 
contrasted with the term “pension scheme” which represents a bundle of rules for paying out pensions. 
24   In  the  context  of  a  defined  contribution  scheme,  “adequate  income”  has  the  meaning  of  “targeted 

income”. 

25   In  the  context  of  a  defined  benefit  scheme,  “adequate  income”  has  the  meaning  of  “prescribed 

income”. 

26   For a definition of the term manager see below. 

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3.4  Core and non-core accounts 

The supplementary table on pensions in social insurance distinguishes between pension schemes 
whose positions are recorded also in the core system of national accounts and those recorded only 
in Table 29. There is essentially one type of pension scheme, namely social security pension 
schemes, recorded only in the supplementary table. For EU countries however, by convention, 
unfunded defined benefit schemes for general government employees are also recorded only in the 
supplementary table.  

3.5  Pension manager, multi-employer pension scheme 

and pension administrator 27 

The supplementary table classifies pension schemes according to the sector classification of the 
manager28 of the pension scheme. A pension manager is mandated by the employer to manage the 
pension scheme. He/ she is responsible for setting the terms of an employment-related pension 
scheme and bears the ultimate responsibility for pension entitlements29. The pension manager also 
has a significant degree of responsibility for the long-term policy of investment in assets, including 
the selection of an investment strategy and the structure of administrative providers.  

A single unit may often contract with several employers to manage their pension schemes. This unit 
is called a multi-employer pension scheme. As a pension manager, it bears the responsibility for 
any shortfall in the funds to meet the entitlements in return for the right to keep any excess funds30. 
By pooling the risks of various employers, the multi-employer pension scheme expects to balance 
under- and over-funding and run a surplus in the schemes taken as a whole. This resembles the way 
in which an insurance corporation pools risk for many clients. 

When general government takes responsibility for providing benefits to large sections of the society, 
the social security function fills the role of a multi-employer scheme. Like the insurance corporation, 
the government then takes on the responsibility for any shortfall in funds to meet the pension 
obligations, and may be entitled to retain any surplus generated31. As social security pension 
schemes are financed on a pay-as-you-go basis there is usually no surplus or deficit; if there is a 
shortfall of the scheme, government may have the power to adjust pension obligations not only in 
relation to future employment but also to past employment32. 

Besides the pension manager, the employer may also appoint a pension administrator responsible 
for the day-to-day administration of the pension scheme. The pension administrator, however, does 
not take any responsibility for a shortfall of the scheme or the benefit of any surplus.  

27   The  definitions  of  “pension  manager”,  “multi-employer  pension  scheme”  and  “pension  administrator” 
are  also  provided  in  the  ESA  2010  manual,  in  the  dedicated  section  corresponding  to  paragraphs 
17.72 to 17.79. 

28   Please note that the term ‘manager’ is used synonymously for the word ‘sponsor’. 
29   The pension manager entirely bears the risk in a defined benefit scheme, whereas in case of a pure 
defined contribution he/she does not bear the risk and in case of a shared-risk scheme he/she partially 
bears the risk. 

30   The pension manager entirely bears the risk in a defined benefit scheme, whereas in case of a pure 
defined contribution he/she does not bear the risk and in case of a shared-risk scheme he/she partially 
bears the risk. 

31   It  depends  on  the  type  of  social  security  scheme  and  its  legal  provisions.  In  case  of  social  security 

arrangements with shared risks, this does not apply. 

32  This might be regarded as rather theoretical. In practice, the government often, as a consequence of 
relevant  legislation  might  be  obliged  to  change  the  provisions  of  a  social  security  pension  scheme, 
including increasing contribution rates or reducing benefit entitlements (typically with respect to future 
service), or alternatively the pension scheme might have itself self-adjustment mechanisms, stipulated 
in the law and thus avoiding political interference. 

Technical compilation guide for pension data in national accounts 

26 

 
 
 
                                                           
Pension schemes in social insurance covered by the supplementary table 

3 

Please note that the same unit may in practice carry out both functions of pension manager and 
pension administrator. 

Technical compilation guide for pension data in national accounts 

27 

 
 
 
 
 
Columns and rows in the supplementary table 

4 

4 Columns and rows in the 

supplementary table 

The supplementary table on positions and flows of all pension schemes in social insurance  provides 
a complete and comparable framework for compiling and presenting comparable balance sheets and 
transactions and other flow data of all types of pension entitlements from a debtor's (pension 
manager) and also from a creditor's (household) point of view. The table also covers stock and flow 
data not fully recorded in the core national accounts for specific pension schemes such as 
government-unfunded defined benefit schemes with government as the pension manager, and social 
security pension schemes.  

All elements of the supplementary table are recorded with no deductions made for taxation, further 
social contributions or the service charge associated with the pension scheme. 

This chapter describes in detail the columns and rows in the table. The outline follows closely 
chapter 17 of the ESA 2010 (paragraphs 17.121 to 17.161). 

Technical compilation guide for pension data in national accounts 

28 

 
 
 
 
 
 
Columns and rows in the supplementary table 

4 

Figure 5: The supplementary table on pension schemes in social insurance 

Technical compilation guide for pension data in national accounts 

29 

 
 
 
 
 
 
 
Columns and rows in the supplementary table 

4 

4.1  Columns of the supplementary table 

Recording 

Core national accounts 

Pension 
manager 

Non-general government 

General government 

Not in the core 
accounts 

Counterparts: entitlements 
of 

Total 
Pension 
Schemes 

Resident 
households 

Non-
resident 
households 

Defined 
benefit 
schemes 
and other 
non-defined 
contribution 
schemes 

Defined 
contribution 
schemes 

Defined benefit schemes for general 
government employees 

Defined 
contribution 
schemes 

Classified 
in financial 
corporations 

Classified 
in general 
government  

Classified 
in general 
government 

Total 

Social 
security 
pension 
schemes 

Column 
number 

A 

B 

C 

D 

E 

F 

G 

H 

I 

J 

K 

The columns of the table refer to the three groupings of pension schemes, as follows: 

(1) 

(2) 

(3) 

By type of recording into pension schemes completely recorded in the core national accounts 
(columns A to F) and those whose entitlements are only recorded in the supplementary table 
(columns G and H); 

By type of pension manager into non-general government (columns A to C) and general 
government pension schemes (columns D to H); pension schemes including social security 
classified in general government are shown in columns D, F, G and H; and 

By type of pension scheme into defined contribution schemes (columns A and D) and defined 
benefit schemes (columns B and E to G). 

For the most part, the beneficiaries of pension schemes are resident households. In some countries, 
the number of non-resident households receiving pension benefits may be significant. In this case, 
column K is added to show the total for non-resident households. 

The decision to record the pension entitlements of an unfunded employment-related defined benefit 
pension scheme where government is the pension manager within the standard national accounts or 
only in the supplementary table depends on the nature of the defined benefit scheme. The guiding 
principle for inclusion in the national accounts is the closeness of the scheme to the national social 
security pension scheme. 

There is a wide diversity of schemes in the EU, and including all schemes would lead to 
inconsistencies in recording. So entitlements of unfunded employment-related defined benefit 
schemes where government is the pension manager might be recorded only in the supplementary 
table. This affects the calculation method in the core national accounts of the imputed employer 
social contributions for these schemes. 

Pension schemes are classified further according to the pension manager, as government and non-
government pension managers. 

Some employer pension schemes have a mixed membership, for example including both 
government employees and employees of public corporations, and many pension schemes have 
frozen the membership of participants who have moved to other employers. A scheme having a 
small proportion of non-government employees does not prevent the scheme being described as 
having a government pension manager. 

Technical compilation guide for pension data in national accounts 

30 

 
 
 
  
  
  
 
Columns and rows in the supplementary table 

4 

General government-funded defined benefit schemes for its own employees are shown in columns E 
and F. Column E shows schemes managed by a pension fund or an insurance corporation and 
column F those schemes managed by general government itself. Government schemes for its own 
employees where the pension entitlements do not appear in the core national accounts are shown in 
column G. The sum of columns E, F and G therefore shows the total responsibility of government for 
pension entitlements for its own employees. 

4.2  Rows in the supplementary table 

The rows of the table relate to balance sheet positions, transactions and other flows associated with 
pension entitlements of the schemes included in the supplementary table. There is reconciliation 
between the opening stock of pension entitlements of such schemes at the beginning of a period and 
the closing stock of pension entitlements at the end of a period, taking account of all transactions and 
other flows during the period. For schemes recorded in columns G and H, the stocks of pension 
entitlements are not recorded in the core national accounts, but many of the transactions are 
recorded in the core national accounts. 

Opening and closing balance sheets 

Row 1 shows the opening stock of pension entitlements, which is exactly equivalent to the closing 
stock of the previous accounting period. Row 10 shows the corresponding closing stock of pension 
entitlements at the end of the accounting period. 

Technical compilation guide for pension data in national accounts 

31 

 
 
 
 
 
Columns and rows in the supplementary table 

4 

Changes in pension entitlements due to transactions 

Employer and employee actual social contributions are recorded in rows 2.1 and 2.3, as in the core 
national accounts. In the case of some pension schemes, notably social security pension schemes, it 
is necessary to distinguish actual social contributions relating to pensions from social contributions 
relating to other social risks such as unemployment. 

For defined benefit pension schemes, employer imputed social contributions could be measured as 
the balancing item – any changes in entitlements over the year not included in other rows of the table 
are captured in row 2.2. This row covers "experience effects" where the observed outcome of 
pension modelling assumptions (wage growth rate, inflation rate and discount rate) differs from the 
levels assumed. Zeroes are shown in this row for defined contribution schemes33. 

Alternatively, the employer imputed social contributions in row 2.2 could be actuarially calculated as 
the difference between Current Service Cost34 in a given year and the sum of employees and 
employer social contributions paid in that year plus the experience effect which reflects the 
assumptions taken in the calculation of opening stock of pension entitlements and the actual 
experience. 

Row 2.4 shows the property income earned or imputed in the schemes, which is routed via the 
households sector or the rest of the world sector. It should be noted that for all defined benefit 
schemes including social security, whether funded or unfunded, this property income is equivalent to 
the unwinding of the discount rate. In other words, the value is equal to the discount rate times the 
pension entitlements at the beginning of the accounting period. 

Some of the entries in the rows of columns G and H, specifically the actual contributions made by 
both employers and employees, appear in the core national accounts, even though the entitlements 
and change in entitlements do not. Other entries in the columns for G and H shown only in the 
supplementary table are shaded in the table and explained below. 

The imputed contribution by employers in row 2.2 for those government schemes for which 
entitlements appear in column G but not in the core national accounts requires special consideration. 
Within the core national accounts the imputed contributions are to be estimated on the basis of 
actuarial calculations. In cases where the actuarial calculations cannot obtain a sufficient level of 
reliability and in such cases only, two other approaches are possible to estimate government 
employers' imputed pension contributions as follows: 

(1) 

(2) 

on the basis of a reasonable percentage of wages and salaries paid to current employees; or 

as equal to the difference between current benefits payable and actual contributions payable 
(by both employees and government as employer). 

Items for household social contribution supplements and the other changes in entitlements are 
shown on the same basis as for private schemes. 

33   If the employer has truly “contracted out” the “management” of a DB scheme to an external unit, the 
pension  manager  (and  not  the  employer)  bears  the  ultimate  responsibility  for  pension  entitlements 
(ESA  2010,  paragraph  17.75).  Any  discrepancy  between  the  actuarial  assumptions  of  the  pension 
manager (e.g. an insurance company) and the reality (experience effect) is borne by the manager not 
the employer. So “imputed employer social contributions” should be zero also for these DB schemes. 
However, ESA 2010, paragraph 17.136 indicates that the “experience effect” has to be recorded as in 
row 2.2 to reflect this in the “changes in pension entitlements due to social contributions and pension 
benefits” (row 5). According to the Table 29 structure (see Figure 5) the “experience effect” has to be 
recorded in row 2.2 of Table 29 in the sector to which the “manager” of the scheme belongs (imputed 
“employer” social contributions, by convention). 

34   It represents the actuarial present value of the projected benefits, calculated based on the prescribed 

ADL methodology and assumptions and attributable to employees’ service in the current year. 

Technical compilation guide for pension data in national accounts 

32 

 
 
 
                                                           
Columns and rows in the supplementary table 

4 

An item calculated on the same actuarial basis in respect of social security is shown in row 3 as 
"other (actuarial) accumulation of pension entitlements in social security funds". It is, thus, 
distinguished from employers' imputed social contributions. 

Given that the supplementary table provides a complete breakdown of the changes in pension 
entitlements over the accounting period, it is necessary to introduce a specific row to deal with the 
case whereby actual social contributions to the social security pension scheme are not actuarially 
based, and, therefore, there is an imputed contribution, which is not the responsibility of any 
employer. Such imputed transactions of social security pension schemes are shown in row 3 as 
other actuarial increase of pension entitlements in social security pension schemes. The entries in 
this row can be positive or negative – the negative cases occur in a social security pension scheme 
where the discount rate is higher than the scheme's internal rate of return. The internal rate of return 
of a pension scheme is the discount rate that equalises the present value of the actual contributions 
paid and the discounted value of pension entitlements accrued through those contributions. Negative 
entries occur for example when contributions have been raised above the actuarial required level in 
order to finance a short-run cash shortfall35. 

Row 3 does not represent cash transfers from tax revenues, and would be recorded in the standard 
accounts as current transfers between government units if they have no impact on pension 
entitlements. In some Member States, governments make transfers to pension schemes which do 
increase pension entitlements (for example where transfers are made for specific social groups 
which are unable to contribute directly), which would indicate that the amounts should be implicitly 
included in this row figure calculated by difference. 

Differences in the accounting period encountered between assumed and actual wage growth (that is 
the wage growth part of the "experience effects" or "actuarial effects" when modelling) need to be 
reflected in transactions (employer's imputed social contributions), along with all other experience 
effects. 

Row 3 figure represents the difference between Current Service Cost in a given year and the sum of 
actual social employees’ and employer’s contributions paid during that year. It also captures any 
“experience effects” observed for social security pension schemes where the observed outcome of 
pension modelling assumptions (wage growth rate, inflation rate and discount rate) in that year 
differs from the levels assumed36. 

Row 4 shows pension benefits that are paid during the accounting period. Payment of pension 
benefits has the effect of "settling" some of the pension entitlements included in the opening stock in 
row 1. 

Row 5 presents the changes in pension entitlements due to contributions and benefits. It is row 2 
plus row 3 less row 4. This balancing item measured from the non-financial accounts is generally 
equivalent to that measured from the financial accounts37.  

35   A positive or negative entry occurs when the total amount of actual contributions raised by or on behalf 
of active contributors in a given year is below or above the Current Service Cost of pension benefits for 
those contributors in that year. 

36   A  breakdown  of  the  row  3  figure  could  be disclosed,  showing  separately  the  “Experience  effect”  and 

the remaining amount of imputed social contributions. 

37   There  may  be  differences  in  some  particular  cases.  ESA  2010  requires  a  different  recording  of 
pensions  as  opposed  to  voluntary  financial  transactions  in  life  insurance  and  annuities  (F.62). 
Households  are  treated  in  the  financial  accounts  as  owning  pension  entitlements  (F.63)  as  well  as 
F.62;  the  excess  of  pension  contributions,  over  pension  receipts  (for  simplicity  hereinafter  net 
contributions)  leads  to an  increase  in  the  net  worth  of households  due  to  transactions.  However,  the 
net contributions are deducted from primary income, similar to taxes, in the calculation of disposable 
income of households, as the net contributions are not available for consumption. The net contributions 
increase  saving  but  are  not  funded  by  disposable  income.  Contributions  to  F.62  by  contrast  are 

Technical compilation guide for pension data in national accounts 

33 

 
 
 
                                                           
Columns and rows in the supplementary table 

4 

One characteristic of the changing environment of pensions is the increasing possibility of having 
"portable pensions", where a person moving jobs can transfer the pension entitlement with the 
former employer to one with the new employer. When this happens, the pension entitlement of the 
household concerned is unaffected but there is a transaction between the two pension schemes as 
the new one assumes the liability of the former. In addition, there will be a counterpart transaction in 
some assets to match these liabilities. 

If government assumes the responsibility for pension provision for the employees of a non-
government unit through an explicit transaction, any payment by the non-government unit needs to 
be recorded as pre-paid social contributions (F.89).  

When one unit takes over the responsibility for pension entitlements from another unit, this is 
recorded in row 6 as the transfer of pension entitlements from the original pension scheme to the 
new pension scheme. There may also be an underlying transfer in cash or other financial assets to 
compensate the new pension scheme, and it is possible that the value of the transfer of financial 
assets is not exactly equal to the value of the pension entitlements transferred, however row 6 only 
relates to the transfer of entitlements between schemes.  

Employers are increasingly reforming the pension schemes they manage in response to 
demographic and other factors. Reforms may take the form of a change to the benefit formula, a 
change in the retirement age, or a change in other scheme provisions. 

Only enacted38 pension reforms lead to recording in the national accounts, in the estimates of 
pension entitlements in the year in which enactment takes place and subsequently in observed flows. 
An announcement by an employer of its intention to undertake a pension reform is not a sufficient 
basis to introduce the effects of the reform into national accounts data. 

In some cases of reform, the employer chooses to leave the vested rights of existing members 
untouched and only applies the reformed arrangements for future acquisition of additional 
entitlements. There would be no immediate impact on current pension benefits. The impact would be 
seen in future measures of pension benefits, in line with the accrued to date approach. 

However, in some cases the employer decides to make reforms which affect the accrued to date 
entitlements for existing members; for example, a general increase in retirement age for all 
members. Such types of reforms change the stock of pension entitlements during the year in which 
they are enacted. This effect must be accounted for as a flow. It may be very large since it affects 
current and future pension entitlements. 

Changes in pension entitlements are recorded as transactions as follows: 

(a) 

(b) 

If the entitlements of a pension scheme are included in the core national accounts, and the 
employer agrees to a change in the terms of pension entitlements via negotiation with the 
affected employee, this change is recorded as a transaction in the core national accounts 
(under imputed employer social contributions); 

If the entitlements of a pension scheme are not recorded in the core national accounts, and 
the employer agrees a change in the terms of pension entitlements via negotiation with the 
affected employees, this change is recorded as a transaction in the supplementary table; 

financial  transaction  funded  by  household  savings.  In  order  to  neutralise  this  effect,  an  adjustment 
(D.8) is added to the disposable income, or adjusted disposable income, of households in the use of 
income accounts before arriving at saving. Because of this different treatment the borderline between 
pensions  and  voluntary  saving  schemes  is  particularly  important  for  the  consistency  of  the  non-
financial and the financial accounts. 

38   “Enacted” means that the reform legislation (in whatever form it takes) is passed. 

Technical compilation guide for pension data in national accounts 

34 

 
 
 
                                                                                                                                                                          
Columns and rows in the supplementary table 

4 

In the case of social security, if changes in pension entitlements are agreed by the parliamentary 
authorities, this is recorded in the supplementary table as if it were negotiated. 

Changes in pension entitlements that are imposed without negotiation are recorded as other 
changes in the volume of assets. 

Changes in accrued-to-date entitlements arising from past service are recorded as capital transfers. 

Row 7 shows the impact of reforms of pension scheme structures on entitlements relating to past 
service. 

Changes to pension entitlements due to other economic flows 

Rows 8 and 9 account for the other flows as revaluations and other changes in volume associated 
with pension schemes in social insurance. Table 17.7 illustrates the other flows, divided into 
revaluations and other changes in volume. 

Revaluations are due to changes of key model assumptions in the actuarial calculations. These 
assumptions are the discount rate, the wage rate and the inflation rate. Experience effects are not 
included here unless it is not possible to identify them separately. Other changes in actuarial 
estimates are more likely to be recorded as other changes in volume of assets. The effects of price 
changes due to the investment of the entitlements are recorded as revaluations appearing in the 
revaluation account. 

When the demographic assumptions used in the actuarial calculations are changed, they are 
recorded as other changes in the volume of assets. 

Table 2: Other flows as revaluations and other changes in the volume of assets 

Revaluations 

Changes in assumed discount rate 
Changes in assumed wage developments 
Changes in assumed price developments 

Other changes in the volume of assets 

Changes in demographic assumptions 
Other changes  

Figure 6: Pension entitlements and their changes 

Contributions 
(actual, imputed 
of which: property income) 
(rows 2 and 3) 

Other flows 
(revaluations, 
other changes in volume) 
(rows 8 and 9) 

Pension benefits (row 4) 

Financial services 

Changes in  
pension entitlements 
(due to transactions and other 
economic flows) 

Pension entitlements 
at the end 
of the period (row 10) 

Pension entitlements 
at the beginning 
of the period (row 1) 

Stock at t0 

Stock at t1 
Transactions and other flows between t0 and t1 
This chart is purely illustrative and no specific meaning should be attributed to the size of the different boxes. 

Technical compilation guide for pension data in national accounts 

35 

 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
Columns and rows in the supplementary table 

4 

Related Indicators 

Financial services produced by all pension schemes are recorded as being paid by scheme 
members, and so the costs of pension schemes are not recorded as intermediate consumption of the 
employer operating the scheme. Financial services are shown separately from social contributions. 
Presenting financial services in this way means the figures shown as contributions received by 
employees from their employers are exactly the same as that part of the contributions paid by the 
employees to the pension scheme. Furthermore, it is not necessary to show which element of social 
contributions covers the service fee. It is the household contribution supplement that covers the 
service fee for a defined contribution scheme and it is either the employers' or the household 
contribution that does so for a defined benefit scheme. 

As output is recorded for all employer pension schemes, which the scheme's members consume, 
row 11 shows the output by type of scheme39. 

39   Row 11 (output) exists in ESA 2010 but has been removed from this table because it is equivalent to 

row 2.5 by construction, and therefore would just duplicate that row. 

Technical compilation guide for pension data in national accounts 

36 

 
 
 
 
                                                           
Key assumptions in measuring pension entitlements 

5 

5 Key assumptions in 

measuring pension 
entitlements 

Pension entitlements are recorded as positions in national accounts representing future payments of 
pension benefits. Moreover, the changes in positions between two points in time are also registered; 
these changes cover transactions, revaluations and other changes in the volume of assets as 
described in chapter 4. Positions in pension entitlements are derived by applying actuarial estimation 
methods which are based on the net present value concept. Such actuarial estimation methods are 
used for all pension schemes.  

For pension schemes managed by non-government units, position data on pension entitlements are 
usually available based on business accounting and/or supervisory data sources (see chapter 6). 

For defined benefit schemes for general government employees and for social security pension 
schemes, such data are typically not available and need to be compiled based on data taken from 
government finance and population statistics. With respect to the social security pension schemes, 
separate actuarial estimations usually need to be undertaken for the purposes of national accounts 
recording, based on sufficient and reliable administration data which could be compiled from the 
relevant social security institutions’ databases.  

For such actuarial estimations various assumptions have to be made: economic, demographic and 
scheme-specific assumptions. 

First of all, a suitable discount rate has to be chosen since pension entitlements are calculated in 
present value terms — i.e. they reflect the discounted sum of present and future flows compared to a 
certain base year.  

Another key economic assumption concerns future wage growth. Often, the development of future 
pension levels is highly dependent on wage assumptions, e.g. via pension formula (when pension 
amount is based on salary) and pensions-in-payment indexation. Other economic assumptions 
concern the inflation rate and the (un-)employment rates. 

Further, demographic assumptions — mainly concerning mortality rates — play a significant role in 
estimating pension entitlements.  

Following the appropriate choice of the economic assumptions as well as demographic assumptions, 
the estimation of pension entitlements is described for such government-managed pension schemes.  

Finally, some other assumptions, which are scheme-specific, include for example the prevalence 
rates for disability, retirement rates and family structure. 

Technical compilation guide for pension data in national accounts 

37 

 
 
 
 
 
Key assumptions in measuring pension entitlements 

5 

5.1  Economic assumptions 

5.1.1  DISCOUNT RATE 

a) The concept of the discount rate 

The choice of the discount rate is one of the most crucial assumptions for estimating pension 
entitlements, since its accumulated impact over many decades is quite high, as shown in the 
following table. 

Impact of the discount rate on pension entitlements: 2015 pension entitlement of households’ 
defined benefit schemes for general government employees and for social security pension 
schemes (i.e., column G plus column H of Table 29) 

COUNTRY 
Belgium 
Bulgaria 
Czech Republic 
Germany  
Estonia 
Ireland 
Spain 
France 
Croatia 
Italy 
Cyprus 
Latvia 
Lithuania 
Hungary 
Malta 
Netherlands 
Austria 
Poland 
Portugal 
Romania 
Slovenia 
Slovakia 
Finland 
United Kingdom 
Iceland 
Norway 
Switzerland 

minus 1pp 
1 345 507 
81 692 
469 711 
9 745 970 
65 999 
424 900 
3 678 476 
9 804 000 
123 763 
6 603 446 
47 911 
51 504 
96 717 
316 554 
30 549 
1 385 508 
1 499 284 
1 352 364 
667 480 
347 470 
148 490 
312 275 
747 019 
8 631 482 
13 590 
1 029 533 
1 509 349 

base case 
1 123 394 
71 861 
390 371 
8 079 140 
52 384 
345 500 
3 102 318 
8 108 000 
105 688 
5 631 628 
40 044 
43 403 
78 559 
260 615 
24 841 
1 164 296 
1 255 532 
1 127 612 
561 751 
286 358 
121 709 
248 052 
631 547 
6 736 087 
11 364 
850 838 
1 244 000 

plus 1pp 
955 829 
63 853 
330 385 
6 818 550 
42 654 
284 600 
2 665 228 
6 837 000 
91 495 
4 875 826 
34 004 
37 196 
65 153 
219 100 
20 625 
993 897 
1 069 407 
962 232 
482 877 
240 827 
101 738 
201 679 
542 795 
5 375 045 
9 668 
716 662 
1 044 883 

Source: Eurostat [nasa_10_pens2] 
Base case is a real rate of 3% (5% nominal). The discount rates used for the first data transmission 
(December 2017, on 2015 data) were based on 2018 Ageing Report recommendations (European 
Commission, 2017; European Commission, 2018). Sensitivity analysis excludes Denmark and Sweden. 

Pension entitlements as positions are compiled based on the net present value method, i.e. they 
reflect the value of a future payment stream for a given base year. When calculating pension 
entitlements, the crucial question is: what are future payments of pension benefits worth today?  

Technical compilation guide for pension data in national accounts 

38 

 
 
 
 
 
 
Key assumptions in measuring pension entitlements 

5 

One tool for valuing a future stream of payments is the discount factor (𝐷𝐹). The 𝐷𝐹 is compiled 
based on the following Equation 1: 

(1)             𝐷𝐹𝑡 =

1
(1 + 𝑟)𝑠−𝑡 

The discount rate 𝑟 as part of the denominator determines the level of the 𝐷𝐹. To calculate the 
present value in year 𝑡 of a future pension benefit in year 𝑠 this future payment needs to be multiplied 
by the 𝐷𝐹𝑡. 

Generally, there are two approaches of interpreting this factor. From the point of view of the creditor 
who earns the pension entitlements, the discount factor reflects the time value of money. It is the 
value of a future payment in terms of a present payment. Present payments are seen as worth more 
than future payments due to opportunity costs and possible risks associated with future payment 
streams. It means that the discount factor is generally smaller than one. 

From the debtor’s point of view the discount rate is used to calculate the pension reserves to be set 
aside today to finance future pension obligations. For a more detailed description of these two 
perspectives, see Box 7. 

Box 7: The creditor’s and the debtor’s perspective: two 

interpretations of the discount rate 

For pension entitlements (obligations), the discount rate can be interpreted from two perspectives, 
from the perspective of the creditor and from the perspective of the debtor. 

From the perspective of the creditor, a future payment is influenced by the opportunity costs of 
“waiting”. If a future pension benefit were available today, it could e.g. be saved and therefore could 
yield a return in the coming period. In such cases, the opportunity costs are reflected by the interest 
rate on the possible investment. Additionally, the discount rate of the creditor may be affected by the 
uncertainty of future payments. For example, there is the risk that the pension scheme may default. 
From the individual perspective of the creditor, therefore, the discount rate may be higher than the 
risk-free interest rate. Obviously, the discount rate from this viewpoint is difficult to measure and 
might vary considerably across individuals and time depending on individual preferences. However, 
such aspects of risk and preferences need to be taken into account when considering the creditor 
perspective. 

The discount rate can also be interpreted from the debtor’s perspective, representing a tool to 
measure the present capital costs of financing future payments. Due to gains through interest rates, 
the amount of money to be set aside today to finance a future payment can be smaller than the 
actual payment in the future. On the basis of these interest rates (discount rates), therefore, present 
pension reserves can be estimated to finance future pension payments. In the case of defined 
benefit schemes, notional reserves may be quantified. In practice, most accounting standards require 
debtors to calculate using relatively risk-free interest rates such as corporate bonds or central 
government bonds.  

Technical compilation guide for pension data in national accounts 

39 

 
 
 
 
 
Key assumptions in measuring pension entitlements 

5 

b) 

The choice of the discount rate 

The choice of the discount rate in business accounting standards differs. International accounting 
standards (IAS) aim for a discount rate that reflects market yields on the balance sheet of “high-
quality corporate bonds”. In this context, “high quality” is generally defined by business accountants 
as bonds with a high rating. Where the markets for corporate bonds are thin, it is possible to use 
yields on central government bonds. 

For government-managed pension schemes, it is generally agreed that central government debt 
securities provide a suitable basis for the discount rate40. Furthermore, the choice of the discount 
rate is ideally based on the following criteria: 

1) 

In order to obtain a suitable proxy for a risk-free interest rate, it is advisable to base it not on 
central government debt securities of one single country but on a basket of e.g. European 
central government debt securities. 

2)  The maturity of these debt securities should be similar to that of pension entitlements, i.e. at 

least 10 years, but preferably longer. 

3) 

In order to guarantee comparability across countries, the same discount rate should be 
applied to all EU countries and all government-managed pension schemes (including social 
security pension schemes) at whatever level of government. 

4)  A stable discount rate should be applied to avoid the noise resulting from frequent changes. 

In line with the above criteria, for the first Table 29 data transmission – December 2017 on 2015 data 
– it was recommended by the Ageing Working Group to set the discount rate at three per cent in real 
terms and five per cent in nominal terms. As a general rule, since Table 29 data are collected every 
three years, for every transmission the discount rate is aligned with the one recommended in the 
Ageing Report, also a triennial exercise. 

The ultimate long-term interest rate assumptions adopted by the Ageing Working Group for the 2021 
Ageing Report have been lowered to a level of two percent for the discount rate in real terms for all 
the EU countries. As a result the nominal target discount rate is set at four percent in nominal term 
(the inflation target being: 2%) for all EU countries except for: 

  Poland and Romania, where the target nominal rate is set at 4.5% (the target inflation set by the 

respective National Central Banks being 2.5%) and 

  Hungary, where the target nominal rate is set at 5% (target inflation: 3%).  

Another difference for the 2021 Ageing Report is that the linear convergence to the above set targets 
is assumed to be reached (and maintained thereafter) by (T+30) 2050 as opposed to T+10, as in the 
previous Ageing Report. As a result, an intermediate country-specific convergence target has been 
set for nominal long-term interest rates at T+10 (2030), according to the forward rates at t+10, as per 
the following table: 

40   E.g. IPSAS recommends (long-term) government bonds as a basis for the discount rate. 

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Target long-term nominal interest rates at T+10 (2030) (May 2020) 

Country  10Y interest rate in T+10 

AT 
BE 
BG 
CY 
CZ 
DE 
DK 
EE 
EL 
ES 
FI 
FR 
HR 
HU 
IE 
IT 
LT 
LU 
LV 
MT 
NL 
PL 
PT 
RO 
SE 
SI 
SK 
UK 

0.56 
1.17 
1.18 
2.69 
2.38 
0.15 
0.36 
1.12 
2.44 
2.12 
0.49 
1.04 
1.75 
2.91 
1.04 
3.33 
1.31 
0.46 
0.92 
1.45 
0.24 
1.79 
2.35 
6.14 
0.88 
1.93 
1.29 
1.03 

The appropriate choice of discount rate for pension obligations under public pension schemes is 
discussed in more detail in Box 8. 

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Key assumptions in measuring pension entitlements 

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Box 8: The appropriate choice of a discount rate for 

government pension obligations 

In order to produce comparable estimates for pension entitlements (obligations) in national accounts 
across pension schemes, countries and time, the following criteria should be met with regard to the 
discount rate: 

1)  To obtain a suitable proxy for a risk-free interest rate it is advisable to base it not on the 

central government debt securities of one single country but on a basket of e.g. European 
government long-term debt securities. 

The main argument for such a portfolio of bonds is based upon risk considerations. Government 
bonds are usually not absolutely risk-free and generally include the risk of default by the country 
concerned in the shape of a risk premium. This risk premium can vary across countries and over 
time. 

2)  The maturity of these bonds should be similar to that of pension entitlements, i.e. at least 10 

years but preferably longer. 

When calculating the accrued-to-date liabilities (ADL) of government-managed defined benefit 
pension schemes and of social security pension schemes, one projects future pension benefits 
accrued to date into the future. These benefits will arise after a period of some several decades. The 
government bonds used should cover (at least) a similar period of time. Therefore, only government 
bonds with a maturity of at least 10 years should be considered as a basis for the discount rate. 
Preferably, duration of 30 years should be chosen, which reflects the average length of pension 
entitlement payments.  

3)  To guarantee comparability across Europe, the same discount rate should be applied to all 
EU countries and all government-managed defined benefit pension schemes (including 
social security pension schemes) at whatever level of government. 

In theory, there is only one risk-free interest rate. This interest rate should be equal for all countries 
and all levels of general government. Therefore, only one value should be approximated for the 
corresponding discount rate and used for estimations across Europe to ensure comparability.  

4)  A stable discount rate should be applied to avoid the noise resulting from frequent changes. 

Frequent changes in the discount rate between estimation exercises can make it difficult to explain to 
the public and compare time series of pension entitlements since outcomes can differ widely. As 
stated above and confirmed by the results of first Table 29 data transmission sensitivity analysis, 
variation in the discount rate may change outcomes considerably.  

Why to choose a discount rate of two per cent per annum?  

The long-term interest rate assumptions that underpinned the Ageing Report (AR) 2018 long-
term projections until 2070 contain elements dating back to 2006. The conventional 
assumptions on long-term interest rate that have underpinned the AWG work over the past 15 years 
reflect historical averages in some countries41. However, the macroeconomic environment has 
substantially changed over the past decades, as acknowledged by a vast literature. 

Risk-free nominal interest rates in advanced economies have been trending downward, for 
several decades (see Figure 7)42. Real rates declined in parallel, although to a slightly lesser 

41   See European Commission (2017), “The 2018 Ageing Report: Underlying Assumptions and Projection 

Methodologies”, European Economy Institutional Paper, No. 065, Part I.4. Table I.4.1. 

42   European Commission (2020), Note to the EFC on ‘Drivers of the Low Interest Rate Environment’, 27 

February 2020, Brussels (see attachment to this note). 

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Key assumptions in measuring pension entitlements 

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extent. Persistently low inflation and sluggish economic growth suggest a secular decline of the real 
equilibrium rate to historically low levels, as reflected in market expectations of persistently low 
interest rates in the years to come. This global phenomenon is well documented in the literature, 
being attributed to both “structural factors” having triggered an excess of real savings over 
investment (ageing and low productivity trends, sluggish invention and innovation, low investment 
profitability, income growth in emerging economies, rising income or wealth inequality, deleveraging), 
but also to some more circumstantial or policy-related drivers, such as the scarcity of safe assets 
coupled with increased demand during global uncertainty, especially in the euro area after the 
sovereign debt crisis43.  

Figure 7: Interest rate decline 

7a.  Natural (or real equilibrium) rate estimates for advanced economies 

Notes: *Estimates provided by the New York Fed, following Holston, Laubach, Williams (2017). 

Source: EFC note quoted, based on New York Fed. 

43   For a thorough survey of the literature and the empirical evidence see: European Commission (2020), 

Note to the EFC on ‘Drivers of the Low Interest Rate Environment’, 27 February 2020, Brussels. 

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7b.  Nominal and real 10-year yield on government bonds, % 

Notes: *Simple averages of available data for selected countries. 

Source: EFC note quoted, based on Macrobond, national sources. 

5.1.2  WAGE GROWTH 

To estimate the pension entitlements of defined contribution schemes, no assumptions regarding 
wage growth are required. In such systems, pension entitlements depend solely on the financial 
assets accumulated through contributions.  

In contrast, in defined benefit schemes the level of pension entitlements depends also significantly 
on future wage growth44. These schemes usually apply a formula to the member’s salary (final 
salary, an average over a period of years, or lifetime earnings) to determine the level of the initial 
pension. In these circumstances, the PBO approach — described in Section 2.2 — is used, and the 
future wage development is taken into account. Therefore, assumptions have to be made regarding 
future wage growth, through promotion/career progression but also due to general economic 
growth45. 

44   In Notional Defined Contribution (NDC) systems, generally, future pension levels are determined by 

the wage growth or more precisely the wage bill growth in the economy. 

45   When applying the ABO method no assumptions have to be made about the future development of 
wages. Under ABO method, the members’ pensions are determined solely on the basis of their 
current salary in the base year. The use of the ABO method is appropriate when the pension formula 
is not linked to future salaries (e.g. flat-rate benefit plans) and has to be mentioned by countries in the 
metadata. 

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Determining the wage growth assumption 

Assumptions as to the future development of wages have a significant impact on the level of pension 
entitlements when the PBO method is used. Therefore, guidelines for determining this essential 
parameter for actuarial estimations are given below.  

Generally, two factors lead to future wage growth:  

1)  Promotions and the career progression; and 

2)  The general wage growth in the economy 

The first factor, the career path of individuals is usually relatively age-specific. European countries 
generally show an increasing over the employment cycle — as illustrated in Figure 8. In the 
European Union, younger cohorts (here aged less than 30 years) generally earn less than their older 
counterparts in the workforce. With an increasing age, average earnings rise and reach their 
maximum usually close to the end of working-life. To approximate future career paths, it is useful to 
take the earnings profile for the base year as the basis. It is assumed that the present age- and 
gender-specific salary structure will remain constant over time.  

Based on Eurostat information available on the structure of earnings in Europe, we can observe the 
following: 

  A male individual aged less than 30 years in the base year 2014 can expect to earn almost 70 per 

cent more due to career progression by the end of his career.  

  A women individual aged less than 30 years in the base year 2014 can expect to earn almost 50 

per cent more due to career progression by the end of her career. 

Career progression might differ between members of government-managed pension schemes for its 
employees and members of social security pension schemes. This is mainly due to differences in 
promotions in the private sector compared to the public sector. Therefore, earnings profiles should 
distinguish between private and public employees, if possible. 

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Key assumptions in measuring pension entitlements 

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Figure 8: Age and sex specific earnings profile – mean hourly wages (EUR)

20

18

16

14

12

10

Less than 30 years

From 30 to 39 years

From 40 to 49 years

From 50 to 59 years

60 years or over

Males

Females

Source: Eurostat, 2014 Structure of earnings survey: hourly earnings [earn_ses_hourly]. 

The second factor, the General wage growth in the economy will also affect future pension levels, 
and therefore PBO pension entitlements. Since the development of future wages is uncertain, 
assumptions have to be made here as well.  

Generally, it is assumed that, over the long term, average wage growth follows labour productivity 
growth in the economy.  

An overview of EU countries shows that this growth rate is relatively heterogeneous (see Figure 9). 
Specifically, countries with lower GDP per capita rates have seen higher productivity growth rates in 
recent years. According to the projections of the Ageing Working Group (AWG), this trend will 
continue in the coming decades. In particular, central eastern EU countries are expected to 
experience higher growth paths, catching up to the productivity levels of the “old” EU Member States 
(see e.g. the example of Poland  and Estonia in Figure 9). 

Choice of wage growth assumption 

In order to reflect heterogeneous growth paths across the EU, the wage growth assumptions 
of the AWG — reflecting labour productivity growth — should if possible be used for the 
estimation of pension entitlements. This provides a basis for harmonised growth assumptions and 
at the same time allow for heterogeneous growth paths across EU Member States. 

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Key assumptions in measuring pension entitlements 

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Figure 9: Ageing Working Group labour productivity and wage growth paths for Germany, 
Poland and Estonia 

Source: EC-EPC 2018 Ageing Report (Ageing Working Group). 

In many government-managed pension schemes of the EU countries, wage growth also plays a 
crucial role in the indexation of pension benefits. To ensure consistency, the AWG assumptions for 
future wage and productivity growth should be used to estimate the future indexation of pensions. 

Changes in the wage growth assumption 

The assumption for wage growth should be reviewed and updated on a regular basis. The latest 
productivity projections of the AWG should always be applied. These forecasts are revised every 
three years, in the Ageing Report document on Underlying Assumptions and Projection 
Methodologies. The latest edition was the 2018 Ageing Report, and next update is scheduled for 
October 2020. If there are changes in the assumptions for future real wages, this will be recorded as 
other flows (revaluations). 

5.1.3 

INFLATION 

For calculating pension entitlements, it has to be decided whether future flows are to be projected in 
nominal or in real terms. If nominal values are chosen, both the discount rate and the wage growth 
rate should include future inflation expectations. If the projection is based on real values, inflation 
expectations are not considered. The latter approach has the advantage of avoiding further 
assumptions regarding future price levels. Generally, for calculating present values both approaches 
(nominal and real values) should lead to similar results (see Box 9). Therefore, both approaches can 
be used for the estimation of pension entitlements. However, it is essential to check which is being 
taken as the basis for the assumptions. Discount rates are usually quoted in real terms, but not 
always. Wage growth is sometimes presented in nominal terms. Hence, it is important to verify 
whether inflation is considered in the financial assumptions or not. 

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Key assumptions in measuring pension entitlements 

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Choice of future inflation  

For the future, an ultimate inflation rate of two per cent should be applied46. This is in line with the 
ECB’s inflation rate target of just under two per cent over the medium term as well as the AWG’s 
long-term assumption of price inflation. 

Box 9: Projecting future flows — nominal terms versus 

real terms 

To estimate the present value (𝑃𝑉) in year t of a pension benefit  𝑃  paid out in t+1, the following 
growth-discount factor (𝐺𝐷𝐹) is applied: 

(2)       𝐺𝐷𝐹𝑟𝑒𝑎𝑙 =

(1 + 𝑔)
(1 + 𝑟)

The discount rate is denoted by 𝑟 and the growth in the pension benefit, e.g. due to pension 
indexation, is denoted by 𝑔. The present value is then calculated by multiplying the pension level with 
the 𝐺𝐷𝐹: 

(3)       𝑃𝑉𝑡 =   𝑃𝑡+1 × 𝐺𝐷𝐹𝑟𝑒𝑎𝑙 

If a nominal approach is adopted, expected inflation (𝜋𝑒) is considered for future wage growth and for 
the discount rate, leading to the following growth-discount factor:  

(4)      𝐺𝐷𝐹𝑛𝑜𝑚𝑖𝑛𝑎𝑙= 

(1+g+𝜋𝑒) 
(1+r+𝜋𝑒)

Since expected inflation (𝜋𝑒) is in both the nominator and the denominator, it is almost cancelled out. 
𝐺𝐷𝐹𝑟𝑒𝑎𝑙 and 𝐺𝐷𝐹𝑛𝑜𝑚𝑖𝑛𝑎𝑙 therefore have a similar value, with the consequence that the results 
calculated in nominal terms are rather close to the outcomes estimated in real terms. 

5.1.4 

(UN)EMPLOYMENT RATES 

The level of future pensions may be directly linked to (un)employment rates in the economy. 
Therefore, employment assumptions may be required for the estimation of pension entitlements.  

The choice of future (un-)employment rates 

For the choice of future (un-)employment rates, the AWG provides a basis comparable across EU 
countries. Therefore, these assumptions should be used if required for the estimation of pension 
entitlements. 

5.2  Demographic assumptions 

Eurostat database is constantly updated with its most recent population projections47. The datasets 
are composed by baseline population projections and various sensitivity tests. 

Data available include: 

  Projected population on 1 January by age and sex, and by single year time interval for several 

decades ahead of projections’ base-year; 

46   Except for Hungary (3%), Poland (2.5%) and Romania (2.5%). 
47   See https://ec.europa.eu/eurostat/web/population-demography-migration-projections/population-
projections-data, where also detailed information on the methodologies applied can be found. 

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  Assumptions on future age-specific fertility rates; sex-specific and age-specific mortality rates and 

international net migration levels; 

  Corresponding approximated values of the life expectancy by age and sex. 

The following demographic balances and indicators are also available: 

  Total numbers of the projected live births and deaths; 

  Projected population structure indicators: proportions of broad age groups in total population, age 

dependency ratios and median age of the population. 

5.2.1  LIFE EXPECTANCY 

The level of pension entitlements is also dependent on future demographic developments. Assumed 
future life expectancy, measured through mortality rates and mortality improvement rates, plays a 
significant role. It determines the expected number of years the pension annuity is to be paid out. 
Consequently, pension entitlements may vary if different life expectancies are applied. Life 
expectancies are calculated based on mortality tables already established for the modelling of 
pension and life insurance schemes.  

In the case of social security pension schemes covering a large part of the population, demographic 
data provided by Eurostat ensure a comparable data set across EU countries. Eurostat provides 
age- and sex-specific mortality tables for all EU countries. Only if specific data on the mortality of 
social security members are available such data should be used48. Since mortality rates differ widely 
between men and women, a sex-specific differentiation of mortality data is necessary. 

Assumptions provided by Eurostat regarding future life expectancy should be applied as well. In 
doing so:  

  Eurostat’s most recent population projections must always be used.  

 

In the case of several sensitivity tests for Eurostat population projections, the baseline projections 
must always be assumed.  

  Furthermore, assumptions regarding future life expectancy must again be differentiated by 

gender.  

5.2.2  FERTILITY RATE 

The modelling of some pension schemes may involve the use of other demographic 
assumptions such as future fertility rates. Assumptions on the total fertility rate may play a role 
in certain benefit formulas under specific pension schemes, where, for example, future pensions 
might be linked to demographic developments, which are partly determined by projected fertility 
rates (or projected number of births). 

In addition, this may play a role in estimating entitlements for an orphan’s pension. The right to 
these benefits is accrued today by present contributors to the pension scheme. When they die 
at some point in the future, however, their dependent children — whether born or unborn at 
present — will generally receive an orphan’s pension. A higher future fertility rate will therefore 
lead to a higher number of children receiving an orphan’s pension. However, this should play 
only a minor role since orphans’ pensions account only for a small part of overall pension 
entitlements. 

48   If  the  mortality  of  pension  scheme  members  is  assumed  to  differ  widely  from  the  general  population 
mortality,  scheme-specific  mortality  data  should  be  used  if  available.  In  contrast,  the  beneficiaries  of 
disability  pensions  might  have  significantly  higher  mortality  rates  than  average  members  of  the 
population. 

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Key assumptions in measuring pension entitlements 

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5.2.3  MIGRATION 

Migration is another factor that might be relevant for the estimation of pension entitlements. In 
some countries, individual pension levels may differ if contributors migrate. Different pension 
rules may apply to pensioners who choose to emigrate. Also, migration may play a role in the 
pension benefit formula — e.g. if a sustainability factor is applied as in notional defined 
contribution schemes. Here, national modellers have to make assumptions about how migration 
will develop in future. 

The choice of demographic assumptions 

It is recommended for Member States to use the Eurostat’s latest available population 
projections framework with respect to the demographic assumptions of mortality, fertility and 
migration. 

5.3  Other assumptions 

Pension entitlements calculations for a pension scheme in accordance with Table 29 requirements 
require a set of assumptions specific to the scheme in addition to the discount rate, the demographic 
and economic assumptions.  Key scheme-specific assumptions include the disability prevalence 
rates, the retirement rates, the distribution of past insurance credits, the distribution of insurable 
earnings, the family structure statistics and the pensions in payment indexation. 

The appropriate choice of scheme-specific assumptions for pension obligations under social security 
pension schemes, which could be made in accordance with international actuarial standards, is 
discussed in Box 10. 

Box 10: Setting scheme specific assumptions — an 

actuarial perspective 

The International Standard of Actuarial Practice on Financial Analysis of Social Security Programs, 
ISAP249 provides guidance to social security actuaries performing financial analyses of social 
security pension schemes, thus giving intended users confidence that: 

  Actuarial services are carried out professionally and with due care; 

  The results are relevant to their needs, are presented clearly and understandably, and are 

complete; and 

  The assumptions and methodology (including, but not limited to, models and modelling 

techniques) used are disclosed appropriately 

ISAP2 requires scheme-specific assumptions to be determined on a realistic best estimate50 basis, in 
contrast to, for example, the life insurance rating process in which the actuary often uses a certain 
margin of conservatism. Scheme-specific assumptions are set having regard to experience analysis 
to determine, to the extent that the available data permits, if experience trends are relevant to the 
setting of certain assumptions.  It is appropriate, therefore, in carrying out financial pension 
entitlement calculations, to have regard as much as possible to scheme-specific experience in 
addition to the provisions of the social security pension scheme, and the assumed values of all of the 
above scheme-related variables should be disclosed in a relevant country report. 

49   See http://www.actuaries.org/CTTEES_ASC/isaps/pdf/isap2.pdf  
50   Best  estimate  assumptions  are  such  that  it  is  expected  that  the  resulting  projection  of  the  social 

security program experience is not a material underestimate or overestimate of the obligation. 

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Key assumptions in measuring pension entitlements 

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5.3.1  FUTURE PREVALENCE OF DISABILITY 

The supplementary table covers all types of pensions, including disability and invalidity pensions. In 
order to estimate entitlements to disability and invalidity pensions, assumptions thus need to be 
made regarding the probability of becoming disabled in the future. This probability is reflected in the 
so-called prevalence rate, which is defined in this context as the total number of disabled persons 
divided by the total population by single age and gender.  

Pension entitlements take into account the probability of receiving a pension in future. Therefore, 
they are generally higher — other things being equal — the higher the assumed future prevalence 
rates for disability. Accordingly, the crucial question is whether the present health status will remain 
constant in the future.  

The choice of future prevalence rates for disability 

For the determination of prevalence rates for disability, it is important to use the specific experience 
of the pension scheme in order to generate the correct number of new annual invalidity/ disability 
pensioners. In particular, the number of new cases of disability pensions during recent past years are 
typically used to estimate future disability prevalence rates. To estimate the incidence rate, the data 
on new cases should be collected by age and sex. 

In recent decades, a rise in disability due to mental illness has been observed. Whether this trend will 
continue in the coming years is uncertain, and is not clearly evident from academic studies. 
Moreover, in many member states the eligibility age for old-age pension is legislated to increase in 
future. Then prevalence rates for older age cohorts must be constructed following the experienced 
age-dependence of disability prevalence. Also, future behavioural responses of this kind are difficult 
to forecast. Due to this uncertainty, constant prevalence rates are likely to be used for the estimation 
of pension entitlements. 

5.3.2  RETIREMENT RATES 

To set the assumption of future retirement patterns, the data need to be collected on past retirement 
experience under the pension scheme, for which the data on new retirement pensions awarded, by 
age at retirement and gender, are necessary. The calculation of retirement rates must be consistent 
with the rule applicable to testing the eligibility of insured persons for the retirement pension, for 
example, by referring to contribution credits. If the retirement age has recently changed, experience 
data may need adjusting before they are used to calculate retirement rates, taking into account time 
lags between the scheme’s modifications and the time the modification appear in the statistics. 
Similarly, if the retirement is legislated to increase in future, the assumed retirement rates by age and 
gender need to be shifted upwards accordingly. 

5.3.3  DISTRIBUTION OF PAST INSURANCE CREDITS AND INSURABLE 

EARNINGS 

When estimating future eligible pensioners (retirement, death or disability) and calculating new 
pension award amounts, the variables of the distribution of past insurance credits and a distribution 
of insurable earnings should be considered. 

5.3.4  FAMILY STRUCTURE STATISTICS 

Statistics on the family structure of the insured persons is necessary for the calculation of pension 
entitlement to survivors’ benefits. Assumptions need to be established on the probability of being 
married at death, the age difference between spouses, the average number or children possibly 
eligible for an orphan’s benefit and the average age of orphans. 

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Key assumptions in measuring pension entitlements 

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The above assumptions on family statistics are derived from scheme past experience if these 
information is recorded and emerging trends. Otherwise, family statistics can be based on other 
national or international sources. 

5.3.5  PENSIONS-IN-PAYMENT INDEXATION 

Pensions-in-payment are adjusted at regular intervals in accordance with pension scheme’s 
indexation rules.  The above adjustment is typically linked to the variation of price or wage index. 

When the scheme does not guarantee a periodic indexation and instead has a practice of ad hoc 
indexation, the pensions are assumed to be indexed according to the assumption adopted in the 
AWG exercise. Under AWG framework, pensions are indexed according to the legislated rules which 
stipulate price or wage indexation, or an indexation which combines the above two. 

If pensions-in-payment are not adjusted on a regular basis in line with economy (wages), the pension 
scheme would quickly lose its significance. In that context, under the AWG framework, the minimum 
pension is typically indexed according to the nominal wage growth.  

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Data sources for compiling pension entitlements 

6 

6 Data sources for 

compiling pensions 
entitlements 

Different data sources can be utilised to fill in the supplementary table on pension schemes. 
Accounting, administrative and statistical data generally provide a suitable basis, in particular for 
employment-related social insurance schemes other than social security, recognised in the core 
system of national accounts. 

Information for columns on government schemes for its own employees not recognised in the core 
national accounts and social security pension schemes (column G and H of Table 29, respectively) 
can be partly obtained from administrative data of general government. Some rows, however, have 
to be estimated based on an actuarial model51. 

The various data sources that can be used to complete the supplementary table are outlined in the 
following sections. 

6.1  Accounting data for private employer-sponsored 

pension schemes 

The accounting statements of private businesses are guided by accounting principles for pension 
schemes. These principles may be based on one of the following international or national accounting 
standards: 

a) International Accounting Standard (IAS) for private businesses 

b) National accounting standards for private businesses 

These standards are explained below to facilitate the interpretation and use of pension data from 
sources that apply these accounting standards52. 

51   The  figures  of  column  F  may  also  be  estimated  by  an  actuarial  model  depending  on  the  accounting 

practices. 

52   In all cases, data from any source have to be adjusted according to National Accounts valuation and 

principles. 

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A.  INTERNATIONAL ACCOUNTING STANDARD (IAS) FOR PRIVATE 

BUSINESSES 

The accounting treatment of pension schemes in private businesses is set out in International 
Accounting Standard 19 (IAS19 (2011) – “Employee Benefits”). This standard is mandatory for the 
consolidated accounts of listed companies in Europe, with some countries extending its application 
(obligatory or voluntary) to individual accounts and unlisted companies. The standard establishes the 
principle that the cost of providing employee benefits should be recognised in the period in which the 
benefit is earned by the employee, rather than when it is paid or payable, and outlines how each 
category of employee benefits are measured, providing detailed guidance in particular about post-
employment benefits. It furthermore requires full recognition of changes in the net defined benefit 
liability including immediate recognition of defined benefit costs. 

As the recognition of costs and liabilities is based on the accrual principle and not on payments 
made, IAS19 does not distinguish between funded and unfunded pension schemes. However, IAS19 
does distinguish between defined contribution (DC) and defined benefit (DB) schemes, and 
differentiates between the accounting treatment applied: (i) Defined contribution schemes entail the 
cost to the employer in the current period, thus the only balance sheet obligations recorded are for 
employer contributions not paid by year-end; (ii) Defined benefit schemes entail costs to the 
employer in the current period along with balance sheet obligations representing the discounted 
value of future pension payments for accrued pension rights at the balance sheet date. 

For defined benefit schemes, the balance sheet obligations for pension schemes under ISA19 are 
calculated using an actuarial model with the following characteristics: 

  A discount rate equivalent to the market yield (on the balance sheet date) on high quality 

corporate bonds (by convention with an AA ranking or better) should be used, or where there is 
no deep market in such bonds, by reference to market yields on government bonds. Currencies 
and terms of bond yields used must be consistent with the currency and estimated term of the 
obligation being discounted. 

  The “Projected Unit Credit Method” should be used; this method is equivalent to the Projected 

Benefit Obligation (PBO) approach described in chapter 2. 

  Valuations should be carried out regularly and assumptions should be mutually consistent. 

Accounts should therefore record the following on the income (profit and loss) statement for a 
company pension scheme: (i) current service cost (the actuarial estimate of benefits earned by 
employee service in the period); (ii) interest cost (the increase in the present value of the obligation 
as a result of moving one period closer to settlement); (iii) expected return on the pension scheme’s 
assets; (iv) actuarial gains and losses53, to the extent recognised; (v) past service cost54, to the 
extent recognised; (vi) the effect of any plan curtailments or settlements (e.g. pension reforms). 

53   Representing  the  experience  effect  of  outcomes  compared  to  assumptions,  and  also  changes  in 

assumptions between one modelling exercise and the next. 

54   Past service  cost  is  recognised  as  an  expense at  the  earlier  of  the  date  when  a  plan  amendment or 
curtailment  occurs  and  the  date  when  an  entity  recognises  any  termination  benefits,  or  related 
restructuring  costs  under  IAS  37  Provisions,  Contingent  Liabilities  and  Contingent  Assets.  [IAS 
19(2011).103]. 

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B.  NATIONAL ACCOUNTING STANDARDS FOR PRIVATE BUSINESSES 

As regards companies that do not apply IAS, accounting practices differ across Europe. In some 
jurisdictions, there is a national standard for business accounting which is similar to IAS19, while in 
other countries a historical approach continues to be used, which can be quite different from IAS1955.  

It is important to stress that data reported by corporations for regulatory purposes may use a different 
basis than company accounting practices. Generally, it should be examined which approach is 
applied in accounting practices. Preferably, the approaches used for the columns of the 
supplementary table should be comparable. If e.g. both ABO and PBO data are available, the latter 
should be used to complete the supplementary table. 

6.2 

International standards, administrative data and 
actuarial calculations for government-managed 
pension schemes 

While non-government employer pension schemes are usually recorded on a business accounting 
basis or subject to reporting requirements for regulatory purposes, this is often not the case for 
government-managed pension schemes. Especially for social security pension schemes, usually 
only data on a cash basis are available. For the government-managed pension schemes the figures 
for the supplementary table (in columns G and H) can only be partly derived directly from 
administrative data. Large parts of the rows in columns G and H need to be estimated with an 
actuarial model. 

6.2.1 INTERNATIONAL PUBLIC SECTOR ACCOUNTING STANDARD (IPSAS) 

The international accounting standard for the employer pension schemes of public bodies is set out 
in International Public Sector Accounting Standard (IPSAS39 – “Employee Benefits”). IPSAS 39 is 
largely based on IAS1956. Yet it diverges from IAS19 in one main respect: there is more leeway 
concerning the discount rate, as it can be based on the market yields of government bonds, high 
quality corporate bonds, or any other financial instrument. In this context, the IPSAS Board has 
concluded that the required rate should reflect the “time value of money” and that in some 
jurisdictions the yield on government bonds would be the most appropriate.  

Where IAS19 or IPSAS39 based accounts are available, they can often be readily used to complete 
the main parts of the supplementary table. In these accounts, the pension entitlements are measured 
on an actuarial basis and the assumptions made are usually readily available from the notes to the 
accounts. Access to business accounts varies between countries. In some cases, the full data are 
available through central balance sheet offices or similar central data collections, while in other 
countries the collection might be based on the largest companies or some other sample-based 
approach. However, the data available might not be broken down by defined contribution schemes 
and defined benefit schemes — for this, ECB pension funds statistics may need to be used (see 
below). 

It should be noted that the IPSAS39 standard does not cover reporting by social security pension 
schemes. Social security pension benefits are covered by IPSAS42 (“social benefits”) which takes a 

55   In Germany, for example, an ABO approach and a fixed interest rate were used for a long time. With 
reforms in 2009, however, the German GAAP is now closer to IAS19, requiring a PBO approach and a 
time-variant discount rate (which is regularly defined by the Deutsche Bundesbank and published on a 
monthly  basis  https://www.bundesbank.de/en/statistics/money-and-capital-markets/interest-rates-and-
yields/discount-interest-rates/discount-interest-rates-793604. 

56   For  further  information  on  IPSAS  39 see  https://www.ifac.org/system/files/publications/files/IPSAS-39-

Employee-Benefits.pdf 

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narrower view of an entity's liability for future payments (when there is "the satisfaction by each 
beneficiary of all eligibility criteria to receive a social benefit payment")57. This means that the 
balance sheet entries based on IPSAS42 are not suitable for direct use as statistical balance sheet 
data. 

6.2.2 PENSION DATA DIRECTLY OBTAINED FROM ADMINISTRATIVE DATA 

Parts of column G of general government employees pension schemes and column H of social 
security pension schemes can be derived directly from the administrative data of general 
government, namely for: 

row 2.1  employer actual social contributions; 

row 2.3  household actual social contributions 

row 2.5  pension scheme service charges; and  

row 4  

reduction in pension entitlements due to payment of pension benefits. 

The pension data should be recorded in gross terms and social assistance schemes should not be 
included.  

If pension data cannot be obtained from administrative entities, alternative sources may be used. 
They are described in Box 11. 

Box 11: Additional data sources to compile pension 

entitlements 

Macroeconomic data 

ESSPROS 

One additional data source based on macroeconomic data is the European System of Social 
Protection Statistics (ESSPROS) maintained by Eurostat according to Regulation 458/2007 of the 
European Parliament and of the Council. It contains statistics on the expenditure and receipts of 
social protection schemes as well as on the number of pensioners. ESSPROS is based on registers 
and other administrative sources, surveys, and estimates by EU Member States and is designed to 
provide a comparable data base for EU countries plus Iceland, Switzerland and Norway. Pension 
and pensioners data are categorised by various types of pensions included in old age pensions, 
disability pensions, survivor’s pension and early retirement for labour market reasons pensions 
(which is part of the unemployment function). ESSPROS data are available with a time lag of less 
than two years (generally after 17 to 22 months after the end of the reference year). Similar to the 
distinction made between social insurance and social assistance pension schemes — the latter are 
not to be included in the supplementary table (see chapter 3) — ESSPROS divides benefits into 
means-tested benefits and those that are not means-tested. However, ESSPROS lacks precision on 
a number of issues that are important for pension entitlements. For example, it provides only limited 
information on the characteristics of pensioners, which is differentiated by gender but not by age. 
However, the coverage of pensioners in number is complete and includes those living in institutional 
households. Also, no distinction is made between government employee and social security pension 
schemes. However, ESSPROS schemes are classified according to five criteria, including “decision 
making” (government-controlled vs. not government-controlled schemes), “legal enforcement” 
(compulsory vs. non-compulsory schemes) and “establishment of entitlements” (contributory vs. non-

57   More explicitly – “The maximum amount to be recognized as a liability is the costs the entity expects to 
incur in making the next social benefit payment. This is because social benefit payments beyond this 
point are future events for which there is no present obligation”.  

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contributory schemes) and data and metadata by individual schemes are made available by Eurostat 
for the large majority of countries. Links and comparison between ESSPROS and national accounts 
have been developed in recent years both at conceptual and practical (data) level. 

COFOG and detailed tax and social contribution receipts 

Another macroeconomic/ fiscal data source refers to data based on the Classification of the 
Functions of Government (COFOG), which is compiled under the ESA transmission programme. It 
provides a breakdown of general government expenditure by economic function and by type of 
transaction. Pension data are allocated to the COFOG groups “old age2, “survivors”, 
“unemployment” as well as the COFOG class “disability”, like in ESSPROS. At the same time, 
government expenditure on actual or imputed employers’ social contributions is reflected within 
compensation of employees in the relevant groups (e.g. “police services” for police personnel). It 
should be noted that published COFOG data provide only a very rough overview of pension 
expenditure aggregates. They cannot give a differentiated picture of pensions since the transmission 
programme does not distinguish between social cash transfers in the context of social insurance and 
social assistance. Furthermore, no differentiation is made between government employee and social 
security pension schemes. Furthermore, social cash transfers in the context of disability pensions are 
transmitted together with social cash transfers in the context of sickness. Accordingly, aggregated 
COFOG data should only be used for the supplementary table if no other data source is available.  

Detailed tax and social contribution receipts provide actual and imputed pension contributions. The 
level of detail (by scheme, for government/ non-government employees) provided varies.  

Microeconomic data 

National and EU household surveys 

Household surveys focus on the living conditions of representative households and generally cover 
pensioners too. Household surveys are usually available at national level but also at European level. 
Since national surveys generally cover a larger sample, it is recommended to use these data 
sources. If national household surveys are not available, European household surveys should be 
used.  

One major European household survey is the European Union Statistics on Income and Living 
Conditions (EU-SILC), which was launched in 2003 and collects comparable multidimensional micro-
data on income, poverty, social exclusion and living conditions on an annual basis. Every year, both 
cross-sectional data (covering a given time or a certain time period) and longitudinal data (relating to 
individual-level changes over time, observed periodically over — typically — a four-year period) are 
collected. EU-SILC covers all EU Member States as well as Iceland, Norway, Switzerland, 
Montenegro, Serbia, North Macedonia, Turkey. It differentiates between various pension types, 
namely old age, survivors, disability and sickness benefits. Furthermore, benefits are distinguished 
by whether they are paid out by a pension scheme managed by general government or not. The 
same differentiation applies to contributions. However, EU-SILC does not differentiate between 
pensions paid out by government employee and social security pension schemes. Furthermore 
persons living in institutions are not interviewed.  

Before using household survey data, it has to be examined whether the individuals covered by the 
household survey are representative of the members of the pension scheme analysed. Generally, 
these surveys cover a sample characteristic of the overall population. Therefore, household surveys 
may be a particularly suitable alternative data source for social security pension schemes.  

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6.2.3 PENSION DATA TO BE ESTIMATED BY AN ACTUARIAL APPROACH: ALL 

ROWS EXCEPT 2.1, 2.3 AND 4 58 

a. 

Data inputs for the actuarial estimation of pension entitlements  

In addition to rows 2.1, 2.3 and 4 of Table 29, which are directly derived from administrative data as 
per part 6.2.2, other rows in column G and H need to be estimated using an actuarial approach, 
including actuarial pension model. 

Sufficient and reliable data are an essential element necessary for performing such actuarial 
estimates for Table 29 purposes.  Such data can be obtained from institutions responsible for the 
management of the data pertaining to the pension scheme participants and provisions.  Those 
institutions could include social security institutions and other government bodies, including 
ministries. 

The data that enables actuarial estimates to be performed include current beneficiary and contributor 
data and information on current and past pension scheme rules, as well as any planned future 
changes in these rules (e.g. benefit formula, eligibility for benefits and contribution basis).  In 
particular, the summaries of key pension data in the base year, which could be used not only as a 
basis for setting pension scheme’s assumptions but also as a starting point for the actuarial pension 
calculations, include: 

 

 

 

 

the insured population (contributors); 

the distribution of insured wages among contributors; 

the distribution of past insurance credits of contributors; and 

the number and average amount of pensions in payment by type of pension. 

The above data would be disaggregated by each insured population grouping, such as age (by 
single age), gender (males/ females), income group (by earnings band) and employment category 
(public/ private). 

The actuary responsible for the above actuarial analysis should comply with national and/or 
international actuarial standards of practice and/or other relevant guidance that describe data 
requirements, checking and validation procedures, use of incomplete data and disclosure of 
limitations, as well as other aspects related to the data. The above standards include the 
International Standard of General Actuarial Practice of the International Actuarial Association (IAA), 
ISAP159, and in case of a social security pension schemes, ISAP2. 

In practical terms, the actuarial models used for the purposes of undertaking projections for public 
schemes under the AWG framework, which are based on an open-group approach, could also be 
used for the actuarial estimation of pension entitlements under the Eurostat national accounts 
framework, which are based on a closed-group approach.  In fact, in the 2017 Table 29 pension 
exercise, the majority of Member States used a macro-simulation cohort pension model, which is 
typically used for the purposes of the AWG pension projection exercise.  Furthermore, the team 
which conducted the actuarial estimations for Eurostat purposes was, in many cases, the same 
which conducted the AWG pension projections.  Therefore, at national level, close collaboration and 
exchange of common data sources between the pension experts dealing with the Eurostat pension 
calculations and those of the AWG exercise is highly recommended. 

58   It  may  be  for  some  schemes that  the  pension  scheme  service  charges  (row  2.5)  are  also  measured 

using administrative data, in which case an actuarial approach is not needed for this row. 

59   ISAP1. 

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b.  

Quality issues and benchmarking 

While the estimation of pension entitlements should be based on a harmonised approach across 
Europe, particularly with respect to the framework of assumptions, this may not always be feasible in 
practice. Nonetheless, to ensure accurate estimations, the disaggregation of pension data, as 
mentioned above, should be applied and in particular, the following general data guidelines should 
be followed:  

  Pension data and estimations should be divided by gender; this is necessary since men and 

women show differences not only in the level of contributions and pensions but also in expected 
life expectancy, and should therefore be modelled separately.  

  Pension data and estimations should be differentiated by age; pension entitlements should ideally 
be calculated in one-year age groups (i.e. entitlements of a 20-year-old, 21-year-old etc. should 
be calculated), which can considerably improve the accuracy of results since e.g. pension 
reforms may affect a cohort born in the year x but not in the year x − 1. 

It is furthermore recommended to divide participants of a pension scheme into present beneficiaries 
and future beneficiaries, i.e. present contributors. The latter have accrued pension rights but have 
not yet received any payment, while present beneficiaries have accrued “full” entitlements and are 
receiving payments from the pension scheme. Both groups may also be differently treated due to 
pension reforms and indexation rules. It is thus reasonable to estimate the pension entitlements of 
these two groups independently.   

Pension models are usually relatively complex — often considered even a “black box”. Nevertheless, 
they should comply with certain quality criteria and be based on standard actuarial mathematics for 
public pension schemes (see chapter 7). 

Benchmarks are crucial in order to cross-check the plausibility of the outcomes. This is particularly 
the case when new pension models are introduced to estimate pension entitlements. Here, the 
probability of error is generally higher than in frequently used and well-established models. Different 
generic models can be used for benchmarking and quality assurance. These include for example the 
World Bank’s pension reform modelling software PROST, the International Labour Office (ILO) 
generic pension modelling tool, although generational accounting models can be used for benchmark 
exercises too60. 

A high level of transparency in the compilation process should be ensured. Countries are therefore 
encouraged to publish a description of the compilation of the supplementary figures. This may 
include an outline of the actuarial model used to estimate pension liabilities as well as a description 
of the external actuarial valuations and data sources used. 

6.3  Regulatory data – ECB Pension funds statistics 

The ECB Regulation on pension funds (ECB/2018/2)61 remedies shortcomings of the current non-
harmonised and incomplete quarterly statistics on pension funds (PFs), in particular the limited 
transaction data due to insufficient data quality. The enhanced statistics better supports the 
European System of Central Banks (ESCB) in its monetary and financial analyses and its 
contribution to the stability of the financial system.  

60   For  an  application  of  PROST  to  estimate  pension  entitlements  see  e.g.  Holzmann  et  al.  (2004)  who 
examined  public  pension  schemes  of  35  low  and  middle  income  countries.  For  an  application  of 
generational accounting see e.g. Müller et al. (2009) who calculated ADL of government employee and 
social security pension schemes in 19 EU countries.  

61   Regulation  (EU)  2018/231  of  the  European  Central  Bank  of  26  January  2018  on  statistical  reporting 

requirements for pension funds (ECB/2018/2). 

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The ECB Regulation is addressed to autonomous pension funds, as defined by the European 
System of National and Regional Accounts (ESA 2010). ECB Regulations set out the ECB’s 
statistical requirements for MFIs and other financial corporations in the euro area. They are binding 
on the entities to which they are addressed and are directly applicable, meaning that they do not 
need to be transposed into national law. They instruct reporting entities on, for example, statistical 
reporting requirements in terms of definitions, classifications, frequency and timeliness. Only those 
pension funds that are institutional units separate from the units that create them are included. Non-
autonomous pension funds set up, for example, by credit institutions or non-financial corporations 
are not covered, since they are not separate institutional units. Individual pension plans offered by 
insurance corporations or other institutions are also excluded from the scope of the Regulation, as 
are social security schemes.  

The ECB Regulation defines a harmonised statistical reporting population and the data to be 
provided by pension funds includes quarterly data on funds’ outstanding amounts and transactions 
broken down by country, economic sector, maturity and the type of pension plan (e.g. defined 
contribution and defined benefit), as well as detailed security-by-security reporting62.  

Annual PFs liabilities data are homogenously collected by every Member State as defined in the 
Regulation. The quarterly PFs liabilities data, for which there is no direct reporting in most Member 
States, are estimated (e.g. outstanding amounts, transactions and adjustments). The Eurosystem 
has developed a methodological framework63 by referring to background theory, studying possible 
estimation methods and testing the alternatives on using actual data from supervisory sources (e.g. 
European Insurance and Occupational Pensions Authority’s Institutions for Occupational Retirement 
Provision (EIOPA’s IORP) templates and other supervisory sources). The methodology provides 
guidance to the NCBs on choosing the most appropriate technique to reflect and estimate the 
missing quarterly PFs data on liabilities. In practice, the methodological framework also provides the 
compilers and the users with all the available technical material (e.g. model codes, methodological 
explanations, references and mapping) with the objective to support them in implementing different 
tests and compilation methods in their own specific case. 

The ECB Regulation is binding on those countries whose currency is the euro (euro area countries). 
Nevertheless, non-euro area Member States are to implement all measures that they consider 
appropriate for collecting the statistical information needed to fulfil the ECB’s statistical requirements, 
and, where relevant, for making timely preparations for joining the euro area. The first data under the 
ECB Regulation referred to the third quarter 2019. 

62   For a detailed description of the reporting requirements please see ECB Regulation on statistical 

reporting requirements for pension funds (ECB/2018/2): Part 3, Reporting Tables: Table 1a: Assets 
(stocks and revaluation adjustments –including exchange rate adjustments-) or financial transactions, 
Table 1b: Liabilities (stocks and revaluation adjustments –including exchange rate adjustments-) or 
financial transactions) and Table 1c:  country breakdown: (stocks and revaluation adjustments –
including exchange rate adjustments-) or financial transactions. Table 2: Required security-by-security 
data. Table 3: Number of members of pension schemes. 

63   The  ECB 

released  a  dedicated  manual 

including 

the  methodological 

framework.  See 

https://www.ecb.europa.eu/stats/financial_corporations/pension_funds/shared/Pension_fund_statistics
_Compilation_Guide.pdf. 

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7 

Description of the 
approaches to estimating 
pension entitlements for 
government-managed 
pension schemes 

7.1 

Introduction 

Chapter 7 presents the methodologies used in estimating Table 29 pension entitlements for 
government-managed pension schemes, based on two alternative modelling techniques, the 
simulation (Section 7.2) and typical agent (Section 7.3) respectively. 

In the Table 29 pension reporting exercise, the majority of Member States use a macrosimulation64 
cohort pension model, which is typically used for the purposes of the AWG pension projection 
exercise.  In addition, a small number of Member States use a microsimulation65 pension model in 
their Table 29 actuarial estimations.  Section 7.2 provides an overview of the actuarial 
methodological framework which is based on macrosimulation and microsimulation techniques. 

Section 7.3 describes the methodologies used for the estimation of accrued-to-date pension 
entitlements, based on a simplified approach which uses a typical agent model. Such a model is 
used by a small number of Member States in their Table 29 pension calculations. 

The actuarial approach66 to estimating Table 29 pension entitlements is presented in a general way 
to provide a description which can be applied for a variety of pension schemes. This chapter will 
address a broad technical audience, including actuaries and other technical experts, such as pension 
experts, statisticians and data compilers. Furthermore, this chapter is intended to assist countries 
which have not yet (fully) built up a model to calculate accrued-to-date pension obligations. 

7.2  Actuarial methodological framework using simulation 

modelling techniques 

7.2.1  OVERVIEW OF METHODOLOGICAL APPROACH 

As presented in chapter 2, the calculations of the public pension scheme obligations are done by 
applying the accrued-to-date (closed group) method.  The closed group methodology does not permit 
new entrants to the pension scheme from the valuation date onwards.  In addition, under the closed 
group without future accruals the current scheme active contributors at the valuation date are 
assumed to make no further contributions beyond that date, and hence accrue no future service 

64   Projections rely on grouped data. 
65   Projections rely on individual data. 
66   As outlined in chapter 2, an actuarial calculation of pension entitlements is based on a forward looking 
approach. For the estimation of pension entitlements it is, simply speaking, applied to project pension 
benefits in the future and to accumulate and discount them finally to the present value of the base year. 

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benefits.  Hence, the obligations are comprised of accrued benefits up to the valuation date with 
respect to current beneficiaries and current contributors. 

For the purposes of calculating accrued-to-date pension obligations under the closed group without 
future accruals method, either a pure closed group method can be used, or it might also be 
necessary to undertake a projection run under the closed group with future accruals method, which 
assumes future benefit accrual with respect to the current active participants67 (pro rata method). 

In the case when a pure closed group method is used, future contributions of current contributors are 
assumed to be zero and only contributions prior to the calculation date are used to determine 
benefits. The use of such method raises questions about determining the eligibility for certain 
benefits. It is especially true when such eligibility is defined in terms of non-zero contributions during 
a certain period preceding the event that gives rise to the benefit. 

Therefore, the choice between the use of the pure closed group without future accrual calculations 
and pro rata method depends on the scheme’s design, especially on the way the eligibility for 
benefits is defined and its materiality on the calculation of pension obligations.  In particular, if the 
value of accrued-to-date benefits, which are linked to the eligibility requirement, for example the 
contributory period, is financially material, the pro rata method should be used. 

67  Under the closed group with future accruals method, no new entrants to the scheme are allowed for, 
and the obligations are equal to the present value of all expected future benefits to existing pensioners 
and all accrued and future rights of current active participants. 

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Box 12: Pro rata method 

Projections under the closed group with future accruals could be necessary for the following two 
reasons: 

1.  Determine the cohorts of eligible beneficiaries for each projection year by applying the 

scheme’s eligibility conditions as well as identify their type of benefit (survivor, disability, old-
age pension, grant or other type of benefit); so for example, when the contributor has 
accumulated at the valuation date a contributory period which is lower than the minimum 
qualifying period in order to be eligible for an old-age pension benefit, under a closed-group 
with future accruals method the beneficiary’s eligibility is assessed at retirement age. 

2.  Determine the portion of the future benefit that has accrued up to the valuation date. This is 

done by applying a pro rata basis factor to the benefit amount computed under the closed 
group with future accruals method.  
In general, the Pro rata basis factor is defined as the ratio of the actual contributory period 
under closed group without future accruals method to the total (actual and future) 
contributory period of the cohort eligible for a benefit in the projected year under a closed 
group with future accruals method.  This factor is also expressed as follows: 

𝑃𝑟𝑜 𝑟𝑎𝑡𝑎 𝑏𝑎𝑠𝑖𝑠 𝑓𝑎𝑐𝑡𝑜𝑟 =

𝐴𝑐𝑡𝑢𝑎𝑙 𝑐𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑜𝑟𝑦 𝑝𝑒𝑟𝑖𝑜𝑑
𝐴𝑐𝑡𝑢𝑎𝑙 𝑐𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑜𝑟𝑦 𝑝𝑒𝑟𝑖𝑜𝑑 + 𝐹𝑢𝑡𝑢𝑟𝑒 𝑐𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑜𝑟𝑦 𝑝𝑒𝑟𝑖𝑜𝑑

This approach allows to give a uniform weight to the actual and future contributory periods without 
giving a higher weight to the accrued years of contribution up to the valuation date. 
Depending on the scheme provisions, the pro rata basis factor may need to be modified to account 
for non-employment credits and accrual rates that vary by service or age, as described in part 7.2.2. 

Hence, the calculation of the pension obligations under the closed group without future accruals 
method for each possible type of benefit will be as follows: 

  Obligations for existing old-age pensioners, existing disabled pensioners and existing 

survivor pensioners - the present value of all future pension payments from old-age pensions, 
disability pensions and survivor pensions respectively. 

  Obligations for future survivor pensioners emerging from the death of existing old-age 
and disability pensioners – the present value of the corresponding future payments to which 
the survivors would be entitled to.  

  Obligations for future recipients of benefits from old-age pensions, disability pensions and 
survivor pensions emerging from the death of an active contributor – the present value of all 
future pension payments under  
  closed group without future accruals method68, or  

  closed group with future accrual method and applying the Pro rata basis factor for the 

respective type of pension. 

68   If  this  method  is  used,  future  old  age,  disability  and  survivor  benefits  only  for  participants  who  are 

eligible to the respective benefits at the calculation date are considered. 

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7.2.2  OTHER METHODOLOGICAL CONSIDERATIONS 

Credited years for education, child-care and other non-employment credited 
years 

Some schemes include non-employment periods, such as education or child-care, into the total 
contributory accumulated period. These credited years can be either recorded as they occur or 
computed and recorded at the year of retirement. 

When actual credited years for education, child-care and other non-employment years are recorded 
as they occur, these are taken into account as at the valuation date. 

When non-employment credited years are not recorded as they occur but are computed at the year 
of benefit take-up, the accrued non-employment credited years should be estimated.  One possibility 
could be to compute the average non-employment credited years over the whole active life period 
from past experience data for all the projected cohorts of new pensioners under closed group with 
future accrual methodology.  Then, to apply the Pro rata basis factor corresponding to the member at 
age “x” at the valuation date to the average of non-employment credited years.  

Minimum pension 

If the minimum pension is based on a minimum amount accrued for each contributory year, one 
simply needs to check if the accrued pension benefit is above the minimum pension that should be 
accrued for the corresponding contributory period.  If it is below, the accrued pension benefit is 
increased to the minimum corresponding level. 

If the minimum pension is a flat amount not related with the contributory period, one compares the 
projected pension benefit at the benefit take-up date to the minimum pension under the closed group 
with future accrual method. If the projected pension benefit at the benefit take-up date is lower than 
the minimum pension, the projected pension benefit is increased to the minimum pension.  Then, the 
accrued minimum pension at the valuation date is computed by applying the Pro rata basis factor.  

Non-uniform accrual rates 

Sometimes the accrual rates are not uniform over the whole career.  For example, in Greece, the 
accrual rate for the earnings-related component of the social security pension scheme increases with 
the number of years of contribution, and in Finland the accrual rate, for certain cohorts during a 
transition period, increases with age. In those cases, if the Pro rata basis factor is applied to the 
projected benefit at the benefit take up date, this produces a higher accrued benefit at the valuation 
date than if the accrued benefits were calculated using the accrual rate based on the years of 
contribution at the valuation date. The opposite could happen if in a country the accrual rate is 
reduced for future years. 

7.2.3  KEY METHODOLOGICAL FEATURES OF PENSION MODEL 

The actuarial pension model used for the purposes of Table 29 pension reporting exercise should 
satisfy the following key methodological features, thus complying with quality standards: 

  The model is based on standard actuarial mathematics for social security schemes and on 

actuarially assumed transition probabilities (mortality rates, incapacity rates, retirement rates, 
etc.) which are used to map the transition of an insured person (active person69, inactive person70 
and pensioner) in a given year onto the next year’s status. 

69   Active  insured  person  refers  to  an  individual  who  has  made  at  least  one  contribution  to  the  social 

security scheme during a given year. 

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  The development of the active insured population is linked to the evolution of total employed 

population and earnings assumptions, which, in turn, are explicitly linked to the assumptions on 
macroeconomic growth and the wage share of GDP. 

  The active insured population is disaggregated into population groupings, which exhibit different 

insurance profiles. Examples of such groupings include: 

– 

– 

– 

– 

age (by single age); 

gender (males/ females); 

employment type (salaried employees/ self-employed); and 

wage/ earnings level (by wage band). 

7.3  Step-by-step estimation approach using typical agent 

modelling techniques 

7.3.1  OVERVIEW 

The aim of section 7.3 is to outline step-by-step the procedure to estimate pension entitlements of 
unfunded public pension schemes using typical (representative) agent modelling techniques. The 
calculation procedure, which is aimed at technical audience, is outlined using formal equations as 
well as various illustrative examples.  

Before the calculation procedure is outlined, it is useful to state the aim: pension entitlements 
accrued-to-date of all public unfunded pension schemes in the country concerned. This figure 
represents the sum of entitlements of each participant in the relevant pension schemes. Of course, 
individual entitlements differ by age and gender. Figure 10 illustrates the typical distribution of 
pension entitlements, by age groups as well as by gender. Cohorts at the age of retirement, i.e. 
around the age of 60, have usually, accrued-to-date comparably high pension entitlements. They 
have, generally, contributed to a pension scheme over a longer period than younger cohorts, and 
have therefore accrued higher pension entitlements. Furthermore, cohorts at the age of retirement 
usually show a higher value of pension rights than older age groups. This is mainly due to the fact 
that only future pension benefits are taken into account in the calculations. New retirees can look 
forward to a relatively longer remaining retirement period. Older retirees, on the other hand, have 
already received some of their pension benefits. Their entitlements are, therefore, accumulated over 
a shorter remaining pension period.  

70   Inactive insured person refers to an individual who has made no contribution during the last year due to 
being  unemployed,  or  out  of  the  labour  force,  or  emigrant,  but  is  registered  in  the  social  security 
scheme, i.e., made contributions during previous years. 

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Figure 10: Example showing distribution of pension entitlements by age and gender 

Source: Forschungszentrum Generationenverträge, University of Freiburg. 

Besides age-specific differences, differences in pension rights between genders are also apparent. 
As displayed in Figure 10, women have usually accrued lower pension entitlements than men. Such 
gender differentials may be explained by, for instance, shorter contribution periods, as well as lower 
average wages for women, which result in comparably lower pension benefits and entitlements. To 
estimate accrued-to-data liabilities, these age- and gender-specific differences in pension 
entitlements should be taken into account.  

Two major steps are required to estimate accrued-to-date pension liabilities. In the first step, 
average pension entitlements of different age and gender groups are estimated, as illustrated in 
Figure 10. 

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Figure 11: Exemplary cohort sizes by age and gender 

Source: Forschungszentrum Generationenverträge, University of Freiburg. 

In a second step, these group-specific pension rights (shown in Figure 10) are multiplied by the 
respective age- and gender-specific cohort sizes of the pension scheme members (displayed in 
Figure 11). Step 2 generates the final result: the total value of pension entitlements. To give a 
general overview, both major steps to calculate pension liabilities are displayed in Figure 12 below. 

Figure 12: Overview on the calculation of pension entitlements 

Step 1: Estimating age- and gender-
specific average pension entitlements 

Step 2: Weighting these average 
pension entitlements by the 
respective cohort sizes 

x 

= 

Pension 
entitlements 

Step 1 (parts 7.3.2 to 7.3.4) considers the pension entitlements of a single participant. In step 2 (see 
Equation 35 at the end of chapter 7), these individual pension rights are aggregated. 

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7.3.2  ESTIMATING INDIVIDUAL PENSION ENTITLEMENTS 

Pension entitlements represent the sum of all future pension benefits which are accrued-to-date in 
present-value terms of a base year. The approach to calculating this figure will be demonstrated 
below. A formal outline will be given first, to provide an introduction, especially for actuaries. Then 
the estimation approach will be illustrated through various examples. 

Formal outline of the estimation approach 

Equation 5 presents the general approach to calculating pension entitlements71. In the following 
parts, further extensions of this formula are discussed. 

where 

 𝐸𝑥,𝑔,𝑏      = 

𝑎𝑐𝑐𝑟𝑢𝑒𝑑 = 

𝐵𝑠,𝑔,𝑓

the pension entitlements of a representative individual of age 𝑥 and gender 𝑔 in the 
base year 𝑏,  

the annual pension benefits accrued-to-date of a representative individual at age 𝑠 and 
gender 𝑔 in a future year  (𝑓 = 𝑏 + 𝑠 − 𝑥 ), 

 𝑝𝑠,𝑔,𝑓       = 

the probability of a representative individual of gender 𝑔 of surviving to age 𝑠 in a future 
year 𝑓  (𝑓 = 𝑏 + 𝑠 − 𝑥 )72, 

 𝐷 

 𝑟 

=  the maximum life time, 

=  the discount rate. 

The aim is to calculate pension entitlements 𝐸 for an average representative of different age groups 
𝑥 and genders 𝑔 in a given base year 𝑏. The variable 𝐵𝑎𝑐𝑐𝑟𝑢𝑒𝑑 denotes the annual pension level 
accrued-to-date. How to derive this pension level accrued-to-date is then discussed in detail. It is 
important to note that only future pension payments are taken into account for the estimation of 
pension entitlements. All payments during or before the base year are disregarded. Therefore, the 
control variable 𝑠 starts with the age 𝑥 + 1, i.e. one year after the base year, and ends at the age 𝐷. 
In this context, the variable 𝐷 denotes the highest maximum life time considered in the calculations. 
Usually, a level of 100 years is chosen for the variable 𝐷. Pension entitlements represent the 
expected amount of pension payments accrued-to-date. In line with this concept, future survival rates 
are taken into account for the calculation of entitlements. For this purpose, the variable 𝑝 

is introduced. It represents the probability of an individual of gender 𝑔 surviving to a 

certain age 𝑠 (in the year 𝑏 + 𝑠 − 𝑥). In accordance with the applied present value concept, all future 
pension payments are discounted to the base year. 

71   Please note that the following definitions may not be fully applicable for disability, survivors’ and early 
retirement  pensions.  It  should  be  e.g.  taken  into  account  that  after  the  death  of  a  retiree  his/her 
surviving  spouses/orphans  (if  existing)  are  entitled  to  a  survivors’’  pension  benefit.  For  a  further 
description  of  the  differentiation  by  pension  type  see  “Estimating  pension  entitlements”  under  part 
7.3.4. 

72   These  survival  rates  should  reflect  the  expected  increase  of  the  life  expectancy  according  to  the 

newest EUROPOP projections. For a further discussion see part 5.2.1. 

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,,,,x,g,b1*(5)E=*(1)sgfaccruedsgfDxssxBpr(01)p 
 
 
 
 
 
 
                                                           
Description of the approaches to estimating pension entitlements for government managed pension schemes 

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Distinguishing between current retirees and current contributors 

For the estimation of pension liabilities, it is important to distinguish between pension entitlements 
accrued by present retirees, and pension entitlements accrued by current contributors. The former 
group has its working and contribution period behind it, and is therefore already entitled to full 
pension benefits73. For the estimation of accrued-to-date liabilities, it is important to take into account 
that current contributors have not yet accrued 100 per cent of their future (expected) full pension 
benefits upon retirement. They still have an (expected) contribution period ahead of them, whether 
this is one year (in case of a 59-year-old) or 40 years (in case of a 20-year-old, in our example). It is 
strongly recommended to distinguish between present retirees, who have already accrued full 
pension benefits, and present contributors, who have only partially accrued their future full pension 
benefits. Figure 13 illustrates this important distinction. 

Figure 13: Differentiation between present contributors and retirees 

Pension entitlements reflect the present value of all future pension benefits which have been 
accrued-to-date. Contrary to other figures in national accounts, accrued-to-date liabilities are not 
calculated solely on the basis of historic data; rather a projection of future pension payments is 
required. This forward-looking approach will be discussed in further detail below. First, the actuarial 
method for estimating pension entitlements for current pensioners will be outlined (part 7.3.3). Then 
an equivalent description will be provided for present contributors (part 7.3.4). The following two 
parts always consider an average representative of a certain age group and gender.   

7.3.3  ESTIMATING INDIVIDUAL PENSION ENTITLEMENTS FOR CURRENT 

RETIREES 

Current pensioners are entitled to pension benefits on the basis of past accrued pension rights. As 
outlined above, this group is entitled to full pension benefits. In other words, the benefits they receive 
in the base year are fully accrued. It is important to note that current pensioners are entitled to 
pension benefits not just for one year but, in fact, to all future pension payments, usually until they 
die74. To illustrate the estimation approach for current retirees, see the example in Box 13. 

73   Of course, in some pension systems — such as in Germany — it is possible to contribute and accrue 

further pension rights after receiving a pension benefit. . 

74   In fact, one may furthermore attribute future survivor’s benefits — which accumulate after the death of 
present retirees — to the entitlements of current pensioners. For a further description see Box 23. 

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Box 13: Estimating pension entitlements for current retirees 

To outline the estimation approach applied for current retirees, take the example of an average male 
pensioner, aged 70. His pension entitlements are relatively straightforward to calculate. The current 
retiree’s pension benefit level is projected over his remaining (expected) life span. Generally, the 
pension data needed for this projection can be obtained from the respective pension scheme 
institutions, while assumptions on the (contingent) life expectancy should be obtained from Eurostat75. 
For the following example, the representative retiree will receive an annual pension payment of EUR 
10,000 in the year 2010. His life expectancy at age 70 is 10 years. In other words, he can expect to 
receive EUR 10,000 per year over an (expected) period of 10 years, which adds up to EUR 100,000 
over the rest of his retirement. 

Calculation of the present value of pension entitlements 

Pension entitlements represent the aggregated present value of future pension payments. In 
accordance with this present value concept, pension benefits in the far future are generally considered 
less valuable than present pension payments. To estimate entitlements, therefore, a discount factor is 
applied — described in Section 5.1 — to translate future pension benefits into present-value terms. As 
a consequence, a pension payment of EUR 10,000 in 10 years is, for instance, worth only EUR 7,440 in 
present-value terms if one uses a discount rate of 3 per cent (this is only illustrative, please see the 
above guidance discount rates to be applied). The blue bars in Figure 14 represent the respective 
present values of the future pension payments.  

Figure 14: Aggregating annual pension benefits in present value terms 

Source: Forschungszentrum Generationenverträge, University of Freiburg. 

75   For a further description of the demographic data and assumptions see section 5.2. 

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In the final result, pension entitlements are calculated by summing up all future pension payments 
in present- value terms. In this example, the total pension entitlements of a 70-year-old pensioner 
would amount to about EUR 85,000 EUR. From the point of view of the government, this figure 
represents the accrued-to-date pension liability. In other words, the value of EUR 85,000 reflects 
the amount of money which has to be set aside today by the government to finance all accrued 
pension rights of the hypothetical 70-year-old average retiree. 

Choosing a base year for the calculations 

Only future pension benefits over the remaining life cycle of an individual are considered in 
estimating pension entitlements. All pension benefits received in the past — or more precisely, 
before the end of a certain base year — are not taken into account. The pension payments 
considered, therefore, depend on the base year applied. If the base year is 2010, the aim is to 
estimate the stock of pension entitlements at the end of the year 2010 for inclusion in row 10 of the 
supplementary table of the base year 201076. 

Consideration of pension indexation rules 

For the calculation of entitlements, the indexation practice of the respective pension scheme should, 
possibly, be reflected. Most EU countries, including, for instance, France and Spain,  adjust pension 
benefits annually in accordance with the change in the consumer price index (CPI). This is “price 
indexation”. Several EU countries, for instance, Slovenia or the Netherlands, base annual pension 
adjustments on general wage growth in the economy. This is referred to as “wage indexation”. Other 
countries have a mixed indexation system. In their annual pension indexation changes, they consider 
the CPI and, to some extent, wage growth77. In accordance with the respective pension indexation, 
an accrued pension benefit (𝐵𝑎𝑐𝑐𝑟𝑢𝑒𝑑) in year 𝑡 + 1 may differ from that in the previous year 𝑡  (see 
Equation 6). The variable 𝑎 denotes the annual adjustment factor, which reflects the indexation rules 
in the respective country. 

Before implementing country-specific indexation rules, it is crucial to decide whether future 
payments will be calculated in nominal or in real terms. As outlined in part 5.1.3, the 
difference between these two approaches concerns the way in which future inflation is 
considered. A nominal estimation approach takes into account assumptions on future 
inflation, while a real approach disregards such expectations78. The indexation of pensions 
with prices as well as with wages is illustrated in Box 14, which shows calculating pension 
entitlements both in nominal and in real terms.  

76   For an overview on the supplementary table see chapter 4. 
77   For  example  Finland  adjusts pension  benefits annually  with  80  per  cent of  CPI changes  and  with  20 

per cent of the growth of the earnings level. 

78   For a further discussion on these two approaches see part 5.1.3. 

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11(6)(1)*accruedaccruedtttBaB 
 
 
  
 
                                                           
Description of the approaches to estimating pension entitlements for government managed pension schemes 

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Box 14: Estimating pension entitlements for current retirees 
— considering pension indexation rules 

Below are outlines of examples regarding pension indexation rules. The case again is a typical 70-year-
old male pensioner, on the same assumptions as in Box 13. First, the application of a price indexation is 
described. Under these rules, an expected future price rise of e.g. two per cent would translate into 
annual pension increases of two per cent — see green bars in Figure 15. If future pensions are projected 
in real terms, an indexation of the pension in line with prices would imply that pensions stay constant in 
real terms — see red bars in Figure 15. 

Figure 15: Consideration of price indexation in real and in nominal terms 

Source: Forschungszentrum Generationenverträge, University of Freiburg. 

As outlined in part 5.1.3, both approaches, a nominal and a real calculation approach, should lead to 
almost the same level of pension entitlements. It is, however, crucial that the approach used for the 
pension indexation is also applied to the discount rate. In other words, if the projection is undertaken in 
real terms, inflation expectations should not be considered in either the discount rate, or the pension 
indexation. 

Further assumptions have to be taken in pension schemes which apply wage-growth indexation. To 
estimate pension entitlements for these schemes appropriately, assumptions on future growth of wages 
are required. For the sake of simplicity, an assumption of constant wage growth of 1.5 per cent in real 
terms is assumed in the following example. This translates into nominal wage growth of 3.5 per cent if 
inflation is assumed to be 2 per cent. Obviously, future pension levels differ if varying pension indexation 
rules are applied. To take the example of a current pensioner aged 70 again, if pensions are adjusted 
only according to the CPI, this retiree can expect an increase in his pension benefits from EUR 10,000 
currently to EUR 12,200 (EUR 10,000) in nominal (real) terms until the age of 80. Under wage 

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indexation, as observed in the Netherlands or Germany, his pension level would, on the other hand, rise 
to EUR 14,100 (EUR 11,600) in nominal (real) terms at the age of 80 — see Figure 16. 

Indexation rules play an important role in the estimation of pension entitlements, since the effects of 
indexation accumulate over the entire retirement period. This is also apparent in our example. In the 
case of price indexation, the pension entitlements of the 70-year-old pensioner add up to about 85 000 
EUR. However, they are considerably higher, by 7 000 EUR, if wage indexation is applied to the 
entitlement.  

Figure 16: Consideration of wage indexation in real and in nominal terms 

Source: Forschungszentrum Generationenverträge, University of Freiburg.  

Consideration of future adjustments in the benefit formula  

Besides indexation rules, future pension levels of current retirees might also be altered due to future 
adjustments in the benefit formula. For example, the German statutory pension scheme has a 
sustainability factor. With this new element in the benefit formula, pensions are adjusted annually in 
accordance with demographic and employment changes. Such future alterations in the benefit 
formula should if possible be taken into account when projecting future pension benefits of current 
retirees. The variable 𝑏 in Equation 7 denotes such changes in the benefit formula.  

For the estimation of entitlements, it has to be taken into account that in most European countries, 
future adjustments in the benefit formula affect only future new pensioners, i.e. current (and future) 
contributors. For example, the future rise in the age of retirement in the United Kingdom, or the 
gradual change of accrual factors in Portugal, only play a role for future new pensioners. Such 
changes in the benefit formula will be discussed in part 7.3.4 below, which outlines the estimation 
procedure for future new pensioners. 

The conclusion is that data on the annual pension level and life expectancy are required for 
the estimation of pension entitlements of current pensioners. Furthermore, pension 

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111(7)(1)*(1)*taccruedaccruedtttBabB 
 
 
  
 
Description of the approaches to estimating pension entitlements for government managed pension schemes 

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indexation rules as well as future adjustments in the benefit formula of the respective pension 
scheme should be reflected in the calculation procedure. To obtain the present value of 
entitlements, a discount rate of, preferably, two per cent in real terms should be applied. 

7.3.4  ESTIMATING INDIVIDUAL PENSION ENTITLEMENTS FOR CURRENT 

CONTRIBUTORS 

A general overview 

The estimation of pension entitlements for current contributors closely follows the approach 
described in the previous part. However, two further aspects need to be considered when calculating 
the accrued pension rights of this group. On the one hand, the fact should be taken into account that 
present contributors are not yet entitled to the full pension79 they would receive after a complete 
contribution career. On the other hand, current contributors are not yet retired. Hence, their future 
pension payment needs to be newly estimated. 

Current contributors are, generally, expected to accrue further pension rights in the future. This 
differentiates them from current retirees. To indicate the extent to which a future full pension 
𝐵𝑓𝑢𝑙𝑙 has been accrued-to-date, the so-called accrual factor λ is introduced (see Equation 8)80. 

Equation 8 illustrates the link between the estimation of pension entitlements and  other pension 
projections such as the AWG exercises. While the latter group, generally, takes into account only 
pensions after a full contribution career (𝐵𝑓𝑢𝑙𝑙), the ADL approach considers only a certain proportion 
(λ) of such “full” pensions (in the case of current contributors). In other words, only accrued-to-date 
pension benefits (𝐵𝑎𝑐𝑐𝑟𝑢𝑒𝑑) are considered in ADL calculations. 

The value of λ

 may differ by age and gender. For present pensioners, the accrual 

factors sum by definition to unity, i.e. they are fully entitled to their pensions paid in future years. For 
current contributors, who are still expected to earn further pension rights in future, the accrual factor, 
generally, amounts to less than unity. 

For present pensioners, the level of pension benefits can be obtained from the institutions 
responsible for the respective pension scheme. For current contributors, on the contrary, this future 
retiree income has to be newly estimated. The following paragraphs describe how to estimate the 
initial annual pension benefit accrued-to-date (𝐵𝑟

𝑎𝑐𝑐𝑟𝑢𝑒𝑑) at the point of retirement r.  

79   A  full  pension  is  defined  as  the  pension  level  one  receives  after  the  completion  of  the  individual 
contribution  career.  The  individual  contribution  career  may  vary  considerably.  Some  individuals  may 
retire already at the age of 40 due to a disability while others finish their contribution career not until the 
age  of  65  or  later.  Consequently,  also  the  full  pension  levels  can  differ.  This  aspect  is  discussed  in 
further detail in the following text. 

80   Please note that Equation 8 follows the same notation as Equation 5. 

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x,g,b,,x,g,b,,1(8)E=***(1)DfullxssgfsgfsxBpr,,accruedsgfB(01) 
 
 
 
 
 
  
 
 
                                                           
Description of the approaches to estimating pension entitlements for government managed pension schemes 

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Generally, there are two approaches for calculating the “starting pension” to which a current 
contributor is entitled. On the one hand, the estimation may be based on the assumption that all 
contributors feature homogeneous contribution careers (homCC). With this approach, future pension 
levels of current contributors are not estimated using past contribution data. In fact, future retirement 
benefits are approximated on the basis of current pension levels. This approach has the advantage 
of significantly limiting the input data required for estimations, so data on past contributions can be 
(partly) disregarded. The homCC approach is, therefore, recommended if no or only limited 
contribution data are available. Alternatively, heterogeneous contribution careers (hetCC) may be 
considered. This approach requires comprehensive data on past contributions. The hetCC approach 
has the advantage of reflecting cohort-specific employment careers. Its application may therefore 
lead to more accurate estimations than the homCC approach. 

The following paragraphs are structured as follows: first, the estimation of the initial annual pension 
𝑎𝑐𝑐𝑟𝑢𝑒𝑑) is outlined, applying a homCC approach and a hetCC approach; 
benefit accrued-to-date (𝐵𝑟
then these annual pension benefits will be projected over the remaining retirement phase to calculate 
the final result, namely the pension entitlements of current contributors. 

Estimating the initial pension by applying homogeneous contribution careers  

With the homCC approach, future accrued-to-date pension benefits (𝐵𝑟
are not directly calculated on the basis of past contribution data. In fact, 𝐵𝑟
retirement r is estimated from current pension levels. This small detour helps to limit the required 
data inputs for estimations, namely to limit the data on past contributions. This procedure, therefore, 
can be valuable for countries wishing to limit the data input for calculations.  

𝑎𝑐𝑐𝑟𝑢𝑒𝑑) of current contributors 
𝑎𝑐𝑐𝑟𝑢𝑒𝑑 at the future point of 

The estimation under the homCC approach proceeds as follows. In the first step, future full 
pensions81 𝐵𝑓𝑢𝑙𝑙 of current contributors are estimated using the pension data of current retirees. The 
second step takes into account the fact that current contributors are only partially entitled to their 
expected full pension 𝐵𝑓𝑢𝑙𝑙  which is accounted for with the so-called accrual factor λ. Equation 9 
summarises formally the steps for the estimation of 𝐵𝑎𝑐𝑐𝑟𝑢𝑒𝑑.  

Both steps — 1) the approximation of future full pensions and 2) the estimation of the accrual factor 
— are outlined in detail below.  

Step 1: Approximation of future full pensions 

For the first step, the approximation of future full pensions 𝐵𝑓𝑢𝑙𝑙 of current contributors, the basis can 
be the pension data of present retirees. It is assumed that future full pensions of current contributors 
are equivalent to pension benefits of current new pensioners82. All future new retirees are assumed 

81   As outlined before a full pension is defined as the pension level one receives after the completion of 

the individual contribution career. 

82   It  is  recommended  to  base  on  the  contribution  history  of  present  new  pensioners  and  not  all  current 
pensioners. The former group is temporally ‘closer’ to current contributors. Therefore, their contribution 
history  can  be  assumed  to  be,  generally,  more  similar  to  current  contributors.  This  is  e.g.  the  case 
when looking on female participation rates. While very old female retirees often show low participation 
rates, new female retirees feature, usually, a higher labour activity over their contribution history which 
is more comparable to current female contributors. 

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accruedfull12*(9)B=BStepStep 
 
 
 
 
 
                                                           
Description of the approaches to estimating pension entitlements for government managed pension schemes 

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to have the same contribution history as present new pensioners, i.e. using homCC as a basis83. As 
a consequence, future new retirees will receive (almost)84 the same pension benefit as current 
pensioners. 

In a flat-rate pension scheme, the homCC approach implies that all cohorts are assumed to have the 
same number of contribution years at the point of retirement as current new pensioners. In an 
earnings-related pension scheme, this assumption would mean that contributors show not only the 
same contribution periods but also (almost)85 the same reference earnings over their contribution 
career as present pensioners. A formal outline of the procedure to estimate full pensions of future 
new pensioners is provided below. As a start, the pension benefit 𝐵𝑓𝑢𝑙𝑙 of a new pensioner in the 
base year 𝑏 would be equivalent to the pension of a new retiree in the following year 𝑏 + 1 , as 
outlined in Equation 10. Of course, Equation 10 ignores the impact of 1) pension reforms and 2) 
indexation effects. 

Most European countries have implemented profound pension reforms in recent years. Usually, 
these reforms will lower the level of pensions for future new retirees. Therefore, a deduction factor 

should be applied (defined by a reform or, for instance, inherent in the benefit formula, as in the 
notional defined contribution scheme). 

Secondly, pre-retirement indexation effects need to be considered. The valorisation of pension rights 
of current contributors up to the point of retirement should be taken into account. In a number of 
countries, past entitlements are indexed annually to wage growth. These pre-retirement indexation 
effects are reflected with the valorisation factor v86.  

In schemes where past pension rights are indexed only to prices, the valorisation factor also comes 
into play. Here future pensioners have, usually, earned higher reference earnings than present 
retirees, due to general wage growth in the economy. As a result, they should in earnings-related 
pension schemes benefit from higher pensions than their present counterparts87. This aspect is also 
taken into account with the valorisation factor v in Equation 11.  

83   It  should  be  stated  that  such  an  assumption  is  only  reasonable  in  pension  schemes  which  are 

sufficiently matured.  

84  Of  course,  the  pension  level  of  future  new  retirees  might  differ  from  current  retirees  even  if  one 
assumes homogeneous contribution histories. For example pension reforms may lower pension levels 
of future new retirees.  

85  We  will  outline  later  that  not  exactly  the  same  reference  earnings  should  be  assumed.  In  fact,  one 
should take into account wage growth effects, i.e. one should consider (under the PBO approach) that 
reference earnings increase yearly with the general wage growth in the economy.  
86   Under the ABO approach v would equal to zero in schemes with a wage-indexation. 
87   For an illustration we want to imagine a final earnings scheme where the pension level depends on the 
last earnings in the year before retirement. We want to compare the initial pension benefit of a 60 year 
old  new  retiree  in  2010  and  a  60  year  old  new  pensioner  in  2020.  Due  to  the  future  general  wage 
growth the last earnings of the new retiree in 2020 are expected to be higher than the last salaries of 
its ‘2010-counterpart’. In accordance with the benefit formula, also the initial pension benefit of ‘2020-
retiree’ would be greater than the pension payment of the new retiree in 2010. This example outlines 
that even if past earnings are ‘only’ indexed to prices, wage increases need to be considered under the 
homCC approach. 

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1(10)bfullfullbBB11(11)**(1)bfullfullbbBBv 
 
 
  
 
 
                                                           
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Step 2: Estimating the proportion of the full pension entitlements accrued-to-date 

The second step takes into account the fact that current contributors are not yet fully entitled to their 
future full pension 𝐵𝑓𝑢𝑙𝑙  since they are, generally, expected to accrue further pension rights. In fact, 
current contributors are only entitled to a fraction of 𝐵𝑓𝑢𝑙𝑙 which is denoted by the so-called accrual 
factor λ. 

The crucial question is the extent to which current contributors are entitled to their future full 
pensions. The answer depends on the choice between the ABO and the PBO approach, as 
described in Section 2.2. Generally, the PBO approach should be applied for the estimation of 
government-managed defined benefit pension schemes88. Against this background, the following 
description of the accrual factor is based on the PBO method89. Generally, the accrued proportion of 
the full pension under the PBO approach depends on contribution periods (see Equation 12). 

Where 

𝑐𝑏𝑎𝑠𝑒 𝑦𝑒𝑎𝑟   = the contribution periods of the participant until the base year, 

𝑐𝑟𝑒𝑡𝑖𝑟𝑒𝑚𝑒𝑛𝑡 = the total expected contribution periods of the participant until retirement90,  

𝑥 = the age of the participant in the base year, 

𝑒 = the age at which the participant entered the pension scheme, 

𝑙 = the expected retirement age of the pension scheme participant91, 

As outlined in Equation 12, the level of the accrual factor depends on the ratio of contribution years 
accrued until the base year (𝑐𝑏𝑎𝑠𝑒 𝑦𝑒𝑎𝑟) to the (expected) total number of contribution years upon 
retirement (𝑐𝑟𝑒𝑡𝑖𝑟𝑒𝑚𝑒𝑛𝑡 ). A longer accrued contribution period automatically translates into higher 
pension entitlements.  

In the absence of data on contribution years accrued until the base year (𝑐𝑏𝑎𝑠𝑒 𝑦𝑒𝑎𝑟), this figure can 
be approximated by subtracting the age at which the scheme member started paying contributions 
(𝑒) from the age in the base year (𝑥) — as outlined in Equation 12. The value of total contribution 
years upon retirement (𝑐𝑟𝑒𝑡𝑖𝑟𝑒𝑚𝑒𝑛𝑡 ) is then calculated in the same way. To illustrate the approach to 
estimating the accrual factor further, some illustrative examples are given in Box 15. 

88   As  stated  in  chapter  17  of  the  ESA  2010  (paragraph  17.177)  the  PBO  approach  should  be  followed 
where  the  benefit  formula  ‘includes  implicitly  or  explicitly  a  factor  for  wage  increases  (before  or  after 
retirement)’.  With  the  PBO  approach  reference  earnings  applied  in  the  pension  benefit  formula  are 
projected over the entire (remaining) contribution career. In this sense the PBO approach is similar to 
the projected unit credit method — widely used in the private sector accounting (e.g. in IAS). 

89   It should be noted, that the accrual factor can also be applied  — after a few modifications  — for the 

calculation of ABO entitlements. 

90   In case of disability pensions 𝑐𝑟𝑒𝑡𝑖𝑟𝑒𝑚𝑒𝑛𝑡  denotes the total contribution periods of the participant when 
he/she is expected to become disabled while in case of survivors’ pensions 𝑐𝑟𝑒𝑡𝑖𝑟𝑒𝑚𝑒𝑛𝑡 represents the 
total contribution periods at the expected age of death of the pension scheme participant. 

91   Please  note  that  this  definition  holds  for  old  age  and  early  retirement  pensions.  In  case  of  disability 
pensions 𝑙 denotes the age when an individual is expected to become disabled while for the estimation 
of survivors’ pensions 𝑙 represents the expected age of death of the pension scheme participant. For a 
further discussion on a differentiation of the estimations by pension type see the following  paragraph 
“differentiation by type of pensions”. 

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(12)baseyearretirementxcelec 
 
 
  
 
                                                           
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Box 15: Estimating pension entitlements for current 

contributors — the accrual factor 

The case of an average contributor, aged 40 in the base year 2010, will provide an example of how to 
estimate the accrual factor. Selection of a base year always refers to the situation at the end of that year. 
This case takes a 40-year-old at the end of 2010 with, for simplicity, a birthday at the beginning of 2011. 
The 40-year-old is assumed to have accrued 20 out of 40 contribution years in a final-earnings pension 
scheme, and is expected to retire at the age of 61. The accrual rates applied in the benefit formula are 
constant over the contribution career. Under the PBO approach, this individual is not yet entitled to a full 
pension. In fact, he/she has accrued 50 per cent of his/her full pension. This value is calculated on the 
basis of the relative contribution history. The 40-year-old can only look back on 20 contribution years out of 
40 (expected) contribution years. For the calculation of entitlements, the accrual factor would, therefore, 
amount to 0.5. 

A 21-year-old contributor who also started to contribute at the age of 21 and who likewise looks forward to  
retiring at 61 with 40 contribution years is, however, entitled to a considerably lower future pension benefit 
as of end-2010. At the end of the base year, this individual can look back on just one contribution year out 
of an expected 40. Due to this relatively short contribution record, this contributor has accrued pension 
rights amounting to only 2.5 per cent (=1/40) of his/her (expected) full pension. Figure 17 illustrates the 
relationship between the proportion of the full pension accrued-to-date and the relative contribution history. 
It displays the accrual factor for each age group. To keep the example simple, it is assumed that one 
contribution year is accrued in each year of the contribution career. 

Figure 17: Proportion of full pension accrued-to-date (PBO approach) 

Source: Forschungszentrum Generationenverträge, University of Freiburg. 

Of course, the proportion of the full pension accrued-to-date depends on the starting and finishing point of 
the individual contribution career. A further example is a 40-year-old contributor who started to contribute 
at the age of 24 and who can be expected to retire at 66. This 40-year-old would not be entitled to 50 per 
cent of his/her full pension benefit, but only to roughly 38 per cent (=17/42) — see Figure 1892.  

92   Of course, it has to be considered that a relatively longer contribution period (in the example 42 instead 

of 40 years) may also lead to comparably higher full pension levels. 

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Figure 18: Proportion of full pension accrued-to-date (PBO approach) — varying contribution 
behaviour 

Source: Forschungszentrum Generationenverträge, University of Freiburg. 

The examples outline that the starting point (the age at which contributions are first paid) as well as the 
finishing point of the contribution career (the expected retirement age) are significant for the estimation of 
the accrual factor. The choice of these parameters is outlined below. 

Choosing the age to pay first contributions 

For the estimation of the accrual factor, the number of contribution periods accrued until the base 
year are required. If such data is not available, one may approximate this figure on the basis of the 
average age at which contributions are first paid (see Equation 12). Generally, this starting point is 
usually at the age of 20 across European pension schemes. However, in government employee 
pension schemes, the age may vary due to specific employment policies in the government sector. 
The age at which contributions are first paid can be derived from contribution data which is usually 
obtainable from the institutions responsible for the respective pension scheme. It can differ by birth 
cohorts and gender93.  

Choosing the expected retirement age  

For the choice of the end of the contribution career, one has to make assumptions regarding future 
retirement age. One option is to assume a constant retirement behaviour, but a change in retirement 
behaviour in future may be considered. For further discussion on the choice of retirement age, see 
Box 16 below. 

93   To  limit  the  data  input  one  may  base  the  estimations  on  one  single  average  age  to  pay  first 
contributions for all current contributors. For example, it may be assumed that all contributors started 
their  contribution  career  on  the  age  of  20  years  —  if  this  is  reflected  in  the  data.  Nevertheless,  it  is 
recommended to apply a differentiation by birth cohorts and gender. 

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Box 16: Choosing the retirement age 

To estimate pension entitlements, various assumptions on future retirement age are possible. There is a choice 
between constant or changing retirement behaviour, as well as between homogeneous or heterogeneous 
retirement behaviour. Below, we discuss the appropriate choice of assumptions. 

Constant vs. changing retirement behaviour 

One option is to assume constant retirement behaviour. We assume that future pensioners will retire at the same 
age as their current counterparts. Of course, such a scenario is only appropriate if the pension legislation allows 
current retirement behaviour to be prolonged into the future. In some countries, such as the UK or Malta, the age of 
retirement will gradually rise in the coming decades. For these countries, a constant retirement approach would not 
be suitable. The future expected retirement age should always be chosen in accordance with future legal 
retirement ages (it has to be underlined that only changes of the statutory retirement age which have been 
legislated until the base year are considered in the estimations).  

Alternatively, one may assume changing retirement behaviour on the basis of behavioural forecasts. For some 
countries, there are authoritative predictions on future retirement choices. Berkel and Börsch-Supan (2004) provide 
such a forecast for Germany.  

It should be noted that the choice between a constant and changing retirement behaviour should have no impact 
on the level of pension entitlements if the respective pension scheme can be considered actuarially neutral 
(actuarial neutrality in the context of pension systems means that the present value of accrued pension 
entitlements does not change due to an earlier or later pension start date). For a detailed description of this 
concept see Queisser and Whitehouse (2006). As these authors indicate numerous pension systems in the OECD 
cannot be considered actuarially neutral. A substantial number of countries do subsidise early retirement and 
penalise late retirement since pension decrements as well as increments are lower than an actuarial neutral rate. In 
these countries one would overestimate (underestimate) pension entitlements with the constant retirement 
behaviour assumption if future pensioners will decide to retire later (earlier) than today. 

Homogeneous vs. heterogeneous retirement behaviour 

When choosing the assumption on future retirement age, the question arises as to whether to consider retirement 
ages as homogeneous or heterogeneous. Should a single retirement age be assumed for all contributors, or not? 
As a starting point, it is sufficient to take one retirement age, preferably the average retirement age, as a basis 
(however, a differentiation between genders is highly recommended since retirement behaviour usually differs 
considerably between males and females). If possible, however, heterogeneous retirement ages should be taken 
into account. Box 17 provides a further description of how to include heterogeneous retirement behaviour in the 
calculation of pension entitlements, under the homCC approach. 

Considering pension increments and decrements 

For the estimation of pension entitlements, it is important to consider that the level of pension benefits 
depends on the choice of future retirement age. In most pension schemes, retirement after (before) the legal 
retirement age leads to an increase (decrease) in annual pension benefits. Such pension increments 
(decrements) should always be taken into account in the calculations. 

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Box 17: Taking into account heterogeneous retirement behaviour 

Usually, retirement ages vary between males and females. Different retirement behaviour may also be observed 
within a cohort. Some individuals may choose to work until the age of 65, while others prefer to retire at 60. How 
should such heterogeneous retirement behaviour be taken into account? To give an illustration, let us return to the 
example of the average 40-year-old contributor (see). As stated, this contributor can look back on a contribution 
history of 20 years. For the example with heterogeneous retirement behaviour, let us assume that the probability of 
this person retiring at the age of 61 is 50 per cent. Furthermore, he/she might retire at 60 (with a probability of 
25 %), or at 62 (with a probability of 25 %). Pension entitlements are calculated separately for each of these three 
retirement paths. In the first path, the 40-year-old individual is assumed to retire at 60, and has therefore accrued-
to-date 51 per cent (=20/39) of his/her full pension for that retirement age. According to the second path, he/she is 
expected to work until the age of 61, and has consequently accrued-to-date 50 per cent (=20/40) of the full pension 
to which they will be entitled at the age of 61. The third path is calculated analogously, resulting in an accrual factor 
of 0.49. Of course, it has to be considered that in most pension schemes a later retirement age would result in a 
higher full pension level. This issue will be discussed below. Finally, the sum of these pension rights, weighted with 
the respective probabilities, represent the pension entitlements of the 40-year-old female contributor.  

Equation 13 provides a formal outline of the procedure to calculate pension entitlements with heterogeneous 
retirement behaviour under the homCC approach (please note that Equation 13 can be applied for old age and 
early retirement pensions). For the consideration of other pension types, such as e.g. disability pensions, see Box 
23. In fact, this formula represents an extension of Equation 5. In Equation 13, the final entitlements  𝐸𝑥,𝑔,𝑏 of a 
contributor are reflected by the probability-weighted sum of pension entitlements for each possible choice of the 
retirement age 𝑙 (𝑥 < 𝑙 ≤ 𝑙𝑚𝑎𝑥). Furthermore, the accrual factor  λx,g,d,b
𝐵𝑠,𝑔,𝑑,𝑏+𝑠−𝑥 depend on the respective choice of the retirement age 𝑙.  

as well as the annual pension benefit 

where  

 lmax = the highest possible retirement age, 

λx,g,l,b = the accrual factor for a given retirement age 𝑙,  

 𝑞𝑥,𝑔,𝑙,𝑏 = the probability of a 𝑥 year old in the base year 𝑏 to retire at age 𝑙, 

𝑓𝑢𝑙𝑙

𝐵𝑠,𝑔,𝑙,𝑏+𝑠−𝑥

= the annual full pension benefit of a 𝑠 year old in the year b+𝑠 − 𝑥 after retirement at age 𝑙. 

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maxx,g,l,b,,,l=x+1x,g,bx,g,l,b,,*q)](13)E=[*(**(1)lfullsglbsxDxssgbsxslBpr 
 
 
 
 
 
 
 
 
 
 
 
 
Description of the approaches to estimating pension entitlements for government managed pension schemes 

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Figure 19: Accrual factors considering different retirement ages 

Estimating the initial pension by applying heterogeneous contribution careers  

A more detailed approach to estimating pension entitlements represents the consideration of 
heterogeneous contribution careers (hetCC). This procedure allows the contribution career of a 
future new retiree to differ from those of current pensioners. For example, due to longer 
unemployment or education periods for younger age groups, contribution careers may vary 
considerably between birth cohorts94. To consider such hetCC, comprehensive data on the 
contribution history of current contributors need to be collected. On this basis, the accrued-to-date 
𝑎𝑐𝑐𝑟𝑢𝑒𝑑) at the future point of retirement r is directly estimated, and later projected 
pension benefit (𝐵𝑟
over the remaining retirement phase.  

The way in which the past contribution career precisely translates into pension entitlements varies 
from pension scheme to pension scheme and is formulated in the respective benefit formula. 
𝑎𝑐𝑐𝑟𝑢𝑒𝑑 of current contributors, it is useful 
Therefore, before describing the required steps to estimate 𝐵𝑟
to classify government-managed employee pension schemes more closely with regard to the benefit 
formula applied. Across Europe, pension schemes may be distinguished as follows: 

1)  flat-rate pension schemes  

2)  earnings-related pension schemes  

final earnings schemes 

pension account schemes 

In flat-rate pension schemes, the final pension level depends on the individual’s number of 
contribution or residence years, as well as on a certain benchmark pension. In earnings-related 
pension schemes, on the other hand, the level of benefits depends not only on the number of years 
during which contributions were made, but also on the amount of reference earnings or contributions 

94   Such differences are also referred to as cohort effects. 

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Description of the approaches to estimating pension entitlements for government managed pension schemes 

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during the contribution career. Earnings-related pension schemes can be further differentiated into 
final earnings types and pension account types. A more detailed classification of pension schemes 
with respect to the benefit formula is provided in Box 18. 

Box 18: Classification of pension schemes with regard to the 

benefit formula 

In all government-managed defined benefit pension schemes covered in the supplementary table, the 
calculation of pension benefits is based on the past contribution career of scheme participants. How this past 
contribution career precisely translates into pension benefits and entitlements varies from one pension 
scheme to another and is formulated in the benefit formula. It is useful to classify these pension schemes 
with regard to the benefit formula applied. In this context, dividing pension schemes into flat-rate and 
earnings-related schemes. 

Flat-rate pension schemes can be found in the Netherlands or in the UK, for instance. They provide a basic 
flat-rate pension (in the UK also earnings-related public pension schemes can be found95. In these schemes, 
the final pension level depends on the individual´s number of contribution or residence years (𝐶) as well as a 
certain benchmark pension (𝐵𝑃), as outlined in Equation 14. The 𝐵𝑃 is, generally, the highest possible 
pension one can receive after a certain number of contribution years. 

Most other European countries — such as France, Poland, Greece and Germany — feature earnings-
related pension schemes. In these schemes, the level of benefits depends not only on the number of years 
of contribution, but also on the amount of reference earnings or contributions during the contribution career. 
All earnings-related pension schemes are based — at least to some extent — on the principle of 
equivalence. According to this notion, higher reference earnings should result in higher pension benefits. 
This aspect plays a role and should be reflected in estimates of pension entitlements. 

Earnings-related pension schemes can be differentiated further with respect to their benefit formula. 
Traditionally, benefit formulas across Europe are designed as final earnings schemes. In such schemes, 
the pensions are calculated, as the name implies, on the basis of final earnings (𝐹𝐸) before retirement. 
These 𝐹𝐸 may comprise the earnings over the entire contribution career, or over a shorter period, such as 
the last year or the last 10 years before retirement. Furthermore, benefit formulas of final earnings schemes 
explicitly take into account the number of past contribution years (𝐶) and generally also a so-called accrual 
rate (𝐴𝑅). 

A formal outline of the calculation for accrued-to-date pension benefits in final earnings benefit formulas is 
provided in Equation 15. The earnings-related part of social security pensions in the Czech Republic is an 
example of a final earnings scheme. In this scheme, future pension benefits are calculated by multiplying 
contribution years by the accrual rate (amounting to 0.015) and the respective reference earnings96.

In recent years, final earnings benefit formulas have been replaced in many countries by pension account 

95   In the UK also earnings-related public pension schemes can be found. 
96   Currently reference earnings in this scheme cover all earnings since 1985. 

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(14)(,)accruedBbenefitformulaCBP(15)(,,)accruedBbenefitformulaFECAR 
 
 
 
                                                           
 
 
 
Description of the approaches to estimating pension entitlements for government managed pension schemes 

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schemes. The characteristic of such schemes is that individual contributions are directly converted and 
recorded in an individual pension account (𝑃𝐴). In comparison to final earnings schemes, individual 
accounts are explicitly considered in the benefit formula — see Equation 16. 

Typical examples of such pension account schemes are notional defined contribution (NDC) accounts, as 
found in Poland, Latvia, Italy or Sweden. In these systems, the amount of yearly individual contributions is 
directly transformed into an equivalent increase in individual pension accounts. Pension point systems, 
found in Germany or Slovakia, are also examples of pension account benefit schemes. In these schemes, 
individual earnings translate into a certain level of pension points, recorded in individual accounts97.  

The following description distinguishes between flat-rate pension schemes and two types of 
earnings-related pension schemes, namely final-earnings and pension accounts types. 

Collection of data on the past contribution career  

In a first step, data on the contributions of current contributors need to be collected. The extent of 
data required depends on the benefit formula of the respective pension scheme.  

In a flat-rate pension scheme like those found in the Netherlands, the accumulated number of 
contribution or residence years should be taken into account. It is useful to collect past contribution 
data broken down by one-year age groups and by gender. This are data for the accumulated 
contribution years for an average x year-old male, an average x year-old female, an average x +1 
year-old male, an average x +1 year-old female and so forth. 

In earnings-related pension schemes, additionally, past earnings or contributions of current 
contributors should be considered. This past contribution data depend on the type of earnings-
related pension scheme. The following description, therefore, distinguishes further between final 
earnings and pension accounts schemes. 

For pension accounts schemes, past earnings/contributions are, generally, already accumulated in 
individual pension accounts. These accounts facilitate the collection of contribution data since they 
also reflect (implicitly) the number of past contribution years. For pension schemes classified as 
pension accounts, the recommendation is to collect past contribution data broken down by one-year 
age groups and by gender. An example of such data is presented in Figure 20, which displays the 
required average notional defined contribution accounts, distinguished by age and gender, in the 
case of Poland98. 

97   Generally,  one  pension  point  is  accrued  by  contributors  who  earn  in  a  certain  year  the  average 
earnings  in  the  economy.  Higher  or  lower  salaries  result  in  increased  or  diminished  pension  point 
values per year. 

98   Contributors older than 60 years have no NDC account in the Polish general pension system. They are 
insured according to the old, pre-NCD pension rules. For a description of the pension system and the 
use of this data to project future pension levels see Jablonowski et al. (2010), p. 26-36. 

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(16)()accruedBbenefitformulaPA 
 
 
                                                           
 
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Figure 20: Value of NDC accounts differentiated by age and gender 

Source: Forschungszentrum Generationenverträge, University of Freiburg, based on data provided by 
the Polish social insurance institution (Zaklad Ubezpieczen Spolecznych, ZUS). 

In pension schemes classified as final-earnings types, such as those in Bulgaria or Portugal, past 
reference earnings and the number of contribution years of current contributors need to be collected, 
preferably broken down by one-year age groups and by gender, that is, data for past reference 
earnings and the number of contribution years for an average x year-old male, an average x year-old 
female, an average x+1 year-old male, an average x+1 year-old female, and so forth.   

On the basis of the contribution data, future initial pension levels accrued-to-date can be calculated. 
Below, this estimation procedure is outlined separately for 1) flat-rate, 2) final earnings and 3) 
pension account schemes.  

I. 

Estimation of accrued pensions in flat-rate pension schemes  

The aim is to estimate the annual accrued-to-date pension benefit 𝐵𝑎𝑐𝑐𝑟𝑢𝑒𝑑 of current contributors at 
the point of their future (expected) retirement. For flat-rate pension schemes, this calculation is 
relatively simple. In a first step, the future retirement age of current contributors should be set. A 
discussion on the appropriate choice of future retirement ages is provided in Box 16.  

As a second step, the information about accumulated contribution or residence years in the base 
year 𝐶𝑏𝑎𝑠𝑒 𝑦𝑒𝑎𝑟 is applied in the respective benefit formula. 

Furthermore, it is necessary to project in a third step the benchmark pension 𝐵𝑃  from the base year 
b to the future year of retirement r. Here — in accordance with the PBO approach — the annual 
adjustments of 𝐵𝑃 starting from the year after the base year b until the year of retirement r should be 
considered (see Equation 18). In most flat-rate pension schemes, wage indexation is applied. But 
other indexation arrangements, such as an adjustment for prices, can also be found. In 

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(17)(,)accruedrbaseyearrBbenefitformulaCBP 
 
 
 
 
  
Description of the approaches to estimating pension entitlements for government managed pension schemes 

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correspondence with the indexation rules, the level of the 𝐵𝑃 is adjusted annually by a factor 𝑣 – as 
outlined in Equation 1899. 

An example of the procedure to estimate Baccrued in flat-rate pension schemes on the basis of the 
hetCC approach is provided in Box 19. 

Box 19: Estimation of accrued pensions in a flat-rate pension 

scheme 

Below is a case study on how to estimate annual accrued-to-date pensions at retirement in a flat-rate 
pension scheme. The example is an average 50-year-old male contributor who participates in a flat-rate 
pension scheme, similar to the basic state pension scheme in the United Kingdom.  

The final basic pension level received at the point of retirement depends solely on the number of 
contribution years the individual accumulates. A “full basic pension”100 (FBP) — corresponding to the 
benchmark pension in the general description above — is granted if 30 or more contribution years have 
been earned. In the example given, the FBP would amount to EUR 5,000 in the base year. Furthermore, it is 
assumed that the FBP is adjusted annually for wage growth in the economy. The example assumes 
constant future wage growth of 1.5 % (in real terms). Pensions are reduced if fewer than 30 qualifying years 
have been accrued. More precisely, the number of qualifying years is compared to the number of years 
needed for a FBP (30 years). This “contribution years ratio” is then multiplied by the amount of a FBP (in the 
retirement year) to estimate the individual pension level at retirement. In the example, the representative 50-
year-old male contributor has accumulated on average 23 contribution years. To keep the description 
simple, it is further assumed that all contributors retire at the age of 65. This representative 50-year-old 
contributor will retire 15 years after the base year.  

The estimation of 𝐵𝑎𝑐𝑐𝑟𝑢𝑒𝑑 of the 50-year-old contributor would be as follows: First, the ratio of 
contribution years accrued until the base year (23 years) to the number of years needed for a FBP (30 
years) is calculated — amounting to about 76 percentage points. Thereafter, in accordance with the 
PBO approach, the FBP is projected to the year of retirement r. Finally, both the contribution years 
ratio and the projected FBP are multiplied to estimate 𝐵𝑎𝑐𝑐𝑟𝑢𝑒𝑑  at the point of retirement. 

As outlined in Equation 19, the 50-year-old male contributor would be entitled to an annual pension benefit 
of roughly EUR 4, 800 at his (expected) retirement age. 

99   Often a time lag of one or two years is set in the benefit formula. In other words pensions are indexed 
to  the  wage  growth  one  or  two  years  before  the  base  year.  The  impact  of  indexation  can  be 
considerable.  In  the  example  given  in  Box  19  the  level  of  a  full  basic  state  pension  in  15  years  — 
when the current 50 year old will retire — would increase by roughly 25 per cent (in real terms) with a 
wage indexation in comparison to an indexation with prices. 

100  A  “full  basic  pension”  should  not  be  mixed  up  with  the  term  “full  pension”.  The  latter  expression 
represents  a  pension  benefit  received  after  a  full  contribution  career,  while  a  “full  basic  pension”  is 
granted after 30 contribution years. 

Technical compilation guide for pension data in national accounts 

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1(18)[1]*rrsbsbBPvBP1550,,23*[(1.015)*5000€]4800€30(19)accruedmalerB 
 
 
 
                                                           
 
Description of the approaches to estimating pension entitlements for government managed pension schemes 

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II. 

Estimating accrued pensions in final earnings schemes 

In final earnings schemes, pension levels depend not only on the number of contribution years 
accumulated until the base year (𝐶𝑏𝑎𝑠𝑒 𝑦𝑒𝑎𝑟), but also on final earnings before the retirement year r 
(𝐹𝐸𝑟). Moreover, in most final earnings schemes, an accrual rate (𝐴𝑅) is applied. For the estimation 
𝑎𝑐𝑐𝑟𝑢𝑒𝑑  of current contributors, all the factors outlined above should be taken into account (see 
of 𝐵𝑟
Equation 20).  

Most of the above-mentioned input factors can be relatively simply obtained from past contribution 
data. This includes information about 𝐶𝑏 but also about past earnings until the base year b. 
Furthermore, the 𝐴𝑅 is defined in the respective benefit formula and can therefore be directly applied 
in the estimations. 

For the estimation of ABO pension entitlements, the above-mentioned input data would be 
sufficient101. However, to estimate pension entitlements with the PBO approach — described in 
section 2.2 — some further steps need to be taken: future wage increases have to be considered for 
the estimation of 𝐵𝑟
the assumptions of such a projection are outlined below.  

𝑎𝑐𝑐𝑟𝑢𝑒𝑑. This involves a projection of future earnings periods. The framework and 

Defining the starting and finishing point of the projection 

First, it is important to set the starting and finishing point of the required projection. Commonly, the 
projection of the future contribution career should start after the year for which the latest data on past 
earnings is available. Since the aim is to estimate pension benefits upon retirement, the natural 
finishing point of the projection is the year r in which the respective contributor is expected to retire. A 
discussion on the appropriate choice of future retirement ages is provided in Box 16. 

The example is an average 40-year-old contributor in base year 2010. He is expected to retire at the 
age of 60. Data on his past contributions are assumed to be available until the base year 2010102. 
Figure 21 illustrates the required projection period for this example. Data on his past contribution 
career — reflected by past reference earnings — is obtainable until the base year. For all future 
years, starting from 2011, until the year 2030103, when he is expected to retire, his contribution career 
needs to be projected. 

101  Under the ABO approach only reference earnings until the base year are applied for the estimation of 

𝐵𝑎𝑐𝑐𝑟𝑢𝑒𝑑. This approach requires no projection of future wage increases. 

102  Sometimes  data  on  the  past  contribution  may  only  be  available  for  years  before  the  base  year.  Of 
course, in such a case the projection of the future contribution career may begin already in the base 
year or even in the years before. 

103  To be precise, the projection should finish already at the end of the year 2029 in this example. If the 
contributor is expected to retire in beginning of 2030 his contribution career finishes at the end of 2029. 

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(20)(,,)accruedrrbBbenefitformulaFECAR 
 
 
 
 
 
                                                           
Description of the approaches to estimating pension entitlements for government managed pension schemes 

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Figure 21: Projection of the future contribution career under the PBO approach 

Source: Forschungszentrum Generationenverträge, University of Freiburg. 

Required assumptions for the earnings projection 

Generally, the development of individual future earnings depends on two main factors: 

1) future promotions and  

2) future general wage growth in the economy  

To project future earnings over the (expected) remaining contribution career, assumptions about 
these two factors need to be taken. The choice and application of these is described in detail below.  

As outlined in part 5.1.2, it is recommended to forecast future promotions on the basis of profiles 
reflecting the reference earnings or contributions for different age groups and genders. Figure 22 
shows such an earnings profile for contributors to the German statutory pension scheme (DRV). The 
profile reflects a number of factors which might vary by age and gender, such as the average wage 
paid per hour, the number of hours worked per year, the part-time employment of older (55+) and 
younger cohorts (20 to 25) and so forth. For the following description, all these factors will be 
summed up by the term “promotions”. The picture makes clear that earnings vary over the working 
career. Generally, salaries increase with age and decline slightly before retirement. In this sense, the 
profile shown displays the usual hump shape which can be found in many European countries.  

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Description of the approaches to estimating pension entitlements for government managed pension schemes 

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Figure 22: Age- and gender-specific earnings profile (DRV 2006) 

Source: Forschungszentrum Generationenverträge, University of Freiburg, based on data for 2006 
provided by the Deutsche Rentenversicherung (DRV). 

For the projection of the future contribution career, it is appropriate to base the calculation on a 
constant earnings or contribution profile over time. A current average contributor “walks” along this 
profile over his/her remaining employment life cycle until retirement. Equation 21 provides a formal 
outline of how to calculate future earnings with this approach.   

where 

x           = the age of a participant whose future earnings shall be projected, 

y         = the future age of the participant (y > 𝑥), 

𝑤𝑥,𝑦,𝑚 = the projected earnings of the current x year old participant than he/she reaches the     

            age of y in the future year 𝑚 

𝑚       = the future year for which the wage of a current participant is projected  

              (𝑚 = 𝑏 + (𝑦 − 𝑥)),  

𝑤𝑦,𝑏     = the earnings of a current y year old in the base year 𝑏, 

𝜋𝑖      = the inflation rate in a future year 𝑖 (𝑏 + 1 ≤ 𝑖 ≤ 𝑚),  

𝑔𝑖      = the general wage growth in a future year 𝑖 (𝑏 + 1 ≤ 𝑖 ≤ 𝑚).  

On the one hand, future earnings are determined by future promotions. According to the formula 
outlined above, a current pension scheme member aged 𝑥 can expect to receive the same earnings 
at age 𝑦 as a current member aged 𝑦. On the other hand, future salaries increase by inflation 𝜋 and 

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,,,1(21)*[(1)*(1)]mxymybiiibwwg 
 
 
 
  
Description of the approaches to estimating pension entitlements for government managed pension schemes 

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general wage growth in the economy 𝑔. Of course, inflation should only be considered if the 
calculation is carried out in nominal terms104. 

Data used for earnings profiles can usually be obtained from the institution responsible for the 
pension scheme. Household surveys can be an alternative data source. For a further discussion on 
data sources, see Section 6.2. As outlined in part 5.1.2, the AWG assumptions on future labour 
productivity growth provide a suitable basis for estimating general wage growth in the economy105. 

With the application of the earnings profile and the assumption on general wage growth and inflation 
(if required), earnings can be estimated for each year of the individual’s future contribution career. 
For an example showing how to project future earnings, see Box 20. 

104  For a further discussion see part 5.1.3. 
105  For a more detailed discussion on the future wage growth assumption see part 5.1.2. 

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Box 20: Projection of future earnings 

The following case study illustrates a projection of future earnings. This example takes the case of a  
25-year-old man, an average contributor who is expected to follow the earnings profile shown in  
Figure 23. The aim is to calculate his projected earnings at the age of 40. Of course, the same approach 
can also be applied to other periods of the individual's contribution career.  

The projection is carried out in real terms, i.e. inflation is disregarded. In base year b, the contributor 
earns about EUR 20,000 (see Figure 23). Assuming a constant earnings profile over time, he can expect 
to earn a 75 per cent higher wage at the age of 40 (in 2021), due to career progression. However, there 
are factors other than promotions to consider for the projection of his future contribution career. The level 
of future contributions and reference earnings is also affected by general wage growth in the years until 
2021. The assumption here is that annual real wage growth in the economy is 1.5 per cent, and that all 
employees benefit equally. Under these assumptions, the 25-year-old contributor can expect to improve 
his relative income position in the workforce due to promotions as well as from general wage growth in 
the economy. In quantitative terms, this implies that in 15 years' time, he will exceed the earnings of a 
current 40-year-old contributor, about EUR 35, 000 annually. When the 25-year-old reaches the age of 
40, he can expect future earnings of about EUR 45, 000 due to general salary growth. The dotted lines in 
Figure 23 illustrate the increase in the earnings profile due to expected wage growth after 15 years. 

Figure 23: Age- and gender-specific earnings profile considering general wage growth (DRV 2006) 

Source: Forschungszentrum Generationenverträge, University of Freiburg.  

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Description of the approaches to estimating pension entitlements for government managed pension schemes 

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For the estimation of 𝐵𝑟
account, such as the definition and valorisation of final earnings. The most important issues are 
discussed below.  

𝑎𝑐𝑐𝑟𝑢𝑒𝑑 a number of further aspects of the benefit formula need to be taken into 

Defining final earnings 

Generally, final earnings reflect the average of annual reference earnings (RE)106 over the last n 
years before retirement (as outlined in Equation 22). 

The calculation of final earnings may differ widely from one pension scheme to another. In most 
pension schemes across Europe, not all contribution periods until retirement age are relevant for the 
pension calculation. In some schemes, only the earnings in the last three years before retirement 
matter (e.g. in the German civil servants pension scheme). In other pension schemes, the reference 
earnings of the best 25 years (e.g. in France) before retirement or even of the entire contribution 
career (e.g. in Slovakia) are taken into account. The length of the contribution career considered in 
the benefit formula can have a significant impact on future pension levels107. It is important to reflect 
this aspect in the estimation of 𝐵𝑎𝑐𝑐𝑟𝑢𝑒𝑑. The definition of final earnings should, therefore, always be 
chosen precisely in accordance with the benefit formula. Furthermore, it has to be considered that 
these past earnings are usually valorised to the point of retirement r. This aspect is described below.   

Indexation of past earnings  
To estimate future pension levels, the indexation of reference earnings until the point of retirement 
should be reflected. These adjustments are also referred to as pre-retirement indexation. Most 
pension schemes across Europe apply indexation to past earnings according to wage growth in the 
economy108. Only a few pension schemes (e.g. in Portugal) choose a lower indexation of past 
contributions, using the CPI109. In accordance with the benefit formula, a past earning w in a year t is 
indexed by a factor v until the year of retirement r (see Equation 23). This valorised past salary 
represents the reference earning (RE) of the year t applied in the benefit calculation (see Equation 
22). 

Considering future adjustments to the benefit formula  
Besides the contributions career, future changes to the benefit formula should also be taken into 
account. For example, alterations to accrual rates (e.g. in Austria or Hungary) as well as extensions 
of the periods relevant for reference earnings (e.g. in Portugal or Malta) should be considered. In 
some countries, moreover, demographic factors should be applied when estimating the final pension 
level upon retirement. These factors, often referred to as sustainability factors, link future pension 
levels to demographic trends and play a role in, for instance, Germany, Austria or Portugal. It is 

106  Reference earnings are defined as the past earnings relevant in the benefit formula. 
107  Generally, an extension of the reference earnings translates into a decrease of pension levels — given 

the ceteris paribus condition. 

108  In  these  schemes  the  AWG  assumptions  on  the  future  labour  productivity  growth  provide  a  suitable 

proxy for the future wage growth. For a further discussion see part 5.1.2. 

109  In fact, in Portugal reference earnings are indexed to the growth of CPI from 2012 onwards. Before the 

year 2012 a slightly higher indexation is applied. 

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1,(1)(1)(22)rtrtrnrREFEn,1(23)*[1]rtrtiitREwv 
 
 
 
 
                                                           
Description of the approaches to estimating pension entitlements for government managed pension schemes 

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important to stress that only pension reforms which have already been enacted in the base year for 
calculations should be taken into account. 

Once final earnings have been accurately defined and valorised, 𝐵𝑎𝑐𝑐𝑟𝑢𝑒𝑑 at the point of retirement 
can be estimated. An example for the estimation of 𝐵𝑎𝑐𝑐𝑟𝑢𝑒𝑑 at the point of retirement in final-
earnings pension schemes (applying the hetCC approach) is provided in Box 21. 

Box 21: Estimation of accrued pensions in a final-earnings 

pension scheme 

The following case study illustrates how to estimate annual accrued-to-date pensions at retirement in a 
final-earnings pension scheme. Take the case of a 50-year-old male contributor who is a member of a 
final-earnings pension scheme. The individual pension received at the point of retirement (P) will 
depend on the number of contribution years (C), the valorised final earnings of the year before 
retirement (FE) and on an accrual rate of two percentage points. Equation 24 provides a formal outline 
of the applied benefit formula.  

To keep the description simple, it is assumed that all contributors retire at the legal retirement age of 65. 
Moreover, it is assumed that reference earnings are wage-indexed up to the year of retirement. The 
example assumes constant future wage growth of 1.5 % (in real terms). In the base year, the 
representative contributor earned a salary of EUR 20,000. In the case of the ABO approach, this would 
be applied as FE. However, as pension entitlements will be based on the PBO approach, future wage 
increases need to be taken into account, requiring an earnings projection. According to this projection 
the representative contributor will earn an (expected) annual salary of EUR 30,000 (in real terms) in the 
year before his retirement. Of course, in line with the benefit formula, these final earnings need to be 
valorised to the year of retirement. Here the valorised FE would amount to EUR 30,450 EUR (= EUR 
30,000 * 1.015) in real terms. Furthermore, this contributor has collected 30 contribution years until the 
base year.  

𝑎𝑐𝑐𝑟𝑢𝑒𝑑 at the future point of retirement r — as presented 
These inputs yield an estimate of the level of 𝐵𝑟
in Equation 25. In this example, the 50-year-old male contributor would be entitled to an annual pension 
benefit of EUR 18, 270 at his (expected) retirement age of 65. 

III. 

Estimation of accrued pensions in pension account schemes 

In recent years, final earnings benefit formulas have been replaced in many countries by a pension 
account scheme. The characteristic of these schemes is that individual contributions are directly 
converted and recorded in an individual pension account (𝑃𝐴). Individual accounts are explicitly 
taken into account in the benefit formula — see Equation 26. This aspect distinguishes them from 
final earnings schemes.  

In pension account schemes, accrued pension rights are reflected by the value of the 𝑃𝐴 in the base 
year. In line with the ADL approach, pension rights accrued in future years are not taken into 
account. The degree to which the level of the pension accounts translates into future pension 

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(26)()accruedrBbenefitformulaPA(24)**2%PFEC50,,6530,450€ * 30*2%=18,270€(25)accruedmaleB 
 
 
 
 
 
Description of the approaches to estimating pension entitlements for government managed pension schemes 

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payments depends on the pension formula used. Pension account schemes can be divided into: 
NDC, pension point and other pension schemes (as outlined below).  

Pension account schemes 

NDC pension schemes 

Pension point schemes 

Other pension account schemes  

The following description of the estimation of Br
pension account schemes. 

accrued distinguishes between these three types of 

NDC pension schemes 
NDC schemes are typical examples of pension account schemes such as those in Poland, Latvia, 
Italy or Sweden. In these systems, the amount of yearly individual contributions is directly 
transformed into an equal increase in individual pension accounts110.  

For the estimation of Br
1) the NDC account (𝑃𝐴𝑏,𝑟)  of the base year b valorised to the future retirement age r and 2) the 
average remaining life expectancy 𝐿𝐸𝑟

accrued of current contributors, one has to take into account mainly two factors: 

 at retirement age r (see Equation 27). 

As a first step, appropriate assumptions about the future retirement age r of current contributors are 
needed111. As a second step, the base year NDC account (𝑃𝐴𝑏) should be valorised until the future 
retirement age r to reflect future wage growth.  

Usually, individual NDC accounts (PA) are adjusted annually in accordance with wage bill growth or 
GDP growth. The indexation rules applied are reflected in the annual valorisation factor v (see 
Equation 28). On the basis of these two steps, the level of Br
Equation 27 above. 

accrued may be estimated – as outlined in 

110  Characteristic for NDC plans is that their benefit formula mimics the build-up of pension accounts in 
DC plans. Similarly to DC schemes, individual accounts in NDC schemes already reflect to a certain 
degree the value of individual pension entitlements — at least of old age pensions. Against this 
background, one may argue that an estimation of pension entitlements based on a projection of future 
pension payments is not required in case of NDC schemes because pension entitlements should 
correspond to the value of the NDC account. However, this ‘non-projection approach’ has a number 
of shortcomings. First of all, the results would not be comparable to the estimations of other countries 
which apply a (PBO) projection approach based on harmonised assumptions. With the above 
described ‘non-projection approach’ also cases where contributors die before retirement cannot be 
appropriately reflected. Furthermore, a projection is in most NDC schemes required since survivor’s 
pension benefits are usually linked to old age NDC pensions. Against this background, a projection 
approach as described in Equation 27 should be applied for the calculation of NDC pension schemes. 
Only if this approach is not yet realisable for a start a ‘non-projection approach may be acceptable for 
the estimation of current contributors´ entitlements. In other words under such circumstances the sum 
of individual pension accounts may serve as a proxy of total current contributors´ (old age) pension 
entitlements. 

111  For a further discussion on the choice of future retirement ages see Box 16. 

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,(27)braccruedrrPABLE,1(28)*(1)rbrbiibPAPAv 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
Description of the approaches to estimating pension entitlements for government managed pension schemes 

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Pension point schemes 

Pension point systems, such as those in Germany or Slovakia, are also examples of a pension 
account benefit formula. In these schemes, individual earnings translate into pension points which 
are recorded on individual accounts112. The level of 𝐵𝑟
𝑎𝑐𝑐𝑟𝑢𝑒𝑑 at the future point of retirement depends 
on 1) the total number of pension points accrued until the base year (𝑇𝑃𝑏) and 2) the valorised point 
value in the retirement year (𝑃𝑉𝑏,𝑟).  

Generally, the level of 𝑃𝑉 is adjusted annually to the growth of average earnings in the economy. But 
other indexation rules are also possible. The valorisation factor v reflects the respective indexation 
rules for the annual adjustments of 𝑃𝑉.  

To take into account future wage growth, the 𝑃𝑉 of the base year is valorised until the future point of 
retirement r (see Equation 30)113. 𝐵𝑟
𝑎𝑐𝑐𝑟𝑢𝑒𝑑 may then be estimated as outlined in Equation 29 above.  

Other pension account schemes 

In all pension account schemes, accrued pension rights are directly reflected in individual accounts. 
These accounts are then explicitly considered in the benefit formula. Besides NDC and pension point 
schemes, there are also other forms of pension account schemes. One example is the UK civil 
service pension scheme, Nuvos. In this scheme, participants pay a certain percentage of pension 
earnings into a PA each year. In other words, the amount of yearly contributions is directly 
transformed into an equal increase in the individual PA. Finally, in the year of retirement r the initial 
annual pension payment equals the level of the PA. 

𝑎𝑐𝑐𝑟𝑢𝑒𝑑 it is necessary to valorise the base year pension account to the future 

For the estimation of 𝐵𝑟
point of retirement r. This procedure is outlined in Equation 32. In the case of the Nuvos pension 
scheme, the pension account value of a year t is increased in line with inflation to the following year 
t+1. In fact, under such price indexation, no future wage increases need to be taken into account. As 
a consequence, the results of the PBO estimation approach would equal the ABO outcomes. Of 
course, other annual adjustment rules, such as wage indexation, are possible. The valorisation factor 
v — in Equation 32 — reflects the indexation rule of the pension scheme analysed.    

Estimating pension entitlements 

In the paragraphs above, the procedure to estimate the initial annual pension accrued-to-date 
𝐵𝑟
approach. In other words, the calculation of the “starting pension” of current contributors was 

𝑎𝑐𝑐𝑟𝑢𝑒𝑑 was outlined — applying both a homogeneous and a heterogeneous contribution careers 

112  Generally,  one  pension  point  is  accrued  by  contributors  who  earn  in  a  certain  year  the  average 
earnings  in  the  economy.  Higher  or  lower  salaries  result  in  increased  or  diminished  pension  point 
values per year. 

113  For a discussion of the choice of the retirement age see Box 16. 

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,(29)*accruedrbbrBTPPV,1(30)*(1)rbrbiibPVPVv,(31)accruedrbrBPA,1(32)*(1)rbrbiibPAPAv 
 
 
 
 
 
 
 
                                                           
Description of the approaches to estimating pension entitlements for government managed pension schemes 

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described. On this basis, it is relatively straightforward to estimate pension entitlements of present 
𝑎𝑐𝑐𝑟𝑢𝑒𝑑 at retirement year r is projected over the entire 
contributors. First, the initial pension level 𝐵𝑟
remaining retirement phase. This projection follows the same procedure described for current 
retirees. For the projection of current contributors´ benefits, (post-retirement) indexation rules also 
need to be taken into account. and future adjustments in the benefit formula have to be considered. A 
more detailed description of the projection of pension benefits over the remaining retirement phase is 
provided in part 7.3.3.  

On the basis of the benefit projection, 𝑓 (𝑓 = 𝑏 + 𝑠 − 𝑥) the annual pension benefit received by a 
current contributor can be calculated for any future year. To estimate the expected entitlements, 
future pension payments are weighted in a further step by the respective survival probabilities 𝑝. 
Finally, all future pension payments are summed up and discounted to the base year (see Equation 
33 below)114.  

An example of the procedure to estimate pension entitlements for current contributors is provided in 
Box 22. 

Box 22: Estimation of pension entitlements of current 

contributors 

This case study outlines the estimation procedure to calculate pension entitlements of current 
contributors. This example is used to calculate the pension rights of a 40-year-old male contributor, 
base year 2010. This individual is expected to retire at the age of 61 (in 2031). At the beginning of his 
retirement he can look forward to receiving a full pension benefit of EUR 10,000 (see first green bar, 
Figure 24), representing a pension payment after a full contribution career.  

For the estimation of pension entitlements, however, only accrued-to-date pension benefits are taken 
into account. In the example given, the initial annual pension benefit accrued-to-date (𝐵𝑟
amount to EUR 5,000 (see first red bar, Figure 24). In other words, the 40-year-old contributor would 
be entitled only to half of his future (expected) full pension. This proportion has been estimated on the 
basis of the homCC approach, described in part 7.3.4 under “estimating the initial pension by applying 
the homogeneous contribution careers”. 

𝑎𝑐𝑐𝑟𝑢𝑒𝑑) will 

Pensions are paid until his expected death after the age of 80 (after 2050). To keep the case study 
simple, all values are calculated in real terms and price indexation is assumed. According to these 
assumptions, he can expect to receive the value of the initial pension over his entire retirement. 

The aim is to calculate pension entitlements in the present value terms of the base year. All future 
accrued pension payments are therefore discounted. Since these future flows are paid out in the far 
future, in 20 to 40 years they are heavily discounted (see blue bars in Figure 20). At this stage of the 
estimation, an important aspect becomes apparent. Younger contributors especially have accrued 
only relatively little pension entitlement. This can be explained by two factors. First, their future 
pension payments are paid out in the far future, and are therefore heavily discounted. Secondly, they 
have accrued only a relatively small proportion of their full pension. Therefore, younger cohorts play 

114  Please  note  that  Equation  33  equals  Equation  5.  For  a  description  of  the  used  parameters  and 

variables see, therefore, Equation 5. 

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,,x,g,b,,1(33)E=**(1)accruedsgfDxssgfsxBpr 
 
 
  
                                                           
Description of the approaches to estimating pension entitlements for government managed pension schemes 

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only a minor role in the total of pension liabilities. This aspect should be kept in mind when setting up 
a pension model. It is important to focus especially on the estimation of pension entitlements of 
present pensioners and older contributors, since they have the largest impact on the total value of 
pension liabilities. 

Finally, all discounted accrued-to-date pension payments are accumulated to obtain the stock of 
pension entitlements. For the example of the 40-year-old male contributor, these pension rights would 
amount to about EUR 30, 000 in the base year (see blue bar to the far left). Analogously, for all other 
age groups, pension rights should be calculated and projected differentiated by gender115. 

Figure 24: Estimating pension entitlements of current contributors 

Source: Forschungszentrum Generationenverträge, University of Freiburg. 

Differentiation by type of pension 

As outlined in section 3.1, the supplementary table covers various types of pensions. The most 
significant category for the estimation of entitlements is old age pensions. Generally, the largest 
amount of pension expenditure and entitlements is determined by this type of pension.  However, 
disability, early retirement, widows' pensions and orphans' pensions should also be considered in 
this new table of national accounts. As an example Table 3 displays the breakdown of aggregate 
payments by type of pension for the social security pension scheme in Slovakia. 

115  In  the  given  example  it  was  so  far  assumed  that  current  contributors  reach  with  certainty  the  age  of 
retirement.  This  is  of  course  not  a  realistic  presumption  since  a  certain,  though,  small  proportion  of 
contributors  is  expected  to  die  before  they  can  receive  any  pension  benefits.  The  aim  of  the 
estimations is to calculate the expected pay-out of pension benefits. Therefore, the mortality of current 
contributors  should  be  taken  into  account  by  weighting  the final  pension  with  the  probability  to  reach 
the  respective  retirement  age.  This  aspect  is  considered  in  Box  23  with  the  probability  to  die  before 
retirement. 

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Table 3: Differentiation of aggregate payments by type of pension — the example of the 
Slovakian social security pension scheme 

Type of pension payments 

Total of pension payments 

Old age pensions 

Disability pensions 

Survivor pensions 

Pension payments 
SKK billions, 2007 

126.519 

96.148 

15.380 

14.991 

It is desirable to distinguish among pension types, for two main reasons: the benefit formula and the 
resulting pension levels may vary considerably between pension types; and the duration for which 
participants receive a specific benefit may vary significantly by pension type. While old age pensions, 
for instance, are granted until death, disability benefits are usually paid until the legal retirement age 
or the death of the beneficiary116. Box 23 outlines how to differentiate the calculation procedure by 
pension type.  

In some countries, however, the data and resources to differentiate by pension types in making the 
calculations may not yet be available. In such cases, it is best to focus on the calculation of old age 
pension entitlements, due to their relative importance (see Table 3): a detailed estimation of disability 
and survivors' pension entitlements (for current contributors)117 may initially be disregarded118. Under 
such circumstances, the final old age pension entitlements of a current contributor should be 
rescaled by a factor reflecting the ratio of the total aggregate pension payments and the aggregate of 
old age pension payments in the base year119.  

116  Also  pension  type  specific  survival  rates  may  represent  a  reason  to  differentiate  the  calculation  by 
𝑑𝑖𝑠𝑎𝑏 may deviate from the average survival 
pension type. E.g. survival rates of disabled individuals  𝑝𝑠,𝑔
rates applied for old age. If possible — as outlined already in part 5.2.1 — such pension type-specific 
survival rates should be taken into account. 

117  For  present  pensioners  the  estimation  procedure  is  more  straightforward.  For  this  group  a 
differentiation in the course of the calculations by pension type should, possibly, always be applied. 
118  For the development of a pension model it should always be taken into account which factors play the 
most  decisive  role  for  the  final  results.  Generally,  about  half  of  pension  entitlements  are  accrued  by 
current  contributors.  Of  these  half  about  70  per  cent  are  old  age  pension  entitlements.  Old  age 
pensions are therefore rather significant for the final level of pension entitlements while disability and 
survivors’  pensions  play  a  less  important  role.  One  may  conclude  that  ‘only’  about  15  per  cent  of 
overall  pension  entitlements  are  calculated  not  in  depth  when  disregarding  disability  and  survivors’ 
pensions of current contributors. 

119  This rescaling approach has been applied e.g. by Holzmann et al. (2004), see p.34. In the Slovakian 
example shown in Table 3 the rescale factor would amount to about 1.3. In this example it is assumed 
that  only  old  age  pension  have  been  calculated  in  detail  by  the  actuarial  model.  Of  course,  it  also 
imaginable  that  further  types  of  pensions  (besides  old  age  pensions)  can  be  estimated  in  detail  and 
fewer categories have to be disregarded. In this case the rescale factor would consequently decrease.  

Technical compilation guide for pension data in national accounts 

98 

 
 
 
 
 
 
 
                                                           
Description of the approaches to estimating pension entitlements for government managed pension schemes 

7 

Box 23: Differentiation of estimations for current contributors 

by pension type 

The aim of the calculations is to estimate entitlements for different types of pension: old-age and early 
retirement, disability and survivors’ pensions. The calculation procedure should distinguish between 
these pension categories. This approach is explained below. The description is provided for a homCC 
approach. But it is also applicable for a hetCC approach after the consideration of a few minor 
modifications120.  

Pension entitlements of current contributors should reflect the fact that these individuals retire with a 
certain probability 𝑞𝑜𝑙𝑑 at age 𝑑, but also that they may become disabled or may die with a certain 
probability at an age 𝑑. Their pension rights should represent the probability-weighted sum of 
entitlements for each of these pension types. Equation 34 provides a formal outline of the estimations 
differentiating by pension type. The formula reflects heterogeneous retirement ages 
 d (x + 1 ≤ d ≤ D)121. For every d the accrual factor λx,g,d is calculated. Moreover, the present value of 
the expected payment stream PV is calculated for each type of pension considering the type-specific 
survival rates p and pension benefits B.  

where  

λx,g,d,b = the accrual factor of a participant of age x and gender g in the base year 𝑏  who 
retires/becomes disabled or dies at age d,  

𝑜𝑙𝑑
𝑞𝑥,𝑔,𝑑,𝑓

 = the probability of a 𝑥 year old to retire at an age 𝑑 and to receive 𝐵𝑜𝑙𝑑 in a future year 𝑓                 

120  In  case a  hetCC  approach  is applied accrued  pension  benefits  are estimated directly.  Therefore,  the 
accrual  factor  λ  would  be  omitted.  Furthermore,  annual  pension  benefits  𝐵  would  reflect  not  a  full 
pension but accrued-to-date pension payments estimated on the basis of past contribution data — as 
described  in  part  7.3.4  under  “estimating  the  initial  pension  by  applying  heterogeneous  contribution 
careers”. 

121  In  case  homogeneous  retirement  behaviour  is  assumed  it  is  recommended  to  choose  separately:  1) 
one average retirement age, 2) one average age to become disabled and 3) one average age to die 
during  the  time  of  contribution.  For  a  further  description  on  heterogeneous  and  homogeneous 
behaviour see Box 16. 

Technical compilation guide for pension data in national accounts 

99 

x,g,d,fDdisabsurvx,g,d,fx,g,d,fd=x+1x,g,bx,g,d,b*[qq+ q](34)E=[***oldolddisabsurvPVPVPV,,,,,,,,,,,,,,,,,,,,,,,,,,,(*)= *)*(1)(*(1)**(1)oldsgmsgdmdisabsgdmsurvsurvsurvsgdmsugmoldoldfulloldxgdfdisabdisabfulldisabxgdfsgmsurvsurvfullsurvxgdfDxssdDxssddDxssdPVBPVBPVBprprpr 
 
 
                                                           
 
 
 
 
Description of the approaches to estimating pension entitlements for government managed pension schemes 

7 

(𝑓 = 𝑏 + 𝑑 − 𝑥)122,  

𝑑𝑖𝑠𝑎𝑏  = the probability of a 𝑥 year old to become disabled at an age 𝑑 and to receive 𝐵𝑑𝑖𝑠𝑎𝑏 in a 
𝑞𝑥,𝑔,𝑑,𝑓
future year 𝑓, 

𝑠𝑢𝑟𝑣  = the probability of a 𝑥 year old to die at an age 𝑑 and to have a surviving spouse/orphan 

𝑞𝑥,𝑔,𝑑,𝑓
who receives 𝐵𝑠𝑢𝑟𝑣 in a future year 𝑓, 

   = the present value of the expected payment stream of old age and early retirement 

𝑜𝑙𝑑
𝑃𝑉𝑥,𝑔,𝑑,𝑓
pensions after retirement at age d in future year 𝑓, 

𝑃𝑉𝑥,𝑔,𝑑,𝑓

𝑑𝑖𝑠𝑎𝑏    = the present value of the expected payment stream of disability pensions, 

𝑃𝑉𝑥,𝑔,𝑑,𝑓

𝑠𝑢𝑟𝑣    = the present value of the expected payment stream of survivors pensions,  

𝑓𝑢𝑙𝑙,𝑜𝑙𝑑 = the annual full old age or early retirement pension benefit at age 𝑠 in year 𝑚 after 

𝐵𝑠,𝑔,𝑑,𝑚
retirement at age 𝑑, 

𝑓𝑢𝑙𝑙,𝑑𝑖𝑠𝑎𝑏 = the annual full disability pension benefit at age 𝑠 in year 𝑚 after the participant became 

𝐵𝑠,𝑔,𝑑,𝑚
disabled at age 𝑑, 

𝑓𝑢𝑙𝑙,𝑠𝑢𝑟𝑣  = the annual full survivor’s pension benefit at age 𝑠 in year 𝑚 after a participant died at 

𝐵𝑠,𝑔,𝑑,𝑚
age 𝑑, 

𝑚               = a future year after retirement/disability/death  (𝑚 = 𝑏 + 𝑠 − 𝑥), 

𝐷𝑜𝑙𝑑    = the highest possible age to receive 𝐵𝑜𝑙𝑑, i.e. the highest age considered in the calculations,  

𝐷𝑑𝑖𝑠𝑎𝑏     = the highest possible age to receive 𝐵𝑑𝑖𝑠𝑎𝑏, 

𝐷𝑠𝑢𝑟𝑣      = the number of years a spouse/orphan at age 𝑑 + 𝑢𝑠𝑢𝑟𝑣 can at most receive 𝐵𝑠𝑢𝑟𝑣, 

𝑜𝑙𝑑       = the probability of an old age pension beneficiary of gender 𝑔 to survive an age 𝑠, 

𝑝𝑠,𝑔,𝑚

𝑑𝑖𝑠𝑎𝑏     = the probability of a disability pension beneficiary of gender 𝑔 to survive an age 𝑠, 

𝑝𝑠,𝑔,𝑚

𝑠𝑢𝑟𝑣       = the probability of a survivor’s pension beneficiary of gender 𝑔𝑠𝑢𝑟𝑣 to survive an age 

𝑝𝑠,𝑔,𝑚
𝑠 + 𝑢𝑠𝑢𝑟𝑣, 

𝑢𝑠𝑢𝑟𝑣= the number of years, positive or negative, that when added to the participant’s age (in the 
year of his death) gives the age of the surviving spouse (in this year).  

The approach to calculating pension entitlements for average present pensioners (part 7.3.3) and for 
average current contributors (part 7.3.4) has been described. The distribution of pension entitlements 
for each age group and gender can then be estimated. The last step for estimating the total pension 
entitlements of a respective pension scheme is relatively simple. As outlined in Equation 35, all 
average pension entitlements calculated by age and gender in the previous steps need to be 
multiplied by the respective cohort sizes

in these groups. The sum represents the total of pension 

entitlements (𝑇𝐸) in the respective scheme in present values of the respective base year b.  

122  In various countries the entitlement of a pension is dependent on a minimum period of membership or 
contribution in the pension system. For example, in Italy 20 years (for people insured before the year 
1996) of contribution are necessary to receive a pension entitlement while in Belgium no minimum 
period of membership in the pension system is required. The variable qold should possibly reflect the 
probability to reach the minimum periods of contributions, i.e. to be eligible to a pension benefit.   

Technical compilation guide for pension data in national accounts 

100 

N,,,,00(35)**DDmalemalefemalefemalebsbsbsbsbssTEENEN 
 
 
   
 
                                                           
References 

 References 

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Auerbach, A., J. Gokhale and L. Kotlikoff (1992), Social security and medicare policy from the 
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Auerbach, A., J. Gokhale and L. Kotlikoff (1991), Generational accounts: a meaningful alternative to 
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Bonin, H. (2001), Generational accounting: Theory and application, Springer, Berlin. 

Börsch-Supan, A., A. Ludwig, and J. Winter (2004), Aging, Pension Reform, and Capital Flows: A 
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Canton, E., C. van Ewijk and P.J.G. Tang (2003), Population Ageing and International Capital Flows, 
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Wiesbaden.  

Deutsche Bundesbank (2007), Monatsbericht Juni 2007, Frankfurt am Main. 

Dippelsman, R. (2010), Recording of Defined Benefit Pension Schemes in Macroeconomic Statistics, 
ECB/Eurostat E-Book, p. 18-27. 

European Central Bank (2009), “Workshop on Pensions” 
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Eurostat (2014), European system of accounts ESA2010 – Transmission programme of data. 
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Technical compilation guide for pension data in national accounts 

103 

 
 
 
 
GETTING IN TOUCH WITH THE EU 

In person 
All over the European Union there are hundreds of Europe Direct information centres. You can find the 
address of the centre nearest you at: https://europa.eu/european-union/contact_en 

On the phone or by email 
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FINDING INFORMATION ABOUT THE EU 

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EU law and related documents 
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Data can be downloaded and reused for free, for both commercial and non-commercial purposes. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Technical compilation guide for 
pension data in national accounts

The European Commission (Eurostat) and the ECB have released the 
updated Technical Compilation Guide for Pension Data in National 
Accounts. The Guide, produced by the two institutions, is a handbook for 
compilers and users of data on pension schemes in social insurance. It 
aims at supporting National Statistical Institutes, Central banks and other 
compilers within the European Union, to derive position and flow data 
for pension entitlements. The guide is also a useful tool to help users to 
understand the data. 

For more information
https://ec.europa.eu/eurostat/

PDF: ISBN  978-92-76-21570-7

Technical compilation guide for pension data in national accounts 2020 edition