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Luxembourg’s experience in compiling the ESA 2010 supplementary table on pension entitlements

Luxembourg’s experience in compiling the ESA 2010 supplementary table on pension entitlements. John HAAS WORKSHOP ON PENSIONS 22-24 April 2013 Canberra - Australia. ESA 2010 is a regulation ... which is:. Heaven. Hell. Administrative uses hinder application of „better“ solutions

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Luxembourg’s experience in compiling the ESA 2010 supplementary table on pension entitlements

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  1. Luxembourg’s experience in compiling the ESA 2010 supplementary table on pension entitlements John HAAS WORKSHOP ON PENSIONS 22-24 April 2013 Canberra - Australia

  2. ESA 2010 is a regulation ... which is: Heaven Hell Administrative uses hinder application of „better“ solutions Comparability issues may bloc search for optimal solutions Slow (and ever slower) procedures • Institutional cooperation • Clear methodological choices made • Extensive guidance and interpretation by Eurostat • Comparability across EU • Compulsory methods and transmission program

  3. Main hypotheses of model • For pensioners • Life expectancy  EuroPop tables • Indexation to: • Prices  „échelle mobile“ (hypo: 2%) • Real wages  „ajustement“ (hypo: 1.5%) • For current workers • Average age of retirement  60 • Probability of not reaching age of retirement

  4. This is well reflected for the pensions issue • Extensive preparation • Eurostat/ECB Task Force • 2009 Workshop by Eurostat/ECB • Guidance handbook • Pilot compilation exercise • Looooooooong negociations at Council level • Fear over political implications of possible „wrong“ interpretation • Compulsory delivery only from 2017 on at t+24 deadline only • Publication not yet fully assured

  5. Luxembourg pension system in a nutsshell • General scheme = define benefit (pay as you go) • Formula: flat rate + wages + length of career • Exception = 3 special schemes • Civil servants • 2 public corporations • BUT: harmonized by 2001 reform • Coverage = old age, survivors, disability, early retirement • Automatic adjustment • Price changes (recent modulation) • Real wage increases

  6. Work on supplementary table • Pilot exercise on supplementary table • Presentation at Eurostat/ECB workshop in April 2009 • Update after • Collaboration with IGSS (Social Security) • Special statistical unit has • Actuarial model • Corresponds well to ADL / PBO options • Coherence with Ageing Working Group assumptions • Very detailed individual data set (Data Warehouse) • Every single pensioner covered • Almost every single active person covered

  7. Indexation of pensions: is this PBO? • There is an adjustment for real wages • Automatic every 2 years • BUT: there is no simulation of careers of current workers • ESA 2010 § 17.177 ...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.  Thus our calculation should be PBO

  8. Provisional results for table 29 • Column H (Social security pension schemes) • 315% of GDP in 2008 • Column G (Defined benefit schemes classified in general government) • 57% of GDP in 2008 • Other columns?? (Non general government managed pension schemes) • Work on-going • Should be relatively small (general scheme = „very generous“)

  9. Future work • Do another update of pilot exercise table • More detailed data from IGSS to „feel“ impact of hypotheses • Filling in the data for supplementary pension schemes manages by non-general government units • Supervisory authority (social security – IGSS) contacted • Plan to do voluntary transmission of table 29 in September 2014 • Not wait till 2017

  10. Thank you for your attention QUESTIONS?

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