Luxembourg’s experience in compiling the ESA 2010

supplementary table on pension entitlements

John HAAS

WORKSHOP ON PENSIONS

22-24 April 2013Canberra - Australia

ESA 2010 is a regulation ... which is:Heaven

•Institutional cooperation•Clear methodological choices made•Extensive guidance and interpretation by Eurostat•Comparability across EU•Compulsory methods and transmission program

Hell

•Administrative uses hinder application of „better“ solutions•Comparability issues may bloc search for optimal solutions•Slow (and ever slower) procedures

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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

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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

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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

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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

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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 7

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“)8

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

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QUESTIONS?

Thank you for your attention

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