Households’ pension entitlements amount to €1 295 bn (376% of Gross Domestic Product, GDP) based on actuarial valuations at the end of 2015. Thereof, 97% are held against government pension schemes (social security and civil servants scheme) and 3% against private employment-related pension schemes.
Ageing of society leads to growing interest in management and financing of future pension benefits. The revised version of the European System of National Accounts (ESA 2010) accounted for this development by enhancing statistical reporting on pensions. The ‘Table 29: Accrued-to-date pension entitlements in social insurance – base scenario’ presents a comprehensive and internationally comparable overview of pension entitlements and obligations, respectively. The table comprises general government pension schemes and employment-related pension schemes of corporations, whereas social assistance and individual pension schemes are excluded.
Table 29 is structured as a balance sheet of accrued-to-date entitlements (ADE) of households, and from the counterpart’s point of view, as accrued-to-date liabilities (ADL) of governments or businesses. ADE provide information on the accumulation of pension rights of households in the past, and at the same time estimates the actuarial value of assets that pension managers would need to invest today to be in a position to pay out all future pension benefits (ADL).
The concept of accrued-to-date liabilities (or entitlements) limits the time horizon to the past and disregards flows of pension contributions. Hence, it cannot be used as a measure of sustainability of pension schemes that requires the parallel prognosis of future pension benefits and contributions. At European level, the annual Ageing Reports addresses the projected impact of pension schemes on sustainability and public finances.
The data are distinguished in non-government employment-related pension schemes that also appear in core national accounts and general government schemes of social security and for civil servants, which are only published in Table 29. The latter are organised as pay-as-you-go (PAYG) schemes, in which pension contributions are used to pay for the benefits within the same period of time. Consequently, there is no element of funding.
Accumulated pension rights in PAYG schemes are considered as contingent liabilities for the debtor (pension manager). In contrast to conventional government debt, no market value can be established for contingent liabilities. Actuarial calculations are necessary to estimate the value of conditional pension obligations. The results depend heavily on the underlying demographic and economic assumptions. In addition, a (partial) payment default of benefits for current contributors due to pension reforms is not unlikely.
Table 29 consists of an opening stock at the beginning of a period and a closing stock of pension entitlements (obligations) at the end of a period. The change in stocks during that period is caused by transactions (e.g. property income or pension benefits paid) and other flows (changes in entitlements due to revaluations or due to other changes in volume).
The present value of accrued-to-date entitlements (ADE) in civil servants pension schemes at the end of 2015 totals €211 bn or 61% of GDP in 2015 (Table 29, Column G”).
At the end of 2015, ADE sum up to €1 044 bn in social security pension schemes. That amount equals 303% of GDP in 2015 (Table 29, Column H).
Changing the real discount rate from 3% (baseline scenario) to 2% raises the estimated accrued-to-date entitlements of civil servants by 14% and for contributors and pensioners of social security schemes by 21%. Calculations with a real discount rate of 4% reduce entitlements of civil servants by 11% and for social security (future) beneficiaries by 16% compared to the baseline results (see “Table 29a: Accrued-to-date pension entitlements in general government schemes – scenario discount rate 2%” and “Table 29b: Accrued-to-date pension entitlements in general government schemes – scenario discount rate 4%”)
Accrued-to-date entitlements against non-government employers, a pension fund or insurer at the end of 2015 add up to €40 bn and 12% of GDP in 2015, respectively (Table 29, Column C).
Estimations of accrued-to-date entitlements for other EU-member states as well as methodological information are published by Eurostat.
|Table 29: Accrued-to-date pension entitlements in social insurance - base scenario, 2015|
|Table 29a: Accrued-to-date pension entitlements in general government schemes - scenario discount rate 2%, 2015|
|Table 29b: Accrued-to-date pension entitlements in general government schemes - scenario discount rate 4%, 2015|
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