Pension statistics for the new ESA: Compilation, modelling and some results for Portugal in 2011...

Pension statistics for the new ESA:Pension statistics for the new ESA:

Compilation, Compilation, modelling modelling and some results for Portugal in 2011and some results for Portugal in 2011Workshop on PensionsWorkshop on Pensions

OECD - ABS, Canberra 22-24 April 2013OECD - ABS, Canberra 22-24 April 2013

Ana M. de AlmeidaDeputy-Director | Statistics Department

Pension statistics for the new ESA:

Compilation, modelling and some results for

Portugal in 2011

OECD – ABS Workshop on PensionsCanberra, 22-24 April 2013




1. PENSION ECONOMIC PROJECTIONS FOR EUROPE

2. METHODOLOGICAL FRAMEWORK FOR PENSION STATISTICS

3. PORTUGUESE PENSION SCHEMES

3.4 RESULTS

OUTILNE

3.3 MODELLING

3.2 COMPILATION

3.1 CHARACTERISTICS

3. 5 MAIN CHALLENGES

1




The 2009 Ageing report: Economic and budgetary projections for the EU-27 Member States (2008-2060) – DG ECFIN and EPC AWG, states that sustainability gaps emerge because the discounted values of all future primary balances are too small to offset current debt.


2




In Portugal, a slight increase

of the gross pension

expenditure (0.2% of GDP) is

projected for this period.

According to the 2012 Ageing report, EU gross pension expenditure is projected to increase from 11.3% of GDP in 2010 to 12.9% in 2060.


Public pensions, gross as % of GDP: 2010-2060 (AWG scenario)

Medium and long term challenge: An ageing population raises challenges! Policy-makers need to ensure long-term public finances sustainability and future pension expenditure has to be taken into account, especially as Europe is in the midst of the deepest recession in decades, which is putting unprecedented stress on economies.

3




In Portugal, elderly

population (65 and

over) as % of total

population is expected to

increase from 18% in

2010, to 32% in 2060.

1. PENSION ECONOMIC PROJECTIONS FOR PORTUGAL

Demographic assumptions

4





Social insurance schemes require formal participation by the beneficiaries. This participation is linked to employment and is usually evidenced by the payment of contributions to the scheme either by the participants, an employer or both (2008 SNA par. 8.89). On the contrary, in Social assistance benefits are paid out irrespective of qualifying contributions (whether actual or imputed) having been made.

5





Social security pension schemes - The beneficiary is enrolled in the scheme or participates usually by paying a contribution to the scheme, or having one paying to the scheme on his behalf. Because it is a contributory scheme, there is some sort of contract between the government and the beneficiaries.

Employment-related pension schemes - part of the employee’s compensation package. Accordingly, negotiations between employees and employers may focus on pension entitlements, as much as on current conditions of service and pay scales.

6




Pension entitlements are classified in the SNA 2008 as a subcategory of the financial asset category Insurance, annuities, pension and standardised guarantees schemes, and show the extent of financial claims both existent and future pensioners hold against either their employer or a fund designated by the employer to pay pensions earned as a part of the compensation agreement between the employer and the employee.

As a consequence of the recognition of the entitlements as being assets of the households and liabilities of corporations and/or general government, it is necessary to show them as being built up by contributions over the period of employment.


7




Three main reasons for changing the treatment of unfunded employer retirement pension schemes from the 1993 SNA to 2008 SNA.


8




Within the discussion of the new international statistical standards, namely SNA 2008, discussions were held concerning the degree of harmonisation in the recording of pension entitlements in the national accounts, when the underlying institutional reality differs significantly across countries.

Pension assets (or future rights) in countries with mainly capitalised systems are recorded as household wealth, while future pension rights in countries with government sponsored pay-as-you-go schemes are not recorded.

Consensus was reached on distinguishing pension schemes sponsored by general government which should be recorded in the core national accounts, from those schemes that should be recorded only in a new Supplementary table on pensions (like social security schemes).


9





The distinction between those schemes whose entitlements are carried forward to the core accounts and those which are not should be based on the analysis of a set of criteria to be applied to the individual pension schemes:

10




Portuguese pension schemes are characterized as follows:

* General government pension schemes are unfunded defined benefit schemes (on a pay-as-you-go basis) :

- Social security general scheme – Regime Geral da Segurança Social (SS) - Civil servants’ pension scheme – Caixa Geral de Aposentações (CGA)

* Non-general government pension schemes are defined benefit schemes, fulfilled with figures from autonomous and non-autonomous pension funds.

Portugal participates since 2007, on the annual voluntary Eurostat/ECB questionnaire on pensions, which covers the Supplementary Table.

3. 1 PORTUGUESE PENSION SCHEMES - CHARACTERISTICS

11




Data are compiled under co-operation between Banco de Portugal and National Statistics Institute from the following institutions:

3. 2 PORTUGUESE PENSION SCHEMES - COMPILATION

12




Contract between Banco de Portugal and the Research Center for Generational Contracts of the Albert-Ludwigs Universität Freiburg for a report and an estimation for the Portuguese pension entitlements: “Estimating pension entitlements of government employer and social security pension schemes in Portugal” .

3. 3 PORTUGUESE PENSION SCHEMES - MODELLING

13




Model other main assumptions:

. Projected Benefit Obligations (PBO) – Expected future pay increases, whether determined by promotions or general wage growth;

. GDP growth rate according to Ageing Working Group (1.7%);

. Wage growth rate: 1.5%;

. Discount rate of 3%: ten year average of Euro area ten-year government bond yields;

. Constant employment rate;

. Mortality / Fertility rates: EUROPOP2008 (Migration was ignored);

. Matlab programme is used for estimations.


14




The model aims to estimate the accrued-to-date liabilities of the base year: current value of

pensions in disbursement; present value of future pensions due to past and actual contributions of

current workers:

This means that in every period , the existing retirees pension benefits and the pension rights

accrued until the base year , which are both discounted by the factor for every future year

, are multiplied by the number of members of the age cohort . This is done for every age-

group, beginning with the ones born in , which goes back 100 years prior to the base year.


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15




3. 4 PORTUGUESE PENSION SCHEMES – RESULTS IN 2011 (M€)

16

122% + 204% = 326% of GDP




challenges

3. 5 PORTUGUESE PENSION SCHEMES - MAIN CHALLENGES

17





18




An institutional framework (which includes the relevant national entities – NCB, NSI, MF, MLSS) is aimed with the following purposes:

• Data providers will be involved in the process of data compilation from the beginning

• Participation on the definition of methodology / share the responsibilities for the compilation

• Ensure the provision of data on time and with quality

• Compile pension statistics to fulfil the reporting obligations to international organizations

• Combine all the expertise to improve the estimations and to analyze the results.


19




21

Development of a national dynamic general equilibrium model:


20




Thank You for Your attention !

Any questions?

Ana M. de [email protected]

21

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Pension statistics for the new ESA: Compilation, modelling and some results for Portugal in 2011...

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