PENSION SCHEMES FOR CIVIL SERVANTS

Transcription

1 PENSION SCHEMES FOR CIVIL SERVANTS AND PUBLIC SECTOR EMPLOYEES By Johan Janssens Civil Service Pension System Brussels, Belgium Seminar on Social Rights and Pensions for Civil Servants in some EU Member States Vilnius, 9 November 2006 Civil Service Dept. under the Lithuanian Interior Ministry and Sigma This document has been produced with the financial assistance of the European Union. The views expressed herein are those of the author, and can in no way be taken to reflect the official opinion of the European Union, and do not necessarily reflect the views of the OECD and its member countries or of the beneficiary countries participating in the SIGMA Programme.

2 Introduction Managing institution : Pension service for public sector PDOS-SdPSP Place Victor Horta, 40 - Bte 30 B1060 BRUXELLES Survey Current legal references State, Communities, Regions: law of 21 July 1844 on civil and religious pensions Coordinated laws on military pensions - Royal decree nr van 11/08/1923 Specific regulations Law of 5 August 1978 on economic and budgetary reforms (regulating overlapping and establishing ceilings) Royal decree n 206 of 29 August 1983 relating to the calculation of public sector pensions for services with partial benefits Royal decree n 442 of 14 August 1986 relating to the impact of certain absences on the calculation of public sector pensions Law of 15 May 1984 providing harmonization of pensions schemes (survivor pensions) Law of 26 June, 1992 on various social provisions (guaranteed minima) Law of 5 April 1994 relating to overlapping public service pensions with professional income or substitution incomes Field of application State, Communities, Regions: civil servants military staff police staff teachers magistrates ministers of registered religions and civil delegates public interest bodies (of State, communities or regions) affiliated to a registered Pool of para-public institutions Local governments: local governments affiliated to the ONSSAPL for pension purposes Pensionable age State, Communities, Regions: minimum age: 60 limit: 65 For army staff: age can vary between 45 and 62 according to rank and section Public interest bodies : minimum age: 60 maximum : 65 Police: age can vary between 52 and 65 according to rank and section Local governments: minimum age: 60 limit: 65 Deferred retirement age: no prolongation after 65 years Conditions for entitlement 5 years membership 2

3 Pension calculation: Old age pension State, Communities, Regions: Pension = S x N x T S = annual average salary of the last 5 years N = number of reckonable years of service (including notional years) T = 1/60 for the staff working in Federal, Community, or regional departments. For teachers: x 1/55, (1/30 for university teachers) For active services, i.e. jobs with difficult working conditions: 1/50. Magistrates: 1/30 and 1/35. Public interest bodies registered in the para-public pool : like State employees Local governments: Pension = S x N x T S = annual average salary of the last 5 years N = number of reckonable years of service (including notional years) T = 1/60 For fireman= 1/50 State, Communities and Regions - Local governments - Public interest bodies: Disability pension payment of a life pension in the case of permanent incapacity (for any work) Other advantages: payment of a holiday allowance Payment of a supplementary allowance topping up the holiday allowance for beneficiaries of the guaranteed minimum pension Pension calculation: Survivor s pension State, Communities and Regions Local governments Public interest bodies: If marriage over one year: 60% of the annual average salary of the last 5 years x ratio of full career to the number of years comprised between age 20 and age of death limited to 50% of the maximum index scale salary of the highest rank of the deceased spouse Children pension if there is no surviving spouse benefit, children can receive: 60% of the pension rights for one child 80% for 2 children 100% for 3 children and over Payment of the pension until 18 years of age or over if child benefit is still paid Other advantages: payment of a holiday allowance Payment of a supplementary allowance topping up the holiday allowance for beneficiaries of the guaranteed minimum pension Adjustment State, Communities Regions & Local governments & Public interest bodies registered in the para-public pool : Pensions are linked to the Consumer Price Index. This indexation generally entails an annual increase of 2 % Pensions in payment are adjusted where the maximum salary of active member of the same rank is increased 3

4 Financing State, Communities and Regions: Pay-as-you-go Retirement pension is free since it is considered as a deferred salary, i.e. salaries of State civil servants are not subject to any contribution; pensions like salaries are integrated in the State budget Local governments: Pay-as-you-go Contributions are collected by the ONSSAPL (Office National de Sécurité Sociale des Administrations Provinciales et Locales) Public interest bodies registered in the para-public pool : Pay-as-you-go, contributions collected by the PDOS Employee's contribution: State, Communities Regions and Local governments: 7.5% of salary for survivor pension Employer's contribution: Local governments: it is established every year on the basis of the ratio of pension expenses to wage bill (= 20 % in ) State, Communities and Regions: pension cost integrated in the budget Para-Public Pool: 24.5 % Management Local governments: 9/10 of provincial and local administrations are affiliated to the ONSSAPL. Pension management is trusted to PDOS The remaining 10% of local governments mange and finance their own pension scheme or take an insurance State, Communities Regions & Local governments & Public interest bodies registered in the para-public pool : Pension management is trusted to PDOS 4

5 Nature of the Scheme: Management Scheme features States, Communities and Regions The pension scheme (for State civil servants) is set out in the general law of 21 July 1844 on civil and religious pensions, and in the law of 15 May 1984 introducing harmonization measures for survivor pension schemes. Specific rules regarding retirement pensions apply to certain categories of employees (co-ordinated laws on military pensions for army staff, judiciary code for magistrates). This special basic scheme is independent from the general scheme of Social Security. It is a statutory, compulsory scheme. A pension payable by the Treasury can only be granted in accordance with a law. There is no supplementary scheme for State employees. It is a defined benefit scheme. As the scheme is centralized, pension entitlements are established by the Pension Department (Administration des Pensions) of the Ministry of Finance which also carries out the calculation of pensions; this department is the only body the pensioner can refer to. Pensions are paid by the Federal Public Service of Finances (central service for fixed expenses). Public interest bodies Law of 28 Aril 1958 relating to pension for the staff of certain public interest bodies, and their dependants. Local governments The pension scheme for local government employees is set out in the Law for Municipalities codified by the royal decree of 24 June 1988 and ratified by law of 26 May Population involved Employers State, Communities or Regions departments Special bodies : magistrates, State Audit Office, Conseil d Etat, Arbitration Court Provinces Local governments (municipalities, public centers of social assistance, intermunicipal services) Public interest bodies or legal entities of public law depending on State Communities or Regions, which are affiliated to the registered Pool of para-public institutions (para-public pool) Certain public companies (Poste, Belgacom, BIAC) Integrated Police Employees Professional categories Employees of State, regions, and local governments, employees of services depending from communities and regions (army forces, police, magistrates, administrative staff, teachers of municipalities and provinces, former staff of African colonies) and staff of certain public companies (Poste, Belgacom, BIAC), policemen and officers. Qualifying conditions for affiliation Employees must be appointed on a permanent basis (permanent staff) or be on preappointment probation period. Public sector employees who are not appointed on a permanent basis (contract, temporary staff) are covered by the general scheme of Social Security. The statutory age limit for State civil servants is 65. There are specific age limits, i.e. age 67 or 70 for magistrates, between age 45 and 62 for army staff. 5

6 Managing Decision-making body It depends on the level of administration: For pensions payable by the Treasury: the decision making body is the State. According to article 179 of the Constitution, no pension can be granted without a law. Pension entitlements are established by the PDOS which also calculates the amount of pensions At the level of Provinces, decision making falls on the Council of the Province At local government level: the city council for public interest bodies: the administration board Supervising ministries and bodies As mentioned above, they depend on the level of administration: Pensions of provinces: Council of the Province. Pensions of local governments: the City Council or the Council of the Region Pensions of public interest bodies: the Federal or regional minister competent in the sector of activity The State Audit Office (entity of the federal legislative power) supervises the pensions payable by the Treasury and the provinces 6

7 Financing Contribution rate for employers For State civil servants, there is no employers contribution since pensions are financed by the State budget For local government staff (affiliated to ONSSAPL, pay-as-you-go schemes), the contribution rate is annually fixed in relation to the ratio of pensions expenses to the wage bill, forecasted for a period of at least 3 years. Since 2004 the employers contribution rate is 20% of the wage bill (+ 7.5% of employee s contribution for survivor coverage) Contribution rate for employees There is no personal contribution for retirement pensions, but a 7.5% contribution for survivor pensions. Financial participation of other entities Financial participation of the State. Financial system on which the scheme is based Pensions payable by the Treasury Since the retirement pension of State civil servants is considered as a deferred salary, benefits are directly payable from a pension budget provided by the State (no contribution from employers or employees). As regards the financing of survivor pensions, a contribution (currently 7.5%) is deducted from civil servants salaries. This contribution is based on the full salary of each employee, whatever his/her personal situation (married or not). The difference between the global amount of contributions and the survivor pension expenses is allocated every year to the State pension budget used to pay retirement pensions. Pensions not payable by the Treasury, but calculated like State civil servants pensions The financing of pensions for public interest bodies and local governments staff, is based on a pay-as-you-go system. This pension scheme is purely pay-as-you-go since; the contribution is annually fixed on the basis of: the wage bill of all permanent employees affiliated to the common local government pension scheme the global pension expenditure It also involves solidarity between employers since the contribution is the same for all of them. The pension cost of a given municipality is not entirely supported by this municipality, but is shared between all the affiliated local governments. The global pension cost, is financed by a contribution payable to the National Social Security Office of local and provincial institutions (ONSSAPL). This contribution is calculated annually, according to the pension expenditure and the wage bill forecasted for a period of at least 3 years. This contribution, together with the 7.5% employees contribution finances both retirement and survivor pensions. Survivor pensions are financed by the 7.5% contribution paid by the active members like for State civil servants. Independent schemes Retirement pensions of provinces and local governments which are not affiliated to ONSSAPL, as well as public interest bodies not covered by the law of 28 April 1958, are also considered as deferred salaries and are directly payable from their own budget. There is no personal or employer s contribution. 7

8 Old Age Pension Qualifying conditions Age The normal age is 60 for most employees who have completed their career after 31/12/1976 without being dismissed. Limit retirement age for State employee is 65. For magistrates, between 67 and 70. For army staff between 45 and 62, according to rank and for certain categories of police staff, 58. Qualifying period (minimum period of membership) 5 years according to Art 46 of the law of 15/5/1984. (previously 20 years). Since 1/1/1984, part time services are converted in full time years according to a pro-ratacalculation. 8

9 Calculation method Calculation of pensionable salary Pensionable salary is the average index linked salary of the last five years of the career, revaluated on the date of pension entitlement (final salary for army staff). Only bonuses and extra payments provided by law are taken into account for contributions and pension calculation. Value of pensionable year (accrual rate) The value of the pensionable year is generally 1/60th of the pensionable salary. This percentage can be more favorable for certain professional categories: 1/55th for service completed in the education sector other than university 1/50th for active service (hard jobs) and for police staff and firemen 1/35th for years of service completed after the first 5 years (the first five years are taken into account at a rate of 1/30) by magistrates who retire because of physical incapacity or before the age limit (67 years, 70 years for the Supreme Court of appeal, the Conseil d Etat and the Arbitration Court) 1/30th: for university teachers 1/25th: for the first 15 years completed as a District Governor or Deputy- District Governor 1/20th: for years of service as member of the Supervision Committee for police and intelligence services 1/12th for first 7 years as Province Governor and deputy Province Governor Service time taken into account Service completed within the State, municipalities, regions, State-controlled companies and other public bodies as a permanent employee (civil servant) Service completed as a contract or temporary agent if the agent is subsequently appointed on a permanent basis Military and comparable service (resistance and captivity) Complete or partial leaves validated either for free or through payment of contributions Unpaid absence periods assimilated to service Absence periods resulting from the part time pre-retirement system, or the voluntary 4 days-a-week system Pre-retirement leaves. Any pre retirement period where an employee keeps an administrative position with a remuneration or a substitutive income while reducing or stopping his activity The last 4 cases are taken into account for the pension calculation, only within the limit of the time credit, that is the % of notional service in relation to actual service time. This % varied from 20 to 25 % according to birth date. Accrual of notional years: Notional years for degrees Notional years for Navy staff Maximum number of reckonable years: 45 years of service if the accrual rate is 1/60th Calculation formula P = S x N x 1/60th Where : P = Pension S = Annual average salary of the last five years N = Number of years of service taken into account (including notional years). The percentage may be more favorable for certain professional categories (see value of pensionable year). 9

10 Enhancements A holiday allowance is granted once a year to pensioners from the age of 60 if the global amount of their pension is lower than 1.264,26 (in May). It is enhanced for a married pensioner whose spouse fulfils certain conditions (particularly regarding income). An additional allowance is granted to pensioners with the guaranteed minimum. Where the pensioner receives the same type of allowance from another scheme, the allowance paid by the State scheme is reduced by the same amount. Minimum pension The pension paid cannot be lower than the minimum guaranteed amount. This supplement is only granted for the main pension. The guaranteed amount varies according to the pensioner s personal situation and the cause of retirement: For a single pensioner: 1.076,75 per month For a married pensioner: 1.345,94 per month The guaranteed minimum calculation takes into account all other incomes: Pensioner s and spouse s pensions, industrial injury allowance, disability pension, etc. Maximum pension The public sector pension cannot exceed ¾ of the pensionable salary, but with the bonuses it can reach 9/10. All pensions are submitted to a ceiling of ,21 per year ( 5.470,43 per month). Replacement rate for a full career Replacement rate for a full career = ¾ of pensionable salary. The State pensions regulations do not allow the payment of any lump sum. Co-ordination Co-ordination between public sector pension schemes: the last scheme pays for the whole career. The gross amount of the pension is supported by the relevant schemes proportionally to the career completed within each scheme. Each scheme pays every year its share of the pension to the scheme which pays the whole pension. Co-ordination with institutions of international public law (European institutions): possibility to transfer the surrender value of the pension rights (amount of contributions). Pension payment The payment is carried out on a monthly basis by the Treasury Central service for fixed expenses, SPF Finances, which is the institution pensioners refer to in this field. Pension adjustment Pensions are linked to the Consumer Price Index. This indexation generally entails an annual increase of 2 %. Pensions in payment are adjusted where the maximum salary of active member of the same rank is increased. 10

11 Overlapping There are 3 rules: 1. Overlapping with a professional activity: pension may be reduced or stopped if exceeding the ceilings set out below: Year 2006 Salaried employees Self employed No child dependant Children No child dependant Children Aged less than , , , ,89 Aged over , , , ,97 Compulsory retirement before age 65 for reason other than disability , , , ,97 2. Overlapping with an allowance granted for a career break or reduction of benefits: the payment of the pension is stopped except if the beneficiary renounces the substitution benefit. 3. Overlapping with pensions from the general scheme or from the scheme for self employed: the global amount of all pensions must not exceed ,21 per year. Above this ceiling, the public sector pension is reduced. 11

12 Disability Pension Temporary disability pension A pension for physical incapacity is granted for a period of 2 years (conditions and calculation: see 3.2). This short-term pension can be converted into a pension for permanent physical incapacity before the 2-year deadline if: The employee is recognized as definitely unable to work He/she has not resumed his/her activity Permanent disability pension The pension for physical incapacity is granted to an employee appointed on a permanent basis who has been declared unable to work by the relevant medical department. No age condition. No vesting period. Pension calculation Pensions for physical incapacity are calculated like normal pensions on the basis of the number of service years. An additional amount is granted when the pension level is lower than the following guaranteed amount: For a single pensioner : 50% of the average salary of the last 5 years For a married pensioner : 62.5% of the same average salary The guaranteed amount for physical incapacity cannot exceed: Either 75% of the maximum salary of the employee s higher rank Or 100% of the guaranteed income if the pensioner is single, or 125% if he/she is married A specific additional amount is paid to severely handicapped pensioners upon retirement. The handicap must have occurred during the career, and the loss of autonomy must reach at least 12 points on the current reference scale. This is a personal right of the pensioner. Pension if disability is due to service If an industrial accident or disease causes a permanent disability, an allowance is paid since the date of consolidation of lesions. A = S x Ppi Where: A = Allowance S = annual salary Ppi = % of permanent invalidity Overlapping: This allowance can overlap with the civil servant s disability or retirement pension only within a limit of 100% of the final salary. 12

13 Other Personal Benefits Gradual cessation of activity As from age 55, employees are allowed to work part-time (1/2 time) during a period of 5 years. They receive the salary usually paid for part-time service, as well as a monthly bonus amounting to paid by the employer. Early pension Certain categories of municipal staff, made redundant further to a merging of municipalities, can be entitled to early retirement as from age 55. For employees of State, Communities and Regions, the minimum age for early retirement is 60. In certain public bodies, pre-retirement leaves are allowed as from age 55 with payment of a part of salary. Regarding retirement before age limit: the early pension is calculated on the basis of reckonable services and periods and cannot be actuarially reduced. Since the number of years of service taken into account is often not sufficient to reach a full pension, the early pension is naturally lower than the pension obtained at age 65. Partial or flexible pension This notion does not exist in the pension scheme of the Belgian public sector. It has been proposed but the project did not succeed due to its complexity. Others The scheme for Belgian civil servants does not provide any deferred retirement system after the statutory pensionable age. Once 45 reckonable years have been completed, years of service are no longer taken into account. 13

14 Surviving Spouse (or Partner) Pension Qualifying conditions Marriage (between same sex or different sex persons) must have taken place at least one year before the member s death, except for specific circumstances (if a child was born from the marriage, if death is due to an accident which occurred after marriage, or to an industrial disease, if, at the time of death, there was a dependant child for whom one of the spouses received child benefit). The surviving spouse or divorced spouse must not have been sentenced for making attempts on the member s life. The divorced spouse must not be remarried before the date of the member s death. Before age 45 The surviving spouse aged under 45 is entitled to a minimum fixed pension, unless there is a dependant child or if he/she has a permanent work incapacity of at least 66% (in other cases, he/she must wait for the age of 45). After age 45 There is no qualifying period if the deceased had already retired or if he/she was still in service at the time of death. If the member dies after leaving the public sector and before being retired, there is a qualifying period of 5 years of service. The survivor s right ends on the first day of the month following remarriage. Calculation method Calculation formula: P = S x 60 % x (T1/T2) Where: P = Pension S = Pensionable salary = average salary of the last 5 years T1 = number of months of service taken into account (actual and notional) T2 = number of months between the 20th birthday of the deceased member and the month of death (with a maximum of 480) Minimum pension guaranteed Relative maximum The pension cannot be lower than 938,60 per month The pension cannot exceed 50% of the maximum index scale salary of the last post of the deceased spouse. Absolute maximum The pension cannot exceed 50% of the maximum salary of general secretary of ministry, i.e. 50% of 3.896,06 per month. Death in service If death is caused by an industrial injury or disease, the surviving spouse is entitled to an allowance amounting to 30% of the annual salary. This allowance can be converted into a lump sum for 1/3 of the amount, on the beneficiary s request, except for an industrial disease entailing a degree of disability lower than 10%. 14

15 Overlapping rules There are overlapping rules as regards the beneficiary of a survivor pension: Year 2006 Salaried employees Self employed Survivor aged under 65 with no other income apart from survivor benefits In all other cases: a) If aged under 65 b) If aged over 65 No child dependant Children No child dependant Children , , , , , , , , , , , ,97 Divorced spouse If not remarried before the member s death, the divorced spouse is entitled to a survivor pension from the age of 45 only, unless there is a dependant child or a work incapacity of at least 66% (see qualifying conditions). 15

16 Children Pension Qualifying conditions If there is no surviving spouse, dependant children are entitled to a survivor pension until they reach the age of 18 or as long as they are entitled to family allowances. Beneficiaries must not have been sentenced for making attempts on the member s life. Calculation method One child: 6/10th of the surviving spouse pension. 2 children: 8/10th of the surviving spouse pension to be shared between beneficiaries. 3 children and over: 10/10th of the surviving spouse pension to be shared between beneficiaries. Children pensions are calculated on the basis of the surviving spouse pension. In the case of death in service If death results from an industrial injury or disease, a short-term allowance is granted to each child. It amounts to 15% or 20% of the salary according to the number of beneficiaries. But the total amount granted to all beneficiaries cannot exceed 45% or 60% of the above mentioned salary. 16

17 Recent Reforms and Evolution Age bonus For all services completed after , a bonus is granted for each month completed after age 60. This bonus is calculated as follows: % of the annual amount of pension for each month of service completed between age 60 and 62 (with a minimum of 20.19) 0,167 % of the annual amount of pension for each month completed after age 65 (with a minimum of 26.92). The maximum bonus can reach 9 % of the pension amount as shown below: Age Bonus per year Total bonus ,5 % 1,5 % ,5 % 3 % % 5 % % 7 % % 9 % The Integrated Police Pool Further to the Police reform, a budgetary fund denominated Pension Fund for the Integrated Police was created as a specific service of the PDOS. All police services are obligatorily affiliated to this fund as from 1 April This fund is financed by a global contribution paid by employers and employees. In this scheme which is based on solidarity, the global contribution rate is calculated on the basis of the expenses expected for the on-going year and the estimated amount of the wage bill of all appointed police staff. The personal contribution is the same as for local government employees (7.5 %). The employer s contribution rate to be paid by police services is the difference between the global contribution rate (presently 27.5 %) and the personal contribution rate. 17