Public Sector Pension Service

1. Public Sector Pension Service Public Sector Pensions in Belgium A brief overview By Johan Janssens “Social Rights and Pensions for Civil Servantsin some EU Member States”Vilnius, 9 November 2006

2. Civil servants

3. Kingdom Belgium 10 provinces 589 cities & communes

4. The federalisation of the Belgian State, multiplied the number of authorities. These authorities can freely determine their staff administrative and financial positions, whereas the financing of pensions of this staff remains at the federal level. 3 communities 3 regions

5. Social security

6. Social security –Ideological background • Bismarck: the financing is borne by both employees and employers, completed with a government contribution for pensions. Benefits are salary-linked. • Lord Beveridge: the total population is entitled to subsistence security.

7. Social Security - organization In the organization of the Belgian social security system, a first distinction should be made between the three systems: • for salaried persons (including not appointed civil servants !!!) • for self-employed persons • for appointed civil servants

8. Social security - benefits • Family benefits: • child's allowance, the orphan's allowance, the maternity fee and the adoption fee. • Unemployment benefits : • exclusively aimed at salaried employees. • Old-age and survivor’s pensions • Maternity benefits • Accidents at work • Professional diseases • Annual vacation

9. Social security - benefits • Medical care • covers both preventive and curative care • divided in 25 different categories of medical dispensations, the most important of which are these: • ordinary medical care; • dental care; • deliveries; • dispensation of pharmaceutical products ; • hospital care; • help required for revalidation.

10. Social Security - management Salaried persons (managed by social partners) • National office for family allowances RKW - ONAFTS • National employment office RVA - ONEM • National pension office RVP - ONP • National institute for sickness and invalidity insurance RIZIV - INAMI • Fund for accidents at work FAO - FAT • Fund for professional diseases FBZ - FMP • National office for annual vacation RJV – ONVA Self-employed persons (managed by social partners) • National institute for the social insurances of self-employed persons (RSVZ - INASTI) Civil servants (managed by social partners) • National Social Security Office for the Local and Provincial Administrations (RSZPPO - ONSSAPL) • Public Sector Pension Service (PDOS - SdPSP)

11. Social Security - management Since 1990 Belgian social security institutions collaborate in an electronic network. The Crossroads Bank for Social Security has won, in name of the network for social security, the 2006 United Nations Public Service Award in the category of "Application of ICT in Government : e-government".

12. Social Security – Global Management • Past: • the proceeds of the social security contributions were distributed among the different schemes in proportion to a legally fixed percentage for each of them. • Fund for the financial equilibrium of the social security. • Now (since 1/1/1995): • all social security contributions are collected in a "common fund" • the intervention of the State is incorporated • social security schemes are financed according to their needs. • The Management Committee = social partners responsibility • Consultative Committee = senior civil servants of the ministerial departments and public social security institutions concerned.

13. Social security –contribution percentages

14. Social security –contribution percentages

15. Pension schemes

16. Belgian pension systems Individual pension insurance system Extra legal pension system Legal pension system • Law regulated • Repartition (solidarity) • Managed by public autorities • Contract regulated (employer-financial organization) • Capitalization • Managed by insurance com-panies (pension funds & group insurances) • Contract regulated Contract regulated (employer-financial organization) • Capitalization • Managed by insurance companies 1st pillar 2nd pillar 3th pillar

17. Belgian pension systems Individual pension insurance system Extra legal pension system Legal pension system • Law regulated • Repartition (solidarity) • Managed by public autorities • Contract regulated (employer-financial organization) • Capitalization • Managed by insurance com-panies (pension funds & group insurances) • Contract regulated Contract regulated (employer-financial organization) • Capitalization • Managed by insurance companies 1st pillar 2nd pillar 3th pillar

18. Legal pension systems Independant personal services sector Private sector Public sector • Clients: • Private sector workers and employees • Non permanent civil servants • Managed by: • Clients: • Permanent civil servants • Managed by: • Clients: • Self-employed workers, professional services • Managed by: Pension Office of the Public Sector & some other institutions Nationale Institute for Social Insurance to self-employed workers National Pension Service

19. Legal pension systems Independant personal services sector Private sector Public sector • Clients: • Private sector workers and employees • Non permanent civil servants • Managed by: • Clients: • Permanent civil servants • Managed by: • Clients: • Self-employed workers, professional services • Managed by: Pension Office of the Public Sector & some other institutions Nationale Institute for Social Insurance to self-employed workers National Pension Service

20. Pension benefits

21. Benefits • Retirement pension: • Age pension • Disability pension • Survivor’s pension

22. Principles • Retirement pension of a civil servant = deferred salary: • Perequation (= adjustment) • No contribution • Pension rights are individual rights = no family pensions • No differences between man and woman

23. Conditions to obtain a retirement pension • End one’s career as a permanent civil servant • Have a certain: • Retirement age limit: 65 • Early retirement age: 60 • Immediate pension • Deferred pension • Have accomplished a certain number of years of services: 5 • Introduce a demand

24. Conditions to obtain a retirement pension Exception for a disability pension: • No condition of age • No condition of number of services • Being declared unable to exercise one’s function by the medical board

25. Calculationretirement pension Pension = Sal * Serv * Tant • Sal: reference salary = average salary of the last 5 years • Serv : services completed as a permanent or a temporary agent + paid or unpaid periods of absence • Tant (tantième) = 1/60 percentage but wide range of other between 1/12 and 1/55

26. Ceilingsretirement pension • Relative ceiling: • 75% of the reference salary • Absolute ceiling: • For all the public sector pensions but also for the overlapping of such a pension with another pension • Actual gross monthly amount: 5.470,66 EUR

27. Conditions to obtain a survivor’s pension Who obtains this pension? • Surviving spouse • Surviving divorced spouse • Orphans Who opens a right to this pension? A permanent civil servant who dies: • In active service • As a holder of a retirement pension • As a future holder of a deferred retirement pension

28. Calculationsurvivor’s pension Pension = Sal * 60% * N/D • Sal= average salary of the last 5 years • N = number of months of pensionable services and periods • D = number of months between 20th anniversary and decease (or date of pension when disability pension)

29. Ceilingssurvivor’s pension Pension = Sal * 50% * N/D • Sal= maximum salary • N = number of months of pensionable services and periods • D = number of months between 20th anniversary and decease (or date of pension when disability pension)

30. Calculation divorced spouce survivor’s pension Survivor’s pension * N’/D’ • N’ = number of months of pensionable services and periods during marriage • D’ = total number of pensionable services and periods • Pension surviving spouse = survivor’s pension – pension divorced spouse but guaranteed up to the half of the survivor’s pension

31. Minimum guaranteed amount • Only for : • Age retirement pension (if years of services > 20) • Disability pension • Survivor’s pension (only surviving spouse) • Deduction of: • Other pensions • Pensions and other income of the partner • Amount: • Age retirement pension (for a married pensioner whose spouse has no income): gross monthly amount: 1.319,60 EUR • Survivor’s pension: gross monthly amount: 920,23 EUR

32. Welfare Two welfare adjustments are full automatic executed: • Indexation = adjustment to the increasing price level • Perequation = adjustment to the increasing salaries

33. Net monthly amount + Brut monthly amount • 3,55% health insurance contribution • 2% solidarity contribution • 0,5% funeral expenses contribution (only retirement pensions!) • Taxes = Net monthly amount

34. Charges

35. Financial charges Law 14/04/1964: unique pension Federal government, communities, regions Local & provincial government Government Enterprises Treasury Pool 1 IPPF 20%+7,5% >36% 20%+7,5% BRPF SPF Pool 2 PFPPI 20%-50% +7,5% 7,5% ???% 20%+7,5% 24%

36. Second pillar pension • 2nd pillar arrangements for public sector contract employees are almost absent • the longer the period of employment under contract, the more the difference • A law = necessary to introduce such a system

37. PROBLEMS AND ALTERNATIVES FOR THE FUTURE: REGULATIONS

38. Incentive for maintaining employees in activity What? • ≠ a penalising policy • = an active policy to encourage employees to stay at work longer and postpone their retirement. How? • age bonus • + 0.125 % of the annual pension rate for each month competed between age 60 and age 62 (minimum € 15) • + 0.167 % of the annual pension rate for each month completed after age 62 (minimum € 20) • age bonus can reach up to 9 %

39. Gradual transition from work to retirement • The partial pension • Partial early retirement (half time work) • Part time work • Time credit

40. The partial pension Idea? • renounce a part of their activity & obtain a pension for this volume of activity • go on working and having a salary for the remaining part of the activity. Result? • Basic principle = granting a part of pension proportional to the reduction in the working schedule. • Difficult implementation • Considered as too complex

41. Partial early retirement • Duration = 5 years • Start between age 55 and age 60. • Still in service • Work half time • Half salary + monthly bonus. • Obligation to safeguard the pension incomes • Services are covered by the employee’s « time credit ».

42. Part time work • Calculation is based on the full time salary • Services are proportionally recalculated according to the ratio of part time to full time. • Part time services < 1 January 1983: • working rate = average working rate completed after 1 January 1983. If it happens to be actually higher, the employee must prove it. • Part time services >= 1 January 1983: • if average working ratio is equal or higher than 80%, working rate is considered as equal to 100% and in such case the services completed before 1983 are also considered as full time.

43. The introduction of time credit plans Principles: • For employees with age of 55 before 1 January 2002: • Periods of leaves = limit of 20% of the period of service completed • Pre-retirement leave ≠ included in 20 % limit • For employees whit age of 55 between 1 January 2002 and 31 December 2005: • Periods of leaves, including pre-retirement leave = limit of 25 % • For employees with age of 55 between 1 January 2006 and 31 December 2010: • Periods of leave, including pre-retirement leave = limit of 20 % + x/y of 5 %, • x = number of months between 1st day of the month during which the employee is 55 to 1 January 2011 • y = 60

44. PROBLEMS AND ALTERNATIVES FOR THE FUTURE: FINANCES

45. Future An ageing society • “Baby-boom”  “grandma & grandpa”-boom • + 60 : 20%  30% • 2010-2030: +800.000 pensions Increasing expenses in social security • Pensions & Health care  • Family allowances & unemployment benefits  • 2004-2030: expenses social security increase with 3,6% GDP

46. “Silver Fund” Law of 5th September 2001 which guarantees the continuous decrease of the Belgian budget and creates the “Silver Fund”.Two parts: • finances & working of the Silver Fund • conditions on the government policy concerning the ageing society

47. How does the “Silver Fund” work? The Silver Fund’s revenues consist of: • non-fiscal revenues • social security surpluses • possibly, budget surpluses. • proceeds from its investments. The reserves can only be drawn on: • in the 2010-2030 period • the additional expenses of the various legal pension systems (employees, self-employed persons and civil servants) • when the level of indebtedness < 60%.

48. The reserves of the “Silver Fund”

49. PROBLEMS AND ALTERNATIVES FOR THE FUTURE: COMMUNICATION

50. Pact between generations:measure 44 • Simulation = on demand at each age • Simulation = officially at age 55 (also mixed careers) • Information of 2nd pillar pension advantages must be included • Assumption = work till 65 • Deadline = 2010.