Accrued-to-date pension entitlements in social insurance, 2015

Accrued-to-date pension entitlements in social insurance, 2015

We are publishing estimates of the value of pension entitlements. This is a new indicator introduced by the 2010 European System of National and Regional Accounts in the EU. We estimate that the pension entitlements by the end of 2015 in Slovenia represented 321% of GDP.

  • 12/29/2017
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Pension entitlements  
Accrued-to-date pension entitlements include the present value of the already accrued part of future pensions for current employees and the future pensions for already retired. 
Pension entitlements are actual and contingent. Actual pension entitlements are those entitlements for which there are funds. In Slovenia, such pension entitlements are connected with the supplementary pension schemes.  
Contingent pension entitlements are contingent entitlements of households and contingent liabilities for the government and as funds do not exist; they do not have commercial value, the exact value is uncertain, estimates are based on numerous assumptions and dependent on the model used for estimation. In Slovenia such pension entitlements are connected with the compulsory pension and disability insurance managed by the Pension and Disability Insurance Institute (ZPIZ) (compulsory pension and disability insurance – PDI). As pension entitlements all pensions and related social contributions for health insurance are treated, but wage compensations, attendance allowance, disability allowance and annual grant are not included.

By the end of 2017, all EU Member States have to report data on the value of pension entitlements
The 2010 European System of National and Regional Accounts introduced compulsory reporting of pension entitlements for all pension schemes. The system of national accounts already includes all defined contribution pension schemes (schemes for which there are funds) and defined benefit schemes managed by the non-government sector or classified in the financial corporations sector. The novelty is reporting on the pension entitlements for social security schemes. In Slovenia, we classify in the financial corporations sector defined contribution pension schemes (supplementary pension insurance) and in the government sector the social security scheme (compulsory PDI). For each pension scheme the pension entitlement from the beginning and the end of the year should be estimated (balance sheet) and all transactions (social contributions, pensions) as well as other economic flows (revaluation) should be calculated. Eurostat will publish data on the value of pension entitlements for all EU Member States in the first half of March 2018 (more information on http://ec.europa.eu/eurostat/web/pensions/overview).

Estimated value of contingent entitlements is prepared on the basis of the model
The estimates of contingent pension entitlements are a result of actuarial calculation model based on assumptions on developments in economy and demography. Key assumptions are the discount rate to estimate the present value of pension entitlements (i.e. 5%), wage growth, pension growth and demographic assumptions. Assumptions are chosen in line with Eurostat recommendations. The starting data for calculation are data on pensions from the ZPIZ and data from income tax declaration.

Most pension entitlements are contingent  
All pension entitlements in Slovenia represented at the beginning of 2015 EUR 122,154 million or 315% of GDP and at the end of 2015 EUR 124,742 million or 321% of GDP. Most pension entitlements are contingent pension entitlements; they represented 97.6% at the end of the year. In all pension schemes in 2015 EUR 3,702 million actual social security contributions were paid or 9.5% of GDP, and EUR 4,704 million pensions were paid out or 12.1% of GDP (11.8% from compulsory PDI). Among the transactions an important category is social contribution supplements attributable to households. For supplementary pension insurance the contribution supplement (EUR 62 million) represents a premium supplement. For compulsory PDI the contribution supplement (EUR 5,965 million) is equal to the discount rate multiplied by the pension entitlements at the beginning of the accounting period. The balancing item for compulsory PDI is the category other actuarial changes in pension entitlements and amounts to EUR −2,520 million. The negative value indicates that the discount rate is higher than the internal rate of return. The internal rate of return is the rate that equates the present value of the contributions actually paid and the discounted value of pension entitlements arising from these contributions.

In interpreting the data on contingent pension entitlements it is necessary to take into account the fact that the estimates are based on the assumptions. The biggest impact comes from the selected discount rate. If the discount rate were lower by a percentage point, pension entitlements would increase by 22%; if the discount rate were higher by a percentage point, pension entitlements would decrease by 16%. 
Accrued-to-date pension entitlements in social insurance for 2015, Slovenia (EUR million)
TOTALDefined contributions Social security
  schemespension scheme
Pension entitlements (opening stock)122,1542,855119,299
Increase in pension entitlements due to social contributions 9,6991999,499
- of wich actual social contributions3,7021673,534
- of wich husehold social contribution supplements6,027625,965
Other (actuarial) change of pension entitlements-2,5200-2,520
Reduction in pension entitlements due to payment of pensions4,7041344,569
Other changes in entitlements 1121120
Pension entitlements (closing stock)124,7423,033121,709
Accrued-to-date pension entitlements in social insurance for 2015, Slovenia (% GDP)
TOTALDefined contributions Social security
  schemespension scheme
Pension entitlements (opening stock)314.57.4307.2
Increase in pension entitlements due to social contributions 25.00.524.5
- of wich actual social contributions9.50.49.1
- of wich husehold social contribution supplements15.50.215.4
Other (actuarial) change of pension entitlements-6.50.0-6.5
Reduction in pension entitlements due to payment of pensions12.10.311.8
Other changes in entitlements 0.30.30.0
Pension entitlements (closing stock)321.27.8313.4
METHODOLOGICAL NOTE
The estimates of contingent pension’s entitlements are sensitive to changes in the underlying assumptions of the estimation model.
Detailed data and time series are available in the SI-STAT database.
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