Accrued-to-date pension entitlements in social insurance, 2018

Pension entitlements at 367% GDP at the end of 2018

We are publishing annual estimates of the pension liabilities and entitlements in social insurance pension schemes for 2018. Pension entitlements amounted to 367% GDP at the end of 2018, thereof 98% related to social security and 2% to supplementary pension insurance.

  • 30 December 2020 at 10:30
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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 the 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 to the supplementary pension schemes.  
Contingent pension entitlements are thus contingent entitlements of households and contingent liabilities for the government, and as funds do not exist; they do not have commercial value, their 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 to the compulsory pension and disability insurance (social security scheme) 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, whereas wage compensations, attendance allowance, disability allowance and annual grant are not included.

Estimated value of contingent entitlements is prepared on the basis of the model
The estimates of contingent pension entitlements are a result of the 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. 4%), 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 ZPIZ and data from income tax declaration.

Most pension entitlements are contingent  
All pension entitlements in Slovenia represented at the beginning of 2018 EUR 159,695 million or 348% of GDP, and at the end of 2018 EUR 168,326 million or 367% of GDP. Most pension entitlements are contingent pension entitlements; they represented 98% at the end of the year (EUR 164,797 million). In all pension schemes in 2018 EUR 4,537 million actual social security contributions were paid or 9.9% of GDP, and EUR 5,007 million pensions were paid out or 10.9% of GDP (10.6% from compulsory PDI). Among the transactions an important category is social contribution supplements attributable to households. For supplementary pension insurance, the contribution supplement (EUR 47 million) represents a premium supplement. For compulsory PDI the contribution supplement (EUR 6,253 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 it amounted to EUR 2,855 million. The positive value indicates that the discount rate is lower than the internal rate of return, whereas the latter is the rate that equates the present value of the contributions actually paid and the discounted value of pension entitlements arising from these contributions.

The largest impact of the amount of contingent entitlements is that of the discount rate 
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 1 percentage point, pension entitlements would increase by 24%; if the discount rate were higher by 1 percentage point, pension entitlements would decrease by 18%. 
Because in the previous release on accrued-to-date pension entitlements for 2015, published three years ago, a higher, i.e. 5 %, discount rate was applied, in the SiStat database we now recalculated the data for 2015 to the discount rate of 4%.

Accrued-to-date pension entitlements in social insurance for 2018, Slovenia (EUR million)
TOTALDefined contributions Social security
  schemespension scheme
Pension entitlements (opening stock)159,6953,363156,332
Increase in pension entitlements due to social contributions 10,79931810,481
- actual social contributions4,5373104,227
- husehold social contribution supplements6,300476,253
- less: pension scheme service charges39390
Other (actuarial) change of pension entitlements2,85502,855
Reduction in pension entitlements due to payment of pensions5,0071374,870
Other changes in entitlements -15-150
Pension entitlements (closing stock)168,3263,529164,797
Accrued-to-date pension entitlements in social insurance for 2018, Slovenia (% GDP)
TOTALDefined contributions Social security
  schemespension scheme
Pension entitlements (opening stock)348.27.3340.9
Increase in pension entitlements due to social contributions 23.50.722.9
- actual social contributions9.90.79.2
- husehold social contribution supplements13.70.113.6
- less: pension scheme service charges0.10.10.0
Other (actuarial) change of pension entitlements6.20.06.2
Reduction in pension entitlements due to payment of pensions10.90.310.6
Other changes in entitlements 0.00.00.0
Pension entitlements (closing stock)367.07.7359.3
METHODOLOGICAL NOTE
The estimates of contingent pension’s entitlements are sensitive to changes in the underlying assumptions of the estimation model.
Data on pension entitlements are not suitable as a measure of the sustainability of pension schemes. Contingent pension entitlements should not be considered as part of government debt.


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