© OECD A joint initiative of the OECD and the European Union, principally financed by the EU. Public Sector Pensions in Germany Seminar on “Social Rights and Pensions for Civil Servants in some EU Member States” Jointly organised by the Civil Service Department under the Ministry of Interior and the Sigma Programme 9 November 2006 — Vilnius, Lithuania

© OECD A joint initiative of the OECD and the European Union, principally financed by the EU. Scope of the Public Sector l Civil servants (0ne Third) Federal Länder Local Authorities l Emloyees ( two Thirds) Federal Länder Local Authorities The pension system differs for the two groups: One system for civil servant ( similar for judges and armed forces) One system for public employees, similar to private sector employees

© OECD A joint initiative of the OECD and the European Union, principally financed by the EU. Distribution of staff

© OECD A joint initiative of the OECD and the European Union, principally financed by the EU. Pensions of Civil Servants System l Paid by public employers, directly out of the current budget l No contribution of the individual civil servant, but l The pension entitlement is taken into account in the gross remuneration (i.e. it is lower than that of comparable employees) Entitlement to an appropriate pension is one of the traditional principles of the civil service and protected by the constitution

© OECD A joint initiative of the OECD and the European Union, principally financed by the EU. Entitlement l when the general retirement age has been reached (at age 65) l or a special retirement age (for police and prison staff, as well as professional fire brigades: at age 60), l on request from age 63 onwards (severely disabled: from age 60 onwards) or l if permanent invalidity has been established. l Requirement for entitlement: Minimum five years and work until retirement

© OECD A joint initiative of the OECD and the European Union, principally financed by the EU. Civil Service Pensioners

© OECD A joint initiative of the OECD and the European Union, principally financed by the EU. Calculation of the pension l Pensionable years of service Work in the public service, work in the interest of the country in an intern. Organisation; required training periods (?) l Pensionable remuneration Last basic salary, family allowance plus pensionable allowances (most allowances are not pensionable)

© OECD A joint initiative of the OECD and the European Union, principally financed by the EU. Calculation of the pension Until 2003 the maximum pension was 75% of the pensionable remuneration which could be reached after 40 years. By 2010 the maximum pension will be % of pensionable remuneration. The pension will be reduced by 3.6% for each year the civil servant retires earlier than 65 (max reduction 10,8%) Special rules apply if the civil servant becomes an invalid

© OECD A joint initiative of the OECD and the European Union, principally financed by the EU. Provisions regarding other pensions and dependants l Other pensions may be deducted from the regular pension l Money earned through employment may be deducted from the pension if it exceeds the last “active” salary l Money earned after 65 is reducing the pension only if earned in the public sector. l The surviving spouse will receive 55% of the pension, but maybe reduced if he/she has an own pension l Orphans receive orphans benefits up to the age of 25 if they are education and have no own income

© OECD A joint initiative of the OECD and the European Union, principally financed by the EU. Pension Expenditure

© OECD A joint initiative of the OECD and the European Union, principally financed by the EU. Pension Expenditure

© OECD A joint initiative of the OECD and the European Union, principally financed by the EU. The reforms to meet budget constraints l Extension of working years l Reduction of max pension l Reducing if early retirement l Reducing if other income l Promotion of additional private pension plan, e.g. through special allowances or tax benefits Still pensions increase yearly in line with the salary increases of active CS

© OECD A joint initiative of the OECD and the European Union, principally financed by the EU. Pensions of Public employees Ensured by l The general statuary pension insurance (in 2005 = 19.5% of the gross income, equally paid by employer and employee) l The supplementary pension scheme for public service employees l Possibly a fully funded private pension scheme

© OECD A joint initiative of the OECD and the European Union, principally financed by the EU. The statuary pension scheme of public employees The amount of the statuary pension is not governed by the total amount of contributions paid in, but by the relative amount of the income on which contributions are based, measured against the average income of all insured parties. The general pension is supposed to increase yearly at least by the inflation rate; however there were no increases over the last 3 years With full employment and normal career development the pension should be around 66% of the last gross salary

© OECD A joint initiative of the OECD and the European Union, principally financed by the EU. The supplementary pension scheme for public service employees l This new supplementary pension scheme is based on occupational pension schemes typically offered by private employers. l Benefits are calculated as if contributions of 4% of the employee’s pay eligible for the supplementary pension scheme were being paid into a fully funded system. l The amount of benefits resulting from the model of pension credits reflects the employee’s actual career. l Each employee receives pension credits for each year of employment; the credits are determined on the basis of the employee’s individual annual income

© OECD A joint initiative of the OECD and the European Union, principally financed by the EU. The supplementary pension scheme for public service employees Financing l Since 1 January 2002 the contribution rate for the SPS (VBL) has been 7.86% for the old Länder. Employers pay 6.45%, while employees only pay 1.41%. l For the VBL (in the new Länder) the contribution rate has been 1.0% since the introduction of the supplementary pension scheme in the East on 1 January The contribution is paid only by the employer

© OECD A joint initiative of the OECD and the European Union, principally financed by the EU. Pension benefits from the SPS