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Public Sector PensionsPublic Sector Pensionsin Germanyin Germany

Seminar on “Social Rights and Pensions for Civil Servantsin 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

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Scope of the Public SectorScope of the Public Sector

Civil servants (0ne Third)• Federal• Länder• Local Authorities

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

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Distribution of staffDistribution of staff

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Pensions of Civil ServantsPensions of Civil ServantsSystemSystem

Paid by public employers, directly out of the current budget

No contribution of the individual civil servant, but

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

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EntitlementEntitlement

when the general retirement age has been reached (at age 65)

or a special retirement age (for police and prison staff, as well as professional fire brigades: at age 60),

on request from age 63 onwards (severely disabled: from age 60 onwards) or

if permanent invalidity has been established.

Requirement for entitlement:• Minimum five years and work until retirement

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Civil Service PensionersCivil Service Pensioners

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Calculation of the pensionCalculation of the pension

Pensionable years of service• Work in the public service, work in the interest of

the country in an intern. Organisation; required training periods (?)

Pensionable remuneration• Last basic salary, family allowance plus

pensionable allowances (most allowances are not pensionable)

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Calculation of the pensionCalculation 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 71.75 % 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

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Provisions regarding other Provisions regarding other pensions and dependantspensions and dependants

Other pensions may be deducted from the regular pension

Money earned through employment may be deducted from the pension if it exceeds the last “active” salary

Money earned after 65 is reducing the pension only if earned in the public sector.

The surviving spouse will receive 55% of the pension, but maybe reduced if he/she has an own pension

Orphans receive orphans benefits up to the age of 25 if they are education and have no own income

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Pension ExpenditurePension Expenditure

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Pension ExpenditurePension Expenditure

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The reforms to meet The reforms to meet budget constraintsbudget constraints

Extension of working years Reduction of max pension Reducing if early retirement Reducing if other income 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

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Pensions of Public Pensions of Public employeesemployees

Ensured by The general statuary pension

insurance (in 2005 = 19.5% of the gross income, equally paid by employer and employee)

The supplementary pension scheme for public service employees

Possibly a fully funded private pension scheme

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The statuary pension The statuary pension scheme of public employeesscheme 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

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The supplementary pension scheme The supplementary pension scheme for public service employeesfor public service employees

This new supplementary pension scheme is based on occupational pension schemes typically offered by private employers.

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.

The amount of benefits resulting from the model of pension credits reflects the employee’s actual career.

Each employee receives pension credits for each year of employment; the credits are determined on the basis of the employee’s individual annual income

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The supplementary pension scheme The supplementary pension scheme for public service employeesfor public service employees

Financing 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%.

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 1997. The contribution is paid only by the employer

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Pension benefits from the Pension benefits from the SPSSPS