Cocktail with MS DelegationsCocktail with MS Delegations

Briefing Briefing

Pension FundPension Fund

2Ambassadors / March 2011

nºnº Proposal Org.Org. CurrentCurrentstaffstaff

Future Future staffstaff

CurrentCurrentpensionerpensioner

FutureFuturepensionerpensioner

11Increase contribution rateIncrease contribution rate- from 30,88% to 34%- from 30,88% to 34% XX XX

22Freeze pensions until individual Freeze pensions until individual purchasing power loss reaches 8%purchasing power loss reaches 8% XX

33Add Special Contributions Add Special Contributions - CERN: 60 MCHF/yr until full funding- CERN: 60 MCHF/yr until full funding- ESO: 3 MCHF/yr until full funding- ESO: 3 MCHF/yr until full funding

XX

• 1st package – decision in December 2010, implemented as of January 2011

• 2nd package – decision in June 2011 for implementation in January 2012

nºnº Proposal Org.Org. CurrentCurrentstaffstaff

Future Future staffstaff

CurrentCurrentpensionerpensioner

FutureFuturepensionerpensioner

44 Modify benefits packageModify benefits package XX

55Introduce transitory measures Introduce transitory measures - relating to indexation of pensions- relating to indexation of pensions XX

Where are we now?Where are we now?

3Ambassadors / March 2011

• Weight of CERN Council’s past decisions• CERN has a dual role: “Employer + State”

• Employer: it decides on various elements of a staff policy

• State: it must compensate the financial impact for the cost of these elements of staff policy in particular also for the Pension Fund

• Balancing more fairly the efforts made by parties involved• substantial efforts had already been agreed on by the “employee”

college• Mechanism of under-indexation of pensions for 2005-2033

• Staff recruited after 1987 have a pension reduction factor between the ages of 60 (by -30%) and 64 (by -7%) and hence contribute more than enough for their pension plan.

• no substantial effort had been agreed on by CERN in the meantime

What does 60MCHF/yr stand for ? What does 60MCHF/yr stand for ?

4Ambassadors / March 2011

22ndnd package: management proposals package: management proposals

Drastically reduced benefits for future staff (similar to Drastically reduced benefits for future staff (similar to former proposal given by the MS advisory group):former proposal given by the MS advisory group):• Age limit from 65y to 67yAge limit from 65y to 67y• Accumulation rate from 2% to 1.75% Accumulation rate from 2% to 1.75% • Maximal pension at 70 % after 40yr instead of 35yrMaximal pension at 70 % after 40yr instead of 35yr• 1/3 – 2/3 share becomes 40%-60 % 1/3 – 2/3 share becomes 40%-60 % Organization contribution Organization contribution

rate reduced by 25%, while Staff contribution rate is maintainedrate reduced by 25%, while Staff contribution rate is maintained• Pensionable salary calculated on basis of the average of the Pensionable salary calculated on basis of the average of the

salaries of the last 5 years, instead of the last basic salarysalaries of the last 5 years, instead of the last basic salary

• Transitory measuresTransitory measures• Remain to be definedRemain to be defined

Comparing International Comparing International Organizations pensions schemesOrganizations pensions schemes

The level of conditionsThe level of conditions

6Ambassadors / March 2011

Recent changes in PF of other I.O.Recent changes in PF of other I.O.

Org. WhenType of pension

plan

Contributions

Full pension Years tofull pension Age limit Annual

adjustmentTotal Employee Employer

EPO

Before Jan.09 DB

share = 1/3 + 2/370% of Last salary 35yr 60yr As salaries

27.3% = 9.1% + 18.2%

From Jan.09

Mixed share = 1/3 + 2/370% of Last salary 35yr 60yr As salariesDB 21.0% = 7.0% + 14.0%

DC 6.3% = 2.1% + 4.2%

EIB

Before Jan.09 DB

share = 1/3 + 2/370% of Last salary 30yr 60yr As COL

30.0% = 10.0% + 20.0%From

Jan.09 DBShare = 1/3 + 2/3

70% of Average salariesof last 10 years 35yr 65yr As COL

30.0% = 10.0% + 20.0%

WTO

Before Jan.10 DB

share = 1/3 + 2/370% of Last salary 35yr 62yr As COL

22.5% = 7.5% + 15.0%From

Jan.10 DBshare = 1/3 + 2/3

70% of Last salary 35yr 65yr As COL23.7% = 7.9% + 15.8%

ESA

Before July.10 DB

share = 1/3 + 2/370% of Last salary 35yr 60yr As salaries

25.1% = 8.4% + 16.7%From

July.10 DBshare = 40% + 60%

70% of Last salary 35yr 63yr As COL23.3% = 9.3% + 14.0%

EUMETSAT

Before Jan.11 DB

share = 1/3 + 2/370% of Last salary 35yr 60yr As salaries

27.0% = 9.0% + 18.0%From

Jan.11 DBshare = 40% + 60%

70% of Last salary 35yr 63yr As COL23.3% = 9.3% + 14.0%

CERN / ESO

Before Jan.12 DB

share = 1/3 + 2/370% of Last salary 35yr 65yr Freeze (-8%)

then as COL34.0% = 11.3% + 22.7%From

Jan.12Mixed

DB/DC ?share = 40% + 60%

70% of Average salariesof last 5 years 40yr 67yr ?

28.3% = 11.3% + 17.0%

Comparing International Comparing International Organizations pensions schemesOrganizations pensions schemes

The modifications recently introducedThe modifications recently introduced

8Ambassadors / March 2011

Recent changes in PF of other I.O.Recent changes in PF of other I.O.

Org. WhenType of pension

plan

Contributions

Full pension Years tofull pension Age limit Annual

adjustmentTotal Employee Employer

EPO

Before Jan.09 DB

share = 1/3 + 2/370% of Last salary 35yr 60yr As salaries

27.3% = 9.1% + 18.2%

From Jan.09

Mixed share = 1/3 + 2/370% of Last salary 35yr 60yr As salariesDB 21.0% = 7.0% + 14.0%

DC 6.3% = 2.1% + 4.2%

EIB

Before Jan.09 DB

share = 1/3 + 2/370% of Last salary 30yr 60yr As COL

30.0% = 10.0% + 20.0%From

Jan.09 DBshare = 1/3 + 2/3

70% of Average salariesof last 10 years 35yr 65yr As COL

30.0% = 10.0% + 20.0%

WTO

Before Jan.10 DB

share = 1/3 + 2/370% of Last salary 35yr 62yr As COL

22.5% = 7.5% + 15.0%From

Jan.10 DBshare = 1/3 + 2/3

70% of Last salary 35yr 65yr As COL23.7% = 7.9% + 15.8%

ESA

Before July.10 DB

share = 1/3 + 2/370% of Last salary 35yr 60yr As salaries

25.1% = 8.4% + 16.7%From

July.10 DBshare = 40% + 60%

70% of Last salary 35yr 63yr As COL23.3% = 9.3% + 14.0%

EUMETSAT

Before Jan.11 DB

share = 1/3 + 2/370% of Last salary 35yr 60yr As salaries

27.0% = 9.0% + 18.0%From

Jan.11 DBshare = 40% + 60%

70% of Last salary 35yr 63yr As COL23.3% = 9.3% + 14.0%

CERN / ESO

Before Jan.12 DB

share = 1/3 + 2/370% of Last salary 35yr 65yr Freeze (-8%)

then as COL34.0% = 11.3% + 22.7%From

Jan.12Mixed

DB/DC ?share = 40% + 60%

70% of Average salariesof last 5 years 40yr 67yr ?

28.3% = 11.3% + 17.0%

9Ambassadors / March 2011

Comparison with current staffComparison with current staff

• Hypothesis: 35 yr contribution, retirement at 67 yrHypothesis: 35 yr contribution, retirement at 67 yr

• Income: CERN 22.67% Income: CERN 22.67% 17 %, employee still at 11.33% 17 %, employee still at 11.33%

• Benefits:Benefits:

leverages reduction factor comments

Age limit 65 67yr 0.9

Pension after 35 yr 0.875 (35 x 1.75% = 61.25% compared to 70 %)

Average of last 5 years 0.92

TOTAL 0.72 Pension cut by 28%

10Ambassadors / March 2011

Our positionOur position• Recent changes of pension systems in other IOs show that:Recent changes of pension systems in other IOs show that:

• CERN modifies 5 parameters instead of 2 in other IOsCERN modifies 5 parameters instead of 2 in other IOs

• CERN degrades scheme far below levels achieved in other IOsCERN degrades scheme far below levels achieved in other IOs

• Many MS delegates are the same in other IOs. Why this treatment for CERN?Many MS delegates are the same in other IOs. Why this treatment for CERN?

• Highest contribution rates for CERN employeesHighest contribution rates for CERN employees

•Drastically reduced benefits for future staff: unacceptableDrastically reduced benefits for future staff: unacceptable• New recruits have no responsibility in the PF current deficitNew recruits have no responsibility in the PF current deficit

• No significant effect before 30 years !No significant effect before 30 years !

• The worst PF scheme of all IO’sThe worst PF scheme of all IO’s

•Reduced PF scheme = reduced attractiveness of CERNReduced PF scheme = reduced attractiveness of CERN• CERN S. II 1.03, 1.04: CERN must be able to attract and retain the most competent CERN S. II 1.03, 1.04: CERN must be able to attract and retain the most competent

staff from all the member statesstaff from all the member states

• Attractiveness = package of job interest, salary conditions, Attractiveness = package of job interest, salary conditions, welfare systemswelfare systems

• By reducing so drastically the PF scheme, the Member states are working against the By reducing so drastically the PF scheme, the Member states are working against the interests of the Organization! interests of the Organization!

11Ambassadors / March 2011

ConclusionsConclusions

• Must objectively compare CERN pensions to other IOsMust objectively compare CERN pensions to other IOs• 11stst package concerning current actives & pensioners was a package concerning current actives & pensioners was a

hard negotiation, but is acceptedhard negotiation, but is accepted

• 22ndnd package proposal is unjustified and inacceptable package proposal is unjustified and inacceptable

• Concertation process must start again:Concertation process must start again:• The SA proposed a better 2The SA proposed a better 2ndnd package which was deemed package which was deemed

“interesting” but was not further discussed“interesting” but was not further discussed

• New recruits have no responsibility in and should not New recruits have no responsibility in and should not pay for the PF current deficit pay for the PF current deficit

• CERN is an International Organization and should not CERN is an International Organization and should not be treated differently from its pairsbe treated differently from its pairs