Civil Service Pension Schemes

This publication is a tool for designers of new civil service pension schemes in central and eastern Europe. It presents civil service pension schemes in five OECD Member countries and ten central and eastern European countries. In most central and eastern European countries, people employed in the public administration are covered under common national pension schemes, usually defined in a common pension law. As part of efforts to improve the professionalisation and quality of public administration, countries are defining civil service categories of personnel through civil service legislation. Some countries will introduce specific pension provisions for the public administration employees subject to this legislation. There are at least three obvious reasons for this: to secure the independence of civil servants, to make a public sector career more attractive, and to shift the costs of current remuneration into the future. In most OECD Member countries, civil servants have separate and specially designed pension schemes. These are either totally independent of the common national pension schemes or complementary to them. Conditions vary between countries and so do principles for financing. In one country there might also be several schemes for various categories of state officials and employees. “Pay-as-you-go” schemes financed by the annual state budget exist in several OECD Member countries. When they were introduced, national civil services were small and common pension schemes for the working population at large were lacking. Over the last 30 years, the rapid growth of western public services has not had any major impact on pension costs in pay-as-you-go schemes for demographic reasons and, until recently, the financing of pensions has in many countries stayed unchanged. The long-term nature of pension schemes and the strong interest that civil servants and their unions have in keeping them intact has added to the difficulty of changing them. With changing demography, pensions are becoming a heavy burden on the budget. Pensions imply both considerable running costs and heavy long-term liabilities. That is why many OECD Member countries today are trying to find new solutions to fund the financing costs. Different funding and actuarial techniques can be used to achieve this.