Pension schemes in the updated SNA

1. Pension schemes in the updated SNA Anne Harrison Editor

2. Range of pensions • Employer’s schemes • Private employer • Public employer • Social security • Private pension provision

3. Social insurance scheme • No change to SNA • Must be a requirement imposed by a third party (by government or as a condition of employment) • Deal only with private employers’schemes

4. Alternatives • Schemes may be contributory on the part of the employee or non-contributory • Schemes may be defined contribution (money purchase) or defined benefit (defined by a formula)

5. Less relevant alternatives • Funded or unfunded • Autonomous, non-autonomous but segregated, non-autonomous and non-segregated • Concentrate on entitlements of pensioners not assets of the scheme

6. Defined contribution schemes • No change from 1993 SNA • Employer and or employee make contributions • Excess of contributions over cost of running the schemes become assets of the scheme • Entitlements are exactly equal to assets

7. DC schemes cont • Property income from the management of the assets is distributed to future pensioners and treated as contribution supplements • Holding gains and losses add to assets of fund manager and an equal amount is added to the entitlement via the revaluation account

8. Defined benefit schemes • May or may not be actual contributions by employer and or employee • May be imputed contribution by employer • Sum of actual and imputed contributions must exactly equal the increase in pension entitlement coming form the current period’s service plus service charge

9. Change • Focus on entitlement not assets • May have imputed contribution in addition to actual contribution if actual contributions insufficient to meet current period entitlements • May have imputed contribution even when employer takes a “contribution holiday”

10. Property income • Increase in net present value of start of period pension entitlement due to lapse of time and the fact that fewer discount factors apply • How this is to be funded is irrelevant; the amount is predetermined and increases the entitlement by a known amount. Full amount treated as property income

11. Estimates • Actuarially based • Assume most likely that business accounts will provide • Investigating use of pension modelling software

12. Other change in volume of entitlements • Life expectancy • Promotion • Change in pension scheme

13. Other change in value of entitlements • Change in discount rate • Inflation protection clause

14. Service charge • If no other valuation available is sum of costs • Paid by future beneficiaries • By convention out of current contributions (matches DC case)

15. If employer has full responsibility for pensions • Employer must make up any difference between entitlements and assets available • Employer may be entitled to keep any excess of assets over entitlements • But some jurisdictions may forbid this

16. If employer lays off responsibility • Via insurance company • Via multi-employer scheme • Then insurance company or multi-employer scheme is responsibility for any shortfall but keeps any excess

17. Change in unit holding liability for entitlement • Shows as transaction in financial account

18. Public employee schemes • Eurostat task force looking at possible compromise • Supplementary table containing all estimates for all schemes, private, public and social security • Criteria given for which entries carry forward to core accounts and which not • Gives flexibility to compilers and users