Pension schemes in the updated SNA

							Pension schemes in the
    updated SNA
      Anne Harrison
         Editor
         Range of pensions

• Employer’s schemes
  – Private employer
  – Public employer
• Social security
• Private pension provision
     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
             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)
    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
 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
         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
     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
                  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”
           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
               Estimates
• Actuarially based
• Assume most likely that business
  accounts will provide
• Investigating use of pension modelling
  software
   Other change in volume of
          entitlements

• Life expectancy
• Promotion
• Change in pension scheme
     Other change in value of
           entitlements

• Change in discount rate
• Inflation protection clause
            Service charge

• If no other valuation available is sum of
  costs
• Paid by future beneficiaries
• By convention out of current contributions
  (matches DC case)
       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
 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
 Change in unit holding liability
       for entitlement

• Shows as transaction in financial account
    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