For a better user experience please update your browser or use Chrome or Firefox browser.
Utilities
Publication detail
HomePublic pensions in the national accounts and public finance targets
Publication metadata
The purpose of this paper is to provide a framework for setting the debt and deficit targets under both current and proposed definitions. Applying the same principles to record the pension liabilities over all institutional sectors, including public pensions, can be argued on the grounds of similarity or at least parallelism: (1) in public pensions too, a link often exists between the pension contributions paid (by employer or employee) and future benefits, even though this link is not perfect in typical Defined Benefit (DB) schemes, (2) accumulated pension rights have to be met in future from government revenues or assets, and therefore (3) assessing the soundness of public finances requires examination of public pension liabilities, especially as we know that population ageing is leading to their significant increase under the current rules. In accounting terms, following the principles to be used in national accounts for corporations, public pensions should be recorded as pension rights are accrued, rather than waiting until payment is made. Consistent with this, contributions paid to the public pension system giving rise to pension liability – asset from the point of view of the person covered by the scheme – should be treated as a financial transaction, and the payment of pension as a depletion of this government liability. This is in contrast with the treatment under the current SNA/ESA rules where public pension liabilities are not recorded, pension contributions are recorded as government revenue (under social contributions) and pensions as transfer payments to retirees. Preparations are underway to revise national accounting to implement actuarial recording of pension liabilities for corporations and government as an employer. This paper extends this to unfunded public pensions with the help of ‘implicit tax’ in pension contributions. The clearest advantages of the revision appear in situations where pension liabilities are shifted from the corporate sector to government, and where part of the public pension system is privatised. The proposed revision raises public debt and deficit to new orders of magnitude.
- Published:
- Corporate author(s): Directorate-General for Economic and Financial Affairs (European Commission)
- Personal author(s): Oksanen, Heikki
- Themes: Economy — Finance
- Subject: national accounts , pension scheme , public finance , public insurance
|
Paper
|
|||
| ISSN 1016-8060 | ISBN 92-894-5972-7 | DOI | Catalogue number KC-AI-04-207-EN-C |
- Released on EU publications website:
Document viewer
Note:
The publication cannot be displayed in the document viewer. Open web version
You may access it from: Download and languages