Pensions in ESA 2010

WORKSHOP ON PENSIONS

Canberra 22-24 April 2013

Jens GrützEurostat

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Outline

• The new SNA 2008Recognition of pension entitlements

• More specific: ESA 2010/Pension compilation guideCore / Non core recordingRecommendations for actuarial issues

• Future activities in EuropeWorkshopsTransmission program

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Increasing information needs

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•Pension entitlements should be recognized as financial assets/liabilities in macroeconomic statistics

• Pension entitlements represent a future benefit that contributes to the net wealth of households

• Omitted benefits / liabilities may lead to comparability problems in national/international analysis

• Accounting practice increasingly recognises pension entitlements

ESA 95: Current recording of pension entitlements

• Distinguish social insurance• Pension schemes in social insurance treated according to

their features:• Private funded social insurance schemes - insurance

technical reserves, actuarial treatment• Unfunded private social insurance schemes - no insurance

technical reserves• Social security pension - no reserves, no actuarial treatment

Possible different treatment across sectors/countries

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Towards SNA2008

• IMF-led Electronic Discussion Group 2002-2004• Discussions at the AEG 2004-2007

• In principle record pension obligations, on an actuarial basis, for all employer schemes (funded/unfunded)

• but recording of social security remains unchanged• Recognition of issues in Europe

• Difficulty to distinguish unfunded government employer schemes from social security worldwide compromise

• SNA 2008 - Chapter 17 (part 2)• Adopted by UNSC in August 2008

• Some further issues left for the research agenda• Criteria for core/non-core classification, treatment of property

income

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2008 SNA: Scope of pension entitlements in National Accounts

Accrued-to-date pension entitlements

• Focussing on old age pensions• Covering the entitlements already accrued in the past • Taking on board new entitlements accrued in the

respective period• Ignoring the impact of work to be done in future periods

on individual pension entitlements• For db schemes actuarial techniques are required:

Discounting the future benefits to present value

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ESA 2010: Core / Non-core allocation of schemes

2008 SNA: Examples for criteria•Closeness to social security•Strength of the contribution-benefit-link•Ability of government to change the scheme rules

ESA 2010: Pragmatic solution•Pay-as-you-go schemes of general government are, like social security, allocated to the non-core accounts. However, reporting on all schemes is provided in the supplementary table.

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ESA 2010: Recommendations on actuarial issues

• Demographic assumptions: Longevity assumptions should include the increase of longevity over time; persons receiving disability pensions should be modelled separately

• Wage effects: The choice of an ABO or PBO approach should depend on the underlying benefit formula. Formulas including implicitly or explicitly a factor for wage increases should follow the PBO approach.

• Discount rate: The discount rate should be a risk-free rate. Some criteria are given in ESA 2010 further guidance is provided in the technical compilation guide.

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Compilation guide: Recommendations on actuarial issues

Technical compilation guide for Pension data in National Accounts / Ageing working group

•Discount rate = 3% in real terms; 5 % nominal•Wage growth = 1.7 % in the (very) long run•Life expectancy= Eurostat projection(Europop)

•Comparability of assumptions/results

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ESA 2010 Transmission program

Compulsory Table:

Accrued-to-date pension entitlements in social insurance

• three yearly• 2015 onwards (2012 on a voluntary basis)• t+24 •The data should comprise three datasets based on the actuarial calculations.

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ESA 2010 Transmission program

Clear and comprehensive communication on pensions• Outcome of pension reforms• Interpretation of pension data

In particular:Accrued-to-date pension entitlements are not as such an indicator for sustainability of public finances

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Sustainability analysis: The 2012 Ageing Report

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The 2012 Ageing Report - Results

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Past & Future activities on pensions

• ECB/Eurostat Task Force• Final report http://www.cmfb.org/pdf/TF%20on%20Pensions%20-%20Final%20report.pdf

• ESA 2010 Training course – November 2012• Implementation of new ESA rules• Software presentations & exercises

• Eurostat country visits – Identification of best practice• Data sources• Institutional set-up• Modelling

• Pension workshops 2009/2010/2013• http://www.ecb.int/pub/pdf/other/ecbeurostatworkshoponpensions201002en.pdf

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Past & Future activities on pensions - cont.

• Eurostat Contact Group• Electronic discussion forum on issues related to the calculation

of pension entitlements• Questions to be sent to Eurostat

•• Pension compilation guide/Update of the compilation guide

• http://epp.eurostat.ec.europa.eu/portal/page/portal/product_details/publication?p_product_code=KS-RA-11-027

• Comments are welcome!

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Thank you for your kind attention!

Jens GruetzEurostat-C1 National Accounts methodologyJens.GRUETZ@ec.europa.eu

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