Treatment of Pension Schemes in  | View Thread
Accounting in full for pension liabilities
Anne Harrison on 6/10/2003 10:12:49 AM
This paper by Anne Harrison is written in a purely personal capacity and the views herein should not be attributed to any part of the OECD secretariat. The posted text (on June 18, 2003) is a slightly edited version of a text initially posted on June 10, 2003.

This paper discusses how to account in full for pension liabilities in national accounts. The treatment of pensions in the 1993 SNA is driven by two considerations. The first is whether a scheme is considered to be part of social insurance, in which case the accumulation of future provision of pensions is recorded as current transactions and not as part of a saving scheme. The second consideration is what assets, if any, are created by contributions to social insurance schemes. The question of the liability incurred by pension funds arises only in the context of the balance sheet.

For some schemes, no liabilities are recognized in 1993 SNA. For others, a liability is established but no reconciliation is given to explain how this liability will be met if the corresponding assets of the pension fund are insufficient. Only in the case of a defined contribution (or money purchase) scheme does it happen that there is an exact match of assets and liabilities of a pension fund.

The growing concern about unrecognized liabilities of enterprises in respect of pensions suggests reviewing the treatment of pension provision in the SNA from the standpoint of how and when liabilities are incurred and how a full recording of these might be effected. Further, this should be done in such a away that there is a match between assets and liabilities of all pension funds. This is the goal of the attached paper. While much of the paper concentrates on employers' schemes, there is also discussion of how far the proposals might apply to social security schemes and consideration of the basic concept of social insurance.


Anne Harrison (OECD) wrote the Annex IV of the 1993 SNA on The treatment of insurance, social insurance and pensions. She currently works at the OECD.

The author of this contribution to the discussion group on this site bears the sole responsibility for both the substance and the style of the contents. The purpose of the discussion group is to elicit comments and to promote debate on specific topics. As such, the views expressed on any of the issues raised are not to be attributed to the IMF.

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