Treatment of Pension Schemes in  | View Thread
Revised treatment of government employer unfunded pension plans in Canadian national accounts
Patrick O'Hagan on 6/2/2003 1:07:51 PM
This paper describes how and why Statistics Canada revised in 2000 the Canadian System of National Accounts' (CSNA) treatment of government sector unfunded pension liabilities (UPL). UPL were classified as liabilities of the government sector and as assets of the personal sector in the balance sheet accounts. Corresponding adjustments were made to sector accounts? income, expenditure and financial flows. Behind this change, was a lengthy consideration of the benefits of such a proposed revision. Practices in other countries as well as guidance provided in the 1993 SNA were also considered.

The groundwork for this revision was laid in the late 1980?s. At that time, large government deficits and growing debt centered the discussion with respect to the treatment of unfunded pension plans to the appropriate measure of government debt. However, from about the mid-1990?s, as the saving rate fell and as the post-war baby-boom generation aged, the debate shifted into the appropriate measurement of pension saving.

Statistics Canada was motivated to revise its practice for a number of reasons. Most important among these was the desire to have a complete, consistent and analytically meaningful set of CSNA statistics on (i) employer-sponsored pension plans and on (ii) personal saving (and net worth) as well as government saving. A second purpose was to bring the national accounts measures of government debt and deficit/surplus more in line with those of the Public Accounts. In the end, the funded-unfunded distinction did not play a major role in the decision-making process behind this revision.

This revision is viewed as an extension of current international standards, as defined by the 1993 SNA. The factors considered behind the Canadian change, as well as practices elsewhere (Australia and the U.S.), bring into question the current internationally accepted conceptual treatment.

Patrick O'Hagan is Assistant Director (Income and Expenditure Accounts) for Canadian System of National Accounts of Statistics Canada

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