Employer Pension Schemes Presentation Points IMF Statistics Department OECD-UN ECE Meeting On National Accounts Paris, October 12-15, 2004

Employer Pension Schemes: Main Issues Background: what is the problem? Electronic discussion group (EDG) The EDG’s main recommendations

Background: What Is The Problem? 1993 SNA only recognizes pension obligations for funded employer pension schemes No such obligations are recognized for unfunded pension schemes

Background: What Is The Problem? Not recognizing unfunded schemes Violates the 1993 SNA’s fundamental asset criteria Ignores liabilities usually recognized by economic agents in their own accounts Distorts measures of household savings

Electronic Discussion Group In 2001, the ISWGNA requested the IMF set up an EDG on unfunded employer pension schemes In 2002, the EDG was asked to cover all such schemes In February 2004, the ISWGNA-AEG meeting endorsed the EDG’s main recommendations To meet recent requests from courtiers, the ISWGNA has decided to delay decision to 2005

The EDG’s Main Recommendations Abandoning the different treatment of funded and unfunded schemes Using actuarial valuations for both stocks and flows Allocating the funds’ net assets to the employers

Why Abandon The Different Treatment? Removes an unequal treatment from the accounts Meets households’ perceptions Improves measurement of cost of labor Improves consistency with GFSM 2001 Improves basis for economic decision making and international comparability

Why Use Actuarial Valuations? For unfunded schemes self-evident By extension then also for funded schemes Will reinforce market valuation and accrual recording

Why Allocate The Funds’ Net Assets To The Employers? Equal treatment across schemes Enhances international comparability Conforms with generally accepted accounting principles