ECB Regulation on Pension Fund statistics ECB-UNRESTRICTED Rafael Quevedo European Central Bank DG-Statistics Andreas Hertkorn ECB Regulation on Pension Fund statistics Pensions Expert Group meeting Luxembourg, 5 April 2019

Overview 1. ECB Regulation on Pension Funds 2. Issues: - Sector definition - reference to ESA 2010: S.129 - Pension entitlements – reference to ESA 2010: F.63 - Pension plans: DC & DB (including Hybrid) - Annual Liabilities  quarterly estimates - Other : geographical allocation, accrued interest ECB Regulation on pension funds

1. ECB Regulation on PF statistics: (1/8) ECB collects data on PFs based on a ‘short-term’ approach (see Annex 1)  move towards an ECB Regulation on PFs ECB Regulation on pension funds statistics approved by the Governing Council on 26 January 2018 The Regulation was approved following a merits and cost procedure and a public consultation Final Regulation (see also Annex 2) released in the Official Journal (OJ) and on the ECB website together with the Summary of merits and costs and with a Feedback statement (outcome of the public consultation) Regulation improve the timeliness (e.g. quarterly reporting), coverage and quality of the data reported by pension funds, data on funds’ outstanding amounts, transactions, revaluations and other changes in volume, broken down by country, ESA 2010 sector, maturity and the type of pension plan (e.g. DB/DC), detailed security-by-security reporting. ECB Regulation on pension funds

New features: ECB Regulation on PFs statistics (1/7) 1. ECB Regulation on PF statistics: (2/8) ECB-UNRESTRICTED New features: ECB Regulation on PFs statistics (1/7) Country breakdown Back data Assets Liabilities Timeliness Other ECB Regulation on pension funds

New features: ECB Regulation on PFs statistics (2/7) 1. ECB Regulation on PF statistics: (3/8) ECB-UNRESTRICTED New features: ECB Regulation on PFs statistics (2/7) From just EA (e.g. domestic, OMUMS and RoW) to: EA Pre-ins Main counterparts (US, China, Japan, Canada, Switzerland, Russia, Brazil) “EU Institutions” “Other international organisations” Off-shore financial centres Country breakdown ECB Regulation on pension funds

New features: ECB Regulation on PFs statistics (3/7) 1. ECB Regulation on PF statistics: (4/8) ECB-UNRESTRICTED New features: ECB Regulation on PFs statistics (3/7) Insurance technical reserves and related claims/Pension fund reserves Claims of pension funds on pension managers Reinsurance recoverables Equity Of which unlisted shares Of which other equity Non-money market fund shares Equity fund shares Bond fund shares Mixed fund shares Real estate fund shares Hedge fund shares Other non-money market fund investment fund shares Assets ECB Regulation on pension funds

New features: ECB Regulation on PFs statistics (4/7) 1. ECB Regulation on PF statistics: (5/8) ECB-UNRESTRICTED New features: ECB Regulation on PFs statistics (4/7) Insurance technical reserves and related claims/Technical reserves Claims of pension funds on pension managers Entitlements to non-pension benefits Life insurance (reported in total ITR) Pension entitlements Split Defined Benefit & Defined contribution Liabilities ECB Regulation on pension funds

New features: ECB Regulation on PFs statistics (5/7) 1. ECB Regulation on PF statistics: (6/8) ECB-UNRESTRICTED New features: ECB Regulation on PFs statistics (5/7) Compilation approach indicator: + Home approach Data type: more availability of data on flows Reclassifications and other adjustments Revaluations, write-down/write-offs and exchange rate adjustments Data on Members: Active, deferred and retired Granular data: list of assets Security-by- security reporting Register of pension funds (RIAD) Other ECB Regulation on pension funds

New features: ECB Regulation on PFs statistics (6/7) 1. ECB Regulation on PF statistics: (7/8) ECB-UNRESTRICTED New features: ECB Regulation on PFs statistics (6/7) Quarterly data for assets and annual data for liabilities (& members): NCBs to derive quarterly estimates for liabilities (when not reported by PFs) Timeliness: Quarterly assets to be reported: starting from 10 weeks to 7 weeks by 2022 Annual liabilities to be reported: starting from 20 weeks to 14 weeks by 2022 Quarterly balance sheet to be reported by NCBs ref. 2019Q3 (by end-2018) Frequency/Timeliness ECB Regulation on pension funds

New features: ECB Regulation on PFs statistics (7/7) 1. ECB Regulation on PF statistics: (8/8) ECB-UNRESTRICTED New features: ECB Regulation on PFs statistics (7/7) DG-S will derive back data (first reporting ref. 2019Q3) Overlapping periods 2019Q3/Q4 but no more back data to be reported DG-S to derive/link quarterly data for PFs up to ref. period 2008Q1 Dissemination/publication (tentative): First internal dissemination & back data by early 2020: quality control Building block for financial accounts External dissemination & potential press release: depending on the quality of the data by mid-2020 Other means: Box in MoBu FSR/FIR OECD newsletter Back data & publication/dissemination ECB Regulation on pension funds

1. Pension funds as defined in ESA 2010: sector S.129 Issues: implementation ECB Regulation on PFs statistics (1/4) 1. Pension funds as defined in ESA 2010: sector S.129 Pension funds defined as financial corporations and quasi-corporations that are principally engaged in financial intermediation as the consequence of the pooling of social risks and needs of the insured persons (social insurance) Pension funds as social insurance schemes provide income in retirement, and often benefits for death and disability (ESA 2010, paragraphs 2.105 to 2.110) ESA 2010 Pension Funds (sector 129) excludes: general government social security funds; holding corporations controlling PFs which are not PFs themselves; non-profit institutions serving PFs, not directly engaged in financial intermediation; non-autonomous pension funds (book reserves of employers) ECB statistics on autonomous Pension Funds, i.e. which “have autonomy of decision and keep a complete set of accounts Issue: implementation of ESA 2010 definition across countries (e.g. institutions with individual pension plans? (see Annex 3)) ECB Regulation on pension funds

Issues: implementation ECB Regulation on PFs statistics (2/4) /3) 2. Pension plans & schemes - in line with ESA definition of pension entitlements (F.63) and with further splits: - Defined contribution (DC) - Defined benefit (DB)* Issue: Statistical treatment of individual “pension” plans (see Annex)  life insurance vs social insurance  employment related, government/employer support - Life insurance (F.62) offered by PFs to be reported under total insurance technical reserves - if Social insurance under corresponding pension entitlements (F.63) and according to type of plan (DC/DB) Note: Notional DC schemes (DC with guarantees and hybrid schemes) are grouped as DB schemes (ESA 2010, paragraph 17.59). ECB Regulation on pension funds

Issues: implementation ECB Regulation on PFs statistics (3/4) /3) 3. Recording of Under-/ overfunding - in line with ESA and as agreed WGFA and WG MFS in March 2017 Defined benefit pensions schemes funding responsibility of employers (“Managers” or Sponsors) Underfunding: F.64 assets against employer Overfunding: F.64 liabilities against employer Counterparty sector information on employer (e.g. sector & residency) Net worth (as balancing item) included in the Regulation: liability of a DB pension scheme is equal to the present value of the promised benefits - if no 3rd party (e.g. employer) retained funding responsibility net worth can be different from zero; liability of a defined contribution scheme is the current market value of the fund's assets thus net worth is always zero. ECB Regulation on pension funds

Issues: implementation ECB Regulation on PFs statistics (4/4) /3) 3. Annual liabilities  quarterly estimates - Derivation of quarterly estimates for stocks based on annual data  statistical methods - Derivation of quarterly transactions Assets: based on data reported (e.g. s-b-s reporting) Liabilities: based on changes in stocks and data on revaluations and other changes in volume (actuarial assumptions) Expert Group (EG) developing recommendations for the derivation of quarterly estimates on stocks and transactions. EG (composed by NCBs, NCAs, EIOPA and industry, Eurostat invited to participate). - Valuation rules: national valuation standards for technical provisions are heterogeneous, particularly due to differences in discount rates Issue: given differences across countries the derivation of estimates will be developed and implemented at national level but ECB will propose a common methodology 4. Other issues - Geographical allocation of pension entitlements - Accrued interest: instrument vs other accounts payable/receivable - Reinsurance recoverables: part of F.61 assets (for PFs which reinsure part of their liabilities) - Entitlements to non-pension benefits: F.65 liabilities ECB Regulation on pension funds

Mandatory pension schemes based on individual accounts ECB questionnaire on the implementation of the ECB Regulation: Reporting population Pension funds: Institutions for Occupational Retirement Provision (IORP) and non-IORP. 11 countries (BE, DE, EE, LV, LT, PT, SI, SK; BG, HU, PL ) have indicated that non-IORPs with mandatory contributions exist (in 9 included in reporting population). WG on Financial Accounts questionnaire on “Individual Pension Plans”: 21 countries described 44 potential IPPs - some are mandatory by law, and have individual accounts: BG: Universal mandatory pension funds (UPF) covering employees and self-employed HR: DC scheme, individual capitalised savings, legally regulated contribution rate LV: Mandatory DC funded pension scheme, all persons covered by state social insurance LT: No limitations to participate … Opting out from the scheme once joined is not allowed SE: Mandatory Premium Pension Scheme, covers the working population born after 1937 ECB Regulation on pension funds

ECB Regulation on Pension Fund statistics – Questions ?

`` Annex 1: PFs (euro area): some facts (1/6) ECB-UNRESTRICTED `` ECB Regulation on pension funds

Annex 1: PFs (euro area): some facts (2/6) ECB-UNRESTRICTED ECB Regulation on pension funds

Annex 1: PFs (euro area): some facts (3/6) ECB-UNRESTRICTED ECB Regulation on pension funds

Annex 1: PF (euro area): some more facts (4/6) ECB-UNRESTRICTED Source: ECB. ICPF and PFB databases. * neither seasonally adjusted nor adjusted for reclassifications or revaluations ECB Regulation on pension funds

Annex 1: PF (euro area): some more facts (5/6) ECB-UNRESTRICTED Source: ECB. ICPF and PFB databases. * neither seasonally adjusted nor adjusted for reclassifications or revaluations ECB Regulation on pension funds

Annex 1: PF (euro area): some more facts (6/6) ECB-UNRESTRICTED ECB Regulation on pension funds

Annex 2 – Reporting scheme ECB Regulation on Pension Funds

Annex 2 – Reporting scheme ECB Regulation on Pension Funds

Annex 2 – Reporting scheme ECB Regulation on Pension Funds

Annex 2 – Reporting scheme ECB Regulation on Pension Funds Table 1c - Country breakdown (cont.) ECB Regulation on pension funds

Annex 3 - ECB Regulation on Pension Fund statistics Table: Overview reporting population: pension funds   Exist Do not exist Are in reporting population IORPs AT, BE, CY, DE, ES, FI, GR, IE, IT, LU, LV, MT, NL, PT, SI, SK; BG, HU, PL, SE EE, FR, LT; CZ AT, BE, CY, DE, ES, FI, GR, IE, IT, LU, LV, MT, NL, PT, SI, SK; BG, PL, SE Mandatory contributions to  non-IORPs BE, DE, EE, LV, LT, PT, SI, SK; BG, HU, PL AT, CY, ES, FI, FR, GR, IE, IT, LU, MT, CZ, SE BE, DE, EE, PT, SI, SK; BG, HU, PL Voluntary contributions to non-IORPs AT, BE, DE, EE, ES, FI, FR, GR, IE, IT, LT, LU, LV, MT, NL, PT, SI, SK; BG, CZ, HU, PL, SE CY ES, MT, PT, SI, SK; BG, PL ECB Regulation on pension funds