From “Table 29” to the actuarial balance sheetis it really that big a leap?

  1. Anne M. Garvey 1
  2. Juan Manuel Pérez-Salamero González 2
  3. Manuel Ventura-Marco 2
  4. Carlos Vidal-Meliá 3
  1. 1 Department of Economics and Management Sciences, University of Alcalá, Madrid (Spain)
  2. 2 Department of Financial Economics and Actuarial Science, University of Valencia, Valencia. (Spain)
  3. 3 Department of Financial Economics and Actuarial Science, University of Valencia
Mostrar afiliaciones +
Revista:
Documentos de Trabajo (ICAE)

ISSN: 2341-2356

Año de publicación: 2021

Número: 5

Páginas: 1-37

Tipo: Documento de Trabajo

DIALNET GOOGLE SCHOLAR lock_openDocta Complutense editor

Otras publicaciones en: Documentos de Trabajo (ICAE)

Resumen

EU regulations since 2017 have required all Member States to disclose their accrued-todate pension liabilities (ADL) using a standard actuarial cost method and some common assumptions. This applies to both Social Security (SS) schemes and unfunded defined benefit (DB) schemes covering civil servants. These pension liabilities have to be disclosed in a supplementary table referred to as Table 29. An actuarial balance sheet (ABS) can be defined as a financial statement that lists a pension system's obligations to contributors and pensioners at a particular date, together with the amounts of the assets (financial and in particular those from contributions) that underwrite those commitments. The ABS can be used to assess the solvency of SS schemes, whereas Table 29 cannot. This paper develops a methodology to (easily) transform Table 29 into an ABS and compile its associated income statement (IS). To enable policymakers to better understand how the model would function, the paper also contains a country case study based on data from the most recently published Table 29 for Spain. According to our best estimate assumptions, it can be said that the Spanish pension system is partially insolvent because only part of the pension entitlements is backed up by assets, and that the system's sustainability has markedly deteriorated over the period 2015-2018.

Referencias bibliográficas

  • Barr, N.; Diamond, P. (2009). Pension Reform: A Short Guide. Oxford University Press: New York, U.S.A.; ISBN13: 9780195387728.
  • Billig, A., and Ménard, J.C. (2013). Actuarial balance sheets as a tool to assess the sustainability of social security pension systems. International Social Security Review, 66(2), 31- 62.
  • Billings, M., O’Brien, C., Woods, M. and Vencappa, D. (2017). Discretion in accounting for pensions under IAS 19: using the ‘magic telescope’? Accounting and Business Research, 47:2, 123- 143, DOI: 10.1080/00014788.2016.1205967
  • Blanchet, D., Le Minez, S. and Marino, A. (2017). Building and interpreting macro/micro estimates of accrued-to-date pension liabilities: French reforms as a case study. Review of Income and Wealth 63(1), 70-94. DOI: 10.1111/roiw.12207
  • Boado-Penas, C. and Vidal-Meliá, C. (2013), “The Actuarial Balance of the Pay-As-You-Go Pension System: the Swedish NDC model versus the US DB model.” In Holzmann, R., E. Palmer and D. Robalino, eds., NDC Pension Schemes in a Changing Pension World, Chapter 14, Volume 2. Washington, DC: World Bank.
  • Boado-Penas, M. C, Domínguez-Fabián, I. and Vidal-Meliá, C. (2007). Notional Defined Contribution Accounts (Ndcs): Solvency and Risk; Application to the Case of Spain International Social Security Review. 60 (4), 105-127.
  • Boado-Penas, M.C., Valdés-Prieto, S., and Vidal-Meliá, C. (2008). An Actuarial Balance Sheet for Pay-As-You-Go Finance: Solvency Indicators for Spain and Sweden. Fiscal Studies, 29(1), 89-134.
  • Board of Trustees, Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds (BOT). (2019). 2019 Annual Report. Washington, D.C.: Government Printing
  • Brown, J. and Pennacchi, G. (2016). Discounting pension liabilities: Funding versus value. Journal of Pension Economics and Finance, 15(3): 254-284.
  • Brys, I. (2017). Accrued-to-date pension entitlement in Belgium. Federal Planning Bureau. Economic Analyses and forecast Working Paper 6-17 (May 2017).
  • Chen, G. and Matkin, D.S. (2017). Actuarial inputs and the valuation of public pension liabilities and contribution requeriments: a simulation approach. Public Budgeting and finance, 37(1), 68-87.
  • Davis, R.B. (2011). Is Your Defined-Benefit Pension Guaranteed? Funding Rules, Insolvency Law and Pension Insurance. IRPP Study 16. Montreal: Institute for Research on Public Policy.
  • Deloitte (2017). Pension scheme valuations. Corporate guide. 2nd edition https://www2.deloitte.com/content/dam/Deloitte/uk/Documents/consultancy/deloitteuk-pension-scheme-valuations-corp-guide.pdf
  • Devesa-Carpio, J.E. and Vidal-Meliá, C. (2004). Notional Defined Contributions Accounts (ndc’s). What effect would they have had on the Spanish pension system? Moneda y Crédito, 219, 61-103.
  • Devesa-Carpio, J. E., Lejárraga-García, A. and Vidal-Meliá, C. (2002). El tanto de rendimiento del sistema de pensiones de reparto. Revista de Economía Aplicada, 30 (X), 109- 132.
  • Drouin, A., Plamondon, P. and Lloret, C. (2018). Towards a fair assessment of social security liabilities under pay-as-you-go and partially funded schemes. International Social Security Review, 71(3): 81-103.
  • EC et al. (2009). System of national accounts 2008. Brussels, European Commission, International Monetary Fund, Organisation for Economic Co-operation and Development, United Nations, World Bank.
  • Eurostat (2013). European system of accounts ESA 2010. Luxembourg.
  • Eurostat. (2020). Technical compilation guide for pension data in national accounts. Eurostat. 2020 edition. ISBN 978-92-76-21570-7.
  • Franzen, D. (2010). “Managing Investment Risk in Defined Benefit Pension Funds”, OECD Working Papers on Insurance and Private Pensions, No. 38, OECD.
  • Franzen, D. (2013). “The Impact of Regulation on the Asset Investment of Defined Benefit Pension Fund”, Doctoral Thesis. School of Geography and the Environment. University of Oxford and St. Peter’s College.
  • Garvey, A., Ventura-Marco, M. and Vidal-Meliá, C. (2020). Does the pension system’s income statement really matter? A proposal for an NDC scheme with disability and minimum pension benefits. Economic Research-Ekonomska Istraživanja, DOI: 10.1080/1331677X.2020.1782246.
  • Goebel, P. (2017). "A Primer on Government-Sponsored Pension Schemes in the National Accounts and their Impact on the Interpretation of Government Debt Statistics", OECD Statistics Working Papers, No. 2017/05, OECD Publishing, Paris, https://doi.org/10.1787/c71c7727-en.
  • Gronchi, S.; Nisticò, S. (2008). Theoretical Foundations of Pay-as-You-Go DefinedContribution Pension Schemes. Metroeconomica, 59(2), 131-159.
  • Holzmann, R., Palacios, R. and Zviniene, A. (2001). On the economics and scope of implicit pension debt: an international perspective. Empirica, 28(1): 97–129.
  • Instituto Nacional de Estadística (INE) 2020. Pension Table. lnventory of Methods and Sources. https://www.ine.es/en/daco/daco42/cne10/inv_fuentesymetodos_TP_en.pdf
  • International Financial Reporting Standard (IFRS) (2011). International Accounting Standard 19 (IAS19) Employee Benefits. ISBN: 978-1-907877-30-8. London. UK:
  • International Public Sector Accounting Standards Board. (IPSASB, 2020). IPSAS: The Conceptual Framework for Generally Purpose Financial by Public Sector Entities. In Handbook of international public sector accounting pronouncements 2020: Vol. 1. New York, NY: International Federation of Accountants – International Public Sector Accounting Standards Board.
  • Kaier, K. and Müller, C. (2015). New figures on unfunded public pensions entitlements across Europe: Concept, results and applications. Empirica, 42(4): 865–895
  • Lee, R. (2006). Discussion of “The Rate of Return of Pay-As-You-Go Pension Systems: A More Exact Consumption-Loan Model of Interest”. In Pension Reform: Issues and Prospects for Notional Defined Contribution (NDC) Schemes, Holzmann, R., Palmer, E., Eds.; World Bank: Washington, DC, 2006; eISBN-10: 0-8213-6038-X. DOI: 10.1596/978- 0-8213-6038-5.
  • McNally, B., Garvey, A.M. and O’Connor, T. (2019). Valuation of defined benefit pension schemes in IAS 19 employee benefits true and fair? Journal of Financial Regulation and Compliance, 27 (1), 31-42. https://doi.org/10.1108/JFRC-03-2018-0048
  • Metzger, C. (2018). An actuarial balance sheet of the Swiss old-age pension scheme. International Social Security Review, 71(1), 25-49.
  • Metzger, C. (2019). The German statutory pension scheme: Balance Sheet, Cross-sectional Internal Rates of Return and Implicit Tax Rates. Fiscal Studies: 40(2): 239-270.
  • Moraga, M. and Ramos, R. (2020). An estimate of pension system financial returns. Analytical articles. Economic Bulletin. 3-2020. Bank of Spain.
  • Müller, C. and Raffelhüschen, B. (2014). Estimating pension entitlements of public pension schemes in Latvia. Research Center for Generational Contracts, Freiburg University (April 2014).
  • Naughton, J., Petacchi, R., and Weber, J., (2015). Public pension accounting rules and economic outcomes. Journal of Accounting and Economics, 59 (23), 221–241
  • Nektarios, M., Tinios, P., Simeonidis, G., (2018). Pensions for young people. A developmental system of social insurance, Athens: Papazisi.
  • Núñez-Antón, V., Pérez-Salamero González, J.M., Regúlez-Castillo, M., and Vidal-Meliá, C., (2020). Improving the Representativeness of a Simple Random Sample: An Optimization Model and Its Application to the Continuous Sample of Working Lives. Mathematics, 8 (8), 1225.
  • Office for National Statistics [ONS] (2018). Pension in the national accounts, a fuller picture of the UK’s funded and unfunded pension obligations. 7 march 2018. https://www.ons.gov.uk/economy/nationalaccounts/uksectoraccounts/articles/pensionsi nthenationalaccountsafullerpictureoftheuksfundedandunfundedpensionobligations/2010to 2015
  • Pérez-Salamero González, J.M., Regúlez-Castillo, M. and Vidal-Meliá, C. (2017). The continuous sample of working lives: improving its representativeness. SERIEs. Journal of the Spanish Economic Association 8, 43–95.
  • Pérez-Salamero González, J.M., Ventura-Marco, M., and Vidal-Meliá, C. (2017). A 'Swedish' Actuarial Balance Sheet for a Notional Defined Contribution Pension Scheme with Disability and Minimum Pension Benefits. International Social Security Review, 70(3), 79-104.
  • Schmitz, C., Barb, F. and Bruil, A. (2015). Constructing the Supplementary Pension Table for the Netherlands. Statistics Netherlands Discussion Paper 2015/07.
  • Seguridad Social (2021). Muestra Continua de Vidas Laborales. Seguridad Social Estadísticas, Presupuestos y Estudios – Estadísticas. : http://www.segsocial.es/wps/portal/wss/internet/EstadisticasPresupuestosEstudios/Estadisticas/EST21. Accessed 21 February 2021.
  • Settergren, O. and Mikula, B.D. (2005). The rate of return of pay-as-you-go pension systems: a more exact consumption-loan model of interest. Journal of Pensions Economics and Finance, 4(2), 115-138.
  • Stavrakis, C. (2018). Reporting the pension obligations of social security schemes: An EU perspective. International Social Security Review. 71(3), 105-123.
  • The Swedish Pension System. (TSPS) (2002). Orange Annual Report 2001. Ed. Ole Settergren. The National Social Insurance Board (Riksförsäkringsverket, RFV), Stockholm. Sweden.
  • The Swedish Pension System. (TSPS) (2018). Orange Annual Report 2017. Ed. Ole Settergren. Swedish Pensions Agency (Pensionsmyndigheten), Stockholm. Sweden.
  • The Swedish Pension System. (TSPS, 2020). Orange Annual Report 2019. Ole Settergren (Ed.). Stockholm: Swedish Pensions Agency (Pensionsmyndigheten). Stockholm, Sweden.
  • Ventura-Marco, M., and Vidal-Meliá, C. (2014). An Actuarial Balance Sheet Model for Defined Benefit Pay-As-You-Go Pension Systems with Disability and Retirement Contingencies. Astin Bulletin, 44(2), 367-415.
  • Ventura-Marco, M., and Vidal-Meliá, C. (2016). Integrating retirement and permanent disability in NDC pension schemes. Applied Economics, 48(12), 1081-1102.
  • Vidal-Meliá, C. (2014). An assessment of the 2011 Spanish pension reform using the Swedish system as a benchmark. Journal of Pension Economics and Finance, 13(3), 297-333.
  • Vidal-Meliá, C. and Domínguez-Fabián, I. (2006). “The Spanish Pension System: Issues of Introducing Notional Defined Contribution Accounts” In Pension Reform: Issues and Prospects for Notional Defined Contribution (NDC) Schemes, ed. R. Holzmann and E. Palmer, chapter 23. Washington, DC: World Bank.
  • Vidal-Meliá, C., Boado-Penas, M.C. and Settergren, O. (2009). Automatic Balance Mechanisms in Pay-As-You-Go Pension Systems. The Geneva Papers on Risk and Insurance: Issues and Practice. 33 (4), 287-317.
  • Vidal-Meliá, C., Domínguez-Fabián, I. and Devesa-Carpio, J. E. (2006). Subjective Economic Risk to beneficiaries in Notional Defined Contribution Accounts (NDC’s). The Journal of Risk and Insurance, 73 (3), 489-515.
  • Vidal-Meliá, C., Ventura-Marco, M. and Pérez-Salamero González, J.M. (2018). Social insurance accounting for a notional defined contribution scheme combining retirement and long-term care benefits. Sustainability, 10, 2832.
  • Wiener, M. and Stokoe, P. (2018). Discussing accrued-to-date liabilities. International Social Security Review, 71(3): 27-48.
  • Yermo, J. and Severinson, C. (2010). “The Impact of the Financial Crisis on Defined Benefit Plans and the Need for Counter-Cyclical Funding Regulations”, OECD Working Papers on Finance, Insurance and Private Pensions, No. 3, OECD Publishing. doi: 10.1787/5km91p3jszxw-en.
Fuente de los datos: Dialnet