Regulation (EU) No 549/2013 of the European Parliament and of the Council of 21 May 2013 on the European system of national and regional accounts in the European Union Text with EEA relevance

• 17.18Beneficiaries usually make compulsory contributions towards a social security scheme other than a social security pension scheme which is frequently financed on a pay-as-you-go basis. Pay-as-you-go contributions in a period are used to finance the benefits in the same period. There is no saving element involved, either for general government or the employer operating the scheme or for the beneficiaries participating in it. So there is generally no question of a surplus arising and, if there is a shortfall in resources, government may have powers to change the commitments not just relating to future employment but also for past employment. However, in some countries social security schemes other than pension schemes may accumulate reserves, known as buffer funds.

• 17.19Social security entitlements other than pension entitlements, as outstanding amounts for a social security scheme, are not recognised in the core national accounts of the ESA. Estimates of the outstanding amounts of entitlements under social security schemes other than pensions, as well as of any other employment-related non-pension schemes provided by general government, are not included in the core accounts and not recorded in Table 17.5.

Other employment-related social insurance schemes

• 17.20 Definition: other employment-related social insurance schemes are contractual insurance schemes, either compulsory by law or encouraged by a third party. In other employment-related social insurance schemes employers can make it a condition of employment that employees, the beneficiaries, participate in a social insurance scheme specified by the employer to insure against risk other than old age and age-related. Such employment-related schemes are provided to beneficiaries either by the employer or by other units on behalf of the employer.

• 17.21Other employment-related social insurance schemes are seen, like related pension schemes, as part of the compensation package, and negotiations between employees and employers may focus on current conditions of service and pay scales. Often social insurance benefits other than pensions are provided by private employers from schemes that the employers control or contract to a third party such as an insurance corporation providing social benefits like private medical coverage.

Recording of stocks and flows by type of non-pension social insurance scheme

Social security schemes

• 17.22In recognition of the fact that social security is normally financed on a pay-as-you-go basis, entitlements accruing under social security such as social benefits including pensions are not shown in the core national accounts.

• 17.23Pension entitlements arising from social security schemes are included in the supplementary table for accrued-to-date pension entitlements in social insurance, but this is not the case for entitlements arising from social security schemes, other than pension schemes.

• 17.24The recording of the flows for social security schemes other than pensions refers to contributions made by the employer and by the employees and to social security benefits.

• 17.25Any contribution made by the employer is treated as part of compensation of employees. It is recorded as a distributive transaction payable by the employer and receivable by the employee. The employee then pays an amount equal to what he receives from the employer together with any contribution of his own to the social security fund. This amount is recorded as a use for households and a resource for government.

• 17.26Any contributions made by self-employed or non-employed persons are also included with the contributions by households to government.

• 17.27Social security benefits are recorded as distributive transactions, from general government to households.

• 17.28Table 17.2 shows the transactions related to a social security pension scheme. They are identical to the transactions related to social security schemes excluding pensions.

Other employment-related non-pension social insurance schemes

• 17.29For other employment-related non-pension social insurance schemes, entitlements of the participants are usually recorded as they build up. Investment income earned on existing entitlements is recorded as being distributed to the beneficiaries and reinvested by them in the scheme.

• 17.30The social contribution made by an employer to an insurance scheme on behalf of an employee is treated as part of the compensation of employees.

• 17.31The investment income on accumulated entitlements is recorded as being distributed to households by the scheme. The investment income includes interest and dividends plus, if the institutional unit holds shares in them, the distributed income of collective investment schemes. It is possible that the scheme may own property and so generate a net operating surplus, and this is included with the investment income distributed to the beneficiaries. In that case, the term investment income is to be interpreted as including that source of income. Holding gains and losses generated by the investment of the cumulated entitlements are not included in investment income but are recorded as other changes due to revaluations.

• 17.32Part of the income distributed to households is used to meet the costs of operating the scheme. This cost is shown as output of the scheme and household final consumption expenditure. The remaining part of the distributed income is treated as contribution supplements paid back by households to the scheme.

• 17.33Social contributions are shown as paid by households to the scheme. The total amount of the social contributions is made up of the actual contributions from the employers as part of compensation of employees, actual contributions by employees and by individuals formerly participating in a scheme, self-employed and non-employed persons as well as retirees, and the contribution supplements specified in paragraph 17.32.

• 17.34Those who contribute to a social insurance scheme, who are not employees, may be self-employed or non-employed persons, who participate by virtue of their profession or former employment status.

• 17.35The social benefits paid to households by the scheme administrator are shown as distributive transactions under other social insurance benefits.

• 17.36The payment of the service provided by the scheme administrator, equal to the value of the scheme's output, is recorded as final consumption expenditure of households.

• 17.37An increase in entitlements caused by an excess of contributions over benefits is shown as paid by the social insurance scheme to households. The rationale for this is that, since this increase in entitlements directly affects the net worth of households, it should be included in the saving of the households sector.

• 17.38The adjustment for the change in the entitlements paid by the scheme to households is recorded as a claim from households to the scheme.

• 17.39Table 17.3 shows the transactions for an employment-related pension scheme. They are identical to the transactions related to social insurance schemes other than pension schemes.

PENSIONS

• 17.40 Definition: social insurance pensions are benefits which beneficiaries receive upon retirement, usually under predetermined legal or contractual terms and typically in the form of a guaranteed annuity.

• The most important pension benefit of social insurance schemes is income in retirement, but a number of other cases may also occur. For example, pensions may be payable to widows and widowers or to people who suffer an industrial injury and are no longer able to work. All events that give rise to payments because the income earner is no longer able, through death or incapacity, to provide an income for himself or herself and dependants are treated as pensions.

Types of pension schemes

• 17.41Pensions provided to beneficiaries can take the following forms:

• (a) social insurance pension schemes;

• (b) social assistance; and

• (c) individual insurance policies related to pensions.

• They are usually provided by social security funds, other government entities, insurance corporations and pension funds, or institutional units as employers. However, other institutions could be involved, depending on national circumstances. The use of the term social security funds does not mean that there is always an actual fund of assets created within the scheme. Social security funds and social security schemes are synonymous terms.

• 17.42Social insurance pensions are provided to beneficiaries as participants in social insurance schemes. The part provided by general government is called social security pensions, including social security funds, and the part provided by other units is called other employment-related pensions. The division between which pensions are provided by social security and which by other employment-related schemes varies considerably from country to country with the consequence that the coverage, and therefore national perceptions, of the term 'social security' vary considerably.

Social security pension schemes

• 17.43 Definition: social security pension schemes are contractual insurance schemes where the beneficiaries as participants of a social insurance scheme are obliged by general government to insure against old age and other age-related risks such as disability, health etc. Social security pensions are provided to beneficiaries by general government.

• 17.44When general government takes over the responsibility for providing pensions to large sections of the community, the social security function is in effect filling the role of a multi-employer scheme.

• 17.45Beneficiaries usually make compulsory contributions towards a social security pension scheme which is frequently financed on a pay-as-you-go basis. The contributions in a period are used to finance the benefits in the same period. There is no saving element involved, either for general government or the employer operating the scheme or for the beneficiaries participating in it. So a surplus on the scheme will not exist, and, if there is a shortfall in resources, government may have powers to change the commitments not just relating to future employment but also for the past. In some countries however social security pension schemes may accumulate reserves, known as buffer funds.

• 17.46The narrowest form of social security pension is very basic. The level may be fixed independently of the size of contributions, though not of the fact that contributions have been made for a given period of time or under other specific conditions. An employee's right to a pension under social security is often transferable from one employer to another.

• 17.47By contrast, in some countries most or all pension provision may be made via social security. In this case, government acts as an intermediary for employers so that once the government has received the contributions to the scheme paid by the employer and the households; the government then takes on the risk of making the eventual payment. Government relieves the employer of the risk that the cost of pensions may be too great for his enterprise to meet and assures the population that pensions will be paid, though it may do so with the qualification that it may alter the amount of pensions due, even retrospectively.

• 17.48Pension entitlements as outstanding amounts for a social security pension scheme are not recognised in the core national accounts of the ESA. Estimates of the outstanding amounts of entitlements under social security pension schemes as well as of any other employment-related defined benefit pension scheme provided by general government are not included in the core national accounts but are recorded in the supplementary table for accrued-to-date pension entitlements shown in Table 17.5.

Other employment-related pension schemes

• 17.49 Definition: other employment-related pension schemes are contractual insurance schemes, either compulsory by law or encouraged by government, or where employers make it a condition of employment that employees (the beneficiaries) participate in a social insurance scheme specified by the employer to insure against old age and other age-related risks. These employment-related pensions are provided to beneficiaries either by the employer or by other units on behalf of the employer.

• 17.50Unless employers and beneficiaries agree to change the amounts payable, pension schemes run by private employers are usually not subject to retrospective adjustments. However there is a risk that the employer may be unable to pay because he has gone out of business. Protection for the pension entitlements of individuals is becoming more common. The pension built up with one employer may not be transferable to a new employer. Employer schemes are increasingly likely to have reserves set aside. Even if there are no reserves, accounting conventions may require them to recognise pension entitlements of present and past employees in their accounts.

• 17.51Other employment-related pensions are seen as part of the compensation package, and negotiations between employees and employers may focus on current conditions of service and pay scales and pension entitlements. Often pensions are provided by private employers from schemes that the employers control or contract to a third party such as an insurance corporation. It is sometimes possible for a specialised unit to agree to assume responsibility for providing pensions for a number of employers in return for assuming the risk of ensuring adequate funding is available to make the promised pensions. Such an arrangement is called a multi-employer pension scheme.

• 17.52Both current employees and former employees, who are the beneficiaries, may make contributions to the scheme and are assumed to receive property income from it. This property income is then treated as contribution supplements payable by them.

• 17.53Pension schemes are categorised according to their nature into defined contribution schemes and defined benefit schemes.

Defined contribution schemes

• 17.54 Definition: a defined contribution scheme is a pension scheme where the benefits are defined exclusively in terms of the level of the fund built up from the contributions made over the employee's working life and the increases in value that result from the investment of such funds by the manager of the pension scheme.

• 17.55The entire risk of a defined contribution scheme to provide an adequate income in retirement is borne by the employee.

• 17.56Providing detail on defined contribution schemes is relatively straightforward since full accounts must be available and no actuarial estimation is involved. Most of those schemes are in the corporations sectors (column A of Table 17.5) but it is possible that in some cases government acts as a scheme manager. The pension entitlements of all defined contribution pension schemes are included in the core national accounts.

Defined benefit schemes

• 17.57 Definition: a defined benefit scheme is a pension scheme where the benefits payable to the employee on retirement are determined by the use of a formula, either alone or in combination with a guaranteed minimum amount payable.

• 17.58The risk of a defined benefit scheme to provide an adequate income in retirement is borne by the employer or a unit acting on his behalf.

Notional defined contribution schemes and hybrid schemes

• 17.59Notional defined contribution schemes and hybrid schemes are grouped as defined benefit schemes.

• 17.60 Definition: a notional defined contribution scheme is similar to a defined contribution scheme but with a guaranteed minimum amount payable.

• 17.61In a notional defined contribution scheme, contributions (both from employee and employer) are credited to, and accumulated on, individual accounts. Those individual accounts are notional, in the sense that the contributions to the schemes are used to pay pension benefits to current pensioners. At retirement, the accumulated balance is converted into an annuity through a formula, based, among other factors, on a measure of life expectancy, and is revised annually to catch up with a measure of the standard of living.

• 17.62Hybrid schemes are those schemes which have both a defined benefit and a defined contribution element. A scheme is classified as 'hybrid' either because both defined benefit and defined contribution provisions are present or because it embodies a notional defined contribution scheme and, at the same time, a defined benefit or defined contribution provision. The provision might be combined for a single beneficiary, or differentiated according to groups of beneficiaries by type of contract, pension provided, etc.

• 17.63The risk to provide an adequate income in retirement is shared between the employer and the employee under a notional contribution scheme and under a hybrid scheme.

• 17.64In certain cases, the employer's risk may be borne by the multi-employer scheme that operates the defined benefit pension scheme on behalf of the employer.

Defined benefit schemes as compared to defined contribution schemes

• 17.65The fundamental difference in accounting for a defined benefit pension scheme as compared to a defined contribution pension scheme is that, for the defined benefit pension scheme, the benefit to the employee in the current period is determined in terms of the undertakings made by the employer about the level of pension, whereas for the defined contribution pension scheme the benefit to the employee in the current period is determined by the contributions made to the scheme, and the investment income and holding gains and losses earned on those and previous contributions. Thus while there is in principle complete information available on the benefits for the participant in the defined contribution pension scheme, the benefits for the participants in a defined benefit pension scheme are estimated actuarially.

• 17.66There are four sources of change in pension entitlements in a defined benefit pension scheme. The first of these, the current service increase, is the increase in entitlement associated with the wages and salaries earned in the current period. The second source, the past service increase, is the increase in the value of the entitlement due to the fact that for all participants in the scheme, retirement (and death) are one year nearer. The third change in the level of entitlement is a decrease due to the payment of benefits to retirees of the scheme. The fourth source of change comes from other factors, factors that are reflected in the other changes in assets account.

• 17.67As with a defined contribution pension scheme, the employer and/or employee may make actual contributions to the scheme in the current period. However, such payments may not be sufficient to meet the increase in the benefits accruing from the current year's employment. An additional contribution from the employer is, therefore, imputed to bring equality between contributions (actual and imputed) and the increase in current service entitlements. Such imputed contributions are usually positive but it is possible for them to be negative if the sum of the contributions received exceeds the increase in current service entitlements.

• 17.68At the end of an accounting period, the level of the pension entitlements due to past and present employees can be calculated by estimating the present value of the amounts due to be paid in retirement using actuarial calculations. One element in the increase of this amount year by year is the fact that the present value of the entitlements existing at the beginning of the year, and still due at the end of the year, has increased because the future is one year nearer and so a discount factor less must be used to calculate the present value. It is this unwinding of the discount that accounts for the past service increase in entitlements.

• 17.69A further basic difference between a defined benefit pension scheme and a defined contribution pension scheme concerns the payment for the cost of operating the pension scheme. Under a defined contribution pension scheme all of the risk is borne by the beneficiaries. The pension scheme is operated on their behalf and they pay for the cost of it. Since a unit other than the employer may operate the scheme, it is appropriate to treat the operating cost as part of the investment income that is retained by the scheme to meet its costs and generate a profit. In keeping with accounting for insurance, the investment income is treated as being attributed in full to the beneficiaries, part being used to meet the cost and the remainder being reinvested with the scheme.

• 17.70For a defined benefit pension scheme, the situation is different. The risk that the fund may be insufficient to meet pension entitlements is borne in part or in whole by the employer, or a unit acting on his behalf, and not by the beneficiaries alone. The scheme may be directly controlled by the employer and be part of the same institutional unit or may be purely notional. Even in this case, there are costs associated with operating the scheme. Although such costs are initially borne by the employer, it is appropriate to regard this as a form of income in kind provided to the employees and for convenience it may be included with the employers' contributions. This assumes all the costs are borne by current employees and none by retirees. It also assumes that the attribution that must be made in the case of notional schemes can be applied in other circumstances.

• 17.71For a defined benefit scheme, it is unlikely that self-employed and non-employed persons currently contribute, though it is possible if they were previously in employment giving rise to a defined benefit pension and have the right to continue to participate. Those persons previously in employment, whether currently in receipt of a pension or not, receive property income and pay contribution supplements.

Pension administrator, pension manager, pension fund and multi-employer pension scheme

• 17.72Social insurance schemes may be organised by employers or by government, they may be organised by insurance corporations on behalf of employees or separate institutional units may be established to hold and manage the assets to be used to meet pensions and to distribute pensions. The pension fund subsector consists of only those social insurance pension funds that are institutional units separate from the units that create them.

• 17.73An employer may contract with another unit to manage the pension scheme and arrange disbursements to the beneficiaries. There are different ways in which this may happen.

• 17.74First, the operator of the pension scheme, the pension administrator, simply acts as the employer's agent, undertaking the day-to-day administration of the pension scheme, and the responsibility for any shortfall in the scheme, or the benefit of any excess, remains with the employer.

• 17.75Second, the pension manager is responsible also for determining the terms of another employment-related pension scheme and bears the ultimate responsibility for pension entitlements. The pension manager also retains a significant degree of responsibility over the long-term policy of investment in assets, including the selection of investment options and the structure of administrative providers. Although the same unit may frequently carry out both the functions of a pension manager and of a pension administrator, in some cases they are the responsibilities of different units.

• 17.76Third, it is not uncommon for a single unit to contract with several employers to manage their pension schemes as a multi-employer pension scheme. The arrangements are such that the multi-employer pension scheme accepts the responsibility for any shortfall in the funds to meet the entitlements in return for the right to keep any excess funds. By pooling the risks over a number of employers the multi-employer scheme expects to balance under- and over-funding so as to emerge with an excess over all the schemes taken as whole in a similar way that an insurance corporation pools risk for many clients. In this case, the multi-employer pension scheme is the pension manager.

• 17.77When government takes responsibility for providing benefits to large sections of the community, the social security function fills the role of a multi-employer scheme. Like the insurance corporation, the government then takes on the responsibility for any shortfall in funds to meet the pension liabilities or may be entitled to retain any surplus generated. It is often the case, though, that social security is funded on a pay-as-you-go basis so there is no question of a surplus arising and, if there is a shortfall in resources, government may have powers to change the entitlements not just relating to future employment but also for the past.

• 17.78The pension manager's responsibility for any underfunding, or the benefit of any over-funding, of a pension scheme is recorded as a liability/asset relationship with the pension administrator. The change in the liability between the pension manager and the pension administrator is recorded period by period. It is not the pension entitlements of the scheme that are recorded as liabilities of the pension manager, but rather the difference between the pension entitlements and the assets held by the scheme. Where assets held by the scheme are greater than the pension entitlements, a situation described as over-funding, a liability/asset relationship with the pension manager will be recorded where it is certain that any over-funding would become the property of the pension manager in case of liquidation of the scheme.

• 17.79Any holding gains and losses on the assets managed by the pension administrator are attributed to the pension manager so that the net worth of the pension fund remains exactly zero at all times.

Recording of stocks and flows by type of pension scheme in social insurance

Transactions for social security pension schemes

• 17.80In recognition of the fact that social security is normally financed on a pay-as-you-go basis, pension entitlements accruing under social security are not shown in the core national accounts. If all countries had similar benefits provided under social security and under social insurance schemes, international comparisons would be straightforward. However, this is not the case and national perceptions of what is covered by social security vary considerably.

• 17.81Pension entitlements arising from social security schemes are not included in the core national accounts. The diversity of such schemes and employer schemes varies across Member States. Pension entitlements arising from social security schemes are included in the supplementary table for accrued-to-date pension entitlements in social insurance (Table 17.5) to allow comparison of country data.

• 17.82The recording of the flows for social security pension schemes refers to contributions made by the employer and by the employees and to social security benefits.

• 17.83Any contribution made by the employer is treated as part of compensation of employees. It is recorded as a distributive transaction from the employer to the employee. The employee then pays what he receives from the employer together with any contribution he makes on his own behalf to the social security fund. This amount is recorded as paid by households to government.

• 17.84Any contributions made by self-employed or non-employed persons are also included with the contributions made by households to government.

• 17.85Social security benefits are recorded as distributive transactions from general government to households.

• 17.86Table 17.2 shows the transactions of a social security pension scheme.

Table 17.2 —  Accounts for social contributions and pension benefits paid through social security

Uses	Uses	Uses	Uses	Uses	Type of account and transaction	Resources	Resources	Resources	Resources	Resources
Employer	Social security fund	Households	Other sectors	Total economy	Type of account and transaction	Employer	Social security fund	Households	Other sectors	Total economy
Generation of income account	Generation of income account	Generation of income account	Generation of income account	Generation of income account	Generation of income account	Generation of income account	Generation of income account	Generation of income account	Generation of income account	Generation of income account
139,0				139,0	Type of account and transaction	Employers' actual pension contributions (D.1211)
Allocation of primary income account	Allocation of primary income account	Allocation of primary income account	Allocation of primary income account	Allocation of primary income account	Allocation of primary income account	Allocation of primary income account	Allocation of primary income account	Allocation of primary income account	Allocation of primary income account	Allocation of primary income account
					Type of account and transaction	Employers' actual pension contributions (D.1211)			139,0		139,0
Secondary distribution of income account	Secondary distribution of income account	Secondary distribution of income account	Secondary distribution of income account	Secondary distribution of income account	Secondary distribution of income account	Secondary distribution of income account	Secondary distribution of income account	Secondary distribution of income account	Secondary distribution of income account	Secondary distribution of income account
		226,0		226,0	Type of account and transaction	Social security contributions (pensions)		226,0			226,0
		139,0		139,0	Employers' actual pension contributions (D.6111)		139,0			139,0
		87,0		87,0	Households' actual pension contributions (D.6131)		87,0			87,0
	210,0			210,0	Social security pension benefits in cash (D.6211)			210,0		210,0

Transactions for other employment-related pension schemes

• 17.87For other employment-related schemes, pension entitlements of the participants are usually recorded as they build up. Investment income earned on existing pension entitlements is recorded as being distributed to the beneficiaries and reinvested by them in the pension scheme.

• 17.88The recording of transactions for a defined contribution scheme is less complicated than the recording of transactions for a defined benefit scheme.

• 17.89For both types of schemes, a pension fund is assumed to exist. For a defined contribution pension scheme, a real fund must exist. For a defined benefit pension scheme a fund may exist in reality or it may be a notional fund. If it exists, it may be part of the same institutional unit as the employer, it may be a separate institutional unit with an autonomous pension scheme, or it may be part of another financial institution, either an insurance corporation or a multi-employer pension scheme.

Transactions for defined contribution pension schemes

• 17.90The contribution made by an employer to a defined contribution pension scheme on behalf of an employee is treated as compensation of employees.

• 17.91The investment income on accumulated pension entitlements is also recorded as being distributed to households from the pension fund. The investment income includes interest and dividends plus the distributed income of collective investment schemes if the pension fund holds shares in them. It is possible that the pension fund may own property and generate net operating surplus, which is included with the investment income as being distributed to the pension beneficiaries. In this case, the term investment income includes this source of income, if it exists. Holding gains and losses generated by the investment of the cumulated pension entitlements are not included in investment income but are recorded as other changes due to revaluations.

• 17.92Part of the income distributed to households is used to meet the costs of operating the pension fund. This cost is recorded as output of the pension fund and as household final consumption expenditure. The remaining part of the distributed income is treated as pension contribution supplements paid back by households to the pension fund.

• 17.93Social contributions are recorded as paid by households to the pension fund. The total amount of social contributions is made up of the actual contributions by the employers as part of compensation of employees, actual contributions by employees and possibly by other individuals, such as individuals formerly participating in a scheme, self-employed and non-employed persons as well as retirees, and the contribution supplements specified in paragraph 17.92. For clarity, and to enhance the comparison with defined benefit schemes, the supplements are shown at full value. The total contributions made by households to the pensions fund are net in the same way that insurance premiums are net, that is to say they are the total of all contributions made, less the service charge.

• 17.94Contributors other than employees who contribute to a defined contribution pension scheme may include self-employed persons participating in a defined contribution pension scheme or may be non-employed persons who participate in a defined contribution pension scheme by virtue of their profession or former employment status.

• 17.95Pension benefits to households from the pension fund are recorded as distributive transactions under other social insurance pension benefits (D.6221).

• 17.96There is also a transaction for the service provided by the pension fund (equal to the value of the pension fund's output), recorded as final consumption expenditure by households.

• 17.97The increase in pension entitlements caused by an excess of contributions over benefits is recorded as paid by the pension fund to households. Similarly, a decrease in pension entitlements caused by a deficit of contributions compared to benefits is recorded as a payment from households to the pension fund. The change in pension entitlements directly affects the net worth of households, and so the saving of the households sector. Given that much of the increase in the pension entitlement of participants in a defined contribution pension scheme, and thus ultimately the funding for the benefits, comes from holding gains that are not included in the contribution supplements of participants in defined contribution pension schemes, the adjustment for the change in pension entitlements for such individuals will frequently be negative.

• 17.98The adjustment for the change in pension entitlements paid by the pension fund to households is recorded as a claim from households to the pension fund.

• 17.99Table 17.3 illustrates the entries necessary to record the transactions related to a defined contribution scheme. It is simpler than the corresponding table for a defined benefit scheme, because of the absence of any imputed transactions.

Table 17.3 —  Accounts for pension benefits payable under a defined contribution scheme

Uses	Uses	Uses	Uses	Uses	Type of account and transactions	Resources	Resources	Resources	Resources	Resources
Employer	Pension fund	Households	Other sectors	Total economy	Type of account and transactions	Employer	Pension fund	Households	Other sectors	Total economy
Production account	Production account	Production account	Production account	Production account	Production account	Production account	Production account	Production account	Production account	Production account
					Type of account and transactions	Output (P.1)		1,4			1,4
Generation of income account	Generation of income account	Generation of income account	Generation of income account	Generation of income account	Generation of income account	Generation of income account	Generation of income account	Generation of income account	Generation of income account	Generation of income account
11,0				11,0	Type of account and transactions	Employers' actual pension contributions (D.1211)
Distribution of primary income	Distribution of primary income	Distribution of primary income	Distribution of primary income	Distribution of primary income	Distribution of primary income	Distribution of primary income	Distribution of primary income	Distribution of primary income	Distribution of primary income	Distribution of primary income
					Type of account and transactions	Employers' actual pension contributions (D.1211)			11,0		11,0
			3,0	3,0	Type of account and transactions	Property income (D.4)		3,0			3,0
	16,2			16,2	Type of account and transactions	Investment income payable on pension entitlements (D.442)			16,2		16,2
Secondary distribution of income account	Secondary distribution of income account	Secondary distribution of income account	Secondary distribution of income account	Secondary distribution of income account	Secondary distribution of income account	Secondary distribution of income account	Secondary distribution of income account	Secondary distribution of income account	Secondary distribution of income account	Secondary distribution of income account
		37,3		37,3	Type of account and transactions	Household total pension contributions		37,3			37,3
		11,0		11,0	Employers' actual pension contributions (D.6111)		11,0			11,0
		11,5		11,5	Households' actual pension contributions (D.6131)		11,5			11,5
		16,2		16,2	Households' pension contribution supplements (D.6141)		16,2			16,2
		– 1,4		– 1,4	Social insurance scheme service charges (D.61SC)		– 1,4			– 1,4
	26,0			26,0	Other social insurance pension benefits (D.6221)			26,0		26,0
Use of income account	Use of income account	Use of income account	Use of income account	Use of income account	Use of income account	Use of income account	Use of income account	Use of income account	Use of income account	Use of income account
		1,4		1,4	Final consumption expenditure (P.3)
	11,3			11,3	Adjustment for the change in pension entitlements (D.8)			11,3		11,3
– 11,0	– 11,8	25,8	– 3,0	0	Saving
Changes in assets	Changes in assets	Changes in assets	Changes in assets	Changes in assets	Financial account	Changes in liabilities	Changes in liabilities	Changes in liabilities	Changes in liabilities	Changes in liabilities
					Net borrowing/lending (B.9)	– 11,0	– 11,8	25,8	– 3,0	0,0
		11,3		11,3	Pension entitlements (F.63)		11,3			11,3
– 11,0	– 0,5	14,5	– 3,0	0,0	Other financial assets

Other flows related to defined contribution pension schemes

• 17.100The other factors affecting the change in the balance sheet entry for the change in pension entitlements are shown in the other changes in assets accounts. In particular, the entitlements of the scheme's beneficiaries show holding gains or losses in the revaluation account corresponding exactly to those on the assets held by the pension fund to meet such obligations.

• 17.101The investment of the entitlements of defined contribution pension schemes leads to holding gains or losses. Such gains or losses come about through value changes of the assets held by the pension fund, and an amount exactly equal to the holding gains and losses is attributed as an increase in the pension entitlements of the beneficiaries. This is recorded in the revaluation account.

Transactions for defined benefit pension schemes

• 17.102For defined benefit pension schemes, the employer retains responsibility for meeting the pension payments. Alternatives involving the use of a multi-employer scheme or where government assumes responsibility on behalf of the employer follow the definitions given in paragraphs 17.76 and 17.77.

• 17.103The total contribution made by an employer to a defined benefit pension scheme on behalf of his employee must be sufficient, so that, together with any actual contribution by the employee and excluding the cost of operating the scheme, it matches the current service increase in the employee's pension entitlements. The contribution by the employer is divided into an actual and an imputed part, the latter being calculated so as to be an exact match between all contributions to the fund adding to the entitlements of the employee and the current service cost of these entitlements.

• 17.104The contribution by the employer is calculated in relation to the pension entitlement earned in the period regardless of any investment income earned by the scheme in the same period or any over-funding of the scheme. The current period entitlement is part of compensation of employees, and not including the full value of the employer's contribution will result in an understatement of compensation of employees, and an overstatement of the employer's operating surplus. It is important that contributions continue to be recorded even in the event of a contributions holiday, when the employer does not make an actual contribution, the benefit to the employer being regarded as a change in liabilities between the pension fund and the employer. This leaves the net worth of both the same as when contributions are not recorded under a contributions holiday, without reducing compensation of employees artificially.

• 17.105In defined benefit schemes, a qualifying period before an employee becomes eligible to receive a pension in retirement is possible. Despite this qualifying period, both contributions and entitlements are to be recorded from the start of employment, adjusted by a factor reflecting the probability that the employee will in fact satisfy the qualifying period.

• 17.106The sum of employers' actual and imputed pension contributions is treated as compensation of employees. It is recorded as a use of the employer in the generation of income account, and a resource of the employee in the allocation of primary income account.

• 17.107The increase in the present value of the entitlements of continuing employees and those who no longer contribute but remain eligible for pensions in future represents the investment income distributed to the employees. No deduction is made for any amount that may be funded from holding gains or that is not actually matched by existing funds. The investment income distributed to employees matches the amount that is unequivocally due to the employee under the prevailing agreements; the means by which the employer may ultimately match this obligation is not relevant for the recording of this as investment income any more than the means by which interest or dividends are actually financed affect their recording as investment income. The investment income is recorded as a use for the pension fund and a resource for households. It is immediately reinvested by the households in the fund and included in pension contribution supplements.

• 17.108In the secondary distribution of income account, social contributions are shown as a use of households and a resource for the pension fund. The total amount of the social contributions payable is made up of the actual and imputed contributions of the employers as part of compensation of employees, excluding the amount of the costs of running the pension scheme, plus actual contributions by employees plus the contribution supplements specified in paragraph 17.107. As explained in paragraphs 17.54 to 17.56 with regard to defined contribution schemes, the accounts show the full value of the contributions and contribution supplements with an offsetting item representing the service charge payable. The amount actually paid is a net contributions figure.

• 17.109The pension benefits to households from the pension scheme are recorded in the secondary distribution of income account. When the benefits are taken in terms of an annuity, the annuity payments are shown here, not the lump sums payable at the time of retirement.

• 17.110In the use of income account, there is an entry for the payment of the service provided by the pension fund, equal to the value of the pension fund's output plus the output of the enterprises operating annuities bought with pension entitlements. It is shown as a use for households and a resource for the pension fund.

• 17.111Also in the use of income account, there is an entry showing the increase in pension entitlements caused by the granting of further pension entitlements by the employer, on the one hand, less the decrease from the benefits receivable, on the other. This amount is shown as a resource for households and a use for the pension fund. The rationale for this is that since this change in pension entitlements directly affects the net worth of households, it should be included in the saving of the households sector.

• 17.112The amount in the use of income account as paid by the pension fund to households is shown in the financial account as a change in assets of households vis-à-vis the pension fund.

• 17.113Other organisations, such as a trade union, may operate a defined benefit pension scheme, for their members, that is in all respects parallel to an employer's defined benefit pension scheme. Exactly the same recording is followed except that references to the employer should be understood to refer to the pension manager and references to the employee should be understood to refer to the participant in the scheme.

• 17.114To illustrate the recording of transactions connected with a defined benefit pension scheme, Table 17.4 shows a numerical example. Figures that are imputed are shown in bold; those that result from re-routing are shown in italics.

Table 17.4 —  Accounts for pension benefits payable under a defined benefit scheme

Uses	Uses	Uses	Uses	Uses	Type of account and transactions	Resources	Resources	Resources	Resources	Resources
Employer	Pension fund	Households	Other sectors	Total economy	Type of account and transactions	Employer	Pension fund	Households	Other sectors	Total economy
Production account	Production account	Production account	Production account	Production account	Production account	Production account	Production account	Production account	Production account	Production account
					Type of account and transactions	Output (P.1)		0,6			0,6
Generation of income account	Generation of income account	Generation of income account	Generation of income account	Generation of income account	Generation of income account	Generation of income account	Generation of income account	Generation of income account	Generation of income account	Generation of income account
10,0				10,0	Type of account and transactions	Employers' actual pension contributions (D.1211)
4,1				4,1	Type of account and transactions	Employers' imputed pension contributions (D.1221)
Allocation of primary income account	Allocation of primary income account	Allocation of primary income account	Allocation of primary income account	Allocation of primary income account	Allocation of primary income account	Allocation of primary income account	Allocation of primary income account	Allocation of primary income account	Allocation of primary income account	Allocation of primary income account
					Type of account and transactions	Employers' actual pension contributions (D.1211)			10,0		10,0
					Type of account and transactions	Employers' imputed pension contributions (D.1221)			4,1		4,1
			2,2	2,2	Type of account and transactions	Property income (D.4)		2,2			2,2
	4,0			4,0	Investment income payable on pension entitlements (D.442)			4,0		4,0
Secondary distribution of income account	Secondary distribution of income account	Secondary distribution of income account	Secondary distribution of income account	Secondary distribution of income account	Secondary distribution of income account	Secondary distribution of income account	Secondary distribution of income account	Secondary distribution of income account	Secondary distribution of income account	Secondary distribution of income account
		19,0		19,0	Household total pension contributions		19,0			19,0
		10,0		10,0	Employers' actual pension contributions (D.6111)		10,0			10,0
		4,1		4,1	Employers' imputed pension contributions (D.6121)		4,1			4,1
		1,5		1,5	Households' actual pension contributions (D.6131)		1,5			1,5
		4,0		4,0	Households' pension contribution supplements (D.6141)		4,0			4,0
		– 0,6		– 0,6	Social insurance scheme service charges (D.61SC)		– 0,6			– 0,6
	16,0			16,0	Other social insurance pension benefits (D.6221)			16,0		16,0
Use of income account	Use of income account	Use of income account	Use of income account	Use of income account	Use of income account	Use of income account	Use of income account	Use of income account	Use of income account	Use of income account
		0,6		0,6	Final consumption expenditure (P.3)
	3			3	Adjustment for the change in pension entitlements (D.8)			3		3
– 14,1	– 1,2	17,5	– 2,2	0	Saving
Changes in assets	Changes in assets	Changes in assets	Changes in assets	Changes in assets	Financial account	Changes in liabilities	Changes in liabilities	Changes in liabilities	Changes in liabilities	Changes in liabilities
					Net borrowing/lending (B.9)	– 14,1	– 1,2	17,5	– 2,2	0
		3		3	Pension entitlements (F.63)		3			3
	4,1			4,1	Claims of pension funds on pension managers (F.64)	4,1				4,1
– 10,0	– 2,3	14,5	– 2,2	0	Other financial assets

• 17.115Actuarial calculations show that the increase in pension entitlements coming from current service, that is the net amount of the further pension entitlements 'earned' in the year in question, is 15. Households (the policyholders/employees) contribute 1,5. The employer, therefore, is obliged to provide 13,5. In addition, the cost of operating the scheme is estimated at 0,6. In total, therefore, the employer must provide 14,1. He actually contributes 10 so the remaining 4,1 is an imputed contribution. The output of 0,6 is shown in the production account; the consumption of this service is reported in the 'use of income account'. The contributions by the employer are shown as a use for the employer in the generation of income account and a resource for the households in the allocation of primary income account.

• 17.116In the allocation of primary income accounts, property income is shown. The increase in pension entitlement coming from past service, due to the unwinding of the discount factor because retirement is one year nearer, is 4. This is shown as an imputed flow of property income from the pension fund to households. At the same time, the pension fund actually earns 2,2 from investment income of the funds they manage. At this point, therefore, there is a shortfall of 1,8 in the pension fund resources but it is not shown in the current accounts.

• 17.117In the secondary distribution of income accounts, the payments from households to the pension fund are shown. This can be viewed in one of two ways. The sum of the contributions paid by households should be equal to the increase in entitlements coming from current service (15) plus that coming from income on past entitlements (4) or 19 in total. The amounts actually paid are 10 received as the employers' actual contributions, 4,1 as the imputed contributions, 1,5 of the households own contributions, contribution supplements of 4 less the service charge of 0,6; again 19 in total.

• 17.118In the use of income account, as well as the purchase of the service charge as part of household final consumption expenditure, the change in pension entitlement is shown as a use for the pension fund and a resource for households. In this example, the amount of household contributions of 19 is set against pension benefits of 16. Thus, there is an increase in pension entitlements of 3 owing to households.

• 17.119Households have saving of 17,5 of which 3 is the increase in their pension entitlements. This means that they have acquired other financial assets (or reduced liabilities) by 14,5. This figure is the difference between the benefits received (16) and households' actual contributions of 1,5.

• 17.120In the financial account of the pension fund, the figure of 4,1, which was the imputed contribution, is shown as the claim of the pension administrator on the employer. There is a claim by households on the pension fund of the change in pension entitlements of 3. In addition, the pension fund either runs down financial assets, or increases liabilities, by 2,3, the figure corresponding to disposable income excluding the imputed contribution element from the employer.

SUPPLEMENTARY TABLE FOR ACCRUED-TO-DATE PENSION ENTITLEMENTS IN SOCIAL INSURANCE

Design of the supplementary table

• 17.121The supplementary table (Table 17.5) on accrued-to-date pension entitlements in social insurance provides a framework for compiling and presenting comparable balance sheets and transactions and other flow data of all types of pension entitlements from a debtor's (pension manager) and also from a creditor's (household) point of view. The table also covers stock and flow data not fully recorded in the core national accounts for specific pension schemes such as government-unfunded defined benefit schemes with government as the pension manager, and social security pension schemes.

• 17.122The supplementary table covers the pension part of social insurance regarding old age pensions only, including those pensions paid before normal retirement age. Social assistance, health and long-term care insurance, separate sick leave and disablement insurance are not covered in this table. Neither are individual insurance policies included. However, in practice, it may not be feasible, or sufficiently important, to completely separate the non-pension social insurance elements. Elements of social assistance within pension schemes generally organised as social insurance may not be separable, and so occur in the supplementary table.

• 17.123Entitlements for survivors (e.g. dependent spouses, children, and orphans) as well as disability- and invalidity-type benefits are included in the supplementary table when they are an integral part of the pension scheme.

• 17.124All elements of the supplementary table are recorded with no deductions made for taxation, further social contributions or the service charge associated with the pension scheme.

Table 17.5 —  Supplementary table on accrued-to-date pension entitlements in social insurance

Relations	Row No	Recording	Core national accounts	Core national accounts	Core national accounts	Core national accounts	Core national accounts	Core national accounts	Not in the core national accounts	Not in the core national accounts	Total pension schemes	Counterparts: pension entitlements of non-resident households [^E0024]
Relations	Row No	Pension manager	Non-general government	Non-general government	Non-general government	General government	General government	General government	General government	General government	Total pension schemes	Counterparts: pension entitlements of non-resident households [^E0024]
Relations	Row No		Defined contribution schemes	Defined benefit schemes and other [^E0021] non-defined contribution schemes	Total	Defined contribution schemes	Defined benefit schemes for general government employees [^E0022]	Defined benefit schemes for general government employees [^E0022]	Defined benefit schemes for general government employees [^E0022]	Social security pension schemes	Total pension schemes	Counterparts: pension entitlements of non-resident households [^E0024]
Relations	Row No		Defined contribution schemes	Defined benefit schemes and other [^E0021] non-defined contribution schemes	Total	Defined contribution schemes	Classified in financial corporations	Classified in general government [^E0023]	Classified in general government	Social security pension schemes	Total pension schemes	Counterparts: pension entitlements of non-resident households [^E0024]
Relations	Row No	Column number	A	B	C	D	E	F	G	H	I	J
Relations	Row No			Opening balance sheet	Opening balance sheet	Opening balance sheet	Opening balance sheet	Opening balance sheet	Opening balance sheet	Opening balance sheet	Opening balance sheet	Opening balance sheet	Opening balance sheet	Opening balance sheet
Relations	Row No		1	Pension entitlements
Relations	Row No			Changes in pension entitlements due to transactions	Changes in pension entitlements due to transactions	Changes in pension entitlements due to transactions	Changes in pension entitlements due to transactions	Changes in pension entitlements due to transactions	Changes in pension entitlements due to transactions	Changes in pension entitlements due to transactions	Changes in pension entitlements due to transactions	Changes in pension entitlements due to transactions	Changes in pension entitlements due to transactions	Changes in pension entitlements due to transactions
Relations	Row No	Σ 2.1 to 2.4 – 2.5	2	Increase in pension entitlements due to social contributions
Relations	Row No		2.1	Employer actual social contributions
	2.2	Employer imputed social contributions
	2.3	Household actual social contributions
	2.4	Household social contribution supplements [^E0025]
	2.5	Less: pension scheme service charges
	3	Other (actuarial) change of pension entitlements in social security pension schemes
	4	Reduction in pension entitlements due to payment of pension benefits
2 + 3 – 4	5	Changes in pension entitlements due to social contributions and pension benefits
	6	Transfers of pension entitlements between schemes
	7	Change in entitlements due to negotiated changes in scheme structure
		Changes in pension entitlements due to other flows	Changes in pension entitlements due to other flows	Changes in pension entitlements due to other flows	Changes in pension entitlements due to other flows	Changes in pension entitlements due to other flows	Changes in pension entitlements due to other flows	Changes in pension entitlements due to other flows	Changes in pension entitlements due to other flows	Changes in pension entitlements due to other flows	Changes in pension entitlements due to other flows	Changes in pension entitlements due to other flows
	8	Changes in entitlements due to revaluations [^E0026]
	9	Changes in entitlements due to other changes in volume [^E0026]
		Closing balance sheet	Closing balance sheet	Closing balance sheet	Closing balance sheet	Closing balance sheet	Closing balance sheet	Closing balance sheet	Closing balance sheet	Closing balance sheet	Closing balance sheet	Closing balance sheet
1 + Σ 5 to 9	10	Pension entitlements
		Related indicators	Related indicators	Related indicators	Related indicators	Related indicators	Related indicators	Related indicators	Related indicators	Related indicators	Related indicators	Related indicators
	11	Output

Such other non-defined contribution schemes, often described as hybrid schemes, have both a defined benefit and a defined contribution element.

Schemes organised by general government for its current and former employees.

These are non-autonomous defined benefit schemes whose pension entitlements are recorded in the core national accounts.

Counterpart data for non-resident households will only be shown separately when pension relationships with the rest of the world are significant.

These supplements represent the return on members' claims on pension schemes, both through investment income on defined contribution schemes' assets and for defined benefit schemes through the unwinding of the discount rate applied.

A more detailed split of these positions must be provided for columns G and H based on the model calculations carried out for these schemes. The cells shown as █ are not applicable; the cells in ▒ will contain different data from the core national accounts.

The columns of the table

• 17.125The columns of the table refer to the three groupings of pension schemes, as follows:

• (1) by type of recording into pension schemes completely recorded in the core national accounts (columns A to F) and those whose entitlements are only recorded in the supplementary table (columns G and H);

• (2) by type of pension manager into non-general government (columns A to C) and general government pension schemes (columns D to H); pension schemes including social security classified in general government are shown in columns D, F, G and H; and

• (3) by type of pension scheme into defined contribution schemes (columns A and D) and defined benefit schemes (columns B and E to G).

• 17.126For the most part, the beneficiaries of pension schemes are resident households. In some countries, the number of non-resident households receiving pension benefits may be significant. In this case, column J is added to show the total for non-resident households.

• 17.127The decision to record the pension entitlements of an unfunded employment-related defined benefit pension scheme where government is the pension manager within the standard national accounts or only in the supplementary table depends on the nature of the defined benefit scheme. The guiding principle for inclusion in the national accounts is the closeness of the scheme to the national social security pension scheme.

• 17.128There is a wide diversity of schemes in the EU, and including all schemes would lead to inconsistencies in recording. So entitlements of unfunded employment-related defined benefit schemes where government is the pension manager are recorded only in the supplementary table. This affects the calculation method in the core national accounts of the imputed employer social contributions for these schemes.

• 17.129Pension schemes are classified further according to the pension manager, as government and non-government pension managers. The definition of a pension manager is provided in paragraph 17.75.

• 17.130Some employer pension schemes have a mixed membership, for example including both government employees and employees of public corporations, and many pension schemes have frozen the membership of participants who have moved to other employers. A scheme having a small proportion of non-government employees does not prevent the scheme being described as having a government pension manager.

• 17.131General government-funded defined benefit schemes for its own employees are shown in columns E and F. Column E shows schemes managed by a pension fund or an insurance corporation and column F those schemes managed by general government itself. Government schemes for its own employees where the pension entitlements do not appear in the core national accounts are shown in column G. The sum of columns E, F and G therefore shows the total responsibility of government for pension entitlements for its own employees.

• 17.132Pension schemes are classified by type of scheme as defined contribution pension schemes (columns A and D) and defined benefit pension schemes (columns B, E, F and G). Column H relates to social security pension schemes.

The rows of the table

• 17.133The rows of the table relate to balance sheet positions, transactions and other flows associated with pension entitlements of the schemes included in the supplementary table and they are shown separately in Table 17.6. There is reconciliation between the opening stock of pension entitlements of such schemes at the beginning of a period and the closing stock of pension entitlements at the end of a period, taking account of all transactions and other flows during the period. For schemes recorded in columns G and H, the stocks of pension entitlements are not recorded in the core national accounts, but many of the transactions are recorded in the core national accounts.

Table 17.6 —  Rows of the supplementary table on accrued-to-date pension entitlements in social insurance

Row No
Opening balance sheet	Opening balance sheet
1	Pension entitlements
Changes in pension entitlements due to transactions	Changes in pension entitlements due to transactions
2	Increase in pension entitlements due to social contributions
2.1	Employer actual social contributions
2.2	Employer imputed social contributions
2.3	Household actual social contributions
2.4	Household social contribution supplements [^E0027]
2.5	Less: pension scheme service charges
3	Other (actuarial) increase of pension entitlements in social security pension schemes
4	Reduction in pension entitlements due to payment of pension benefits
5	Changes in pension entitlements due to social contributions and pension benefits
6	Transfers of pension entitlements between schemes
7	Change in entitlements due to negotiated changes in scheme structure
Changes in pension entitlements due to other economic flows	Changes in pension entitlements due to other economic flows
8	Changes in entitlements due to revaluations [^E0028]
9	Changes in entitlements due to other changes in volume [^E0028]
Closing balance sheet	Closing balance sheet
10	Pension entitlements
Related indicators	Related indicators
11	Output

Such supplements represent the return on members' claims on pension schemes, both through investment income on defined contribution schemes' assets and for defined benefit schemes through the unwinding of the discount factor applied.

A more detailed split of such positions has to be provided for columns G and H based on the model calculations carried out for those schemes (see paragraphs 17.158-17.160).

Opening and closing balance sheets