Public pensions in the national accounts and public finance targets

Abstract

Preparations are underway to revise national accounting to implement actuarial recording of pension liabilities for corporations and government as an employer. This paper extends this to unfunded public pensions with the help of 'implicit tax' in pension contributions. The clearest advantages of the revision appear in situations where pension liabilities are shifted from the corporate sector to government, and where part of the public pension system is privatised. The proposed revision raises public debt and deficit to new orders of magnitude. The paper provides a framework for setting the debt and deficit targets under both current and proposed definitions.JEL classification: H1, H5, H6.

Pensions Under Ageing Populations and the EU Stability and Growth Pact

“…The model that underlies the illustration is (with a slightly different notation) adapted from Oksanen (2005Oksanen ( , 2006 and presented in more detail in the Appendix. In the model workers (or employers on their behalf) contribute to the pension system.…”

“…Our numerical example is largely based on the following stylised calibration taken from Oksanen (2005). The unit period corresponds to 30 years, which is roughly the average childbearing age of women in Europe.…”

Public Pension Reform: A Primer

“…Two elements play a key role in understanding the lack of a coherent approach to the question. First, promised future pension payments under a public PAYG pension system do not completely appear in official government statistics (Oksanen 2004, Lequiller 2004. Together with promised health care and long-term care payments, they represent a major component of the concept known as implicit public debt (IPD).…”

“…Pitzer (2002) and Oksanen (2004) address the question of a more comprehensive accounting for pension liabilities. Apart from a general aim of setting the public and private sectors on equal footing, an important practical reason also exists: pension liabilities are sometimes shifted from a corporation to the government against a compensatory payment, often a lump-sum.…”

Pension Expenditure Projections, Pension Liabilities and European Union Fiscal Rules

“…Currently contributions are recorded as government revenue and pensions as payments to retirees. The change would imply that contributions are classified as loans to the public sector, which would not be taken into account in computing the deficit indicator (Oksanen, 2004). Pensions would be considered as loan repayment.…”