Treatment of social insurance schemes in the 2008 SNA

Regional Seminar on Developing a Programme for the Implementation of the 2008 SNA and Supporting

Statistics in the ECO Member Countries

Ankara, Turkey11-13 September 2013

United Nations Statistics Division

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Overview of social insurance schemes Social security Employment-related social insurance schemes other than

social security

Outline of Presentation

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Insurance scheme where the following two conditions are satisfied:• Benefits received are conditional on participation in the scheme

and constitute social benefits; and• At least one of the three conditions following is met:

▫ Participation in the scheme is obligatory either by law or under terms and conditions of employment

▫ Scheme is collective one operated for the benefit of a designated group of workers, whether employed or non-employed, participation being restricted to members of that group;

▫ Employer makes a contribution (actual or imputed) to the scheme on behalf of an employee, whether or not the employee also makes a contribution

Always involves at least one unit (employer, general government, financial corporation, or NPISH) other than the beneficiary

Overview of social insurance schemes

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Two main classes• Social security schemes• Employment-related social insurance schemes other than social

security Can be broken down into various attributes including:

• Institutional sector allocation• Type of benefit (pension and non-pension)

▫ Non-pension schemes are not common

• Autonomy (autonomous vs. non-autonomous)▫ Autonomous social insurance schemes are those schemes with funds

which operate as separate and independent institutional units from the units (such as corporations) which create them

• Funding (funded vs. unfunded)▫ A funded scheme is one where identifiable reserves have been

accumulated to meet the obligation to pay future benefits accrued to the present

Beneficiaries can be resident or non-resident households

Overview of social insurance schemes

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Terms Social contributions

• Actual or imputed payments to social insurance schemes to make provision for social insurance benefits to be paid

▫ Employers, employees, self employed and unemployed Social insurance benefits

• Social benefit payable because the beneficiary participates in a social insurance scheme and the social risk insured against has occurred

• Contribution supplements

• Investment income payable on pension entitlements which is retained by pension funds

• Equivalent of premium supplements

Overview of social insurance schemes

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Social insurance scheme covering the entire community, or large sections of the community, that are imposed, controlled and financed by government units

Individual must participate in the scheme to receive social security benefits

Two types• Pension• Non-pension

Social security

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Output Separate unit

• Sum of costs of non-market output No separate unit

• Output is included with the output of the level of government at which it operates

Social security

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Recording of transactions (similar for pension and non-pension)

Value of output

• Production account of social security fund (general government)

Employers’ and employees’ actual social contributions

• Generation of income account

▫ “Uses” of employers

• Allocation of primary income account

▫ “Resources” of households

• Secondary distribution of income account

▫ “Uses” of households

▫ “Resources” of social security fund

Social security benefits

• Secondary distribution of income account

Social security

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Recording of transactions (similar for pension and non-pension)

Government (individual) final consumption expenditure

• Use of disposable income account

Social transfers in kind

• Redistribution of income in kind account

Service charge (output of social security fund)

• Adjusted disposable income account (actual final consumption)

• Rest of the world account (Exports of goods and services)

Social security

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Two types• Pension

▫ Defined contribution▫ Defined benefit

• Non-pension▫ Unfunded▫ Funded

Employment-related social insurance schemes other than social security

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Defined contribution• Fund must exist• Benefits payable on retirement are defined exclusively in

terms of the level of the fund built up from the contributions made over working life and increases in value that result from the investment of these funds

• Entire risk to provide adequate income in retirement is borne by participant

Employment-related social insurance schemes other than social security – pension

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Defined benefit• Fund may exist. If not, a notional fund is assumed to exist• Benefits payable on retirement are determined actuarially

by the use of a formula, either alone or as a minimum amount payable

• Risk to provide an adequate income in retirement is borne either by the employer or is shared between the employer and employee

Employment-related social insurance schemes other than social security – pension

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Employment-related social insurance schemes other than social security – pension

Output Operated by employer

• Sum of costs of market output Employer uses pension administrator to administer scheme

• Output is explicit fee paid to pension administrator Insurance corporation runs scheme for several employers

(multiemployer scheme)

• Output is calculated as:

▫ Social contributions

▫ plus contribution supplements

▫ minus benefits payable

▫ minus increases (plus decreases) in pension entitlements

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Employment-related social insurance schemes other than social security – pension

Recording of transactions (defined contribution) Value of output

• Production account Employers’ and employees’ actual pension contributions

• Generation of income account

▫ “Uses” of employers

• Allocation of primary income account

▫ “Resources” of households

• Secondary distribution of income account

▫ “Uses” of households

▫ “Resources” of pension fund Investment income payable on pension entitlements

• Allocation of primary income account

• Contribution supplements in secondary distribution of income account

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Employment-related social insurance schemes other than social security – pension

Recording of transactions (defined contribution) Social insurance pension benefits

• Secondary distribution of income account

• Financial account Changes in pension entitlements

• Use of disposable income account

• Financial account Service charge (output)

• Use of disposable income account (final consumption)

• Rest of the world account (Exports of goods and services)

• Secondary distribution of income account

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Employment-related social insurance schemes other than social security – pension

Recording of transactions (defined benefit) Similar to defined contribution, but increase in pension

entitlements is actuarially determined considering

• Current service increase (increase in entitlement associated with the wages and salaries earned in the current period)

• Past service increase (increase in the value of the entitlement since retirement is one year nearer)

• Decrease in the level of entitlement due to the payment of benefits to retirees of the scheme

• Other factors (reflected in other changes in assets account)

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Employment-related social insurance schemes other than social security – pension

Recording of transactions (defined benefit) Sum of employers’ and employees’ actual pension

contributions may be insufficient to meet current service increase and service charge of pension fund

• Imputed employers’ pension contribution is needed to ensure equality

▫ Generation of income account

▫ Allocation of primary income account

▫ Secondary distribution of income account

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Employment-related social insurance schemes other than social security – pension

Recording of transactions (defined benefit) Past service increase reflects investment income payable on

pension entitlements which may not be matched by actual property income earned from investing pension funds

• Imputed interest on the pension fund’s claim on the pension manager

▫ Allocation of primary income account Claim of pension fund on pension manager

• Represents imputed employers’ social contribution and imputed interest on pension fund’s claim on the pension manager

▫ Financial account

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Unfunded Typically operated and managed by employers Employers make imputed non-pension contribution on

behalf of employees No investment income and thus, no contribution

supplements Output is calculated as sum of costs of market output

Employment-related social insurance schemes other than social security – non-pension

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Employment-related social insurance schemes other than social security – non-pension

Recording of transactions (unfunded non-pension) Value of output

• Production account Employers’ imputed non-pension contributions

• Generation of income account

▫ “Uses” of employers

• Allocation of primary income account

▫ “Resources” of households

• Secondary distribution of income account

▫ “Uses” of households

▫ “Resources” of pension fund

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Employment-related social insurance schemes other than social security – non-pension

Recording of transactions (unfunded non-pension) Social insurance non-pension benefits

• Secondary distribution of income account Service charge (output)

• Use of disposable income account (final consumption)

• Rest of the world account (Exports of goods and services)

• Secondary distribution of income account

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Funded May be carried out by insurance corporations or employees

on behalf of present and past employees (for example, health cover)

Liabilities are recorded only when and to the extent that they exist in the employer’s accounts

Output is calculated in the same way as output of non-life insurance

Employment-related social insurance schemes other than social security – non-pension

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Recording of transactions (funded non-pension) Value of output

• Production account Employers’ and employees’ non-pension contributions

• Generation of income account ▫ “Uses” of employers

• Allocation of primary income account▫ “Resources” of households

• Secondary distribution of income account ▫ “Uses” of households▫ “Resources” of non-pension fund

Investment income payable on non-pension entitlements • Allocation of primary income account• Contribution supplements in secondary distribution of income

account

Employment-related social insurance schemes other than social security – non-pension

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Recording of transactions (funded non-pension) Social insurance non-pension benefits

• Secondary distribution of income account

• Financial account Changes in non-pension entitlements

• Secondary distribution of income account

• Financial account Service charge (output)

• Use of disposable income account (final consumption)

• Rest of the world account (Exports of goods and services)

• Secondary distribution of income account

Employment-related social insurance schemes other than social security – non-pension

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2008 SNA, Chapter 17, Part 2 (Social insurance schemes), Handbook on Financial Production, Flows and Stocks in the System of

National Accounts

• Joint UNSD/ECB publication

• UNSD responsible for Chapters 1-3; ECB responsible for Chapters 4-10

• Chapter 3 discusses calculation and allocation of output of various types of financial services including explicit fees, FISIM, money lending, central bank output, dealers’ margins, insurance and social insurance

• Volume measures

• Draft on http://unstats.un.org/unsd/nationalaccount/consultationDocs/draftFinHB-June-2013.pdf

circulated for global review in Jun-Jul 2013

Key references

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Thank You