State Pensions and the National Accounts

You asked

Who in your organisation made the decision to exclude state pensions from the national accounts balance sheet?

Also, who made the decision to exclude civil service pensions from the national accounts balance sheet?

The accounting standards have changed and FRS102 now applies to accounts.

http://www.icaew.com/en/technical/financial-reporting/new-uk-gaap/frs-102-the-financial-reporting-standard

That includes reporting pension obligations.

We said

All European member states, including the UK, are legally obliged to compile their National Accounts in accordance with the European System of Accounts 2010 (ESA 2010)1. ESA 2010 is a statistical accounting framework which is quite distinct from business accounting frameworks such as IFRS (International Financial Reporting Standards) and GAAP (Generally Accepted Accounting Principles).

The rules for the recording of pension related liabilities and assets are set out in Chapter 17 of ESA 2010. Under these rules, state pensions (known as "social security pension schemes") must not be recorded in the core national accounts. The ESA 2010 rules around the recording of civil service pensions (that is "defined benefit schemes for general government employees classified in general government") are somewhat less prescriptive and state:

17.127 The 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.

17.128 There 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.

Following the ESA 2010 guidance; as UK civil service pensions are unfunded employment-related defined benefit schemes, where government is the pension manager and which are administered in a similar way to state pensions, ONS does not record them in the core national accounts.

However, the UK, and all European member states, are required to produce and publish annually a pension supplementary table (officially known as the "Supplementary table on accrued-to-date pension entitlements in social insurance") from 2017 onwards. This supplementary table includes all pensions, including civil service pensions and state pensions. ONS has completed substantial preparatory work to meet this new supplementary table requirement and further information can be found in articles on the ONS website2,3,4.

Footnotes:

1. http://ec.europa.eu/eurostat/web/esa-2010/overview
2. http://www.ons.gov.uk/ons/rel/pensions/pensions-in-the-national-accounts/uk-national-accounts-supplementary-table-on-pensions--2010-/index.html
3. http://www.ons.gov.uk/ons/rel/pensions/pensions-in-the-national-accounts/compiling-a-complete-picture-of-uk-pensions-including-unfunded-pensions-for-public-sector-employees--methodology-article-2011-/index.html
4. http://www.ons.gov.uk/ons/rel/pensions/pensions-in-the-national-accounts/compiling-estimates-of-state-pension-obligations-for-the-national-accounts--methodology-article-2011-/index.html