Defined benefit pensions in Australian economic accounts

1
Defined benefit pensions in Australian economic
accounts
Carl Obst - ABS
2
Australian political context

• Non-contentious issue in Australia
• Governments recognise a legal and contractual
  obligation to employees
• Households undertake financial planning on the
  existence of the asset
• Trend towards funding of unfunded schemes
  indicating the acceptance of a liability
• Possible charge of cooking the books if ABS was
  not to recognise the liability i.e. inaccurate
  statement of government financial position
• Proper accounting for these obligations always
  given as a major benefit of move to accruals in
  government's own reporting

3
Nature of the liability

• Funding of the liability not the key issue
• Focus on nature of the liability itself
• What obligations exist?
• What are the differences from a fully funded
  situation
• All government liabilities could potentially be
  changed by government

4
Measurement issues

• Well accepted methods exist
• Same as methods used for funded schemes
• Methods applied by accountants / insurers
• In Australia, methods accepted by governments
• Reported data can be used
• In Australia, national accounts estimates are not
  based on national accounts models but on reported
  data from governments
• Consistency with changes to international
  accounting standards

5
Key points

• Unfunded pension schemes are recognised as a
  liability by Australian employers, particularly
  by Australian governments
• Methods for estimating the liabilities and flows
  are well established and undertaken by experts in
  this area.
• Incorporation within the accounts based on the
  reported data is quite straightforward