EUROPE – The European statistical office, Eurostat, has ruled that the transfer of unfunded corporate pensions to governments counts as revenue.
The decision on the accounting treatment in national accounts of payments to government by public corporations in the context of the transfer to government of pensions obligations under schemes that they operate for their own employees.
Eurostat says the “counterpart transaction to a payment received by a government from a public corporation in the context of a transfer of unfunded pension obligations that the corporation operates for its own employees” is recorded as government revenue, at the time it occurs.
The transfer would have “a positive impact on government deficit/surplus”.
“However, this improvement of government balancing item will be offset in the future by the payment of pension benefits to the previous beneficiaries of the unfunded pension scheme managed by the public corporation.”
Luxembourg-based Eurostat added that the decision only covers unfounded schemes, and that lump sum payments are not covered. The ruling is consistent with the opinion of the Committee on Monetary, Financial and Balance of Payments Statistics.
The body based the decision on the fact that the current system of national accounts does not recognise a liability, in the sense of a financial instrument, for the obligations relating to pensions in the context of an unfunded scheme.
“Under these conditions, it is not possible to consider that government incurs a liability as counterpart of the amount paid by the public corporation, which should be recorded as a financial transaction without an impact on government deficit/surplus.”
“For various reasons, Member State governments, as owners of the public corporations, may decide to take over these unfunded obligations and relieve corporation from these future obligations,” Eurostat said.