ADJUSTMENT FOR THE CHANGE IN THE NET EQUITY OF HOUSEHOLDS IN PENSION FUNDS RESERVES (D.8)

4.141 Definition:

The adjustment for the change in the net equity of households in pension funds reserves (D.8) represents the adjustment needed to make appear in the saving of households the change in the actuarial reserves on which households have a definite claim (a claim which re-appears at the financial level as an asset under heading F.61) and which are fed by premiums and contributions recorded in the secondary distribution of income account as social contributions.

4.142 Since households are treated in the financial accounts and balance sheets of the system as owning the reserves of private funded schemes, both autonomous and non-autonomous, an adjustment item is necessary to ensure that any excess of pension contributions over pension receipts (i.e. of 'transfers' payable over 'transfers' receivable) does not affect household saving.

In order to neutralise this effect, an adjustment equal to:

the total value of the actual social contributions in respect of pensions payable into private funded pension schemes

plus the total value of contribution supplements payable out of the property income attributed to insurance policy holders

minus the value of the associated service charges

minus the total value of the pensions paid out as social insurance benefits by private funded pension schemes

is added to the disposable income, or adjusted disposable income, of households in the use of income accounts before arriving at saving.

In this way, the saving of households is the same as what it would be if pension contributions and pension receipts had not been recorded as current transfers in the secondary distribution of income account. This adjustment item is necessary in order to reconcile the saving of households with the change in their net equity in pension funds reserves recorded in the financial account of the system. Opposite adjustments are, of course, needed in the use of income accounts of the insurance enterprises or autonomous pension funds or employers maintaining non autonomous pension funds.

4.143 Time of recording: The adjustment is recorded according to the flows which compose it.

4.144 In the system of accounts, the adjustment for the change in the net equity of households in pension funds reserves is recorded:

1. among uses in the use of income accounts of the insurance enterprises sector and other sectors administering non-autonomous pension funds;
2. among uses in the external account of primary incomes and current transfers (in the case of non-resident institutions);
3. among resources in the use of income accounts of the households sector;
4. among resources in the external account of primary incomes and current transfers (in the case of non-resident households).