Transforming the supplementary table on pension liabilities (Table 29) into an actuarial balance sheet

IMPACT

For policy-makers, statisticians, public accountants, social security actuaries, public finance economists and other stakeholders, the regulation introduced by the EU regarding the disclosure of an accrued-to-date liability (ADL) table (Table 29) is a valuable first step in reporting pension liabilities. However, the information disclosed is incomplete and does not provide an indicator of solvency or sustainability. In addition, pensioners and those making contributions to pensions have no information regarding the security of their future benefits. In this timely article, the authors present a methodology to easily transform Table 29 into an actuarial balance sheet (ABS) and compile its associated income statement (IS). The ABS can be used to assess the solvency of pension schemes, whereas Table 29 cannot.

ABSTRACT

This article develops a methodology to (easily) transform the EU’s Table 29 into an actuarial balance sheet (ABS) and compile its associated income statement (IS). The article contains a study based on data from the most recently published Table 29 for Spain to understand its functioning for other jurisdictions. With the new method, the authors found that the Spanish pension system is partially insolvent because only part of the pension entitlements are backed up by assets—showing a deterioration in sustainability from 2015 to 2018. The idea of transforming Table 29 into an ABS and compiling its associated IS has not been previously explored and it could improve people’s understanding of the public pension system and make this public indicator more useful and transparent.

KEYWORDS:

• Accountability
• actuarial balance sheet
• income statement
• pension liabilities
• social security schemes
• Spain
• Table 29
• useful information

Acknowledgements

We would like to thank the seminar participants at the UNED (Asepuma 2021), the University of Barcelona; Spain (VI Workshop on Pensions and Insurance), the University of Valencia, Spain (Congreso RDSFin), University of Salerno, Italy (MAF2022) and Peter Hall for his help with the English text. The comments and suggestions made by two anonymous referees were extremely helpful in improving the paper. Any errors are entirely due to the authors. A previous version was published by Instituto Complutense de Análisis Económico (ICAE): [Documentos de Trabajo del ICAE); Documentos de Trabajo (ICAE), ISSN-e 2341-2356, N°. 5, 2021, págs. 1-37 https://eprints.ucm.es/id/eprint/64444/1/2105.pdf

The authors are grateful for the financial assistance received. This work was supported by the Spanish Ministry of Science, Innovation, and Universities PID2019-105570GB-I00, CCG19/CCJJ-042, Alcalá University CM/JIM/2019-044, UAH/EV1090: Anne M. Garvey. And by the Spanish Ministry of Science, Innovation, and Universities MCIN/AEI/10.13039/501100011033, I + D + i PID2020-114563GB-I00, Carlos Vidal-Meliá, Juan Manuel Pérez-Salamero González and Manuel Ventura-Marco.

Conflicts of interest/competing interests

The authors have no relevant financial or non-financial interests to disclose.

Availability of data and material

Researchers can request versions of the CSWL by post. A separate request must be made for each version. Requests consist of a user profile describing the project being carried out and a document accepting the CSWL’s conditions of use. These are available at the following address:

http://www.seg-social.es/wps/portal/wss/internet/EstadisticasPresupuestosEstudios/Estadisticas/EST211

The data shown in the primary Table 29 for Spain are public and can be found in the sources cited.

Ethics approval

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