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With the release of the first quarter 2000 of the National Income and Expenditure Accounts the sectoring of federal and provincial government, non-autonomous pension plans has changed1. These pension plans are now part of the personal sector. Previously these plans were included in either the federal or provincial government sector accounts. This revision affects the entire 1961 to 2000 period. Government sponsored plans are now treated consistently with autonomous or trusteed pension funds yielding a more complete picture of personal saving. Further, the new pension accounting treatment is consistent with that of the Public Accounts of Canada and the U.S. National Accounts. The change in accounting has no effect on production but a significant effect on saving (and net lending) in the sector accounts. In short, personal saving increases while government saving2 declines by an equal amount.
Pension plans have three sources of income: employee contributions paid out of salaries and wages, employer contributions (part of employee supplementary labour income) and investment income (interest and dividends) earned on the assets in the pension fund. The plans outlays, of course, include pension payments to retirees. Previous accounting for government sponsored plans credited all contributions to and investment income of the plans to government income and saving. Pension payments to retirees were charged against government outlays and credited to personal income. As the contributions plus investment income of these plans have exceeded pension payments out of the plans, the net effect was a positive contribution to government saving.
As indicated above, employer and employee contributions to pension funds are counted as part of the wages, salaries, and supplementary labour income of the personal sector in both previous and current treatments. The investment income of the pension funds is now counted as the investment income of persons rather than as government investment income. Current transfers from government to persons in the form of public sector pension benefits disappear from personal income and are now treated as a reduction in personal wealth, which is outside the scope of these accounts3. On the outlay side of the personal sector the employer and employee contributions to pension funds are no longer transferred to government as part of contributions to social insurance plans. The net effect is increased personal saving resulting from higher personal income and reduced personal outlays.
In addition to the adjustments to saving, the revised treatment also requires an additional entry (beginning in 1990) to account for the transfer of the actuarially determined surplus from the pension plans to the federal government. Such transactions are classified as capital transfers and do not affect saving but do affect net lending.
Table 1 summarizes the impact of the change on the Personal Sector over the period of revision.
1961 |
1971 |
1981 |
1991 |
1995 |
1999 |
|
Income |
Millions of dollars |
|||||
Investment Income |
120 |
476 |
2806 |
9681 |
12170 |
15349 |
Public Sector Pension Benefits |
-100 |
-357 |
-1694 |
-4907 |
-6057 |
-8511 |
Outlay |
||||||
Contributions to Social Insurance Plans |
-253 |
-695 |
-3122 |
-4855 |
-4269 |
-4444 |
Change to Personal Saving |
273 |
814 |
4234 |
9629 |
10382 |
11282 |
Net Capital transfers |
-1275 |
-1725 |
-4900 |
|||
Net Lending |
273 |
814 |
4234 |
8354 |
8657 |
6382 |
The revision to the pension accounting in the government sector is of course a mirror image of the personal sector. Government income is reduced due to lower contributions to social insurance plans (a reduced personal outlay) and by the investment income of pension funds that is now recorded as income in the personal sector. Government outlays are reduced, as the payment of pension benefits is no longer recorded. Tables 2,3,4 summarize the revisions for Total, Federal and Provincial Governments.
1961 |
1971 |
1981 |
1991 |
1995 |
1999 |
|
Income |
Millions of dollars |
|||||
Contributions to Social Insurance Plans |
-253 |
-695 |
-3122 |
-4855 |
-4269 |
-4444 |
Investment Income |
-120 |
-476 |
-2806 |
-9681 |
-12170 |
-15349 |
Outlay |
||||||
Public Sector Pension Benefits |
-100 |
-357 |
-1694 |
-4907 |
-6057 |
-8511 |
Change to Government Saving |
-273 |
-814 |
-4234 |
-9629 |
-10382 |
-11282 |
Net Capital Transfers |
1275 |
1725 |
4900 |
|||
Net Lending |
-273 |
-814 |
-4234 |
-8354 |
-8657 |
-6382 |
1961 |
1971 |
1981 |
1991 |
1995 |
1999 |
|
Income |
Millions of dollars |
|||||
Contributions to Social Insurance Plans |
-222 |
-552 |
-1521 |
-2832 |
-3004 |
-3244 |
Investment Income |
-115 |
-453 |
-2236 |
-7723 |
-10414 |
-12676 |
Outlay |
||||||
Public Sector Pension Benefits |
-80 |
-270 |
-1272 |
-3457 |
-4642 |
-6081 |
Change to Federal Saving |
-257 |
-735 |
-2485 |
-7098 |
-8776 |
-9839 |
Net Capital Transfers |
1275 |
1725 |
4900 |
|||
Net Lending |
-257 |
-735 |
-2485 |
-5823 |
-7051 |
-4939 |
1961 |
1971 |
1981 |
1991 |
1995 |
1999 |
|
Income |
Millions of dollars |
|||||
Contributions to Social Insurance Plans |
-31 |
-143 |
-1601 |
-2023 |
-1265 |
-1200 |
Investment Income |
-5 |
-23 |
-570 |
-1958 |
-1756 |
-2673 |
Outlay |
||||||
Public Sector Pension Benefits |
-20 |
-87 |
-442 |
-1450 |
-1415 |
-2430 |
Change to Saving |
-16 |
-79 |
-1729 |
-2531 |
-1606 |
-1443 |
Net Capital Transfers |
||||||
Net Lending |
-16 |
-79 |
-1729 |
-2531 |
-1606 |
-1443 |