Abstract
This paper develops a social insurance accounting model for a notional defined contribution (NDC) scheme combining retirement and long-term care (LTC) contingencies. The procedure relies on standard double-entry bookkeeping and enables us to compile a “Swedish” type actuarial balance sheet (ABS) following a framework equivalent to an open group approach. This methodology is suitable for reporting the system’s solvency status and can show periodical changes in the system’s financial position by means of an income statement. The information underpinning the actuarial valuation is based on events and transactions that are verifiable at the valuation date, without considering expected future trends. The paper also contains an illustrative example to make it easier for policymakers to understand the main advantages and difficulties of our proposal. The policy conclusions stress the need to properly report social insurance benefits to enhance transparency and sustainability and to improve decision-making because it is in the public interest to do so.
Highlights
Accounting is a necessary requirement for any business, organization or entity, including public and private pension schemes, to enable it to keep track of its resources [1]
We develop the main entries for a Swedish-type actuarial balance sheet (ABS) designed for notional defined contribution (NDC) schemes
The first is in line with one of the main principles used for compiling this type of ABS: the pension system’s liabilities are valued mainly on the basis of events and transactions that are verifiable at the time of valuation with no need for explicit projections
Summary
Accounting is a necessary requirement for any business, organization or entity, including public and private pension schemes, to enable it to keep track of its resources [1]. The present paper deals with the development of a social insurance accounting model for a notional defined contribution (NDC) scheme combining retirement and long-term care (LTC) contingencies. Sustainability 2018, 10, 2832 to the measurement of assets and liabilities as they stand at one particular point in time, which means that it is suitable for reporting the system’s solvency status Such a framework can show periodic changes in the system’s financial position by means of an income statement ( known as the gain and loss account). With the aim of making a comparison with the official actuarial valuation report on the Canadian Pension Plan (CPP), OSFIC [6] and Billig and Ménard [30] made a practical adaptation of the methodology used to compile the Swedish balance sheet They drew up a modified ABS for the CPP that included retirement pensions, disability and survivor benefits. The paper ends with the concluding comments, Appendix A and a list of abbreviations
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