Definition: Mixed pension schemes
The expression "mixed schemes” (or “hybrid schemes") does not exist in current national accounts standards as their creation occurred after their publication. It aims covering cases where a government unit is involved simultaneously in the management of two kinds of schemes (imposed on all the population or only a part, for instance, based on age criteria9), although in appearance there are on one hand a single flow of contributions (a total rate is paid) and on the other hand a single flow of pension benefits (each household receives only one regular payment for a given period).
One scheme is unfunded, organised according to the “normal” features of a “pay-as-you go"
system where the benefits (fixed according to some factors) are directly financed by the
contributions collected and, if necessary, by other government resources.
The other scheme is a funded one that has all the features of a defined-contributions funded
pension scheme: part of the contributions received from the employers is invested on markets
(directly by the government unit but more frequently through specialised market units) and the
individual pension benefits, for that part, will predominantly depend on the invested assets.
What matters here is that both corresponding flows, “in” and “out” and relating to two different sets of
rules, are fully identifiable. Similarly the involvement of government in each kind of scheme is very different.
Under the unfunded scheme, government has taken the commitment to pay a promised level of benefits by reference to rights, determined by given rules on their calculation.
Under the funded scheme, the amount of the pension depends normally on the accumulated assets and government has no general obligations towards all the participants.
As each scheme is run by clearly a different set of rules and more precisely, as the pension benefits are not financed in the same way, the total flows must be allocated to each corresponding scheme, and these should be treated differently in national accounts.
As a result, in such situations, two different institutional units must be distinguished in national accounts, each of them referring to one identifiable scheme.
In this respect, the unit that is identified (resulting from the “split” for statistical purposes of the one apparent government unit) as responsible for the management of the defined-contributions funded scheme must be classified outside the general government sector.
Therefore, the flows of contributions made to the unit managing the defined-contributions funded scheme and the flows of benefits paid from this unit are in no way part of government revenue or expenditure and therefore cannot have an impact on government deficit or surplus.
Eurostat, "Classification of funded pension schemes and impact on government finance", 2004 edition, Office for Official Publications of the European Communities, 2004, Luxembourg