International Social Security Review International Social Security Review

First published in 1948, the International Social Security Review is the principal international quarterly publication in the field of social security.

Articles by leading social security experts present international comparisons and in-depth discussions of topical questions and studies of social security systems in different countries.

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Commencing in 2014, the International Social Security Review is published in English only, and abstracts of all new articles are available in eight languages: Arabic, Chinese, English, French, German, Portuguese, Russian and Spanish.

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Abstracts (current issue: July-September 2018, Volume 71, Issue 3)

Special Issue: Actuarial and financial reporting of social security obligations

The full texts of this issue can be accessed free of charge on the Wiley website (until the end of 2018).

Assia Billig, Simon Brimblecombe and Jean-Claude Ménard

Introduction: Quantifying and reporting social security obligations

In a context of the increasing transparency of social security scheme design and financing, assessing the financial implications of the promises made to current and future retirees of a social security pension system has become a key issue. The central role played by actuaries in the financial evaluation of social security systems means that the debate regarding methods and assumptions to use in such an exercise is of interest to all actuaries, those who use their work and those whose decisions are based on their work. This, in theory, appears a rather technical debate. However, in reality, these deliberations have a much wider impact. The discussion around how to assess the implications of promises made by social security systems to current and future populations will affect the decisions taken regarding the key features of systems, in particular the social contract between generations. It also feeds into the debate regarding sustainability, inter- and intra-generational equity, and the adequacy of benefits as well as the robustness of systems; that is, how future changes to the economic and demographic environment will affect systems. This introductory article discusses the importance of this topic including the implications for actuaries, policy-makers and other stakeholders and then summarizes the seven substantive articles that comprise the special issue. These articles reflect different points of view, but also different experiences and environments – which adds to their value as contributions to this important debate. Finally, this introduction sets the context for the reader – to ensure that the technical aspects of the set of papers are considered within the wider framework of social security provision and financing.


Barbara D’Ambrogi-Ola and Robert Brown

Measuring and reporting obligations of social security retirement systems: Actuarial perspectives

The article is based on the International Actuarial Association (IAA) Social Security Committee’s principles-based paper with commentary on measurement and reporting obligations of social security retirement systems (SSRSs) with proposals for appropriate disclosure requirements, for consideration by national and international organizations when developing reporting standards in respect to SSRSs. The article argues that the method of measuring and reporting obligations should be consistent with the financing basis of the SSRS. In particular, SSRS financed on a pay-as-you-go (PAYG) or partially funded basis should use an open group method for measuring and reporting actuarial obligations. Only SSRS that purport to be fully funded should use a closed group basis, since SSRS are not analogous to large private-sector pension plans. For most PAYG and partially funded SSRS, accounting for obligations on a closed group basis would indicate huge actuarial unfunded liabilities, which might not be understood by the general public and could inappropriately create pressure to move towards fully-funded systems. The methodologies used for accounting and/or statistical reporting should enable the accurate assessment of the long-term financial sustainability of any SSRS without a bias for or against a particular financing approach. The article prefers measures of sustainability of a SSRS to measures of its funding level. A system that is fully funded currently may not be sustainable while a pure PAYG SSRS may be sustainable. In the case where there is a requirement to disclose obligations on a closed group basis, such disclosures should be supplemented by an open group analysis, with appropriate reconciliations and explanations (i.e. a multiple disclosure approach).


Mitchell Wiener and Philip Stokoe

Discussing accrued-to-date liabilities

The international statistical community has a growing interest in the liabilities of pension and social security systems. The System of National Accounts 2008 encourages countries to provide detailed information in a supplementary table on pensions. The IMF Government Finance Statistics Manual also encourages reporting of public-sector balance sheets as part of government debt, and the European Union (EU) has mandated that all EU Member States compile estimates of accrued-to-date (ADL) liabilities for all pensions, including public-sector pensions and social security schemes. The ADL liabilities for public-sector pensions, which are often defined benefit, and typically financed on an unfunded (pay-as-you-go) or partially funded basis, are likely to be very large in some countries, receive significant public scrutiny, and be misunderstood and/or misused. The article begins by reviewing the current requirements, disparity and ambiguity in existing accounting and actuarial standards. It notes the opportunities for “accounting arbitrage”, where countries can provide similar benefits in a different form to avoid placing these pension liabilities on the government balance sheet and/or to avoid required disclosure of pension liabilities. This article concludes that the ADL for social security and government-sponsored pension programmes has little or no meaning, does not provide any information about the fiscal sustainability of a country’s pension programmes and does not provide any useful information for comparing pension plans across countries. It argues that the best measure of fiscal sustainability for unfunded or partially funded pension programmes that are financed on a pay-as-you-go basis is the financing gap, and that this “open group” measure of fiscal sustainability should be published alongside the ADL, supplemented by information on coverage rates, replacement ratios and expenditures as a per cent of GDP. The article concludes that pension expenditures as a per cent of GDP is probably the single best measure for cross-country comparison.


Assia Billig and Jean-Claude Ménard

Measuring and reporting the actuarial obligations of the Canada Pension Plan

The processes used to assess the financial sustainability of the Canada Pension Plan (CPP) and the corresponding reporting are recognized internationally as “best practices”. In the context of the international and multi-disciplinary debate about the most appropriate methodology for the measuring and reporting of social security assets and obligations, the experience and practices of Canada offer a number of important policy lessons. The article analyses the assets and obligations of the CPP using different actuarial balance sheet methodologies, i.e. open and closed group. It concludes that the balance sheets under the closed group with and without future benefit accruals methodologies do not reflect the nature of the partial funding approach of the CPP, whereby future contributions represent a major source of financing for future expenditures. As such, it is inappropriate to reach a conclusion regarding the Plan’s financial sustainability considering only the asset shortfalls determined under the closed group with and without future accruals balance sheets. The article asserts that measuring the Plan’s assets and obligations using the open group approach provides information that properly reflects how changing demographic and economic environments affect the long-term sustainability of the CPP. In contrast, using the closed group without future accruals approach may provide incomplete or even misleading information. Finally, the article discusses approaches used to report the financial state of the CPP, including both actuarial and financial reporting. It highlights the comprehensive disclosures approach adopted for the purpose of CPP annual reports and the Public Accounts of Canada.


Paul Mason

Accounting for social benefits: The search for a past event

The article explains the role of the International Public Sector Accounting Standards Board (IPSASB) in setting accounting standards for the public sector, and the due process that is followed in setting those standards. The article explains the scope of the IPSASB’s current project on social benefits, and how this compares to the scope of social benefits in Government Finance Statistics (GFS)/System of National Accounts (SNA) as well as the IPSASB’s previous social benefits projects. The scope is wider than pensions, and wider than social security as social assistance is also included. The accounting principles that underpin the IPSASB’s current project are discussed and include the IPSASB’s definition of a liability, and the key role that a “past event” plays in that definition. This is contrasted with some of the actuarial approaches. The article then describes the potential past events that the IPSASB has considered to date in the project, and what impact liabilities from these past events would have on the financial statements. This comparison makes reference to pensions, where the financial impact of different past events will be greatest. The article sets out the IPSASB’s proposals in its recent Exposure Draft ED 63, Social Benefits, and also discusses the alternative view of three members on recognition and measurement. The article concludes by discussing the IPSASB’s current guidance in RPG 1, Reporting on the Long-Term Sustainability of an Entity’s Finances, and notes that the IPSASB is seeking views on whether it should undertake further work in this area.


Costas Stavrakis

Reporting the pension obligations of social security schemes: An EU perspective

European Union (EU) Member States have very diverse social security pension systems with respect to the types of schemes/benefits offered, their redistributive features, as well as the method and sources of financing adopted. Also, the role of the state in securing retirement in old age varies considerably across the EU. According to the European System of National and Regional Accounts 2010 framework, the pension obligations of EU social security pension schemes are now reported in the supplementary Table 29, based on the accrued-to-date liability method. Such a method does not allow the assessment of the financial sustainability of social security schemes, which are typically financed on a pay-as-you-go/partially funded basis, as well as the sustainability of public finances. In addition, while the contributory social security pension schemes, with or without non-contributory components, are included in Table 29, the non-contributory social security schemes are in principle excluded. This article aims to suggest how to enhance the transparency and cross-country comparability of Table 29 results at EU level, by disclosing additional information suitable for evaluating the financial status of contributory social security pension schemes, which would take into account not only the financing method adopted but also the type of benefits offered. From a policy perspective, such additional information would ensure that no certain types of social security schemes are promoted in the EU, and that the clarity and effectiveness of the role of the state in financing a social security pension scheme is enhanced.


Anne Drouin, Pierre Plamondon and Cristina Lloret

Towards a fair assessment of social security liabilities under pay-as-you-go and partially funded schemes

This article provides insights into methodological and measurement considerations and challenges from an actuarial and social security policy perspective with reference to actuarial valuation work undertaken in the recent period. It aims at supporting the global discussion to improve the transparency of the reporting of financial liabilities of social security schemes linked to employment-based obligations (contributory), as these are often guaranteed by the government following social security funding rules such as pay-as-you-go and partially funded approaches. The article supports the actuarial profession’s engagement with experts in national accounting and public finance statistics towards providing improved guidance to national governments in presenting a fair and accurate picture of the financial position of their social security schemes with due and unbiased recognition of the social security policy approach decision of any given country. While the reflection of the financial position of social security schemes guaranteeing long-term benefits payable for life is most important in terms of possible public finance implications, care must be exercised in adopting a valuation methodology and indicators that are not biased and which do not distort the interpretation of its financial position. In this respect, challenges remain and there is ample scope for refining methodologies and adopting coherent accounting approaches encompassing policy decisions for funding purposes.


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