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The 2008 SNA appears to provide conflicting guidance on whether to include holding gains and losses in the estimates of investment income attributable to insurance policyholders and pension beneficiaries that are treated as premium or contribution supplements in the calculation of the implicit service charges for insurers and pension funds. In instances where the 2008 SNA appears to recommend the inclusion of holding gains/losses in the estimates of this investment income, it is silent on whether these holding gains/losses should include only realized ones.
The 2008 SNA is also not explicit on whether holding gains/losses should be included in the change in life insurance and annuity technical reserves and the change in pension entitlements when calculating the implicit service charges for life insurance, annuities and pension funds.
The AEG, at its 9th meeting, confirmed the 2008 SNA recommendations on the treatment of holding gains/losses in the estimates of investment income attributable to insurance policyholders and pension beneficiaries and clarified the recommendations as follows:
In measuring the investment income payable on pension entitlements, a distinction is made in the 2008 SNA between defined contribution pension schemes and defined benefit pension schemes. In the latter case, the risks of making an adequate return on investments are with the pension fund or the unit managing the fund. The investment income payable on pension entitlements is generally disconnected from the actual returns on investments, and is typically set equal to the product of the discount rate used for measuring the net present value of future entitlements and the value of the entitlements. In the case of defined contribution schemes, the risks regarding the returns on investments are with the pension beneficiaries. Consequently, the returns on investments exclude any holding gains/losses.
The AEG also noted that the issue related to holding gains/losses in investment income should be discussed under the broader issue of the concept of income, which is on the 2008 SNA research agenda.
For more information see paragraphs 15 and 16 of the conclusions of the 9th AEG meeting.
See also issue 10 of the Research Agenda.
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