§ Mr. Flight:To ask the Chancellor of the Exchequer what the latest estimate is of the present value of the liability for payment of pensions to the beneficiaries of unfunded public sector schemes; and what the value would be if the real rate of discount was (a)3.0 per cent., (b)2.5 per cent., (c)2.0 per cent. and (d)the real rate of return on an index-linked stock of similar duration to maturity. [130882]
§ Mr. Boateng:The Government Actuary's Department estimate that the liabilities of unfunded public service pension schemes were approximately £380 billion as at 31 March 2002.
It is not possible to update that figure before the 2002–03 Resource Accounts for public service pension schemes are published. Revaluation of public service pension liabilities using different discount rates could be carried out only at disproportionate cost.
§ Mr. Flight:To ask the Chancellor of the Exchequer in relation to the estimation of the cost of pensions under the Whole of Government Accounts, why it has been decided (a)to issue figures without explanatory notes, and (b)to publish copies of guidance issued to Departments about the estimation of the cost of pensions. [130883]
§ Ruth Kelly:Central Government Accounts will be published for the first time for 2003–04, as part of the phased introduction of Whole of Government Accounts. Central Government Accounts will include the consolidation of the transactions and balances of those public sector pension schemes covered by the Resource Accounting Manual and other central Government accounting guidance. Central Government Accounts will provide a full explanation of the pension figures in both the income and expenditure account and balance sheet.
The liabilities of the main unfunded public service pension schemes are estimated by the scheme's actuary using assumptions published with the pension scheme accounts, as required by FRS17 and in accordance with the Resource Accounting Manual. Any Departments operating their own unfunded schemes are advised to seek guidance from the Government Actuary's Department on the calculation of the liabilities that should appear in their accounts.
The Resource Accounting Manual, which contains accounting guidance for Departments on all accounting matters, is publicly available.
§ Mr. Flight:To ask the Chancellor of the Exchequer in relation to the estimation of the cost of pensions under the Whole of Government Accounts, what excess of the discount rate over the rate of price inflation has been 5W applied to future liabilities; and what the typical corresponding rate is that is used by the private sector under FRS17. [130884]
§ Ruth Kelly:Central Government Accounts will be published for the first time for 2003–04, as part of the phased introduction of Whole of Government Accounts. Pension liabilities relating to Government employees reported in Central Government Accounts, which will be published for the first time for 2003–04, are a consolidation of the liabilities reported in the underlying scheme accounts. The real discount rate to be used in these accounts is 3.5 per cent., as advised by the Government Actuary's Department and based on the expected yield on long-term gilts.
Private sector schemes reporting under FRS17 are required to use a discount rate equal to the yield on an AA-rated bond of equivalent term and currency to the liabilities, if available. One study (by Lane, Clark and Peacock—"Accounting for pensions: annual survey 2003") has found considerable variation in the discount rate adopted—from under 5.4 per cent. To over 6 per cent. With the majority clustered around 5.6 per cent. Real. The value of the liabilities increases as the discount rate decreases.