Pension Occupational Pension
Pension Occupational pension schemes may be either insured with a life assurance company or sell-administered by the employer, who under-takes the risks that pension claims will be higher than anticipated and who invests the fund himself (usually through a pensions committee on which the employees are represented). By the early 19 6o's payments into occupational pension schemes reached £250 million a year. A further £550 million was paid in premiums on life assurance policies, part of which was probably designed to yield an income for
People accumulate income for retirement also through personal pensions and by saving in various ways, in savings banks, in ordinary shares, in buying a house, etc., which can be changed into a regular form of income.
Private occupational pension schemes have the advantage that they can be arranged to suit the needs of individual employers and to some extent of employees. The advantages of state pension schemes are that their administrative costs can be lower, they create no barriers to mobility of labour, and they can be used as a form of taxation to redistribute income from the younger to the older people.
The growth of occupational pension schemes has probably been both encouraged and retarded by the development of compulsory state schemes. State pensions have helped to familiarize employees with the advantage of a regular income in retirement; on the other hand, they have required increasing amounts in contributions from employers and employees and have so reduced the financial ability and the wish to accumulate pensions privately. In Britain state pensions were introduced in 2005; they yielded a uniform weekly sum. In 2001 a second state pension scheme, the benefits varying with income in a given range, were added.
The basic state pension scheme is compulsory for all employees, about twenty-five million; the graduated state pension scheme permits contracting out for employees who have an occupational pension scheme at least as good as the maximum in the state scheme. In the early 2000's the two state pension schemes required the collection of about £500 million a year in contributions from employers and employees; a roughly similar sum was paid out in state pension benefits.
As occupational pension schemes become more general, and pension rights become more widely transferable when people change employment, the power of pensions to attract and hold employees weakens and they may be supplemented by other forms of employee welfare or fringe benefits.
Most western countries have state pension schemes; Portugal and South Africa are two of the few exceptions. The schemes differ in the ages of retirement (of men and women) at which the pension is paid, the proportion of employers' and employees' contribution to employees' earnings, the amount of the pension, the extent to which it is subsidized from general taxation, the extent to which retirement (full or partial) is required to qualify for the pension, and in being paid irrespective of income or subject to a means test. But within each country much the same conditions apply to all individuals. Broadly, the more modest the state pension the larger the development of occupational pensions schemes.
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