SUPERANNUATION.

Press, Volume LXIII, Issue 19156, 12 November 1927, Page 18

SUPERANNUATION.

PRIVATE FIRM'S SCHEME. REWARD FOR LONG SERVICE. Tho question of making adequate provision for the declining years of faithful workers who have given the best years of their lives to the service of the firm is one which gives many company executives much concern. Many companies postpone taking any action because there is a widely held opinion that a large capital outlay is necessary at the inception of any pension or superannuation scheme which will make provision at all adequately | for those who are the older members of ; the staff (states the "Otago Daily I Times"). Seme firms have solved the I difficulty by entering into a group assurance scheme with a life insurance company, and paying out a lump sum I to the employees at either 60 or 65 years of age. " Others have preferred a pension scheme, and have supplemented contributions of the' staff and have provided pensions commencing at retirement age, but in the event of any previous withdrawal or death the. pa r--1 ticipants receive back only the amount j of the contributions paid in. Messrs J. Rattray and Son, Ltd.. who have over 100 employees in their head office at Dunedin and their various branches, are now completing a superannuation scheme, which combines the best features of the foregoing two systems. Their scheme will provide a minimum pension of £l5O per annum for the members of the office and travelling staffs, and a minimum pension of £IOO per annum for members of the store staffs upon their attaining the age of 60 years. The scheme .will also protect each member of the staff with a life assurance policy from the date of the commencement of the scheme for an average amount of between £6OO and £7OO. dependent upon age and salary. All this is done without the finding of any large capital sum. The company will take no risk with the life insurance policies, as an arrangement has been made with a life insurance office to cover the whole of the male members of the staff under the age of 55 years with its ordinary endowment policies payable at the age of 60 years. These policies, the cost of which is paid eoually by the staff and the firm, are held by trustees, two of whom are appointed by the directors and two elected by the staff. Each member of the scheme, upon attaining the age of 60 year's, elects whether he will take the* amount of his policy, with bonuses, in a lump sum, or whether he will leave the amount at interest with the trustees and draw a yearly pension. Should the employee die his widow will receive the residue of the amount that would have been due to him at the age of 60 years, less 10 per cent. Should he die heforehe has reached the retiring age his widow receives his life insurance money (less five per cent.). In order to provide for those members of the staff who may outlive the actuarial expectation of life, a reserve fund is established, and a small deduction is made from all amounts which would be paid out either through the death of the policyholder or from the lump sum he has the option of taking at the age of 60 years. In addition to the £ for £ contribution from the amount of salaries paid the employees, in order to provide the minimum pensions of £l5O and £IOO per annum, it is, of course, necessary in the case of certain of the older employees that a considerable sum of money will have to be found at the dates when the accumulated funds standing to the credit of those who have gone on pension have become exhausted, and this amount is provided by means of endowment assurance on the life of a young member of the staff. Although the Government makes no direct contribution to the cost d? these staff assurance and pension schemes, yet in an indirect way it j does, as, through the company being able to deduct the total amount it [ pays in premiums from its income tax returns, it considerably reduces the amount of tax it would otherwise have to pay. One or two examples of how the scheme works out in practice show that the employees of Messrs J. Rattray and Son, Ltd., are fortunate in having the opportunity of. participating in such a scheme. A, a clerk, aged 26 years next birthday, salary £330 per annum, premium £33 (of which the firm pays half); amount of insurance on life from commencement of the scheme, £1125; estimated value of policy at maturity, taking last five years' bonuses as basis for future accretions, £2632, which would A to a pension for life of £253 per annum supposing the funds were invested at five per cent. If the trustees had the funds invested at a higher rate, the pensions would be increased. A has the alternative of taking the lump sum of £2632 (less 10 per cent. for_the reserve fund), or a pension of £253 per annum. If A elects to take the pension it has to be supplemented every year by a sum from the principal, which, it is estimated, will be exhausted when he has reached the age of 75. A's pension then continues to be drawn from the reserve fund. B, a storeman, aged 27 years next birthday, salary £247 per annum, premium £24 10s' Sd (of which the firm pays half). Amount of insurance on life from commencement of the scheme, £BOO. _ Estimated value of policy at maturity, taking last five years' bonuses as basis for future accretions, £1824, which would entitle B to a pension- for life, of £176 per annum supposing the funds were invested at five per cent. The same conditions obtain as in the case of A. The older members of the staff are ' even more generously treated under the scheme than the cases above mentioned, because C, a storeman, who is 52 next birthday (provided he lives til 1 i GO), will contribute only £O3 6s untii : he goes on pension, and will then be ' entitled to the minimum pension of ; £IOO per 'annum for life. 1 In the goodwill which is established i between employer and employee, in the : removal of the economic waste of hav- : ing to employ men who are past work ; and who should be pensioned, in the feeling of security and brightened outlook which is given to the employees in knowing that their future is provided for, staff superannuation schemes must be considered well worth the attention of all thoughtful employers, and all the world over, leading firms are giving this particular question more and more thought. Messrs J. Rattray and Son, Ltd., are to be congratulated upon having initiated a scheme which has so much to commend it and. in which there are no apparent defects.