SUPERANNUATION

Evening Post, Volume CXXXIX, Issue 49, 27 February 1945, Page 7

SUPERANNUATION

BASE FOR TRUE SCHEME

During the past 20 years hundreds of so-called superannuation schemes have been arranged by firms throughout New Zealand with life insurance offices. Almost every one of them was the converse, the antithesis of true superannuation. They were only disguised endowment insurance and had already caused great dissatisfaction to thousands of those who joined, said Mr. H. H. Thompson in evidence before the Parliamentary Committee on Local Government yesterday.

"True superannuation can only be secured by a deferred annuity maturing at an agreed age and taken on every group member," he said. "This is the only possible means by which each member will receive the full return for his contributions. In New Zealand hundreds of contributors for various reasons fall out from their miscalled superannuation schemes and the cash surrender they receive is much less than it would be under a true scheme.

"Every life office can issue deferred annuity policies but most of them keep this class of business in the background. They pay only a small commission on it. On endowment insurance they pay their highest commission. As a result their agents press the latter and say nothing about the true superannuation method as practised in England. Commission should not and need not be paid on any compulsory superannuation scheme. The huge amounts now paid in New Zealand so needlessly are better tfhd larger than a win in Tattersall's for each of the many agents receiving them. . . . There are today over 700 local bodies in New Zealand. Each and all should have for its staff's benefit the maximum of benefits at the minimum of costs. "These two essential features are entirely lacking in the endowment insurance schemes which have paid the commission agents so fabulously, and the contributors, as every one of them will ultimately find, so wretchedly for their outlay. INSURANCE BONUSES. "It is well known that in all these endowment insurance schemes bonuses are promised—but only promised," continued Mr. Thompson. "For these bonuses an extra charge varying from several shillings per £100 insured at young ages to over £2 per £100 at the oldest ages is made. The amount of these bonuses is entirely speculative as the results of all life offices for several years past, in fact, throughout history, has proved. If any life office is asked to guarantee its bonus for an amount equal only to the charge made for bonus it refuses, giving reasons apparently good to the layman, but not really informative. They talk about future and unknown expense rates, interest rates, and possible excessive mortality. Anyone with only a modicum of actuarial knowledge knows that such statements are only camouflage.

"It is entirely fair to pay commission on retail sales to individuals. An agent requires both educative ability, tact, and persuasion to secure these. On wholesale trading, as is the case with all superannuation schemes, this huge and needless charge can and should be cut out. If commission is paid both the contributing employee and the employer who subsidises can receive only partial value.

''The National Provident Fund offers exceptional, in fact, phenomenal, opportunities on which to base and establish true superannuation schemes. Every contributor receives much more than the value with interest added to his contributions. Unlike every policy holder in any insurance office he does not pay anything for the cost of running the'business. The State pays all expenses. Further his contributions are subsidised by the Government."