SOCIAL INSURANCE.

Lyttelton Times, Volume CXVII, Issue 17327, 16 November 1916, Page 8

SOCIAL INSURANCE.

GOYEBNJIENTS NEW SCHEME.

ADDRESS TO FRIENDLY

SOCIETIES

Mr R. E. Hayes. Registrar of Friendly Societies, and superintendent of the National Provident Fund, addressed a crowded attendance of members of the local friendly societies at the Foresters' Hall, Oxford Terrace, last night, on the provisions of the Finance Act of last session, relating to social insurance. Brother F. George, president of the Canterbury Friendly Societies' Council, presided. The chairman stated that he had received the following telegram from the Hon J. Hanan. Minister in Charge of Friondly Societies: —"I am pleased to hear from the registrar of the excellent arrangements which have been made to. enable members of tho fnomlly societies to obtain information concerning the Act, and appreciate it. 1 regret that my arrangements will not permit of my being present.'' In opening his address, Mr Hayes congratulated the meeting on tho excellent attendance, which, he said, was the best he had experienced in his lecture tour through the Dominion on the question of social insurance. " In the first place," said Mr Hayes, "remarks relating to tho general annuity question would be appropriate and "particularly is it to be emphasised that the National Provident Fund is primarily and essentially an annuity system. Tho other benefits comprised in it are merely adjuncts, and the contribution paid by contributors is almost wholly required for the purpose of providing the pension allowance at the age of sixty. The problem of providing for old age is ono that has occupied the attention of all Governments for very many years. Various schemes have been tried, some of which have succeeded and others have failed, but the conclusion now arrived at is that working people, that is, people depending upon salary a.nd wages, are unable without aid to provide adequately for themselves in old age. This accounts for the subsidies which are provided in the National Provident Fund. The subsidies are to induce working people to make provision for themselves in old age on a. contributory basis, with the object of establishing a system that will insure this valuable benefit out of a sound fund.

THE ANNUITY QUESTION. " Apart, however, from the National Provident Fund the annuity question has a particular interest for friendly societies. All who have studied tbo finance of societies know the great difficulty in administering what is known as old age sickness and in discriminatng between sickness and an old ago pension. The past history of societies, not only in New Zealand but elsewhere,, shows that the contribution rates in vogue, based on expected sickness after sixty, were, in fact, used to meet what practically amounted to an old age pension. Tbo burden of this old ago sickness has been for years advanced as one of the principal difficulties in Friendly Society finance, and the problem of converting this aged sickness into a pension has been regarded as one of tbo great objects to be attained in friendly societies. Tbo Actuary has, on request, .frequently quoted terms for this reform, but nono of them have been put into operation, probably on account of the cost. Here is an opportunity to effect this by means of the Government subsidies and the scheme has been worked out wi'th this in view. "Tho annuities offered to friendly societies under this Act. aro the same as in the original scheme, that is, pavable at the age of sixty, at tho rate of 10s, 20s, 30s and 40s per week. Any member whose incomo is less than £250 per annum,, and who is under forty-five years of ago, may become a contributor. These conditions havo certain modifications. It is quite optional on the part of any member whether he becomes a contributor or not, and, further, his annuity under this Act docs not affect his right to tho old ago pension. THE CONTRIBUTION RATE.

"The contribution rate which iB specified in the schedule to this Act is- very different from the rate set out in the main Act," continued Mr Hayes. " For the most popular an-nui%,",iflia-H is, 10s a week, tho quoted is exactly half the rate quoted in the main Act. It has to bo membcred that the National Provident Fund, as it now stands on the Statute Book, is sound actuarially, according to tho Actuary's report. If, therefore, Ave offer a. benefit out of that fund ab half the rates we must seo where' the: money, comes from. "The best illustration that can bo given of the finance of the transaction will be to take tho capitalised value of an annuity at age sixty, based on the conditions on which this allowance is payable. The approximate actuarial value of that allowance at age sixty is £306, that is to say, if you desire to purchase an annuity at ,that> ago you will require to place that amount doivn in cash. Therefore the National Fund requires to have from some source or other that amount when it begins to pay out at ago sixty.

AN ILLUSTRATION. "Take the case of a friendly society member, aged twenty-one, who joins the fund. He is required under th(< Act to pay Gd a- week. T3ie payment of that sum until he readies ago sixty, accumulated at compound interest, amounts to £lls odd. All the time he has been paying that the State has been paying 50 per cent of it into his account, that is, 3d per week. This amount, accumulated at compound interest, comes to £57 odd. Wo have, therefore, from these two sources, £172 towards the £306. When the member reaches age sixty the Act proposes that tho sick fund of the lodge he belongs to shall transfer to tho National Provident Fund the value of his future sickness at rates to bo derided in tho. regulations. These rates have been fixed at £1 for tho first six months, 10s for the second six months, and 5s after twelve months—rates which represent what most societies pay. The society is thus relieved of these sick allowances being paid after sixty, and the member receives in lieu thereof the 10s annuity.' The funeral and other benefits are not affected. The actuarial valuation of the sick allowances quoted is £55 12s. On the transfer of that amount to the National Fund the State pays in aho -30 per cent, ■ that is, £27 odd. From those four sources now we have obtained £256. The remaining £SO comes from what is called the benefit of survivorship, and means-tho .moneys left in tho fund from subsidies paid in on account of members who lapse, or withdraw, or die, and ,the interest on contributions which may' be drawn by persons leaving. A SUBSTANTIAL DIFFERENCE. " The ordinary sick and funeral fund contributions will still be payable by the member after age sixty to the,end of his membership in the society. The actuary has certified that the transfer of this sum of £55 12s is actuarially safe for friendly societies to make without loss; and there can be no doubt of this fact that for a certain payment fixed by the actuary the lodges got rid of a very uuceriain liability that in many cases runs into hundreds of pounds. The societies by 'assisting in this scheme are enabling thoir members on the payment of a

small, additional contribution to obtain a benefit worth £306 to take tho place of a benefit worth £55 12s. This comparison gives a fair indication of the value as between sick pay and a pension for members over sixty. FRIENDLY SOCIETIES' CONCES-

SION. " The Act provides as a concession to present members of friendly societies that the income restriction as to tho £250 shall not operate during 1917, and also that tho ago at which present members may join is raised to ago fiftylive on payment according to tho table provided for in tho regulations. This special concession is open to all persons who join societies before January 1 next, and will bo obtainable for twelve months thereafter only. The ■ system of refunds of contributions as laid down in the original Act will be observed in this amendment. On a member of a friendly society withdrawing his membership as an annuitant, he will, on giving twelve months' notice to that effect, be entitled to receive back his contributions tbrcMgh his society and if ho lapses the contributions will be returnable. At his death the amount of such contributions so accrued will bo paid through his society in addition to tho ordinary funeral benefit. If he dias after age sixty, when the f onsion has commenced to bo paid, his representatives will be entitled to receive all contributions back, plus the transfer of £55 12s, less any pensions paid to him.

MATERNITY ALLOWANC.F,

" Tho second benefit payable under the Act is a maternity allowance of £l, payable on the birth of a child to tho wifo of a member of a. friendly society provided the income of the member and his wifo during the twelve months preceding the birth has ■ not exceeded £2OO. and that the member has been at the time of the birth fit'tytwo weeks in his society and paid that number of contributions.' The benefit is claimable whether the member is an annuity contributor or not. The adlowance is payable to the mother of the child. It differs somowhat in its terms from tho benefit paid under the main .Act, where the allowance is subject to reduction if the medical, and other expenses do not reach the sum. In the case of friendly societies, however, in every case the full £4 in cash will bo payable." FOR "APPROVED" SOCIETIES

ONLY

Mr Hayes stated that a special system of remittances and postages j:or the carrying out of the scheme will be established for The convenience of societies. In order to provide for the administration of these benefits the Act sets out that, the National Provident Fund Board may approvo friendly societies, provided they make adequate provision in their rules for complying with the necessary requirements. Model rules have now been prepared and aro being issued to all societies for their adoption. Societies that are unable to hold meetings for the purpose of making those rules before January 1 may be provisionally approved on giving an undertaking that such rules will be adopted at the first opportunity. The benefits of the Act aro only payable to members of " approved societies. Tbo scheme from an annuity standpoint offers to members of friendly ■societies a most advantageous method of securing tor themselves an independent provision in old age. and this has. only been made possible by tho liberal subsidies provided under the Act. Tinimportance of the annuity side of the system cannot bo overstrossed and it is hoped that societies will do their best to assist in promoting a form of thrift which is difficult to establish but which must be of inestimable value to the State and the people Mr Hayes, at the close of dus address, answered., a large number of questions. Brother J. A. Clarke, vicepresident of the Canterbury Friendly Societies' Council, in proposing a vote of thanks, said that Mr Haves had delivered n very interesting address cm the question of Social Insurance and it was to be hoped that tliev would have further opportunities of hearing Mr Hayes speak on friendly soicoty matters. The motion was seconded by Brother A. D. Hossall, secretary of the St Albans Rechabite Tent, and was carried by hearty acclamation.