Page 57 - Group Insurance and Retirement Benefit IC 83 E- Book

In public funds the management meant ultimately the general population, who were the

taxpayers or the users of the products of the nationalized industries. He approached the
matter as a taxpayer, and it was in that sense that he wished to speak for the management.

The main public superannuation schemes—Civil Service, local authorities, teachers,
National Health Service—had approximately 1,500,000 members. The recently formed

public boards for coal, electricity, transport and gas had about 2,000,000 employees.
Whether all those employees would be covered eventually by superannuation schemes

was not known. The large number of members and potential members involved vast sums

of money. In a funded scheme with interest at 3 %, a pension of two-thirds of final
average salary after forty years' service required a joint contribution in the region of15 %

of salary for a young entrant. In the event of inflation, such as had been experienced over

the last ten years, the additional resources required—conventionally described by the
unhappy word ' deficiencies '—were often staggering in their amount. If, however,

instead of being funded, the scheme was to be financed on an emerging cost basis, The
Development of Public Superannuation Schemes 23Heywood and Maples had shown

that, provided the size of the working population remained the same, the cost of the
benefits would rise ultimately to about 30'% of the pay-roll. That figure, of course, was

independent of the rate of interest.

Those liabilities, apart from the members' fixed percentage contributions, normally fell
on the management—the taxpayer—because the schemes were guaranteed. An annual

outgo of 30 % of the pay-roll for a million employees was an immense future
commitment.

Modern accounting practice aimed at isolating individual sources of cost or expenditure,
and allocating to each item or service the true cost of making the item or providing the

service. Prudent finance dictated that all liabilities, as soon as they accrued, should be

covered by assets. Expenditure on superannuation was an important factor in the analysis
of the total cost of a service, and the appropriate provision, either as a percentage of the

pay-roll or an equalized annual charge, should be made currently as the superannuation

liabilities accrued. The best estimate of the necessary provision could be made by an
actuary. Of the 1,500,000 members of public superannuation schemes, about 500,000 we

remembers of local government schemes which were funded ; the other 1,000,000