SUPERANNUATION. The custom of providing pensions for aged employees who, after meritorious service, are no longer able to discharge their duties efficiently, has become increasingly common since the middle of the 29th century. The problem of mitigating the hardships of old age has been attacked from many angles and a great variety of solutions has been tried. In Eng land superannuation schemes for discharged seamen and soldiers date back to the middle ages ; these were followed by systems applicable to civil servants and other public officials, and to employees of statutory undertakings. Finally the custom of mak ing some kind of provision for old age has gradually spread to the employers of labour on a large scale and even to businesses with relatively small staffs. Simultaneously the question has received attention on national lines; this aspect of the subject is treated under OLD AGE PENSIONS, the present article being limited to the examination of superannuation schemes in which the title to benefits has its roots in service given to a particular employer during the pensioner's working life.
At the outset the granting of a pension is often merely an eleemosynary act dictated by the employer's wish to reward meritorious service, or to safeguard an old servant from penury in his declining years. Later, the occasional grant in these cir cumstances having become a custom, superannuation allowances come to be looked upon as a right by the officials, and as a means of securing efficiency by the employer, who realizes that the re tention of aged officials no longer fitted to perform their duties adequately—especially if they hold responsible posts on the directing staff—seriously jeopardizes the conduct of his business. In such a case a definite scheme prescribing the ages between which retirement shall normally occur (generally between 6o and 65), laying down scales and conditions of benefit and defining the class of officials to be included is soon recognized, both by the employer and by the employees, to be essential. With regard to finance the need for sound principles was unfortunately in the past not realized so soon. The expenditure on pensions, being
almost negligible in the early years, was often charged to current revenue, and until this burden became heavy as the numbers on the pension roll grew, causing expenditure to increase at an alarm ing rate, the need for making provision for accruing liabilities was not appreciated. Generally speaking, prudential considerations dictate that appropriate sums should be set aside and accumulated at compound interest throughout a person's service, while the lia bility for superannuation is accruing, in order that when he retires the sum in hand shall be sufficient to provide for his superannua tion allowances. By this method full provision being made before the pension commences, the burden of superannuation is met pari passu with payments of salary during service.
The accumulation of the appropriate reserves can be effected either in a privately managed superannuation fund or by an assur ance company on behalf of the managers of the scheme. Under the former arrangement it is usual to institute a trust fund definitely alienated from the ordinary business transactions of the employer. In Great Britain such funds enjoy certain privileges in regard to income tax upon their interest income. Similarly con cessions are allowed in respect of contributions whether paid by the employer or employee to a superannuation scheme.