Chapter 6: Providers of benefits Flashcards
4 Main providers of benefits
- The State
- Employers or groups of employers
- Individuals
- Financial Institutions or other corporations
4 Key roles of the state in relation to benefit provision
- Direct PROVISION and financing of benefits.
- EDUCATION of the importance of providing for the future
- regulation to ENCOURAGE or compel benefit provision
- REGULATION OF PROVIDERS of benefits to protect the consumer
What benefits might the state provide directly?
- retirement
- ill health
- death
- unemployment
benefits
The state also provide financial instruments such as
- national debt securities
- national savings plans
- state bank accounts
Role of employers in benefit provision
- provide benefit schemes
- finance benefits
- educate, encourage or compel employees to make benefit provision
Why do employers finance benefit provision for employees?
- compulsion or encouragement from the state
- desire to look after employees
- to attract and retain good quality employees
- to pool expenses and expertise
Main advantage of Multi-employer schemes
Cost efficiency
Main difficulties of Multi-employer schemes
Allocating the liabilities between employers
Fund segregation is important.
How do individuals play a role in benefit provision?
Finance benefits through a
- state scheme,
- employer scheme,
- insurance company,
- other financial organisation.
- may use individual savings
- or domestic property
4 Vehicles through which individuals may group together and pool their finances
- trade unions
- employee associations
- religious organisations
- continuous care retirement communities
How can domestic property be used to provide benefits?
By releasing equity on the property or through inheritance.
What role do financial institutions play in the provision of benefits?
- They provide benefit schemes and insurance products
- They may also educate consumers on the importance of making benefit provision.
State
- Direct benefit provision, eg basic state pension
- Encourage/ compel private sector provision
- Regulate to ensure benefit security
- Educate gen public and employers about benefits
- Collect sufficient taxes from individuals and employers to meet the cost of benefit provision
Employers
- Provide group benefit schemes covering benefits such as retirement/ death-in-service
- Enable cheaper benefit provision for employees through economies of scale and provision of expertise
- Facilitate employees being able to make appropriate provision – eg by offering flexible benefit schemes
- May be able to compel some elements of ben provision
Individual
- Ensure total provision (incl that from state and employer) gives an adequate standard of living
- Provide for dependents
- Purchase products to meet any outstanding needs (eg personal pension to top up existing pension provision
- Choose benefits provided by employer (where there is a choice) that best meet their individual needs
- Take part in group schemes
- May set up own provision, possibly using financial intermediary given likely lack of expertise