Chapter 6: Providers of benefits

Question 1

4 Main providers of benefits

Answer 1

• The State
• Employers or groups of employers
• Individuals
• Financial Institutions or other corporations

Question 2

4 Key roles of the state in relation to benefit provision

Answer 2

• 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

Question 3

What benefits might the state provide directly?

Answer 3

• retirement
• ill health
• death
• unemployment
  benefits

The state also provide financial instruments such as

• national debt securities
• national savings plans
• state bank accounts

Question 4

Role of employers in benefit provision

Answer 4

• provide benefit schemes
• finance benefits
• educate, encourage or compel employees to make benefit provision

Question 5

Why do employers finance benefit provision for employees?

Answer 5

• compulsion or encouragement from the state
• desire to look after employees
• to attract and retain good quality employees
• to pool expenses and expertise

Question 6

Main advantage of Multi-employer schemes

Answer 6

Cost efficiency

Question 7

Main difficulties of Multi-employer schemes

Answer 7

Allocating the liabilities between employers

Fund segregation is important.

Question 8

How do individuals play a role in benefit provision?

Answer 8

Finance benefits through a

• state scheme,
• employer scheme,
• insurance company,
• other financial organisation.
• may use individual savings
• or domestic property

Question 9

4 Vehicles through which individuals may group together and pool their finances

Answer 9

• trade unions
• employee associations
• religious organisations
• continuous care retirement communities

Question 10

How can domestic property be used to provide benefits?

Answer 10

By releasing equity on the property or through inheritance.

Question 11

What role do financial institutions play in the provision of benefits?

Answer 11

• They provide benefit schemes and insurance products

- They may also educate consumers on the importance of making benefit provision.

Question 12

State

Answer 12

• 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

Question 13

Employers

Answer 13

• 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

Question 14

Individual

Answer 14

• 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