<
21 -
contributions.
55. A problem of considerable importance as regards old-age pension is the determination of pensionable age, i.e. the minimum age at which the pension may be claimed. The age has a direct impact on benefit cost and thus on the rate of The criterion for fixing the proper pensionable age under a social insurance scheme was defined by the Income Security Recommendations adopted by the International Labour Conference in 1944 as follows: "(the prescribed age) should be that at which persons commonly become incapable of efficient work, the incidence of sickness and invalidity becomes heavy, and unemployment, if present, is likely to be permanent". Another important problem in designing old-age pensions is whether not the pension should be payable where the person concerned still continues to receive wages from his normal work. A number of social insurance schemes insist on retirement from insurable employment as a condition for the payment of old-age pension, the consequence of this being that no person will remain at work after his earnings fall to the amount of the pension awaiting him. Some other schemes which discourage the employment of pensioners do so by reducing Or even suspending the pension, if earnings exceed a prescribed limit. (See paragraphs 18 to 20 above.)
or
V. Financial and administrative arrangements1
Some financial problems
56. The financing of a social security scheme involves decisions as to the proposition of the country's financial resources which can be devoted to this purpose. This is particularly important in the case of non-contributory benefit schemes entirely financed from the general revenue of the country. In order to determine the financial resources of social security, a series of elements will have to be taken into consideration. The most important elements are the scope of persons to be protected, the kind of benefits to be provided and the economic and social conditions peculiar to each country. In particular the direct and indirect repercussions of the various methods of social security financing will be determined by the general level of wages, the economic situation of different sectors of the national economy, the structure of the economically-active population, the demographic situation and the national fiscal system.
57. Newly introduced social insurance schemes have been designed as self- supporting schemes, i.e. to be financed by contributions from insured persons and their employers, without any form of regular state subsidies which have been considered to be hardly justifiable, where, at least at the initial stage of its implementation, it is applied to a rather limited sector of the total working population of the country. However, it has often proved necessary to make available a certain amount of loan or grant from the treasury to cover the initial cost needed for the period during which the body responsible for the administration of the scheme is engaged in the preparatory work. The loan is refunded to the treasury in an appropriate manner after the scheme is actually put into operation and contributions are coming into the social insurance fund.
58. The participation of the employers in financing of social security has been considered justified and desirable in many countries. Employers derive advantages from social security. It is certain that in industrialised countries and developing countries also, social insurance helps to maintain industrial peace a nd the stability of the social order. Its benefits conserve the workers' productive capacity without which the industry would be less prosperous. It is a fact that in the absence of state intervention, enlightened employers are accustomed to initiate and provide welfare measures of many kinds for their employees, and this fact seens to show their sense of social responsibility and their awareness that generosity cn their part brings, as it should, a reward. While an employee's right to benefits may be based on
his employment rather than his participation in the financing of social security, his contributions are justified on the ground that his right to benefit is reinforced by the fact of the contribution payment. In addition, participation of the protected persons in the administration of the scheme and their active interest in its proper management are often heightened by this direct financial participation. Furthermore, employees may wish to demonstrate by their contributions, their conviction that the employee's contribution is an expression of his personal responsibility for himself, for his family and for his fellow workers.
1 For the detailed technical security, see ASS/III/1/1974.
discussions on financial arrangements of social
E-1195-2B:5