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employers, and to establish social insurance schemes based upon the principle cf pooling of risks and financial resources. This has been done in respect of the contingencies of sickness and maternity, but the change of principle has been most marked in the case of provision for employment injury.

National Provident funds

12. The main statutory provident funds in the developing countries of Asia have been in existence for many years, and thus have been able to achieve quite wide coverage.

The familiarity of workers with occupational provident funds, and the ease with which they grasp the concept of individual savings, has encouraged governments to choose this system, sometimes as a first step towards a social insurance system. Other reasons have been the belief that provident funds are easier to administer than a pension scheme, and also that, in principle, financial deficits could not occur because only the suns received, plus interest, are paid out in benefits. On this basis, extensive contribution delinquency would not pose serious administrative and financial problems, whereas the authorities would bear responsibility for the solvency of pension schemes.

13. The salient features of provident funds are that the social security benefits consist of the contributions paid by or on behalf of the member, usually plus compound interest, and that they are paid in the form of a single lump sun. There is no sharing of risks or pooling of financial resources which in a pension scheme ensures that the benefits correspond to the social needs of the beneficiary. For example, if after a few years, possibly only three or five, a member of a comprehensive pension scheme financed by contributions at similar or lower levels to those levied by the statutory provident funds, becomes a permanent invalid he would normally be entitled to an invalidity pension payable throughout the period of invalidity. Furthermore, when he dies his immediate dependants would receive survivors' pensions for as long as they are considered to need continued financial support his widow would be entitled to a pension probably until she dies or remarries, and his children up to the maximum age limit; if he has no widow or dependent children, his dependent father or mother could receive a survivors' pension for life. In these instances, the invalidity and survivors' pensions would be payable by virtue of a prescribed period of membership and the amount of benefit would correspond to the need of the recipients, and not as in the provident fund, to the total of contributions paid by the worker and his employer. Since it is known that only a small proportion of workers become invalid or die after a relatively short period of membership, the pension scheme can undertake to pay these benefits out of the common fund. Thus all workers are insured against the occurrence of these contingencies after a period of a few years of pensionable employment. Even if very high contributions were charged by a provident fund - which would tend to exclude from membership low wage earners whose need for social protection is high the lack of a collective financing mechanism prevents it from quickly achieving social significance.

the

14. Another grave weakness of provident funds is the payment of benefits in form of single lump sums. This is socially unsatisfactory because there can be no guarantee that the sum will be wisely invested or retained in order to provide the substitute income both for the remainder of the worker's life and for his survivors. It is not reasonable to suppose that workers who have been accustomed to low wages throughout their working lives will necessarily have the competence to manage capital suas in the most profitable and secure way. The family obligations of the worker may also militate against his need to conserve the lump Sun as his main source of maintenance for the future. In contrast, pensions are payable periodically throughout the contingency concerned and undoubtedly constitute à much more secure and effective form of income protection than lump-sum payments.

15. On the inception of a provident fund or pension scheme, the group of persons of a relatively advanced age poses a similar problem to that of early deaths ΟΙ invalidity. The difference is that the need for social protection can be foreseen by all concerned, and necessarily is a consideration of governments when planning social security schemes. Whilst the provident fund can only repay the sums received, with interest on

attainment of the prescribed age, it is usual for the pension scheme to provide old-age pensions in respect of a short period of membership, possibly as little as three years.

The speed with which social protection of a satisfactory standard is provided is an important advantage of a collectively financed system and is also valuable in the impact it makes on the members and potential members of the social insurance scheme. The

cost of these

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