Setting Contribution Rates

Corporate entities around the world are turning to defined contribution arrangements as the answer to post-retirement benefit provision for employees. Pension provision in many coun­tries is an important part of the remuneration package, partly because of its tax efficiency (many governments provide tax incentives for employers to provide non-state pension plans) and partly because of its role in recruiting and retaining high quality employees.

- Companies are beginning to recognize the long-term nature of pension liabilities and the uncertainty of the ultimate cost of defined benefit schemes.

- The legislation surrounding them has become more complex and costly as governments seek to increase member security.

- Working patterns are changing, with employees no longer remaining with one company for life. Defined contribution schemes can offer more flexibility.

If the main reason for provision of occupational pension schemes is to attract and retain high quality staff, companies will be interested in ensuring that the design of the scheme fits with their strategy, be it:

- Provision of a minimum level of benefit;

- Provision of an affordable benefit in terms of employer contributions;

- Encouragement for employees to contribute via a matching arrangement;

- Reward to high achievers via an increasing scale by seniority within the organization, or the inclusion of bonuses in the salary on which contributions are calculated;

- Reward for loyalty via a service-related contribution scale.

Employers and their actuaries therefore discuss a contribution rate scale that can be quite complex, in some cases reliant on age, service, job level and level of employee contributions. The other important factors are, of course, the level of contributions that competitors in the same industry are making and what rates are actually affordable.

1. corporate entity – корпорация, юридическое лицо

2. contribution rates – ставки отчислений, взносов

3. defined contribution arrangements – правила по установлению ставок взносов и отчислений

4. post-retirement benefit provision – пенсионное обеспечение

5. the remuneration package – программа материального вознаграждения

6. tax incentives – налоговые стимулы

7. pension liabilities – пенсионные обязательства (обязательства по выплате пенсий)

8.... governments seek to increase member security – … правительства пытаются усилить коллективную безопасность

9.... the scheme fits with their strategy – … программа согласуется с их стратегией

10. an affordable benefit – приемлемый размер пособия

11. via a matching arrangement – посредством равноценных мер

12. reward to high achievers – вознаграждение тем, кто успешно работает

13. reward for loyalty – вознаграждение за лояльность (верность)

14. a contribution rate scale – шкала ставок отчислений, взносов

15. actuary – актуарий (специалист по страховым вопросам)

16. reliant on … – зависящий от …

2) Answer the questions on the microtext «Setting Contribution Rates» (ответьте на вопросы по тексту «Установление ставок отчислений):

1. What solution do corporate entities find to problems of post-retirement benefit provision for employees?

2. Why is the pension provision in many countries an important part of the remuneration package?

3. What kind of design of the occupational pension scheme are the companies interested in?

4. What factors are considered by employers and their actuaries when discussing a contribution rate scale?

Section III. Retirement Pension (Пенсия по старости)