It has long been recognized by statute and by general consent that the main purpose of a pension scheme is the provision of annuities for employees on their retirement and for the dependants of employees who die either in service or after retirement. In recent years, however, the provision of lump-sum benefits in addition to annuities has become widespread; in national and local government service, and in some of the public boards, superannuation arrangements include the provision of lump sums on a substantial scale. In industry and commerce, the advantages of tax-free lump sums have been vigorously sold, with considerable success, by brokers specializing in pension-scheme business.

The objects of this paper are to place such claims in perspective and to explain in broad terms the various methods by which lump-sum benefits may be provided. Reference will be made to insured and to privately administered schemes, but the detailed provisions of trust deeds and insurance contracts are not within the scope of this paper.