SUPERANNUATION.

Auckland Star, Volume LIX, Issue 254, 26 October 1928, Page 7

SUPERANNUATION.

PUBLIC SERVICE FUND.

subsidies nr akbeab.

£400,000 BEHIND NEEDS.

(By Telegraph—Special to "Star.")

WELLINGTON, this day.

An actuarial valuation of the liabilities of the Public Service Superannuation Fund shows that the annual subsidy from the Consolidated Fund is quite inadequate to meet the contingent and that the shortage in this respect since 1925 (when the subsidy of £125,000 was dropped to £86,000) is now £400,000.

The financial stability of the fund is, says the Government Actuary, dependent on a strong subsidy, and his estimate of its amount is made after computing the present value of existing pensions and prospective benefits, less the present value of members' contributions. There are nearly 17,000 members of this fund, paying 5 per cent of their salaries as contributions, if they join before the age of thirty. The fund's income from this source is levied from an annual salary bill of £4,374,000, and amounts to about £247,000. Apart from the State subsidy, the other main source of income is from investments, and oa this point the Actuary presents a satisfactory conclusion, the interest-earning rate having risen by one-quarter per cent in the three years covered by the examination, being now £5 11/7 per cent. High Salary Pensions. The report refers to the effect on the Fund of retirements of high-salaried officers. Pensions are based on the salary of the final three years, though the income has been derived over the pensioner's complete service, covering ; periods of much lower salary. "The corelation, therefore, between the values of contributions and pensions is so low as to be almost non-existent. This is not confined to the Public Service Fund, but is common to nearly all pension schemes based on terminal salary, and supplies one of the reasons why an employer's subsidy to such a scheme »s essential. In individual cases large salary increases during the latter period of service give pensions out of all proportion to contributions, but they are too few in number to be of material moment as regards subsidy, and even this could be minimised if desired, by extending the final period on which pensions are based from three, to say, five or seven years." Recommended Subsidy. The report refers to what it calls the somewhat disturbing fact that during the three years the outgo for benefits approximately equals the contributions and Government subsidy, and is about 70 per cent of the gross income. It is recommended that for three years the annual State subsidy should be £285,000 and the Actuary points out that this should be backdated to 1927, and if there are any arrears, interest at 4* per cent should be paid on any late paid portion. Subsidies will be necessary every year, and as a permanent arrangement the Actuary recommends 8 per cent of the salary roll, equalling £350,000 per annum.