CIVIL SERVICE.

Auckland Star, Volume LXIII, Issue 182, 3 August 1932, Page 5

CIVIL SERVICE.

"CUT" IN PENSIONS?

SUPERANNUATION FUND

PRECARIOUS POSITION.

LEGISLATION NEXT SESSION.

(From A Special Correspondent.)

WELLINGTON, this clay

Surprise and some resentment are expressed here at a report that it is the intention of the Government to extend the term of service and reduce the pensions of civil servants.

It is stated that preparations are nowbeing made to alter the Public Service Act next session and that the principal provisions will be to extend the term of compulsory service to 40 years, or 00 years of age, in place of the existing conditions, which enable men to retire after 35 years with the consent of the Minister.

In addition, there is a belief that the Government intends to cut all pensions granted by 20 per cent.

It is well known th&t Ihe fund is in a precarious position. The fund has never been really on a safe basis, for two reasons. One was the fact that when it was begun Sir Joseph Ward determined to credit all Government servants with the amount of service which thev already had achieved, and the other was the fact that"the Government never paid in its proper contributions to make the fund actuarily sound. This fact was pointed out by Sir Joseph Ward in presenting his Budget of 1920, when he declared (hat the position was "even worse than he had thought," and that the shortage on current pensions alone, which should have been covered by subsidies in the past, was £2,000,000. The pensions, of course, have been paid, but out of the contributions of the officers at present in the service. These contributions should have been accumulating against the pensions of men still on the active list.

To Stop the Drift. The failure to pay the subsidies has been cumulative in effect, and the result is that a large and permanent increase in subsidies and an additional charge on taxation are required now to rehabilitate the funds and maintain them on a sound basis. This course, however, the financial pressure of to-day makes utterly impossible, and the course foreshadowed in its stead is that of pensions reductions, with contributions maintained at their present level, in order to provide that margin which it Jβ held no longer possible to obtain from the Consolidated Fund. That is to say that the Government has determined to stop the drift in the funds and to do it with a minimum burden of general taxation.

The whole issue is so complicated and far-reaching that although the danger was pointed out in 1929 no Government has been willing or able to pursue the matter. Though the question is of outstanding importance not only to the Civil Service but to the taxpayers, there has been no thorough investigation of the 6ituation until recently.

Slipping DownhilL Payments by public servants 'for the benefits of superannuation range from 5 to 7 per cent of their salaries. The latest available figures (for the year 1930-31) show that the accumulated fund stood at £2,917,000, and that interest received totalled £102,888 during the year. There were 18,197 contributors, who paid in £270,316, while the value of retiring and other allowances payable stood at £383,823. But the real position of the fund is not revealed by these figures. The fund is slipping rapidly downhill. Figures for two years past will show this. In 1929 1665 new contributors joined the fund, and their annual contributions amounted to £11,737. I* the same year pensions totalling £32,425 per annum were granted. In 1930 there were 930 new contributors whose contributions reached £8158 per year. In 1930 new pensions totalling £29,618 annually were approved. The liabilities of the fund, in other words, exceed its new income by over 200 per cent. It is to reach some sort of stability that the Government is striving. The need for a Government subsidy is overwhelming, but that subsidy would have to run into millions of pevnds, and such a vote ie not possible. Therefore it is understood the Government is takin<* the course of extending the retiring age and reducing the benefits paid, until such a time as the present crisis has paseed.