SUPERANNUATION.

Auckland Star, Volume LXII, Issue 233, 1 October 1932, Page 11

SUPERANNUATION.

FUNDS IN PRECARIOUS STATE GOVERNMENT'S LIABILITY. HUGE ACTUARIAL DEFICIT. Trenchant criticism of the state of the superannuation funds—public service, teachers, and railway employees—is made by the National Economy Commission. The funds started out with initial deficiencies, liability for which the Government unwisely postponed. The actuarial liability of the Government in respect of the three funds today was approximately £23,000,000. Points Emphasised. The Commission emphasises the following points:— "(1) That any alteration in the basis of calculation of future annuities should bo accompanied by a review of existing annuities. "(2) That any relief obtained by the funds as a result of the foregoing must not bo taken as justifying a reduction in the subsidies payable by the Government to the three funds. "(3) That tho benefit of additional contributions from trading Departments herein recommended should accrue directly to the funds concerned." Referring to the superannuation schemes of local authorities and business firms which are arranged through tho National Provident Fund, the report says it is a striking commentary that the Government subsidy to the National Provident Fund is sufficient to maintain the solvency of that fund, and thus we see tho superannuation funds of the State drifting into a hopeless position, due to insufficient Government subsidies in relation to the retirement conditions, whilo the obligations of the State in respect of subsidy to the National Provident Fund, which includes the superannuation schemes of local authorities and business firms, are met in full. "Wβ are fully aware of the gravity of these proposals. They reflect the belief that the sums involved are so enormous that the State in the past has failed, and is now unable to face the position, and must now divest itself of a portion of its liability to its own servants; but we believe that the public servants and present annuitants will accept a compromise in view of the very serious financial position of the Dominion. With a full sense of responsibility, we urge that payments be never again allowed to fall into arrears. Whatever adjustments arc made should be final and bear proper relation to tho ability of the funds to carry their liability. A second failure of the State to meet its obligations would shatter all faith in Government superannuation schemes." The Employees' Share. The Commission points out that the common belief that it was only by the generosity of the State that the public servants were able to enjoy tlie benefits of superannuation schemes was a fallacy. Up to March 31, 1931, public servants, teachers and railway employees had contributed £8,940,000, compared with the £4,083,000 contributed by the State. Regarding the Public Service Fund tho report finds that its adverse position j to-day was largely due to the policy of early retirements. The potential liabilities of the fund had been added to from time to time without provision to meet those additional liabilities. The present actuarial deficiency in tho fund was a sum exceeding £8,000,000. There had been a progressive increase in tho actuarial deficiency of the Teachers Superannuation Fund, and it now stood at approximately £0,000,00. The actuarial deficiency of the Railways Superannuation Fund was approximately £0,000,000. The.funds had been unwisely used in times of stress, as a means of facilitating retrenchment, and the conditions of retirement had been liberalised from time to time with disastrous results.