STATE PENSIONS

Dominion, Volume 25, Issue 266, 5 August 1932, Page 11

STATE PENSIONS

Position Becomes Worse DEPLETED FUNDS Overhaul Imminent CONTRIBUTORS CONCERNED Ths serious position into which the State superannuation funds have drifted during recent years is causing considerable apprehension not only in Government circles, but also among members of the Public Service, who are contributors to either the Public Service Superannuation Fund, the Government Railways Fund, or the Teachers’ Fund.

It is understood that a considerable portion of the second part of the National Expediture Commission's report, which is now in the hands of Cabinet Ministers, is devoted to a searching inquiry into the operations of the various funds, and it is stated authoritatively that the whole problem of superannuation will have to be reviewed almost immediately by the Government if the funds are to be kept solvent. Action has been delayed from year to year, but legislation will probably be brought down next session to enforce widespread changes in the conditions attaching to pensions of retired Public Servants.

By law, an annual payment of £86,000 is made by the State to the Public Service superannuation fund, which alone has over 18,000 contributors, and. an investigation of the fund is carried out every three years by the Govern-' ment actuary, who reports as to the increased amount to be paid by the State to the fund to meet liabilities falling due for each of the succeeding three years. It was originally intended that each liability on the part of the State should be discharged when it accrued. Extent of Shortage. Actually, however, the State has largely failed to meet these liabilities over and above the £86,000 a year, and at March 31, 1927, the last date for which the Government actuary’s figures can be given, the accumulated shortage of the State’s payments Into this fund was £804,000, and the shortage accumulated at 4i per cent, to March 31, 1928, was £1,060,325. » There is a belief that retiring pensions are paid to Public Servants largely out of the State subsidy, but at the present time it is shown that, as far as the public Service superannuation fund is concerned, the contributors are bearing almost the whole of the burden. As the result of the failure of the Government to pay in its subsidies, outgoings are rapidly, overtaking income. In 1909, the year after the fund was established, the total income of this fund was £108,339, and the payments amounted to £25,272. There was £429 of income for every £lOO of expenditure. In 1930-31, according to figures recently compiled, the total income of this fund was £537,286, and the total payments £439,190. There was in that year only £122 of Income for every £lOO of expenditure.

A substantial portion of existing pensions Is being paid out of the actuarial reserve pertaining to existing contri-i butors. This means that the fundla using part of Its capital to pay. pensions each year, and it Is admit* ted by those connected with the fund, that this process cannot go on Indefinitely. It is stated that an over* haul of the funds generally cannot be delayed, for the other funds are also admitted to be In a serious position. Suggested Revisions. ' Although statements have been made that pensions will be reduced considerably and that steps will be taken to reduce the maximum received to £3OO Irrespective of whether recipients came under the pensions scheme before 1903 or not, It is thought likely that an effort will first of all be made to readjust conditions relative to retirement and to Abe system of contribution. Under the original scheme a male contributor to the Public Service Superannuation Fund was entitled to a retiring allowance on reaching 65 or after 40 years’ service. A woman contributor had rights after 30 years’ service or on reaching the age of 55, Power has since been taken for the lowering of the age or service qualifications, and this has been availed of extensively recently In periods of retrenchment for the purpose of retiring officers who have not qualified on the original basis for the receipt of retiring allowances. In consequence, the fund has suffered considerably-, for allowances have become payable earlier and the fund has been deprived of contributions and in* vestment money. It is considered by many that the State subsidy is to bo regarded as a legitimate liability to ths extent to which the fund has suffered these losses. Burden on Contributors.

On the establishment of the fund In 1908, the Act provided that all continuous service before then should count for superannuation without payment by contributors. It Is contended that the fund is to-day being burdened with heavy payments to such pensioners, for those who joined the Public Service after 1908 had no option but to join the fund, and they are stated to be bearing the burden of pensions being paid to men who have retired without ,aying in adequate amounts to entitle them on the present basis of calculation to the pensions they are getting.

It is maintained by contributors that before the obligations assumed by the State can be considered a subsidy in the true sense of the word, certain liabilities should be discharged. These include (a) the direct liability of the State to “compensation officers” who wei\ given benefits when the fund was established, and accrued compensation for whom up to 1931 \ amounted to £700.006, (b) the past services of officers, who, by Act, were admitted to membership on the fund's establishment without contributions in respect of past services, (c) the use of the fund for retrenchment purposes, and (d) the discharge of payments from the fund-as cost of living bonuses to widows and young children of deceased contributors.