HEAVY LIABILITY

Manawatu Standard, Volume LII, Issue 268, 12 October 1932, Page 5

HEAVY LIABILITY

POSITION OF STATE. TEACHERS’ SUPERANNUATION FUND. WELLINGTON,- Oct. 12. A state liability of £5,659,202 toward the Teachers’ Superannuation Fund is disclosed in the triennial report of the Government Actuary, Mr O. Gostelow, presented in the House of Representatives yesterday. The liability at the previous valuation in 1927 was £4,647,798, so that the increase in three years- has been £911,404.

It is explained that the increase is mainly duo to the accumulation at interest of that part of the State’s liability which is unprovided for, and to the number of retirements of comparatively young teachers w T ith long service being in excess of the valuation assumption's. 6

“As regards the first-mentioned source of valuation loss,” says the report, “it is scarcely necessary to point out that, if a fund is in deficiency at one valuation, the amount of the deficiency at the -succeeding valuation will, all other things being equal, increase at compound interest, since, in addition to tho shortage in the capital, tho fund is deprived of the interest which that capital would have earned during the valuation period. “The latter source of loss is selfevident in the case of those teachers who are retired, irrespective of age, after completing the maximum service .that may he counted for pension, not only from the greater number of years during which the superannuation fund is called on to pay pensions, hut also from tho loss of contribution income until tho normal retiring age.” NUMBER OF RECIPIENTS.

The report states the number of pensioners on the fund at January 1, 1930, was 1231. The pensions drawn amounted to £218,109 annually, exclusive of 300 pensions, amounting to £8893 annually, granted to widows and children of deceased members. The number of contributors was 9614, writhe aggregate salaries amounting to £2,613,078, and they paid contributions amounting to £140,844 annually. The amount of the Government subsidy was £204,000 which, compared with the amount reported as necessary in the last actuarial report, exhibited a shortage of £315,000, apart from the loss of interest.

Outgoings for benefits exceeded 110 per cent! of tho'total of the contribution income, and the Government subsidy, and were more than 85 per cent, of the combined income from contributions, interest and Government subsidy, compared with 90 percent, and 70 per cent, respectively at the previous valuation. Such high percentages were somewhat disturbing, since the liabilities were essentially of a deferred nature, and, consequently, the funds should ho increased rapidly while the fund was young and the membership was expanding.

“I would bo lacking in my responsibility if 1 did not enunciate the general principle that no additional financial strain should he imposed on the fund by policy measures of the Government,” concludes Mr Gostelow. “In tho South African public service superannuation scheme, if an officer is forced to retire on pension due to a retrenchment scheme or otter policy measure, all pension payments up to the date of his attaining, the normal pension age are paid out of public revenue, and not put of the superannuation fund.

“It is scarcely possible under present financial conditions for the Consolidated Fund to assume any such responsibility, and the only sound alternative in the event of any departure from what might be termed the superannuation fund’s fundamental obligations to the contributors is to prevent any increase in its liabilities by'granting pensions that are the actuarial equivalents of the pensions that would normally be received at tire statutory retiring ages, having regard to the contributions payable in the meantime. The Commonwealth of Australia safeguards its public service superannuation fund; by fixing 65 as the normal pension age. with provision that if any officer is retired after 60 either compulsorily or of his own wrish, lie is granted a reduced pension, actuarially calculated.”