STATE SUPERANNUATION

New Zealand Herald, Volume LXIX, Issue 21296, 24 September 1932, Page 12

STATE SUPERANNUATION

REPORT OF ACTUARY SHORTAGE IN SUBSIDIES EARLIER RETIREMENTS SEIRIOUS ' EFFECT ON POSITION [BY TELEGRAPH —SPECIAL REPORTER] WELLINGTON, Friday Tn view of contemplated changes in •ihe Superannuation Act during the present session, the triennial actuarial examination of the i Public Service Superannuation Fund, tabled in the House of Representatives to-day, possesses unusual interest. The fund embraces all permanent public servants except railway employees and teachers. The report was submitted by Mr. C. Gostelow, the. Government actuary, who expressed the opinion that any additional financial strain on the fund, due to policy measures of the Government, should bo a charge on the Consolidated Fund by ;way of special subsidy. The report shows that tho funds at March 31,' 1930, stood at £2,882,504, compared with £2,493,790 at March 31, 1927. On the income side, tho chief item requiring comment was the Government subsidy, compared with the annual subsidies, reported a>s necessary in the last actuarial report Three Years' Subsidies The subsidies paid in during tho three years exhibited a shortage of approximately £500,000, apart from loss of interest. thereon Commenting on the outgoings, the report states that retiring allowances aro increasing, and will continue to do so for many years' to come. The outgoings for benefits during the triennium exceed the ' total of contribution income and Government subsidy, and are about 75 per cent of the combined incomes from contributions, interest and Government subsidy. These high percentages are somewhat disturbing, since the liabilities are essentially of a deferred nature, and consequently the funds' should be increasing rapidly ■while the fund is young and membership is expanding. Retirements were again heavy between the ages of 50 and 59, continues the report, and as attention has been called in the last two actuarial reports to this feature, and to the serious financial effect on the fund of its continuance, the practice of retiring, irrespective of age, a considerable number of officers with from 35 to 40 years' service, must, for valuation purposes, be regarded as a permanent feature of the fund. Effect on Other Rates The persistence of these heavy rates of retirement between the ages of 5u and 59 was accompanied by a flattening of rates at ages over bO, and this appears to suggest that in future officers over the age of 60, retained in the service, will be largely composed of those with only a short seryice to their credit. Continuing, the report says: "The valuation statement shows a State liability of £7,871,439, as compared with £6,659,770 at; the last valuation, giving an increase of £1,211,669. This increase is mainly due to the accumulation of interest of that part of the State's liability which is unprovided for and to the number of retirements of comparatively young officers with long service being in excess of valuation assumptions. "There appears to be a popular impression that in the case of officers retired after 35 years' service the fund is fully compensated by th& fact that the pension is based on thirty-five-sixtieths of the salary, instead of the maximum of forty-sixtieths. Actually, the net liability to the fund in respect of physically fit officers with 35 years' service is, on an average, at least 30 per cent in excess of the net liability in respect of the same officer for jfull pension after completing <0 years. Redeeming the Deficiency "There is a shortage in the fund to interest income, at per cent, of £354,215. If any less annual sum than that is paid in by the State as subsidy, it follows that . the total deficiency will increase." Mr. Gostelow said that to redeem the deficiency more rapidly, a higher subsidy could be fixed, or, altert&iively, the fund could be strengthened by suitable amendments to the Superannuation Act. The actuary also suggests the elimination of all the existing powers of extending provisions of the Act'to provide for early retirements. Such power appeared in the past to have been wrongfully regarded by contributors as options to retire with the Minister's .consent, but it yras clearly designed to cover only exceptional cases.