SUPERANNUATION FUNDS

Otago Daily Times, Issue 22125, 1 December 1933, Page 10

SUPERANNUATION FUNDS

A SERIOUS POSITION NEED FOR SACRIFICES STATEMENT BY MR COATES (From Our Parliamentary Reporter.) WELLINGTON, November 30. The necessity for sacrifices being made by both contributors and annuitants in order to place the State superannuation funds on a sound basis was stressed by the Minister of Finance (Mr J. G. Coates) in an address to the conference of representatives of the different State organisations which had been called together to discuss ways and means of stabilising the funds. Mr Coates referred to the findings of the National Expenditure Commission, and said if effect were given to the proposals a number of the existing annuitants would require to accept smaller pensions. The present contributors would have to submit to a general tightening up of the conditions, particularly in respect of the early retirement provisions, and the Government would need to subsidise the funds to a larger extent than at present. In connection with the proposed £ for £ subsidy, said the Minister, the amount now paid to the railway fund, £170,000, exceeded what would he payable under that subsidy. The position in connection with the teachers’ fund and the public service fund was that an additional amount of £210,000 would he required under the £ for £ scheme. A Bill embodying practically in toto the recommendations of the National Expenditure Commission was drafted last session and introduced iilto the House. The Bill was referred to a Select Committee for a report. The committee eventually recommended that it be not allowed to proceed. The objections raised to the Bill were mainly from members of the affected organisations. They contended that the alteration would be a moral breach of faith or contract. Whether there was any such moral breach of faith or not —and the present instability of the funds would not be laid at the door of the present or any other Government in particular—the contributors and annuitants must face the facts however unpalatable they might be and realise that financial considerations would not allow of the funds being stabilised on the basis of the present benefits and privileges, particularly in regard to early retirements, and if the funds were to be made solvent sacrifices must be made by the contributors and annuitants. Alternative proposals made to the committee for stabilising the funds without any diminution of the benefits to the contributors and annuitants involved the issue of Government stock to the amount of approximately £4,000,000, and were quite unacceptable under the present conditions. Emphasising the serious nature of the position Mr Coates said that the income of the teachers’ fund for the year ended January, 1933, was £217,881, and the outgoings £324,405. The fund was forced to realise £92,000 of the Government securities, and in addition there had been a fall of approximately £16,000 in local body debentures and mortgages. “ It is apparent that this cannot go on for very, long,” said the Minister, “as the bulk of the funds are now in mortgage securities which are practically unrealisable at present. The position is so acute that in order to avoid selling securities on the open market the fund, although only portion of the year has elapsed, has already drawn upon the Treasury to the full extent of the Government subsidy of £43,000, which normally would not be payable until January 31, 1934. “In regard to the other funds the assets of the railway fund last year were diminished by £120,928. The public service fund last year was not forced to realise any of its assets, largely owing to the fact that it received unexpected assistance to the extent of £54,000 by way of an aditional subsidy on con-, tributions and interest. It is also well to realise that the finances of the funds are really worse than is disclosed by the above figures, which assume that interest due and outstanding, amounting to £108,700, will be collected in full. “ Briefly, the position can be thus summarised: (a) That the funds are at present actuarially unsound and some definite steps must be taken to deal with the position; (b) that it is beyond the financial resources of the State to put the funds on a sound financial basis and still give contributors the same rights, liberal conditions and privileges as they have at present; (c) that the funds can be put on a sound financial basis and the resources of the State should be made sufficient to provide the necessary increased subsidy if the contributors and annuitants will accept the lesser benefits recommended by the National Expenditure Commission and embodied in last year’s Bill.”