UNIVERSITY SUPERANNUATION

Otago Daily Times, Issue 25799, 21 March 1945, Page 6

UNIVERSITY SUPERANNUATION

Sir,—To those who take an interest in University affairs the article on the superannuation scheme published in last Friday’s issue was illuminating.- Most people have known in a vague way that the superannuation scheme was anomalous in its effects upon University teachers, but few can have realised that any contributor could be virtually robbed of a sum as great as £7600. This appears so fantastic that it might be supposed to be scarcely credible. Indeed, the position of the contributor whose case is cited is actually worse because social and national security taxes have to be paid on his whole income, including the portion taken as a contribution to the superannuation fund, thus increasing the actual cost to him of his contribution. As against this It may be suggested that the real cost of contributions to the fund is materially reduced through the income tax exemption for life insurance premiums, etc., limited to £l5O. In the case under review this is unlikely to provide any relief. The scheme, being purely a pension scheme, provides no cover against the early death or incapacity ol the contributor. He must therefore provide his own life Insurance cover which in most cases will absorb the exemplion of £l5O, leaving no exemption applicable to the superannuation contribution. It is interesting to note that out of a salary of £2OOO a contributor would have £1133 left after meeting income taxes and paying life insurance premiums of £l5O. On paying a further £l2O to the superannuation fund lie would be left with £lOl3. If there were no superannuation scheme he would be slightly better off with an income of £1750 after paying taxes on that income and the same insurance premiums. In a sense, therefore, his annua] contribution is costing £250, or one-eighth of his salary before allowing for taxes. Apart from this he pays another £250 in social and national security taxes. And what of the reward to be derived from such princely payments? Tresumably the benefit would be a pension of £3OO per annum, on which taxes W'ould be about £46 leaving £254 Under the social security scheme any taxpayer (assuming that he and his wife qualified for the full pension) would be entitled to a pension of £l6O. An additional reward of £BS per annum as a " beneficiary ” of the superannuation fund is obviously an absutd return for a considerably greater annual contribution made over a much longer period. A similar, though smaller, injustice affects most members of the Civil Service in that they have to contribute to a superannuation scheme and pay social security taxes, while the benefits receivable from their superannuation fund eliminate the benefits they would otherwise receive through social security. It would appear that the time has come when consideration should be given to the abolition of all these superannuation schemes or, at least, the making ’of participation in them optional Although the social security scheme offers little enough, no one’ receiving its benefits is likely to starve or suffer excessive hardship, and it should be left to the individual, if he wishes to secure greater benefits, to provide them for himself. Any superannuation scheme which cannot offer beneficiaries greater benefits than they can buy in the open market for the same money is not worthy to be called a superannuation scheme, and the sooner all schemes which do not satisfy this condition are abolished, the less will be the injustice done to the unwilling contributors.—l am, etc.. Graduate. Dunedin. March 20.