PUBLIC SERVANTS

Southland Times, Issue 21650, 11 March 1932, Page 3

PUBLIC SERVANTS

SUPERANNUATION FUNDS FACT'S, AND FARMERS’ UNION FANCIES. To the Editor. I Sir, —So many misleading and inaccurate statements have appeared in your valuable paper recently, and in other leading journals of the Dominion, all of them being apparently part of a concerted attack made by the farming interests on the allegedly sheltered paths of the Public Service, that L venture to write giving the facts of the case. ■ Those who desire further information, or who wish tp verify anything herein, will find full information in the Official Year-Book, the annual reports presented to Parliament by the Superannuation Board, and in the Synopsis of the Law and Procedure Relating to the Public Service Superannuation Fund published by the authority of the boat'd in 192-1. I regret the appalling length of my letter, but 1 have endeavoured to be as pithy as possible. The Public Service Superannuation Fund, administered in the interests of the general Public Service, the Post and Telegraph Department, and the Police Force, dates from January 1, 1908. The Railway Department and the teachers have each their fund, and no doubt most of what follows applies with equal force to those funds. The fund is administered by a Board of Departmental Heads. The salaries and alt other expenses of administration are ap propriated by Parliament, but paid out of the fund, and, therefore, cost the country nothing. The revenue of the fund is made up of contributions from employees, interest on investments, fines imposed on contributors, and Government subsidy when this latter is forthcoming. Contributors pay monthly according to their age on joining the fund, the rate of contribution varying from five to ten per centum of salary received. The fund was intended to provide that contributors should after forty years’ service be eligible to retire on a pension of one-sixtieth of the average salary received during the last three years of service for each year of service, with a maximum pension of two-thirds of that salary, and the scheme was certified to as being actuarially sound. Those who joined the fund prior to December 24, 1909, are eligible for pensions as above. Thise joining since that date are limited in pension to £3OO a year, though they are required to contribute exactly the same proportion of salary as those not sub ject to this restriction. Should an officer be retired medically unfit, he receives pension as above aocording to service. Should he resign from the service he gets his contributions back and no more. Provision was at one time made for interest payments to be added in some cases, but I have never heard of one lucky enough to get it, and now one’s contributions are actually mulcted, even though the retirement is not of one’s own seeking. No outside superannuation scheme would tolerate such a grave injustice, but they are not at the mercy of Parliament as is the Public Service Superannuation Fund. Should a contributor die, whether before or after retirement, his widow gets only £3l a year (until 1925 it was only £18!) and if he has children the widow receives £26 a year for each child under fourteen (until 1925 it was only £13!). Membership of the fund was optional on the part of those in the service on January 1, 1908, but compulsory on those joining the Service since that date. Any Parliamentary restriction of the fund is therefore neither more nor less than breaking faith with those in the Service on January 1, 1908, and for those others who had to contribute to the fund willy-nilly, Parliamentary interference is sheer tyranny masquerading as democratic government. Such is the outline of the provisions of the Superannuation Fund as it applies to cadets and young officers joining the fund since its inception. Were the contributors composed entirely of such, or were their contributions earmarked and allowed to' accumulate so as to pay their pensions in due course, the fund would be entirely selfsupporting, actuarially sound, and the Gov. ernment, would not have to contribute one penny by way of subsidy. The solvency of the fund, however, is very seriously affected by a number of circumstances over which neither the board nor the contributors have any control whatsoever. These unaccountable factors are, of course, political. They tire:

(DA Public Servant appointed under the Civil Service Act, 1858, or the Civil Service Act, 1860, was entitled on retirement at the prescribed age to a pension as above, without being required to pay one pennypiece by way of contribution. These gener ous Acts, which were copied from lni[>erial Statutes, lasted till 1886, in which year a compulsory deduction scheme came into force —the forerunner of the Superannuation Fund—but the liabilities of the Government- contracted under the previous twenty-eight years still remained, and became a problem for Government in the first decade of this century. About the time the fund started in 1998, large numbers of men were due for retirement on pensions under the old Acts of '5B and '66, and the Government was faced with the question of finding the money from the Consolidated Fund. It, therefore, established the fund as above from January 1, 1908, and charged the fund with the burden of paying out hundreds of pensions, many of them large ones, for which the fund had not received a single shilling by way of contribution. The Treasury’s difficulty was solved by temporizing thus, but the Fund was crippled form the very start, and ever since then the Public Service has had to apologize for the fund whenever militant farmers express impatience at its everlasting insolvency. To .compensate the Fund for this terrible drain on its resources from the very outset, the Government agreed to subsidize the Fund from time to time, and the Act provided that the Actuary should submit an analysis of the Fund triennially, in order to determine how much is due from the Government by way of subsidy, and this he has regularly done. Unfortunately, however, there is nothing in the Act or in any other Statute to provide that the Government shall pay what is necessary or indeed pay anything at all. Parliament has to consent in every case, and that is where the Farmers Union has been able to prove that it is a force in the land. The Government has every year been faithfully advised of the true position, but has never honoured its original agreement by paying over the full subsidy required. The report presented to Parliament for 1928 (l-H-26a) shows that up till then the Government subsidies were short by .£804,000 of what the Actuary had certified as necessary to keep the Fund solvent after paying out unearned pensions. To this amount must be added the loss of interest

on these unpaid subsidies, making the total loss to the Fund £1,060,325 up to 1928! Tire Actuary reported that year that the Fund has so far saved the Consolidated Fund £1,376,500 by way of pensions paid out but not earned—as above! He also said that "it is somewhat disturbing to note that the outgo for benefits during the triennium approximately equals the total of the contribution income and the Government subsidy, and is about 70 per cent, of the combined income from contribution, interest, and Government subsidy. This is not what might be expected in a young superannuation fund, since the liabilities are essentially of a deferred nature, and consequently funds should at this stage be increasing very rapidly.” Instead of which, even in 1928 income and outgo were get-, ting dangerously close to one another. The position is no doubt very much worse by 1932. (2) In the slump of 1921-22 the Government retired many officers at 35 years service or thereabouts, Parliament cheerfully

giving the necessary authority. This was * using the Fund quite unwarrantably for retrenchment purposes. Officers were being forced to accept pensions before their time, and the Fund had to forgo anything up to five years of contributions from these men. Such an emergency measure should at least have had the compensation of extra subsidies during the good years which suc- ■ ceeded, but this was never done. (2) Last year the Government retired further batches of officers before their

time, this time making the retiring age even lower than before —see sec. 14 of the Finance Act 1931 and the Finance Act (No. 4) 1931, which modified the retiring age by a further five years. The strain on the Fund, if now bearable which is highly problematical, will certainly be unbearable five years hence. It will be seen from the above that the Fund is most probably in a very parlous condition as a result of continual political interference, so much so that the Government would appear to have recently proposed to limit all pensions to £3OO a year. If this be true, we have as glaring a breach of faith as has ever been made by any Government in the world, but it is to be hoped that the Privy Council will not permit such cold blooded repudiation of a contract. On January 1, 1908, contributors were invited to join the Fund in order to receive a stipulated pension according to salary and service. Many officers have also been retired on pensions exceeding £3OO, and have arranged their households accordingly. If the State can now repudiate its part of the contract whilst holding the original contributors to theirs, there is an end to honour in Government.

It is quite a usual thing for those who are outside the Service —especially members of Farmers Unions —to talk as though the Government subsidizes members’ contributions because these contributions are not great enough to pay their pensions. I have shown that this is not so in the case of those who pay into the Fund over a number of years. Pensions are earned. Were it- not for the Fund having been saddled at the outset as shown in (1) without the proper subsidy being duly forthcoming, and had not the Fund been used by Parliament for retrenchment purposes, the Fund would be solvent and self-supporting. It must always be remembered, too, that a Public Servant is not entitled to an Old Age Pension, nor is his widow eligible for the benefits of the Widows’ Pension Act. Ordinary members of the community are entitled to the benefits of these Acts but pay nothing directly for them. Like them, the Public Servant has the privilege of paying indirectly, but gets nothing in return. The Public Servant has to pay for his pension—perhaps even a tenth of his salary goes thus without his permission being sought. The saving to the Consolidated Fund on the score of Old Age Pensions saved to the Government, must be considerable, and should entitle the Fund to a subsidy. It must also be borne in mind that the general public has also its superannuation fund, the National Provident Fund. The benefits under this Fund are guaranteed to the contributor by the State, and the Government subsidized it every year to the extent of one-fourth of its contribution in-

come, but last year this subsidy was reduced to one-fifth. This amount was always payable by permanent appropriation, and, therefore, the Fund has always received it, and the Farmers Unions were probably no wiser—a striking difference from the Public Service Funds. Public Service Associations have always had to go to the Government, can in hand, to urge payment of that subsidy which the Government agreed originally to pay. but success was never met with to any extent.

Lastly, Superannuation Funds are not peculiar to the Public Service. Many business firms also have them, and the employing firm is always required to subsidize the fund if it has not already shouldered the whole responsibility .for the. pension liability. Employers seem to think such payment on their part is quite worth while, for it ensures satisfied employees. The Imperial Government to this day pays superannuation benefits almost identical, with those receivable by New Zealand Public Servants, but does not charge its employees one shilling for the privilege. I can only conclude that there are no Farmers Unions there, or that English Unions display more intelligence than New Zealand ones. In view of the foregoing, it cannot be denied that State Servants in this country are not receiving something for nothing in the matter of their pensions, and that the attitude of the typical Farmers Union to this question is characterized by an impertinence which can only be excused by their ignorance of the true facts of the case. I am etc., FACTS APE STUBBORN THINGS.