HEAVY LIABILITY

Southland Times, Issue 21836, 13 October 1932, Page 6

HEAVY LIABILITY

SUPERANNUATION FUNDS POLICY OF GOVERNMENT CONDEMNED MR HOLLAND’S CHARGES (From Our Parliamentary Reporter). Wellington, October 2. Condemnation of the Government’s policy in connection with superannuation funds was expressed by the Leader of the Opposition in the course of his speech on the financial debate in the House of Representatives this evening. Mr Holland said that the National Expenditure Commission had placed the total actuarial liability for the three superannuation funds at approximately £23,000,000. In view of the 'commission’s general unreliability none of these figures could be accepted without reservation, but the statement was probably as near to the truth as any other portion of the report. In 1929 the then actuary estimated the capital liability of the Public Service Superannuation Fund at £5,534,173 which was equal at 4 per cent, to the perpetual subsidy of £221,367 per annum. Mr G. Gostelow, the present actuary, estimated that in 1930 the Government’s liability was £7,871,439 and stated that the subsidy required for the year 193031, 1931-32 and 1932-33 was £332,000. The subsidy now being paid was £86,000 per annum or a yearly shortage of £246,000. The actuary stated that the Government’s liability was £5,559,200. The annual subsidy required was £214,000. The subsidy now being paid was £68,000, leaving a deficit of £146,000.

The actuary’s report on the Railways Fund had not yet been tabled, but it could be taken for granted that the position was the same as with the other funds. Under the provisions of the 1866 Act every officer was entitled to a retiring allowance equal to one month’s salary for each year of service. This was a lump payment and there were no contributions from members of the service. When the Superannuation Act was —'ssed the Government’s liability to pay a lump sum was converted into an annual payment to the superannuation fund. It was because of the antecedent liability that the Government undertook to subsidize the superannuation funds. The Act of 1908 provided that in January of each year the Minister of Finance should pay into the fund and out of the Consolidated Fund a sum of £20,000 together with such further amount, if any, as would be deemed in accordance with the report of the actuary to be required to meet the charges of the fund during the ensuing year. The Government had never honoured its obligations in this respect, and it had been pointed out by Mr Gostelow that the amount of the deficiency at the succeeding valuation would, all other things being equal, increase at compound interest since in addition to the shortage of capital the fund was deprived of interest which that capital would have earned during the valuation period. So long as default continued the position would continue to get worse. Mr Holland said that the commission proposed to free the State from it> responsibilities and load them on to the contributors. It was stated that the full amount that was required to straighten out the fund was apnroximate'ly £3,750,000. The deficiency, whatever it was, should be openly and honestly shown in every Budget. There was no doubt that in past years the Government had been recording surpluses where they never existed. It had also been stated that the Government had lent money in the fund out to big landowners at a lower rate of interest than could have been obtained. A Minister: No. Mr Holland said that money had been lent out at 5| per cent., which was a lower rate than could be obtained elsewhere