SUPERANNUATION

Southland Times, Issue 22187, 1 December 1933, Page 8

SUPERANNUATION

GOVERNMENT FUNDS SERIOUS POSITION REVEALED NEED FOR SACRIFICES (Per United Press Association.) 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 I inance, the Rt. Hon. J. G. Coates, in an address to the conference of representatives of different State organizations which has been called together to discuss ways and means of stabilizing the funds. Mr Coates referred to the findings of the National Expenditure Commission and said that if effect were given to the proposals, a number of the existing annuitants would require to accept smaller pensions; present contributors would have to submit to a general tightening up of conditions, particularly in respect of the early retirement provisions and the Government would need to subsidize the funds to a larger extent than at present. In connection with the proposed pound for pound subsidy, the amount now paid to the Railway Fund, £170,000, exceeded what would be 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 be required under the pound for pound scheme. Bill embodying practically in toto the recommendations of the National Expenditure Commission was drafted last session and introduced into the House. The Bill was referred to a Select Committee for report. The Committee eventually recommended that it be not allowed to proceed. The objections raised to the Bill were mainly from members of affected organizations. 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 cannot be laid at the door of the present or any other Government in particular,” contributors and annuitants must face the facts, however unpalatable they may be and realize that financial considerations will not allow of the funds being stabilized on a basis of the present benefits and privileges, particularly in regard to early retirements, and if the funds are to be made solvent, sacrifices«must be made by the contributors and annuitants. Alternative proposals made to the Committee for stabilizing the funds without any diminution of benefits to the contributors and annuitants involved the issue of Government stock to the amount of approximately £4,000,000 and was quite unacceptable under the present conditions. Emphasizing the serious nature of the position, Mr Coates said that as an example the income of the Teachers’ Fund for the year ended January, 1933, was £217,881 and outgoings £324,405. The fund was forced to realize £92,000 of Government securities and in addition there had been a fall of approximately £16,000 in local body debentures and mortgages. “It is apparent this cannot go on for ver.', long, as the bulk of the funds are now in mortgage securities which are practically unrealizable,” said Mr Coates. “At present the position is so acute that in order to avoid selling securities on the open market, the fund, although only a 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 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 realize any of its assets, largely owing to the fact that it received unexpected assistance to the extent of £54,000 by way of additional subsidy on contributions and interest. It is also well to realize that the finances of the funds are really worse than has been 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 summarized:

(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 to give contributors the same rights, liberal conditions and privileges 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 contributors and annuitants will accept the lesser benefits recommended by the National Expenditure Commission and embodied in last year’s Bill.”