SUPERANNUATION FUNDS

Timaru Herald, Volume CXXXVII, Issue 19661, 1 December 1933, Page 10

SUPERANNUATION FUNDS

FINANCIAL STATE SERIOUS “SACRIFICES MUST BE MADE” Bv Telegraph—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 emphasised by the Minister Finance, the Rt. Hon. 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 that if effect were given to the proposals a number of 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 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 £ for £ scheme. A 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 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 an alteration would be a moral breach of faith or contract. Funds Insolvent. Whether there was any such moral breach of faith or not—and the present instability of the funds could not 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 realise that financial considerations will 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 are 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 benefits to contributors and annuitants involved the Issue of Government stock to the amount of approximately £4.000.000 and were quite unacceptable under present conditions. Emphasising the serious nature of the posizion. Mr Coates said. for example, the income of the teacher** fund for the year ended January. 1933. was £217.881. and the outgoings £324.405. The fund was forced to realise £92.000 of Government securities and. in addition. there had been a fall of approximately £16.000 in local body debentures and mortgages. It was apparent that this could not go on for very long as the bulk of the funds were in mortgage securities which were practically unrealizable at present. The position was so acute that in order to avoid selling securities on the open markei, the fund, although only a portion of the year had elapsed, had alrea ly 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 I’und 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 additional subsidy on coninbu* tions and interest. Summary of Position. “It is also well to realise.'’ Mr Coatea said, “that the finances of the funda 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 summarised: <a> "That the funds at present are actuarilv 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.”