A WRONG IMPRESSION

Waipa Post, Volume 45, Issue 3253, 10 November 1932, Page 5

A WRONG IMPRESSION

THE SUPERANNUATION FUND.

AN "ACTUARIAL" DEFICIT.

(Contributed.)

The final report of the National Expenditure Commission in rightly laying stress on the present actuarial deficit of £23,000,000 in the Public Servants' Superannuation Funds has created a wrong impression. The Commission itself is not responsible for this wrong impression; for it has been careful to state that the deficit which it cites is an "actuarial" deficit. The public has, however, very little knowledge of what constitutes an actuarial deficit and confuses it with a present deficit. An actuarial deficit is the deficiency in the amount which will be available to meet all the obligations of the fund during the period for which the scheme is obligated to provide benefits. The present capital deficit is. it is estimated, approximately £3,250,000 and if the superannuation funds of the Public Services are provided with the income from an investment of £3,250,000 the funds would regain their actuarial solvency. Two proposals have been advanced for dealing with the present deficits: one has been advanced by the National Expenditure Commission a'hd the other by the Public Servants themselves. The Commission's proposal is as follows: That the Government pay into the Public Service Fund a subsidy of & for every £ contributed by the Public Servants themselves. It is recognised, however;, that " it would be difficult for the Consolidated Fund to bear its full share of the increased subsidy" under existing conditions, and it is suggested that the trading departments be- called upon for assistance. The amounts payable by the three main trading departments is as follows:

Public Trust Office, £100,000; Government Life Insurance Office, £58,000; State Fire Office, £26,000; total. £184.000.

"In arriving at the foregoing estimate," reports the Commission, " the contributions have been compounded at 4 per cent interest. We recommend that the amount shown above be paid by the trading departments to the Public Service Fnnd, either by lump-sum cash payments or by an amortisation table over a period of 361 years with interest at 5 per cent."

The alternative proposal put forward by the Public Servants is that file Government issue to the fund inscribed stock to the extent of the present deficit of £3.250,000 bearing interest at 5 per cent. This would provide an annual income in interest of £162,000. Comparing the two schemes, it is to be seen that the Commission recemmends the State Trading Departments pay £25,500 more annually than the Public Servants would ask of the Government in interest on the inscribed stock. On the other hand the Public Servants are more concerned about the security of the corpus of the fund and would prefer to hold some tangible securities rather than depend upon the ability of the trading departments to provide their proportions of the subsidies. After past expei'ience Public Servants can hardly be blamed for desiring to have their funds and subsidies thereto as free from political interference as possible. Their proposal would certainly achieve their end in that respect, while the Commission's recommendations can hardly be commended for the quality of security. The trading departments may not. in conceivable circumstances, be able to provide the subsidies mentioned by the Commission. How would the fund fare under such circumstances? It is natural for Public Servants to anticipate that their fund would be left in the lurch, as it has been in the past. From the Public Servants' standpoint, therefore, their own proposal is more satisfactory than that of the Commission's, anrMt does not appear to have anymore onerous incidence than the proposal of the latter body. The responsibility would be fixed upon the Government, and it could exercise its own judgment as to ways and means of sustaining that responsibility without making the State's contributions to the fund contingent upon receiving the revenue from any particular source.