NATIONAL PROVIDENT FUND: ACTUARIAL EXAMINATION FOR THE PERIOD ENDED 31st DECEMBER, 1913.

Appendix to the Journals of the House of Representatives, 1916 Session I, H-17b

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1916. N EW ZEALAND

NATIONAL PROVIDENT FUND: ACTUARIAL EXAMINATION FOR THE PERIOD ENDED 31st DECEMBER, 1913.

I,a,id before Parliament in 'pursuance of Section 24 (3) of the National Provident Fund Act, 1910.

Report by the Actuary appointed by His Excellency the Governor to make the Actuarial Examination of the National Provident Fund. 1 have the honour to submit the following report on the National Provident Fund as at the 31 st. December, .1.913, as required by section 24 of the National Provident Fund Act, 1910. The Act came into operation on the Ist March, 1911, and represents an important step in New Zealand in the direction of social insurance,,the basic principle of which is the intervention of the State to induce the wage-earners to make provision for certain of the eventualities of life, the State bearing a. share of the cost. Old age, for instance, is to the individual a distant and vague possibility, specific provision for which he will neglect in deference to present needs. To the State, on the contrary, old age is an everpresent problem always pressing for solution. The ideas of the State and the individual in this connection, therefore, do not run step for step, and if, by means of subsidies, compulsion, or otherwise, the State endeavours to quicken the pace of the individual towards making this provision, we have social insurance as distinct from commercial insurance. This phase of social insurance is equally distinguished from the opposite extreme of free State systems wherein the State does everything and the individual nothing. Social insurance in this sense is almost a commonplace in Europe, schemes based upon its principles having been adopted in leading European countries, including England, France, Belgium, Germany, and Austria ; and the National Provident Fund Act brings New Zealand into line. The benefits available to contributors under the Act, and the contributions, are set out in the Appendix (Table I), the main benefit being a pension at age 60, with additional benefits such as maternity, incapacity, and orphans' allowances where the contributor has children. Tho scheme of benefits appears to be based upon the principle that if the contributor provides for a. pension at age 60 the State will help him in respect of the family responsibilities he may have. Under the Act the State bears the cost of the administration expenses, and pays into the fund by way of subsidy year by year a sum equal to one-fourth of the total contributions received in the previous year—that is to say, the contributor pays four parts and the State one part, the regular State subsidy being therefore virtually one-fifth, or 20 per cent., of the total contribution cost. In addition the State is to pay into the fund in each year such further amounts as are deemed necessary in accordance with the Actuary's report. The maternity benefit is provided for by an annual parliamentary grant. After careful consideration the valuation of the actuarial liabilities has been made on the following bases :— (I.) Mortality rates of contributors between those of the New Zealand population, 1906-10, and those of the New Zealand Civil Service Superannuation Fund (see graph annexed). The rates are much below, and therefore more stringent than, the Healthy English, with which, however, they agree from age 73 onwards. (2.) Rates of discontinuance approximating to those of the Second Division of the New Zealand Railways. (3.) Rates of invalidity as exhibited by New Zealand friendly societies. (4.) Probabilities of being married, approximately 12| per cent, above those of the New Zealand population, 1911.

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(5.) Probabilities regarding children, as per New Zealand population statistics, 1908-12. (6.) Mortality rates of widows, as per New Zealand friendly-society rates two years younger, the result being an approximation to the rates of the female population of New Zealand for 1906-10. (7.) Interest, has been taken at 4 per cent., as the fund is State-guaranteed. At the valuation date, 31st December, 1913, there were 5,791 members, who were enrolled for 6,664 pensions of 10s. per week- -that is to say, there were 5,791 pensions of Ids. carrying with them the subsidiary benefits (maternity, incapacity, &c), and 873 duplicated pensions of I.os. not carrying with them any duplication of the subsidiary benefits, but paying the same rates of contribution despite that fact.* The valuation balance-sheet is appended : — Valuation Balance-sheet of the National Provident Fund as at 31st December, 1913. Liabilities. Value of liability for —• £ Pensions .. .. .. .. .. .. .. 201,640 Orphans' benefit .. .. .. .. .. .. 37,419 Widows'benefit .. .. .. .. .. .. 1.7,237 Incapacity allowance.. .. .. .. .. .. 13,766 Return of contributions on death .. .. .. .. 18,1.64 Return of contributions on withdrawal .. .. .. 42,195 £330,421 Assets. £ Amount of the fund at 31st December, 1913 .. .. .. 29,327 Value of contributions payable (assumed half a year after due date) . . 242,554 Value of State subsidy of one-fourth (assumed to be received a year later than the above) .. .. .. .. .. .. 58,306 Debit balance .. .. . . .. .. 234 £330,421 From this il will be seen that the assets and liabilities are virtually equal, the debit balance being insignificant. Section 24 of the Act provides thai the report of the Actuary shall show " the probable annual sums required by the fund to provide the, pensions and other allowances falling due within the ensuing three years without affecting or having recourse io the actuarial reserve appertaining to the con tributors' contributions." I think the intention of this is that, the Actuary should report what sums, if tiny, are required by the fund to meet current charges without touching the reserves actuarially earmarked against future liabilities. In other words, he should state what further subsidies are, in his opinion, actuarially necessary in the next three years beyond the statutory one-fourth subsidy attaching to the contributions and. forming part of the reserve with them. In this connection the next section of the Act— 25 (2)— provides that the Minister of Finance shall in each year pay into the fund " a sum equal to one-fourth ol the total contributions paid into the fund during the last preceding year together with such further amount (if any) as is deemed by the Governor in Council, in accordance with the aforesaid report of the Actuary, to be required to meet the charges on the fund during the current financial year." In pursuance of these sections, therefore, I have to report, that no such supplementary sums require 1o be paid into the fund during the three, years following the date of this valuation. As the maternity allowances are annually voted by Parliament I have regarded them as outside the actuarial aspects of the scheme. A, T. Traversi, A.I.A. (London), Wellington. 24th December, 1915. Actuary.

* As a matter of technical explanation it may be mentioned that the full State subsidy of one-fourth has been (alien ore-lit for in tho valuation irrespective of any extra-sufficiency of the suhsidy in oasos of duplicated pensions. There would be no practical object in eliminating tho over-sufficiency and substituting in its place a differently named subsidy, ft is time to do that when (and if) it is found that these particular cases fail to persist in due proportion.

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APPENDIX. TABLE 1. Membership Qualifioations. Any person may become a contributor who— (a.) Is a resident of New Zealand ; (&.) Is over sixteen years of age ; (c.) Is under forty-five years of age ; and (d.) Whose average income during three years prior to joining has not exceeded £250 a. year. Benefits. The following benefits are payable :— (J.) After contributing for twelve months or for such period as the Board determines, a payment not exceeding £6 on the birth of a contributor's child or children, provided the parents' joint income does not exceed £200. (2.) After contributing for five years, an allowance after three months' incapacity to work of 7s. 6d. per week for each child under fourteen years of age ; not to exceed pecuniary loss. Ceases at age 60. Extends to age 18 in case of an infirm child. (3.) After contributing for five years, an allowance, on the. death of a contributor, of 7s. 6d. per week for each child until fourteen years of age, and 7s. 6d. per week for the widow so long as any child is under fourteen years of age. (4.) On reaching age 60, a pension of 10s., 205., 305., or 40s. per week, according to the scale of contributions. (5.) Return of contributions, less benefits, on giving twelve months' notice of cessation of membership. This right, is exercisable at. any time before, drawing the first, payment of the pension. (6.) Return of contributions, less benefits, on death, whether before or after receiving pension.

Contributions.

( Ag( Cc Fin .. „ . . Weekly ContriAge last Birthday of hution required Contributor when to secure a First Contribution is Pension of 10s. a made. Week at .Sixty Years of Ago. ;e lai lonti rat C ist Birthi ributor v Oontribir ma de. W i day of lui when it.ion is Pe: 5 Vcckly Contr ution require to secure a .nsion of Ids, iVeok at Si.xt fears of Age ried ■t. a o. Weekly Contri- Weekly Contribution required hution required to secure a to secure a Pension of 20s. a ! Pension of 30s. a Week at Sixty Week at Sixty Years of Age. Years of Ago. . Weekly Contri hution required to secure a. Pension of 40s. a. Week at Sixty Years of Age. j 16 17 18 19 m 20 21 22 23 24 s. (1. 0&9 0 10 0 10 0 II 1 0 I o l I I 2 I 3 s. d. s. d. l£6 2 3 I 8 2 6 18 2 6 1 10 2 9 2 0 3 0 2 0 3 0 2 2 3 3 2 4 3 6 2 6 3 9 s. d. 3 0 3 4 3 4 3 8 4 0 4- 0 4 4 4 8 5 0 25 26 27 28 29 30 31 32 33 34 I I I 5 I 6 1 7 I 8 1 '.I 1 10 2 0 2 2 2 3 2 8 4- 0 2 10 4 3 3 0 4 6 3 2 4 9 3 4: 5 0 3 6 5 3 3 8 5 6 4 0 6 0 4 4 6 6 4 6 6 9 5 4 5 8 6 0 6 4 6 8 7 0 7 4 8 0 8 8 9 0 i 35 36 37 38 39 2 5 2 7 2 .10 3 0 3 3 4 10 7 3 5 2 7 9 5 8 8 6 (5 0 9 0 6 6 9 9 9 8 10 4 11 4 12 0 13 0 40 41 42 43 44 3 6 3 10 4: 2 4 6 4 11 7 0 10 6 7 8 11 6 8 4 1.2 6 9 0 13 6 9 10 14 9 14 0 15 4 16 8 18 0 19 8

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TABLE 11. Consolidated Revenue Account of the National Provident Fund prom Establishment on Ist March, 1911, to 31st December, 191.3. £ s. d. £ s. d. Fund at Ist March, 1 911 .. .. Nil. Maternity claims (section 18) .. .. 869 8 0 Contributions .. .. .. 24,493 4 5 Refund of contributions on lapse, reducInterest .. .. .. .. 730 2 11 tion, and withdrawal (sections 10, 11, 12, Pines .. ■■ .. .. 496 6 2 and 13) .. .. .. .. 1,228 11 3 Benefits refunded by deduction.. .. 6 0 0 Death : Refund of contributions (section 15) 79 14 7 Government contribution under section 25 4,907 16 3 Refund of contributions overpaid .. 18 17 2 Refund of maternity claims by State .. 869 8 0 Amount of fund at 31st December, 1913 .. 29,327 7 6 Contributions overpaid .. .. 19 7 1 Refunds unclaimed . . . . 1 11 10 Miscellaneous receipts .. . . .. 0 1 10 £31,523 18 6 £31,523 18 6

Numerical Progress to 31st December, 1913.

TABLE III. Particulars of Membership, Pensions, and Contributions.

Numbers. rti QQH i Class 2. Class 3. Class 4. , , Animal Ponoioi Botn mo Pension Hate, Pension Rate, Pension Bate, Aggregate. Contributions. I jreiision .twite, xys, 2 0». 80s. 40s. M. | F. | T. M. | F. | T. M. V. T. M. j F. 'I'. M. j F. i T. £ s. d. Total entered,. . .. 5445 373 5818 530 i 90 020 72 1 ] 83 97 j 7 104 0144 48] 6625 Total transferred from 76 I j 77 11. 4 j 15 2 2 4 3 | I 4 92 8 100 other classes ■ ,l_ 5521 374 5895 541 94 635 74 13 87 100 8 108 6236 489 6725 26,401 18 4 Total discontinued .. -686 55 741 57 I I 68 11 3 14 11 .. 11 765 69 834 Total transferred to other 10 13 58 2 60 8 2 10 16 i 17 92 8 100 classes ; — 696 58 754 115 S 13 128 1 9 5 2 4 2 7 1 2 8 857 77 934 3,682 1 8 0 Total contributors on 4825 316 5141 426 j 81 507 55 8 63 73 7 80 5379 412 5791 22,719 0 4 books at 31st December, 1913 __ '• 1 I i L _ _ _ J

I According to Age at Entry. According to Age attained. _ i 1 ' ' ' j ' j j Age at Entry Number of Age attained Number of ; Number of 10s. Weekly Contribu(Nearest).' Members. (Nearest). Members. I Pensions. tion payable. [_ > I | £ s. d. L6 .. .• 166 16 46 j 46 1 14 4 17 .. 370 17 243 261 9 18 1 18 .. . 409 18 349 372 15 I 11 19 .. .. 456 19 425 469 19 11 8 20 . . 480 20 437 488 2.1 17 10 21 443 21 441 490 23 13 4 22 .. 458 22 443 534 26 10 2 23 . . .. 380 23 468 558 29 5 4 24 360 24 344 430 24 3 3 25 301 25 339 388 23 4 10 26 .. 266 26 294 348 22 8 6 27 . . 243 27 262 302 20 11 0 28 .. 222 28 226 256 18 10 0 29 232 29 244 263 20 0 3 30 197 30 232 264 21 4 9 31 133 31 150 171 14 8 0 32 . 137 32 154 .179 15 16 1 33 .. 98 33 141 169 15 16 11 34- 73 34 97 109 10 17 7 35 . 66 35 78 89 9 15 8 36 . . 71 36 77 91 10 8 11 37 43 37 48 60 7 3 8 38 .. 4.1 38 51 61 ' 7 15 10 39 37 39 44 54 7 10 7 40 27 40 40 53 8 0 1 4L 17 41 23 30 4 .16 8 I4> 15 42 17 20 3 5 10 43 .. 13 43 23 33 6 I 0 44 ..9 44 14 21. 4 9 0 45 28 45 12 20 4 7 8 46 15 L8 4 6 7 Total .. 5,791 47 11 13 3 3 4 ===== 48 3 4 0 19 5 Total .. 5,791 6,664 436 18 1

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TABLE IV. Rates of Withdrawal, Mortality, Marriage, Sickness, etc.

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*''• Rate of Rate of Withdrawal, Mortality, per Ceut. per Cenl. Percentage Percentage of who arc Married married who have (including Children living Wid.). under 14. Number of ,, . . Number of Weeks Children under ''-'Rentage of Siokness per 14 per Family parted Member per A, num. with Children * !!.' h .. lVV a '''^^A"' 8 ,* Thr °" under 14 living. Months Siokness (to Ago 60 only). 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31. 32 33 34 35 36 37 38 39 40 41 42 43 44. 45 46 17 48 49 50 51 52 53 54 55 56 57 58 59 60 61. 62 63 64 65 66 67 68 69 70 71 72 73 10-00 0-23 10-00 0-24 10-00 0-26 9-50 0-27 9-00 0-28 8-50 0-29 8-00 0-30 7-60 0-31 7-20 0-32 6-80 0-32 6-40 0-33 6-00 0-34 5-60 0-35 5-30 0-36 5-00 0-37 4-70 0-38 4-50 0-39 4-20 0-4.1 3-90 043 3-60 0-44 3-30 0-46 5-10 0-48 2-80 0-50 2-50 0-51 2-30 0-53 2-00 0-55 1-80 0-58 1-50 0-61 1-30 0-65 140 0-70 0-90 0-74 0-70 0-79 0-50 0-83 0-30 0-88 0-20 0-92 040 0-96 0-00 1-03 1-10 146 1-24 I -30 1-38 146 1-55 .1-65 I -75 1-94 2-17 2-42 2-70 3-00 3-40 3-85 4-30 4-80 5-53 6-30 7-13* 0-9 49-8 1.0-7 54-0 40-2 65-2 67-3 75-6 80-2 75-5 87-4 71-2 90-5 59-9 91-8 484 93-0 32-0 93-0 18-2 93-0 9-5 93-0 4-5 40-2 67-3 80-2 874 90-5 10(1 100-0 0-150 1-32 98-9 0-497 I -60 98-6 0-237 2-25 98-0 0-211 2-76 97-1 0324 2-83 96-1 0-504 2-76 94-8 0-935 94-8 91-8 2-47 924 1491 924 93-0 2-18 89-3 2449 89-3 93-0 2-02 85-3 3-200 85-3 93-0 1-90 7.8-5 7.8-5 93-0 1-71 70-7 70-7 77 93-0 2-0 93-0 L-7.1 60-4 60-4 82 93-0 0-6 93-0 1-67 47-1 47-1 4 87 I 93-0 0-6 93-0 1-00 ! 37-0 j j 37-0 92 93-0 0-5 93-0 1-00 32-0 32-0 97 93-0 0-1 93-0 30-0 30-0 *', 73 and upwards, an per Fan's r 3 and upwar. ■■ Healthy English." lii tsh."

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