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service in his case would be £966 13s. 4d., for which he could secure, an annuity of £111 17s. per annum from the Government Insuiance Department. It is evident, therefore, that if he retired, voluntarily or coinpulsorily, he would take the full pension of £193 if allowed to do so, but he would certainly reject the half-pension of £97 in favour of £967 cash, which he could invest in the purchase of an annuity of £112, or otherwise. 26. Compensation is one-twelfth, and half-pension is one one-hundred-and-twentieth, of final salary for each year's service, so that the half-pension is always exactly 10' per cent, of the total compensation. The actual annuity which can be purchased from a life office is about 10 per cent, of the purchase-money at age 64, and the percentage increases with the age to nearly 20 per cent, at age 80, so that all those over 64 could get a much better bargain by investing their compensation in life annuities. This makes a certainty of a large selection against the Government, as there are 199 men now aged 64 and over whose salaries amount to slightly over £50,000, so that, taking a moderate estimate of the average service of these men as 24 years, it is clear that the adoption of the half-pension clause would expose the Government to a possible call of £100,000 or more during the first year. Ido not say this is a probable result, but it is clear to me that the actual result would be entirely to obliterate the immediate saving looked for. 27. From another point of view, also, there are most serious objections. The half-pensions would give but little satisfaction, and it is highly probable—indeed, to my mind, certain—that very many of the older men now under pension-age would remain outside the scheme, thus largely defeating one chief object of its introduction—viz., to eventually get rid of the present system of compensation and gratuities altogether, and to consolidate the whole of the assistance given by Government to its employees in one comprehensive scheme. Like many other apparently cheap bargains, I think the half-pensions plan would in reality prove expensive while giving satisfaction to none. Recommendations. 28. As the outcome of my investigation I have no hesitation in respectfully recommending that the modification of the scheme of the Bill contained in I (26), (Appendix No. 5), be adopted on the general lines I have indicated. If this recommendation should be approved it will necesitate the following amendments in the Bill: — (1.) That the interest credited to "the contributed fund" shall not.be at.a lower rate than 4 per cent. (2.) That the widows' annuities shall be increased from £18 to £26. (3.) That the annuities shall be payable to the widows and children of pensioners as well . as to the widows and children of members who die while in the service. . . (4.) That a yearly grant of £30,000 shall be made during the first three years. (5.) That this yearly grant shall be increased (or decreased) from time to time in the manner explained heretofore, in order to meet the yearly accruing liability unpro-vided-for by members' contributions. (6.) That, in order to ascertain the necessary periodical grants, a triennial actuarial investigation of the fund shall be made, the triennial report to state what will • . lie the probable sum required for the ensuing three years. (7.) There will be no necessity to retain the present provision for the guarantee of any deficiency in the, fund. It is provided in the Bill that no payments shall be made from the fund during the firsteleven months. I see no reason why this limitation should be made if my recommendations are approved.. The only effect would be to delay the retirements of the present aged members of the service, thus causing hardship in individual cases and unnecessarily delajdng the complete working of the scheme. In the Bill the annuity provisions apply " in the case of a female contributor who dies leaving a husband or children her surviving." I question the desirableness of including "the husband." I think the absolute or contingent rights of members in regard to accumulations and policymoneys under the various Acts ("The Civil Service Reform Act, 1886," "The Post and Telegraph. Classification and Regulation Act, 1890," and "The Civil Service Insurance Act, 1893"), and compensation under section 12 of " The Civil Service Act, 1866," should be fully safeguarded as in the Bill, but I also think that the Bill might with advantage be simplified and made clearer in these respects. I think it would be better that the provisions for the application of " The Government Railways Superannuation Fund Act, 1902," to the employees of the Wellington and Manawatu Railway Company should be struck out, and dealt with in a separate Bill. Compensation, Gratuities, and Existing Pensions. 29. There will be found in Appendix No. 6 a complete summary of the compensation, gratuities, and pensions which have been paid yearly from 1859 to 1906. I have extracted the information independently from the Journals (House of Representatives), and care has been taken to ensure their correctness —which cannot, however, be guaranteed. They will be of practical interest, as they show the whole of the Government expenditure which can be affected by the introduction of a superannuation scheme. The total of this expenditure (outside the scheme) will tend to diminish, and will be completely extinguished in time. The gratuities will discontinue immediately, the compensation will cease to accrue further, and the outgo for pensions under the existing Civil Service Acts will eventually cease independently of the superannuation scheme. In reference to existing pensions I have the particulars of the 86 present members of the service, who are believed to be the only ones who can become prospective pensioners. I would suggest that the corresponding particulars of the 132 pensioners who were alive in 1906 should be supplied to me. This would be a simple matter, and I could then form a practical estimate of the probable outgo on account of pensions under the existing Civil Service Acts for each future vear till they are extinguished. The results .would be interesting, and would probably show that the total Government assistance to Civil servants for many years after the introduction of the proposed superannuation scheme will not be so great as might be expected.

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