7

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30. It would be a great improvement if the present highly technical method of arriving at the subsidy were abolished in favour of a simple automatic basis that would not only be more in accordance with the actual deficiency, but would avoid sudden, increases in the subsidy and reflect salaryfluctuations. 31. Before making a recommendation on these lines it may be helpful if I point out that the modern trend of pension-fund, schemes is in the direction of equal division of cost between the employer and the employee. This applies not only to Government schemes, but also to funds established by large commercial institutions. As examples of Government funds I might mention that the Public Service Superannuation Fund of the Union of South Africa receives a pound-for-pound subsidy and is further protected by the Union in respect of early retirements due to policy measures. The Public Service superannuation scheme of the Commonwealth of Australia provides that when the retiring-age is reached by new entrants or members joining the scheme under age 30 only one-half of the pension is paid from the Superannuation Fund and the other half from the Consolidated Fund, while in the case of employees over age 30 when the scheme was introduced an equitable amount less than one-half of the employee's pension becomes payable by the Superannuation Fund, the Consolidated Fund finding the balance. The Local Government and other Officers' Superannuation Fund Act, 1922, of the Imperial Government, designed to meet the pressing demand of local-government officials for a comprehensive superannuation scheme, followed in the main the recommendations of the strong Departmental Committee, including leading pension-fund authorities, which was set up to report, and accordingly may be taken as a good example of modern opinions. The Act, which provided benefits not differing very much from those granted by the Teachers' Superannuation Fund, required the local authority to subsidize the employees' contributions pound for pound, and, in addition, to make equalized annual, payments to liquidate within a period not exceeding forty years any initial deficiency due to the grant of back-service rights. Recommendations. 32. After carefully considering the position of the Teachers' Superannuation Fund I recommend that a State subsidy of 10 per cent, of the salary roll be provided and paid, over monthly to the Superannuation Fund along with the deductions from contributors' salaries. The difference between the amount required by the Teachers' Superannuation Fund and an amount on the basis of an equal apportionment of the cost between the employer and the employee is due to the initial deficiency created by the free gift of back service in calculating the pensions payable to employees in the Service when the fund, was established., and the very considerable amounts by which past subsidies have fallen short of the contributions paid by employees. 33. A subsidy of 10 per cent, of the salary roll would mean an annual payment commencing at about £231,000 per annum ; and although this is somewhat higher than the amount payable in accordance with the present method laid down by the Act, it may be said to represent the lowest possible cost to the State of placing the fund on a firm footing. It has the added advantage of subsidizing at the outset the contributions of new members, which must result in a steadier progression in future subsidies. 34. I should perhaps point out that the suggested automatic subsidy of 10 per cent, of the salary roll is in the nature of a perpetuity, and consequently my recommendation will require revision if at any time the present constitution of the fund is altered. For example, if the fund were to be closed to new appointees or membership were made voluntary, a subsidy of 10 per cent, of the salary roll would be insufficient. 35. Should it be desired to go further than I have indicated so as to more quickly redeem the deficiency, a higher subsidy than 10 per cent, of the salary roll could be fixed, or, alternatively, the fund could be strengthened by suitable amendments of the Act. For example, without unduly prejudicing contributors the fund's liabilities could be considerably lessened by eliminating the teacher's right to voluntarily retire after a definite period of service, and substituting a minimum voluntary retiringage. At the present time male teachers have the unqualified right to retire at age 65 or after forty years' service, and females at age 55 or after thirty years' service, and, in addition, the Superannuation Board, with the approval of the Minister of Education, has power to grant pensions earlier. How this has operated in practice may be seen from the following table showing for quinquennial age-groups the number of contributors retiring during the last four valuation periods as the result of attaining pension age oi length of service, together with the percentages which the number of retirements at each group bears to the total retirements : —

Retirements (excluding the Medically Unfit), 1914-1927.

Males. Females. Retirement Age. Number Per Cent, to Total Number Per Cent, to Total i of Retirements, i Retirements. of Retirements. Retirements. Per Cent. Per Cent. 50 and under .. .. .. 12G 27-8 51-54 .. . .. 4 1-4 124 27-3 55-59 .. .. .. 83 29-8 "| 164 36-1 60-64 .. .. .. 84 30-1 33 7-3 65. and over . .. 108 38-7 7 1-5 279 100-0 454 100-0 .