1.—15.

have completed forty years' service irrespective of their age. Many officers join the Service at ages round about 15 (some as low as 12 in the Post Office), and it must be obvious that it is very costly to cause or even allow them to retire on the maximum rate of pension at ages from, say, 52 onwards when in many cases their ability and experience are of most value to the State. There is no particular virtue in assuming that an officer has completed his period of usefulness after forty years' service, as the only tests of ability to render efficient service are age and physical fitness. In the large pension schemes of other countries the general practice appears to be to regard age 65 as the standard age of retirement, and in a number of schemes, both public and private, the rules empower the employer to require the employee to remain on till he is 70. As regards the extension by five years of the age at which female contributors may retire, it is interesting to note that 55 per cent, of female teachers enter on their pensions before age 55. I have showed conclusively in the 1927 statutory actuarial report on the Teachers' Superannuation Fund (v'de paragraph 12) that the female teacher is a greater liability on the Superannuation Fund than the male, in spite of the fact that the male teachers receive higher salaries (on which pensions are based), and, in addition, are covered for widows' and children's benefits, and tha,t such greater liability is due to the early ages at which they can and do retire and the superior vitality of female pensioners generally. Paragraph 1446 (Sections 7, 19, and Si of the Bill). The suggestion is to eliminate all options of early retirement with the consent of the Minister or of the Superannuation Boards on pensions at the rate of one-sixtieth of salary for each year of service, and to substitute actuarially equivalent pensions if compulsorily retired for reasons other than misconduct at any time after twenty-five years' service or attainment of age 50. To my mind this is the most vital suggestion in the Commission's report, as such early retirements are second only to the initial deficiency created by the gift of free pensions for back service in causing the present parlous financial position of the funds. The serious aspect of those early retirements has been stressed ad nauseam in successive actuarial reports, and it must surely be self-evident that officers retiring at ages from 50 to 55 cast a heavy burden on the Fund not only from the greater number of years during which pensions have to be paid, but also from the loss of contribution income until age 65. As an illustration I may point out that a deferred pension of £100 at age 65, subject to contributions in the meantime equal to per cent, of pension (that is, 5 per cent, of salary), is equivalent to an immediate pension of approximately £35f at age 55, or, to put it another way, an immediate pension of £100 to an officer at age 55, allowing for the saving in contributions to a hypothetical fund at a rate of 5 per cent, of salary (that is, 7| per cent, of pension), is equivalent to a deferred pension of approximately £281 at age 65. It will be seen, therefore, that if the officers' contributions to the fund are taken into account the granting of pensions at a fixed age 55 instead of a fixed age 65 would necessitate reducing each unit of pension by 64 J per cent, if the Fund were not to be prejudicially affected ; or, to put it another way, if the amount of pension were to remain unaltered at the maximum, such payment of pension at age 55 instead of age 65 would increase the funds' pension liabilities by 181 per cent. These figures should dispel any impression that in the case of officers retiring after thirty years' service the Government Superannuation Funds are fully compensated by the fact that the pensions are based on thirty-sixtieths of salary instead of the maximum of forty-sixtieths. If any further proof were needed it is to be found in the fact that the Superannuation Act specifically provides that in the case of the Public Service Fund the Minister in charge of the Department to which the officer belongs, and in the Teachers' Fund the Superannuation Board, with the approval of the Minister of Education, has the power, when extending the provisions of the Act to provide for early retirements, to impose upon the retiring contributor such terms and conditions as to payments into the Fund or otherwise as the Minister or the Superannuation Board respectively thinks fit. Unfortunately, this right has been seldom, if ever, exercised in the Public Service Fund, and, moreover, no such provision exists in the Railways Fund. In order to give some idea of the extent to which the extended provisions of the Public Service Superannuation Act have been availed of, I may state that one in every four of those now drawing pensions from the Public Service Superannuation Fund were retired under the extended provisions of section 26 of the Act, and I think it would be safe to say that in the Railways Fund the proportion is even higher, possibly as high as one in every two. Paragraph 1447 (Sections 8, 20, and 32 of the Bill). The suggestion is to reduce the liabilities of the funds by basing pensions on the average salary of the last seven or ten years instead of three years as at present. I approve of this proposal, and had previously recommended it in statutory triennial reports (vide paragraph 23 of the statutory report on the Public Service Superannuation Fund as at the 31st March, 1930, and paragraph 26 of the statutory report on the Teachers' Superannuation Fund as at the 31st January, 1930). In this connection it might not be out of place to make a few general remarks regarding pension funds. The ideal fund is one based on terminal salaries, as it enables each officer to receive a pension directly commensurate with his income and standard of living at the time of retirement. It is admitted, however, that from a practical point of view officers receiving substantial promotion comparatively late in life receive a disproportionate share of the subsidy provided by the employer, and although it is generally held that the employer has an absolute right to say how his own subsidy shall be employed, it is apt to cause discontent, particularly in a Government Service. A greater defect, to my mind, is the amount of fluctuation in the actuarial estimates of liability and the consequent financial safety of the fund. Pension-fund finance demands an equation between pension benefits and contribution income

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