THE "COMMON FUND."

Auckland Star, Volume LIX, Issue 222, 19 September 1928, Page 9

THE "COMMON FUND."

PUBLIC TRUST METHODS. criticism: in Canterbury. RETENTION OF INTEREST. Reporting on behalf-of the Perlm-. mentary Bills Committee to the CovmcVU oi the Canterbury Chataiber oi Commerce' this week, Mr. A. F. Wright dealt at. some length with certain proposals con-| fcained in the Municipal Corporations Amendment Bill at present before a Select Committee of the House of Representatives (says the "Press"). "The bill provides for the establishment of depreciation, renewal, and reserve funds in connection with such trading departments, and the appointment of sinking fund commissioners in respect of such funds. It is to the appointment of sinking fund commissioners, and the manner in which those funds are to be invested, that I wish to

draw pointed attention," said Mr. Wright. "Amongst other persons and corporations who may be appointed trustees, of sueb funds is tho Public No one can take exception to that, but section 47 of the bill contains the mandatory provision that where the Public Trustee is appointed a depreciation sinking fund commissioner, he shall invest the depreciation fund in tho common fund of the Public Trust Office, or in piich other manner as may be specially authorised in that behalf by the Governor-General-in-CounciJ. Now, such provision? as these—some of them even more rigid and open to greater exception—are finding an altogether too common and frequent a place in our statutes, iind through a lack of appreciation on the part of local authorities and others, those sinking funds do not earn within (or at any rate are not credited with) 20 per cent to 28 per cent of what they would receive when invested outside the' common fund. Consequently it takes soino years longer rating, and longer contribution, to such sinking fund before there is sufficient credit to redeem the loan. Earnings of Common Fund.

'" Moneys in the common fiiiid do not receive the rate of interest which the common fund earns, bat receive a fixed «um, fixed by Order-in-Council, varying from 4A per "ccui (iu the case of mental defectives and other persons under disability, such as aged and jnfir;n per ; -" sons;, to b\ per cent in respect of the most favoured estates, the difference

between this amount and the money actually earned by the common fund being retained by the Public Trust Office. Both our legislators and our local authorities appear to have lost sight in this connection of the interests of local bodies. and others as regards sinking funds, superannuation funds, etc., and have not realised that a quite undue call-is being made .upon them by the investment of their einking funds in tn.e cototuoti iunA. "According to the last accounts of the Public Trust Office there were some ten to- eleven million pounds invested on mortgages. Assuming these to be at the ruling rate, this would be at between 6 per cent and V per cent. There were between 6even and eight million pounds invested on local body debentures. It will thus be seen that by far the larger , portion of the common fund is invested on mortgages at a rate of interest from 1 per cent to l\ per cent higher than is paid out. "The Public Trustee has in the common fund at the present time under the Local Bodies Loans Act, £2,027,740. The loss of 20 per cent upon the yearly income from that sum is not inconsiderable; but these loans are growing yearly, and these sinking funds continue in some

cases for 30 to 40 years. The total amount of the loans for the redemption of which these sinking funds were created (and which will ultimately come into the hands of the Public Trustee for nvestment), is £26,7 26,23:2. That a toll of 20 per cent upon the interest derived from the investment of that amount will run into an enormous fiiure goes without saying. Not Favoured for Investment. "If the common fund were the best medium for investment, one would think our very able Civil Service would adopt that form of investmant with regard to their superannuation funds. Yet what do we find ? The teachers' superannuation fund, with a sum of £1,106,190 to its credit, and increasing at the rate of £70.000 a year, until a few years ago used to be invested through the common fund. The teachers, however, grew weary of paying 20 per cent for this privilege, and asked that their fund be invested separately. This is now due. at a charge of 2} per cent for collection, alid the teachers' superannuation fund is the gainer by at least 171 per cent in its

income." "Take the insurance companies' deposits, now standing at £1,010,593. It is mandatory that all money deposited under that Act muse be invested in tho common fund- By this means the insurance companies have to pay ronghly £10,000 per annum, when if their funds were invested outside the common fund they would get the full fruits of their investments, at a , cost of tollection. of,' say. £2500 a year—a clear loss to them of £7500 a year.