E.—Ba

26. Should it be desired to go further than I have indicated so as to more rapidly redeem the deficiency, a higher subsidy could be fixed, or, alternatively, the fund, could be strengthened by suitable amendments to the Superannuation Act. For example, the following alterations in the scheme would considerably lessen the liabilities of the fund without unduly prejudicing contributors :■ — (a) Modify the present right of teachers to retire by length of service by restricting it to those who have attained a specified age —e.g., age 60 in the case of males and age 55 in the case of females — and also increase by five years the minimum age or length of service at which a female contributor has the right to retire. To enable the matter to be more readily visualized, I have set down side by side the present position and that proposed : —

(b) Remove the power of the Teachers' Superannuation Board, with the approval of the Minister of Education, to extend the provisions of the Act so as to grant pensions in the case of early retirements. Such powers appear in the past to have been wrongfully regarded by contributors as options to retire with the Minister's consent, but were clearly designed to cover only exceptional cases. Some provision should, of course, be made to obviate possible hardship in the case of those compulsorily retired through no fault of their own, especially if such retirements are the result of a general retrenchment policy. Two methods of meeting this contingency suggest themselves—namely, to grant pensions based on service on the understanding that the Consolidated Fund pays the necessary retiring-allowances until the attainment of the earliest normal rêtiring-age set out in (a) above, or, secondly, to provide such actuarially calculated pensions as will throw no additional strain on the Superannuation Fund. It will be seen that the Superannuation Fund is safeguarded by either method, the only difference being that in the first case the extra liability is borne by the State, and in the second case by the teacher compulsorily retired. (c) (i) Alter the basis of calculation of " final salary " to the average salary of the last seven or ten years, instead of three years as at present, or (ii) disregard for pension (and contribution) purposes any salary-increases after a specified age; —say, age 55 in the case of males and 50 in the case of females. Of these two, the former has the merit of correlating to some extent the retiring-allowance and the average salary received in the years preceding retirement, while from the viewpoint of the fund the latter alternative has the advantage of being as effectual as the former in minimizing violent fluctuations in the pension liabilities due to salary-increases immediately preceding retirement, and at the same time does not penalize those retiring medically unfit to the same extent as the former alternative would. In making this suggestion lam fully conscious that it violates one of the canons of a good pension fund scheme, but, having regard to the constitution of the Teachers' Superannuation Fund and its present parlous financial position, I feel compelled to recommend it for urgent consideration. General Remarks. 27. While it is not my function to comment on policy matters, I feel I would be lacking in my responsibility if I did not enunciate the general principle that no additional financial strain should be imposed on the Teachers' Superannuation Fund by policy measures of Government. I may mention that in the South African Public Service superannuation scheme, if an officer is forced to retire on pension due to a retrenchment scheme or other policy measure, all pension payments up to the date of his attaining the normal pension age are paid out of public revenue and not out of the Superannuation Fund. It is scarcely possible under present financial conditions for the Consolidated Fund to assume any such responsibility, and the only sound alternative in the event of any departure from what might be termed the Superannuation Fund's fundamental obligations to the contributors is to prevent any increase in its liabilities by granting pensions that are the actuarial equivalents of the pensions that would normally be received at the statutory retiring-ages, having due regard to the contributions payable in the meantime. In this connection, it may be of interest to point out that the Commonwealth of Australia safeguards its Public Service Superannuation Fund by fixing age 65 as the normal pension age, with provision that if any officer is retired after age 60, either compulsorily or of his own wish, he is granted a reduced pension actuarially calculated. 28. In conclusion, I have to acknowledge the assistance of the small but efficient staff engaged in carrying out the heavy work of the valuation. C. Gostelow, Fellow of the Institute of Actuaries (London), Government Actuary.

5

Present Bights. Proposed Rights. Males. (i) After age 65. (i) After age 65. (ii) After forty years' service. (ii) After age 60 if combined with forty years' service. (iii) At any age if medically unfit. (iii) At any age if medically unfit. Females. (i) After age 55. (i) After age 60. (ii) After thirty years' service. (ii) After age 55 if combined with thirty-five years' service. (iii) At any age if medically unfit. (iii) At any age if medically unfit.