8.—4 a,

whole period of their service. Those officers will have bought and paid for the whole of their annuities, and for this reason we eould not recommend a permanent reduction. 1466. It will be noticed that no alteration is suggested in connection with annuities granted belore the 31st March, 1921. Those officers who retired prior to that date did not receive the benefit of the post-war rise in salaries, and consequently their retiring-allowances are on a relatively lower scale, and a general reduction in their annuities would be inequitable. _ 1467. In making our recommendations in regard to the readjustment of existing ana future annuities'we have kept in mind the fact that there are a few superannuated officers receiving quite large payments from their respective funds. It is important to realize that these are isolated cases, as is evidenced by the following figures showing the average annuities payable to those in receipt of over £300 from the various Funds: — £ Public Service Superannuation Fund .. .. • ■ • • 415-8 Teachers' Superannuation Fund .. .. • • • • 386-4 Railways Superannuation Fund .. . • • • • • 407-5 1468. The following table in connection with the Public Service Superannuation Fund will show clearly that the majority of superannuitants are receiving relatively small annuities Number of Amount. Annuitants. £ Up to £200 .. .. •• 1,298 149,169 £200 to £350 .. .. •• 659 171,000 £350 to £600 .. .. •• •• 187 81,844 £600 and over .. .. .. •• 30 21,931 Total 2,174 £423,944 1469. There may be some officers who would suffer no reduction as a result of the alteration in the basis of calculation recommended. In these cases we see no justification for any reduction. 1470 We would now refer to the arbitrary limit of £300 by way of annuity to officers who pined the Service after the 24th December, 1909. The imposition of this limit is operating detrimentally to the best interests of the Service, and after considering the opinions of eminent actuaries on the point we believe that the removal of the limit would have only a slight adverse effect on the Funds and would go a long way towards remedying what is an anomalous position, particularly in so far as it concerns professional officers who join the Service relatively late in life. 1471. The objections to the limit may briefly be stated as follow :■ — (1) It leads in some cases at least to officers paying more in contributions than their annuities are worth. (2) It helps to defeat one of the main objects of the Fund by diminishing the inducement to the best officers to remain in the Service. (3) It renders it more difficult to retire the higher officers who remain in the Service until the retiring-age, the annuity of £300 being small compared with a salary of, say, £1,000 particularly in the case of a deserving officer of long service. (4) It will cause a great deal of embarrassment in the future ; at present its effect is more or less dormant because it applies only to officers joining the Service since the 24th December, 1909. (5) It does not proportionately help the finances of the Fund; witness the following remarks of Mr. George King, F.1.A., of London, a distinguished authority on actuarial matters : " It is wonderful how little saving was thus made upon the general finances of the Fund, because the pensions of the higher grade officials, although they seemed very large, were almost a negligible quantity in looking at the Fund as a great whole." 1472. Taking the three Funds together, the payments in excess of the £300 limit for annuities are only 2-8 per centum of the total annuities payable, and when this fact is remembered the remarks of Mr. George King quoted above will be appreciated. 1473. An even more striking example of the relatively little saving to the three Funds is contained in a report of the Government Actuary in 1920. He pointed out that had a limit of £300 been in force from the inception of the respective Funds the saving would have been only 4-7 per centum in the Public Service Fund, 0-7 per centum in the Teachers' Fund, and 1-8 per centum in the Railways Fund. The disadvantages and anomalies created by the arbitrary limit therefore outweigh the small monetary saving to the Funds. 1474. The limit of £300 has been adversely commented upon by successive Government Actuaries in New Zealand, and we have no hesitation in recommending that this limit be abolished, as operating quite unfairly against those officers who by industry and ability rise to the higher positions in the Service. . , 1475. We have painted a somewhat gloomy picture of the position of the Superannuation Funas. The actuarial deficiency of some £23,000,000 is quite sufficient evidence of the gravity of the position. If a radical alteration be not made in the basis of calculation of annuities, we can go further and state that were the three Funds put into liquidation and were existing annuities treated as preferential claims against the Funds, there would be nothing whatever available to refund to existing contributors any portion of their contributions. The position is even worse, in that on an actuarial basis the present Funds would be insufficient to meet the present annuities, and, taking the three Funds as a whole, the present annuitants could obtain a dividend of only 12s. 9d. in the pound of their annuities or allowances, while contributors still in the Service would forfeit all the contributions they have paid into the Funds.

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