D.—6a.

2

[Railways, 1912.

sisting of the Minister of Railways, the General Manager of Railways, the Solicitor-General, the Public Trustee, two contributors elected from the First (or salaried) Division, and three contributors elected from the Second (or wages) Division. 5. This was the first of the three existing large funds which were established for the superannuation • of public servants, and in its original form it differed in some respects from the two others which were formed a few years later. (a.) There was no subsidy, but the Act contained a guarantee to the effect that '■' in the event of the Fund at any time being unable to meet the charges upon it " the deficiency should be met by the Consolidated Fund. The guarantee thus given would throw any deficiency entirely on the future and from the nature of things could not be regarded as satisfactory. The mere fact of a deficiency not being brought to light for a long period would only augment the difficulties which must eventually arise. Long before a cash deficit was actually disclosed any superannuation fund would probably be hopelessly insolvent, and could only be financially rehabilitated by grants greatly in excess of what the future should properly be called upon to bear. Fortunately, a substantial subsidy was granted by an Act passed seven years later, which in this respect placed the Fund more on a par with the other funds at that time. There is, however, still no provision made for periodical valuations, nor for the gradual increase in the subsidy which must inevitably be provided for all of these funds, and the sooner the better in order to ensure equal justice to all and prevent serious trouble in the future. (b.) All the contributors under age fifty paid on a 2-per-cent. lower basis than in the other two funds, the contributions ranging from 3 per cent, to 7 per cent, of salary according to age at entry as against 5 per cent, to 9 per cent. The Railway Fund was, however, also placed on this latter basis in 1908, but only so far as future contributors were concerned, it being of course impossible to increase the contributions of those who were already members of the Fund. (c.) In another important respect this Fund differs from the later ones, in that only the widows of contributors who never entered upon their pensions receive the usual small family annuities, the widows of pensioners receiving no allowance of this kind on the death of their husbands. I have been able to estimate conclusively that the relief to the Fund through the omission of this benefit to existing contributors rather more than counterbalances the extra liability involved in the deficient contributions referred to in (b). I should mention that there is a strong desire, not unnaturally, that this omitted benefit for the widows of pensioners should be included in the scheme. 6. Particulars of the contributions and benefits provided by the Act, with statements of active membership, discontinuance of membership from various causes, and the progress of pensions for each year, will be found in Tables I, 11, and 111 of the appendix to this report.* The ages of the contributors at date of valuation, with their annual contributions and other particulars, are shown in Table IV, and the ages at which pensions have been granted in Table V. 7. In addition to 431 widows and children, who are drawing small annuities amounting to £6,463 per annum, the number of retired contributors on the Fund at the 31st March, 1912, was 714, and their pensions amounted to £52,463 per annum, giving an average pension of £73 9s. 6d. The number of active contributors at the same date was 9,248, with aggregate annual salaries amounting to £1,425,117, and paying contributions at the rate of £61,621 per annum. 8. Before dealing with the results of the investigation, I will as briefly as possible explain the valuation basis—or, in other words, the various assumptions which have been made in estimating the future progress of the Fund. The average yearly rates of interest earned by the Fund during the five years ending 31st March, 1912, were respectively £4 10s. 2d., £4 12s. 5d., £4 145., £4 175., and £4 7s. 2d. per cent. Considering the nature and circumstances of the Fund, I do not think it is advisable to assume a lower financial basis than 4 per cent., and this rate has been used in the valuation. The Experience Table (Table VI) contains the rates per cent, per annum of withdrawal, mortality, retirement, and increase of salary. All these rates have been taken from the actual experience of the Fund, and from them have been constructed the Life and Service Table (Table VII), showing for the First and Second Divisions separately, out of 100,000 entering at age 15, the numbers who will withdraw, die. and retire in each year. This Life and Service Table forms the basis of the present calculations with reference to the Fund. In regard to the mortality of contributors, it has been found practicable to utilize the experience of the Fund itself, but in regard mortality of pensioners the experience of the Fund was too small and irregular. It has, therefore, been considered suitable to take King's rates of mortality amongst superannuated members (J.I.A. XXXIX) for the younger ages, joining on to Farr's Healthy English Males at age 75. In this Fund it is optional to retire at age 60, and compulsory at age 65, beyond which age there are practically no contributors remaining in the Service, and it is assumed that by then all will have retired. For valuing the widows' and children's benefits the latest New Zealand marriage statistics and the living from the New Zealand census were combined with Farr's Healthy English Females' mortality. 9. There is no statutory obligation, as in the case of the Public Service and Teachers' Funds, to estimate " the probable annual sums required by the Fund to provide the retiring and other allowances filling due within the ensuing three years without affecting or having recourse to the actuarial reserve appertaining to the contributors' contributions," but I have been particularly careful to make this

* The statistics contained in the appendix were compiled from the railway superannuation cards, now written up for the first .time, and differ slightly from the statistics contained in the yearly reports of the Railway Superannuation Board. These unavoidable small differences will not effect the value of the statistics in the slightest.