Bailways, 1912.]

3

D.—sa.

estimate on the present occasion, as it defines very clearly what should be done " in order that the taxpayer of the day should shoulder his fair share of the burden " as laid down in the Financial Statement. The following is the result: —

It will be seen, therefore, that instead of the subsidy of £25,000 per annum now being paid the Fund requires a subsidy of about £50,000 per annum at the present time. Ido not, however, propose that the subsidy should be increased this year, as it will be seen further on that I suggest the amalgamation of the three funds (Public Service, Teachers', and Railways) in certain respects, in order to secure uniformity of treatment financially ; and if effect be given, to my recommendations next year, that will be a more convenient and appropriate time to place the subsidy to the combined funds on an entirely different footing of a more permanent nature. 10. From an inspection of Table VIII it will be noticed that, even at the present higher rates, ranging from 5 per cent, upwards, the contributions are insufficient to secure all the benefits afforded by the Fund. The only effective way of ascertaining how far the total contributions fall short of providing the whole of the benefits is, as has been explained in a previous report, by means of an ordinary actuarial valuation. Following this method the whole of the liabilities and assets are brought to account, the liabilities consisting of the present value of the benefits {i.e., the benefits which will accrue to contributors at future dates duly discounted as at the present date), and the assets consisting of (1) the accumulated funds, (2) the present value of the members' future contributions, (3) the present value of the existing Government subsidy, (4) the present value of the increase in the Government subsidy now found to be necessary, and (5) the present value of future increases in Government subsidy to be provided from time to time. 11. From the resulting valuation balance-sheet, which appears in Table XI, it will be seen that the real assets amount to £1,591,343, consisting of £233,457 accumulated funds, £732,886 present value of the future contributions of existing members, and £625,000 present value of £25,000 annual subsidy already granted. In addition to this there is required, in order to balance with the liabilities, £625,000 the present value of a further subsidy of £25,000 now reported as necessary, and £526,851 the present value of increases in the subsidy which will be necessary in the future. It is noticeable that the last item compares very closely with the present value of the future increases in subsidynecessary for the Public Service Fund, which its last valuation showed to be £532,108 (1912, H.-26A, par. 13). Indeed, it will be seen that, although this Fund differs in important respects from the Public Service Fund, the financial position of the two funds shows much similarity. That this Fund compares so well with the Public Service Fund, considering its greater age, its lower rates of contribution, and the earlier age at which its contributors may retire on pension, is largely accounted for by four causes— (a) No .pensions to the of pensioners, as already explained ; (b) a much higher rate of withdrawal in the Second Division, which comprises the main body of the railway men ; (c) a smaller average of back service, and also (d) a smaller rate of annual increase of salary in the same division. 12. It will be seen from what I have said that with an additional annual subsidy of £25,000 this Fund would be put in a satisfactory position, to maintain which, however, a triennial valuation in future must be arranged for with the resulting periodical adjustment of the subsidy. When this has been done I shall for the first time be able to say unreservedly that the whole of these funds are on a satisfactory actuarial basis. The method of providing the subsidies, however, is capable of improvement. The foundation of the Public Service Superannuation Fund six years ago marked a distinct advance in the actuarial treatment of such funds in New Zealand, and the chief object I had in view was to arrange the subsidy on a scale which would divide the burden equitably between the taxpayer of to-day and posterity. Having little or no actual experience at that time to go upon I adopted the most feasible actuarial arrangement I could devise for ascertaining from time to time how much of the yearly charges of the Fund should be met by the Superannuation Fund itself and how much should be taken from the Consolidated Fund. The working of the method is very troublesome, and requires the application of much care and skill by the leading officers of the actuarial staff, but I believe, and have heard nothing to lessen that belief, that the effect has been an equitable division of the cost. 13. There are, however, evident objections to the practice of finding out, by means of intricate triennial calculations, how much further Government assistance is wanted, and continually asking for irregular special increases in the subsidies. I have known that this would be unavoidable until the Railways Fund should have been actuarially examined, but that Fund's first valuation having now been completed with satisfactory results, covering a period of nearly ten years, the experience thus obtained, together with that afforded by the other two funds, enables me to make a reasonable forecast of the

Required for 1912-13. 1913-14. 1914-15. Current ordinary pensions Prospective pensions to existing contributors now over pension age. . New pensions, family pensions, and miscellaneous benefits £ 51,273 1,214 9,596 £ 47,390 1,127 16,008 £ 43,768 1,048 22,736 Total sums required for retiring and other allowances Deduct amount provided by contributors' contributions without having recourse to the actuarial reserve appertaining thereto 62,083 13,901 64,525 15,409 67,552 17,164 Subsidies required for ensuing three years £48,182 £49,116 £50,388