H.—26a.

27. The importance of the ascertainment of the state of the Fund in the form given in paragraph 25 lies in the fact that the deficiency to be made good by the State —viz., £9,747,559 —is equivalent to an annual interest income (at per cent.) of £438,640. It follows that if any less annual sum than £438,640 is paid in by the State as subsidy the total deficiency will increase, and the subsidy must accordingly by way of compensation rise later on to a much higher figure than £438,640 per annum in respect of present contributors alone. If, however, any annual amount in excess of £438,640 is paid in, the Fund would, in respect of present members, attain solvency within a definite period of time. It should be clearly understood that this amount of £438,640 does not cease with the lifetime of the present members, but is a perpetuity. Furthermore, it does not include any subsidy to new entrants. Ascertainment of State Subsidy. 28. The Act, however, does not provide that the subsidy is to be determined from the foregoing actuarial ascertainment. It directs the Actuary to show in his report " the probable annual sums required by the Fund to provide the retiring and other allowances falling due within the ensuing three years without affecting or having recourse to the actuarial reserve appertaining to the contributors' contributions." I take this to mean that, as the contributions are insufficient to provide the full benefits for service after joining the Fund, the principle underlying the section is that the State shall postpone till it emerges the liability for pensions arising out of service before joining the Fund and for such part of the pensions arising out of subsequent service as is not covered by the contributors' contributions. I estimate the pensions falling due during the financial years 1934-35, 1935-36, and 1936-37, the amounts provided by the contributions, and the subsidies payable on the basis laid down by the Act to be as follow: — 1934-35. 1935-36. 1936-37. £ £ £ Estimated pensions . . . . .. 497,580 501,287 509,719 Amount provided by contributions . . 184,557 191,314 199,700 Amount due to be paid by the State in respect of the three years mentioned (but see also next paragraph) . . 313,023 309,973 310,019 29. The above figures would give for the years 1934-35, 1935-36, and 1936-37 an average subsidy of approximately £311,000 per annum, or £185,000 more per annum than the total of the present statutory subsidy of £86,000 and the trading Departments' subsidy of approximately £40,000. The following considerations, however, must be taken into account: — (a) The actuarial recommendations made in the past in pursuance of the Act have not been fully carried out, the actual subsidy payments into the Fund to the 31st March, 1934, as will be seen from Table XI of the Appendix, being short by £2,104,067 of the amounts recommended. After making allowance for interest, I consider that at least £102,000 per annum will require to be added to the future subsidies on this account. (b) The State subsidy should also provide year by year the amount charged to the Superannuation Fund in administration expenses, less possibly the amount of commission due in connection with investments, which might be regarded as a deduction from interest. The payment of expenses from the Fund is a definite departure from the original scope of the superannuation scheme, and my interpretation of section 49 (2) of the Act is that expenses amounting to, say, £5,000 per annum should form part of the subsidy. 30. I have, therefore, to report that in accordance with the system laid down by the Act the annual subsidy required for each year of the period ending 31st March, 1937, is as follows:— Subsidy now being paid by State (including trading £ Departments) .. . . • • • • • • 126,000 Further annual subsidy required— £ Paragraph 29 . . . . . . . . 185,000 Paragraph 29 (a) .. . . . . • . 102,000 Paragraph 29 (5) . . . . . . • ■ 5,000 292,000 Annual subsidy required for the years 1934-35, 1935-36, and 1936-37 . . • • • • ■ ■ • • • • 418,000

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