"What do you mean by the Treasury having allowed it to operate? "Well, if in fixing any scale of salaries they have considered that the noneffective charge or part of the charge was 15 or 20 per cent, they have no doubt reduced the market rate of pay given to any particular class by that amount." (a)

The point of this is that Mr. Moir at least, and presumably other civil servants, too, had perceived the confusion of ideas which had arisen as a result of testimony before the Ridley Commission in regard to pension charges and the amount of deductions required for maintaining a fund, but thought that, whatever the basis on which the Treasury made deductions, the fact that they made them, regardless of the percentage of deduction or the scientific or unscientific basis for such deductions, was sufficient to justify the theory of pensions as deferred pay and the demand of the clerks for a more equitable distribution of the contributions. Said he:

What I meant was that even though the Treasury may have acted on a wrong basis, it does not follow that the civil servant should suffer because of that. It is not for us to justify the ground on which the Treasury or whoever fixed the rates of pay may have arrived at the proportion. What I mean, if I can make myself quite clear, is this: that it is quite possible that the relation between the noneffective and the effective charges does not bear the same proportion as the value of the deferment, as we call it, does to the pay of any individual civil servant. For instance, we are advised by our actuary that in a few years, say ten or more years, the relation or proportion between the noneffective and the effective charges will probably rise to something like 25 per cent, whilst at the time the Treasury were dealing with these matters the relation was something like 16 to 20 per cent, so that the proportion may be a varying amount, but the value of a civil servant's pension bears a constant relation to his pay.(")

Discussing the matter in detail, the representative of the Deferred Pay Committee and the chairman of the commission agreed that in calculating the pension charge it was important that the element of interest should not be forgotten and that the actual deduction would probably be much less than the ratio of the noneffective to the effective vote. How much less would depend on the rate of interest.

THE FACT OF POSTPONED CHARGE ESTABLISHED BUT AMOUNT NOT DETERMINED.

Sir Francis Mowatt, the permanent administrative Secretary to the Treasury-formerly Mr. Mowatt-was later called before the commission and questioned as to what he had meant in 1888 when he told the Ridley Commission that the real charge that the State had to undertake for a civil servant on £100 ($486.65) a year salary was

a Report of Commission on Superannuation in the Civil Service. 1903. Minutes of evidence, p. 12.

b Idem, p. 13.

£118 ($574.25) a year. "That has no reference to deduction," said he. "I meant no more than this: That the pension charge of an officer might be taken roughly at 16 to 18 per cent in addition to his salary." While it seems clear that he was thinking not of individual charges but of the charge of the whole service, grouping all cases together, since all individuals do not live to pensionable age, it is equally plain that his statement was a little misleading. It is not strange that the civil servants generally should have thought they had high authority for the contention that about 18 per cent of their salaries was being held back by the Treasury.

The origin and fallacy of the theory of a 16 to 20 per cent deduction was thus abundantly shown and admitted, but the theory of pensions being deferred pay remained substantially unshaken, although Sir Francis Mowatt declared that he had never heard of a public servant being reduced in salary on being transferred from a nonestablished to an established post. Members of the Deferred Pay Committee had told the commission that such was the common practice. When given the facts in a definite case, which had been cited to the commissioner, Sir Francis Mowatt said:

I could not answer without looking fully into the case, but I should say that under no circumstances would a man without some express explanation suffer a reduction of 15 per cent on being transferred from a nonestablished to an established post. (a)

Mr. Heath, also an official of the Treasury, admitted, however, that deductions of about 5 per cent of salary were made on transferring workmen from the unestablished to the established service. Mr. Morton, a member of the commission, said to him:

"You were talking just now of two different classes of laborers in dock yards. You gave us an instance some time ago. It is well known that there are hired laborers and established laborers, and we are aware that the hired laborers receive a higher rate of pay than the established laborers."

"Yes," answered Mr. Heath, "the difference being that the established laborer receives about 5 per cent less."

"Yes, in point of fact, that is a species of contribution that he makes toward his future pension?"

"No, I should not put it that way."

"I should be glad to hear what your view is."

"It might be regarded as a contribution toward the cost of giving him pension rights, but of course it is not put aside; it is not accumulated. It has no relation to a system under which a fund is established?"

"Oh no, I am quite aware of that. It is a small contribution toward the cost of making a man pensionable."

"He receives less pay in consideration of pension, in point of fact?" "It is by way of a set-off against the pension charge." (")

a Report of Commission on Superannuation in the Civil Service. 1903. Minutes of evidence, p. 153.

Idem, p. 9.

REQUEST OF CIVIL SERVANTS THAT AMOUNT of Postponed Charge BE DETERMINED.

The members of the commission and representatives of the civil service having agreed that there was a deduction from salary but that it was less than 16 to 20 per cent, Mr. Rolfe defined the position of the civil servants thus:

We should like it to be established in the first instance, if possible, what is the actual deduction, if such deductions exist, which the civil servants at present suffer, and we feel that the Treasury only is in a position to have the necessary calculations made to establish that fact, if that fact can be established. It would then be seen whether the deductions at present made are sufficient in themselves to form a superannuation fund which would give benefits to survivors, and also to those who decease prematurely, but until that is definitely ascertained the position of the civil servant is that the deduction at present suffered is sufficient to provide the benefits for which we ask by the formation of a superannuation fund. (")

The chairman argued that the result of making payments to those who do not now receive payments, namely, widows and orphans, must mean smaller payments to pensioners unless the total pay to the civil servant was increased. The civil servants argued, on the other hand, that something additional would be available, if the funds were set aside, bearing interest. Pressed for an answer whether the civil service was prepared to take less payment to the pensioner, Mr. Moir said that he thought a reduction of pensions, if combined with insurance benefits, would probably be acceptable to them. Mr. Ellis also held that a small diminution of pension would be accepted by the service to insure provision for dependent relatives. The sessions between the commissioners and the representatives of the civil service resulted, therefore, in a helpful clarification of ideas. It seemed to be conceded, on the one hand, that there was reason for thinking that pensions were, to some extent at least, deferments of pay and it was admitted, on the other hand, that there was no sound basis for the contention that the amounts deferred were as much as 16 to 20 per cent of salary. The civil servants' representatives admitted reluctantly, also, that if it was impossible to increase the total charge, the only way to secure the insurance benefits desired might be by reduction of pensions. They hoped, however, that the creation and investment of a fund might obviate that necessity.

The actuary whom the Deferred Pay Committee had consulted, Mr. Philip Lewin Newman, was later called before the commission and his testimony served to emphasize this clarification of ideas. He stated that they had wished to have certain benefits upon death

a Report of Commission on Superannuation in the Civil Service. 1903. Minutes of evidence, p. 14.

before superannuation or upon death after superannuation, but before the amounts assumed to be paid in contribution would equal the pension paid in addition to the present pension, and that he had estimated for them what the additional cost would be for providing benefits on death before superannuation. He did not take into consideration that the charge was to remain the same and said that, if that had been a condition of his investigation, the only way in which he could have given them any plan by which they could secure payment on death before superannuation would have been by reducing the pensions or by requiring them to make a contribution. Such benefits could be secured only at the cost of the superannuation allowance or the cost of some contribution from the civil servant, such as a revision of the scale of salary; in other words, by either reduced pension or reduced pay. On being asked if he had advised the Deferred Pay Committee that they could get greater benefits by the institution of a pension fund instead of the maintenance of the existing system which charged the actual cost of the pensions each year to the annual estimates, he explained that he had done so, but only on the assumption urged by them that they were already suffering a deduction from their salaries of a larger amount than was necessary to give them the pension provided. Having no data to go on, he said he had not been in a position to decide on the truth of their assumption.

VOLUNTARY INSURANCE ORGANIZATIONS MAINTAINED BY CIVIL SERVANTS.

Evidence given the commission by members of the civil service regarding the voluntary insurance organizations maintained by them to provide against that calamity most dreaded by them-"death during service"-showed that there was a commendably high average of foresight and prudence in the service. They found that the largest of these organizations was the Civil Service Insurance Society. This society, which was then about twelve years old, was enabled by a special arrangement with an insurance company to effect insurance for civil servants on very favorable terms, the premiums being deducted quarterly from the salaries of the policy holders. They found that over 20,000 policies had been taken out for an aggregate sum assured of over £5,000,000 ($24,332,500). The Civil Service Insurance Society also deals in annuities both immediate and deferred, and it had recently established in connection with its general business a widows' and orphans' annuity fund. The commission heard evidence also in regard to two old-established and prosperous departmental organizations known as the Customs Annuity and Benevolent Fund and the Inland Revenue Benevolent Fund. They found that the former was mainly a life assurance society and that the latter 35885-S. Doc. 290, 61-2-11*

undertook the provision of widows' annuities in return for the surrender of bonuses on policies of insurance. They found two similar organizations in the Postmen's Mutual Benefit Society and the PostOffice Insurance Society. The former had a membership of about 12,000 and provided a benefit averaging £25 ($121.66) which was payable on death or on retirement by reason of ill health, and, in some cases, on dismissal or on voluntary resignation of employment. To the Post-Office Insurance Society all grades of the established postal service are eligible for membership. The members numbered then about 20,000 and the amount of the benefit varied from £50 to £100 ($243.33 to $486.65). A similar institution had been in existence for fourteen years among the Board of Trade surveyors under the name of the Board of Trade Surveyors' Mutual Trust. During that time the total sum paid out was nearly £5,000 ($24,332.50), or an average benefit of about £165 ($802.97). Another institution that the commission found very meritorious was the Civil Service Benevo lent Fund, which had been established in 1885, was supported by the voluntary subscriptions and donations of civil servants, and applied itself to relieving the necessities of the widows and orphans of those who died either in the service or shortly after retiring on pension. The annual income from subscription was about £1,600 ($7,786.40), the number of cases dealt with since 1885 numbering nearly 1,200. Though the amount of relief given in individual cases was not large, the fund accomplished a very useful work.

PER CENT OF SALARIES PAID FOR LIFE INSURANCE BY CIVIL

SERVANTS.

An interesting statement was made by the commission in their report showing the per cent of salaries devoted to insurance by the clerks of various grades:

In some respects, the considerations which affect the civil servants whose salaries exceed £160 ($779), and who may be distinguished as the income tax-paying body of the service, are not precisely the same as those which affect the wage-earning body. We have obtained, by the courtesy of the heads of departments, a return showing that the total number of officers receiving a salary above £160 ($779) is 14,754, of whom (a) 11,827 or 80 per cent have salaries not exceeding £400 ($1,947); (b) 1,075, or 7 per cent have salaries exceeding £400 ($1,947) and not exceeding £500 ($2,433); (c) 1,104 or 7 per cent have salaries exceeding £500 ($2,433) and not exceeding £700 ($3,407), and (d) 748 or 5 per cent have salaries exceeding £700 ($3,407). Of the (a) class 26 per cent, of the (b) 22 per cent, of the (c) 27 per cent, and of the (d) 34 per cent do not claim any deduction of income-tax in respect of insurance premiums. The remainder in the (a) class pay in premiums on the average 4.6 per cent of their salaries, the (b) 5.5 per cent, the (c) 5.9 per cent; and the (d) 6.9 per cent. In other words, each member of the (a) class, on an average salary of £247 ($1,202), pays away £11 6s.