ing to the normal plan at age 60. A service was assumed with salaries in progress as at present in the New South Wales civil service. Entry age: Under 20 years. 20 and under 25 years.. 35 and under 40 years.. 5 per cent per annum. Mr. Trivett's conclusion, at the close of New South Wales's experiment, was that the details of a practicable system could be readily worked out if the principles laid down by him were adhered to. "It would be in every way regrettable," said he, "if the failure of a system, which had been devised on an unsafe plan, should provide so great a prejudice as to permanently prevent the adoption of some well-founded retirement fund, a most essential attachment to any efficient public service." a ENDORSEMENT OF ACTUARY TRIVETT'S VIEWS BY CIVIL-SERVICE BOARD. In submitting Mr. Trivett's report to the Governor of the colony, on November 1, 1902, the Public Service Board indorsed his views in the following words: Mr. Trivett discusses in his report the terms on which a perfectly safe scheme of superannuation could be maintained. With his remarks thereon the Board agree; but as a question of policy is involved, they do not feel called upon to make any recommendation. They contented themselves, therefore, with pointing out that the fund would become exhausted about the end of the current financial year and should then be replenished from the Consolidated Revenue in order that faith might be kept with the public servants. They urged the passage of a short legislative act to give effect to that proposal. PUBLIC SERVICE (SUPERANNUATION) ACT, 1903. OBLIGATIONS TOWARD CONTRIBUTORS ASSUMED BY GOVERNMENT. In 1903 the disaster, foreseen eight years before when the Act of 1895 became a law, came to pass. The superannuation account became exhausted. By that time the civil service employees had contributed, including the interest earned, no less a sum than £1,100,839 ($5,357,233). Those who had been paying into the fund the longest and who had paid the most, found themselves in the position of a Public Service Board, New South Wales (Supplement to Sixth Annual Report relating to the superannuation account), November 1, 1902, p. 9. having had their money all absorbed by those who had contributed the least. The obligation of the Government being generally admitted in the face of these facts, the Public Service (Superannuation) Act, 1903, was accordingly passed in line with the recommendations of the Public Service Board. It provided that henceforth all amounts payable to and out of the superannuation account should be paid to and out of the Consolidated Revenue Fund. The deficiency had been estimated by Mr. Trivett the previous year to be £1,761,075 ($8,570,271); in other words, that that amount, from an actuarial point of view, would be required to place the fund in a position to meet all its claims. The state of the fund at the time. of the last valuation, as at June 30, 1901, was as follows: The Board did not propose that a loan be floated for the purpose of paying off this deficiency, but indorsed instead the proposal made by the Colonial Treasurer in his budget speech on September 24, 1902, that the necessary amounts be paid, from year to year, as necessity arose, out of the Consolidated Revenue. "The amount to be provided will decrease every year," said he, " and at the end of fortyfour years it is computed that all claims will cease." The act providing for the payment of superannuation allowances out of the Consolidated Revenue on the exhaustion of the superannuation account was accordingly passed on October 19, 1903. The second section reads as follows: " 2. Notwithstanding anything in section 70 of the Public Service Act, 1902 [consolidated from Public Service Act, 1895], when the Governor is advised that the superannuation account has become exhausted, he shall so certify, and on such certificate being given— (a) All deductions under section 53 of the Civil Service Act of 1884, as amended by the act 59 Victoria, No. 25, from the salaries of persons shall be paid into the Consolidated Revenue Fund; (b) All superannuation allowances payable under the Civil Service Act of 1884 and the Public Service Act, 1902, to any persons shall continue to be paid to such persons in accordance with the provisions of the said acts, but shall be paid from the Consolidated Revenue Fund; (c) All persons being contributors to the superannuation account at or after the commencement of this act and becoming entitled to Public Service (Superannuation) Act, 1903. New South Wales. superannuation allowances shall be paid and shall receive out of the Consolidated Revenue Fund allowances to be calculated at the same rates and for the same periods as superannuation allowances payable and receivable from the said account before the commencement of this act; (d) Every person who, having been in the civil service, had a superannuation allowance computed or assigned at any time before the commencement of this act consequent on his acceptance of another office under the Crown which he now holds, but who is not receiving such allowance, shall, upon retirement from such office, be paid from the Consolidated Revenue Fund such allowance in accordance with the provisions of the Civil Service Act of 1884 and the Public Service Act, 1902; (e) All amounts of refunds and interest theretofore payable out of the superannuation account, under section 62 of the act 59 Victoria, No. 25, or section 73 of the Public Service Act, 1902, and all gratuities payable out of such account under section 51 of the Civil Service Act of 1884, shall be paid out of the Consolidated Revenue Fund: Provided, That the annual sum of £3,500, payable out of the Consolidated Revenue Fund, under setion 43 of the Constitution Act, 1902, shall be payable each year in satisfaction of the claims of such officers as are or may become entitled to be paid thereunder. So the matter stands to-day-the obligation of the Government decreasing as the number of pensioners grows smaller every year with the death of those who were in the service prior to the passage of the Act of 1895. In the meantime, those who have come into the service since that date have only their endowment insurance to look to for support after they reach the age of retirement. CONCLUSIONS. The contributory plan devised for the retirement of superannuated members of the civil service in New South Wales failed because it was unsound and inequitable. The experience of this colony shows that, in order to be satisfactory, a contributory plan must be based on the following fundamental principles: The contributions should be placed in a fund and invested at interest under guarantee of the Government, a separate account being kept with each contributor. Under the Act of 1884 the contributions were funded and invested at interest. Careful attention was not given, however, to the matter of interest in all cases. As pointed out by the actuary in the first triennial report, the Government ignored the interest factor in retiring officers because of abolition of office, paying to the superannuation fund the back contributions of 4 per cent without the interest that would have accumulated on these contributions, a practice severely condemned also by the actuary in the second investigation. While the contributions were put into a fund and invested separately from other government funds, no account was kept with each contributor. The assets were commingled, those received from contributors of all ages and all salaries being indistinguishably merged with each other. Even had the fund been found at each actuarial investigation to be entirely sound, that would merely have shown that the contributions in the aggregate were sufficient to pay the pensions; it would not have proved that the plan was equitable as between individual members and that the amount contributed was in each case commensurate with the amount received. The amount of contributions should be determined by the amount of the annuity to be granted under the pension scale adopted. There was no relation or ratio at all under the New South Wales plan, between the amount contributed and the annuities received. The flat-rate deduction of 4 per cent of salary for all ages and on all salaries was inequitable as between individuals of different ages and different salaries. The inadequacy of the contributions to provide for the benefits was pointed out by each of the three actuaries who reported on the fund. The principle that the percentage of deduction from salaries should vary with the age of entrance into the service, though he tried to strike an average, was pointed out by Mr. Teece, in the first actuarial examination. It was brought out with emphasis by Mr. Trivett also, in the second examination. The analysis made by these two actuaries of New South Wales' scheme shows conclusively that flat-rate assessments are unscientific and disastrous. The annuity should be based on the amount of salary and the length of service. As the length of service depends naturally on the age of entrance into the service, the percentage of deduction from salary necessary to provide the required annuity must vary with the entrance age. There must be a sharp differentiation between accrued liabilities and future liabilities. In each actuarial investigation made by the three different actuaries employed to value the New South Wales fund great emphasis was laid on the fact that a failure to differentiate between acqued liabilities and future liabilities was one of the chief causes for the insolvency of the fund. The "enormous dormant liability" with which the fund was burdened was counted among the causes of failure by Mr. Teece; "the accrued, albeit unperceived, debt" which overshadowed the fund from the beginning was held partly accountable for its state of insolvency by Mr. Coghlan. The inability of the government endowment of £100,000 ($486,650) to meet the initial liability which the fund carried on account of the civil service was held by Mr. Trivett to have condemned the plan from the beginning. Here was an absolute agreement of experts amply sustained by the facts. No more striking illustration could be asked of the principle that contributions made by present employees should be held in re serve to pay their future pensions, and that accrued liabilities—pensions for past services-should be paid by the State. Provision should be made for the refund of contributions in case of separation from the service. A slight consciousness of the wisdom and justice of such a provision was shown by the Civil Service Board in its report to the Governor of the colony after the second triennial investigation. Cases of contributors to the fund dying in harness and leaving widows in necessitous circumstances had been frequently brought to their attention. It seems to have occurred to them, about this time, that instead of dispensing gratuities to the widows and children of such employees it would have been more rational and satisfactory to have given them a right to the sums contributed by those employees. The New South Wales experience shows that the amount of the retiring allowance should be calculated on the basis of the average rather than the final salary. Besides being a more scientific method of calculation, this method recommended itself on the score of economy to the various actuaries consulted. Mr. Teece suggested that the most equitable way to accomplish a reduction in the rate of pensions was to base the amount of pensions on the average salaries instead of on those of the last three years. Mr. Trivett recommended as more equitable and more economical an average salary deduced from the aggregate salary as the basis for calculating the amount of the pension. Mr. Coghlan acknowledged this method as the scientific one but contented himself with recommending as a basis for calculating the pension the average salary for the last seven years of service instead of that for the last three years. A provision for life insurance is a desirable adjunct to a retirement measure, but will not do as a substitute. The desirability of it was doubtless impressed on the Civil Service Board of New South Wales by virtue of its difficulties with the widows and orphans of employees who died in the service. It is to be commended as having a tendency, through the operation of medical selection in the choice of candidates, to raise the standard of general efficiency in the service. As a substitute for a proper retirement measure it is, however, inadequate, ast pointed out by Mr. Trivett in his last report. Nor is the necessity for it so apparent, under a proper contributory plan, where provision is made for the refund of contributions in case of withdrawal from the service, save in the younger ages before the employees' contributions are adequate as a protection for his family in case of death. No gratuities should be allowed under a model retirement plan. They lead to abuses of all kinds. They are not needed for the dependents of such employees in case contributions are returned or insurance is provided. Mr. Teece regarded the payment of gratuities |