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not solvent) but decided to make all new officers insure their lives instead of contributing towards Widows' and Orphans' pensions. How far this arrangement will prove a success time will show, but its advantages hardly appear to outweigh those of the pension system. In Mauritius a decision on the matter has been deferred pending the result of an actuarial investigation of the Fund. In Ceylon, where the Fund was much larger than in any other Colony and in a prosperous condition, many members of the service, chiefly through a misapprehension of the reasons for, and the effect of, the Government taking over the Fund, objected to the measure, and it was finally decided that the Fund should be continued so far as existing officers were concerned but that new officers should not contribute to the Fund, the Government instead receiving their contributions and paying the pensions of their widows, thus allowing the old Fund gradually to die out for want of new members.
4. The proposal that the Government should take over the Fund was first placed before the Hongkong Government by the Secretary of State in July 1902 and in February 1903 your predecessor wrote stating that the Executive Council and the Directors of the Fund unanimously agreed to the adoption of that course. Correspondence followed-mainly as to whether the Pension Tables recently introduced in Ceylon might properly be adopted in Hongkong when the Fund was taken over-but in April 1905 Mr. LYTTELTON forwarded a draft of an ordinance to effect the transfer of the Fund and asked that it might be introduced as soon as convenient, and in March 1906, I suggested that certain amendments should be made in the Hongkong law so as to bring it into conformity with the more liberal system which prevails in some other colonies as regards the treatment of bachelors and widowers without pensionable children, and thus to remedy the system under which such officers were minleted for the benefit of their married brother officers.
5. The ordinance now before me authorizes the adoption of the new Ceylon Pension Tables and confers upon bachelors and widowers without pensionable children the benefits just alluded to, but omits altogether the provisions for the Government taking over the Fund and guaranteeing the pensions in view of which the other changes were sanctioned. In explanation of this change of policy I am informed that a small committee under the Chairmanship of the Attorney General had represented to Government that it was the unanimous desire of the contributors that the proposed transfer of the Fund should not be made that thereupon the Directors of the Fund and the Executive Council concurred in advising against the transfer-to which they had previously unanimously agreed-and that you thereupon decided to take no further steps in the matter but simply to enact the other amendments under consideration. I do not understand why this course was taken without previous reference to me, and as I have not been furnished with any explanation as to the nature of the reasons which led the members of the service to object to the transfer of the Fund, I am naturally in a somewhat difficult position in dealing with the matter. In the circumstances I can only give my reasons for pressing the proposal trusting that if in Hongkong the objections to it are similar to those which have been brought forward in other colonies such explanations may serve to remove the misapprehensions upon which the objections are based.
6. The Hongong Widows' and Orphans' Fund was started in 1891. For the calcula- tion of pensions under the system then established three kinds of particulars are required. There must be first the code of rules governing the general constitution of the system, such as that each member shall contribute 4 per cent of his salary or pension for a certain number of years, that Government will pay a given rate of interest upon the balances, that widows' pensions are to cease on re-marriage, and so on. Secondly, it is necessary to have a table of mortality showing at what ages the contributors and pensioners will die if an average is taken of a large number of individuals. Lastly, from the mortality table and the rules there are deduced by actuarial methods the rates of pension which can properly be paid to the widows or orphans of contributors to the Fund, and these pension rates are embodied in pension tables from which, given the amount of contribution and the respective ages of husband and wife, the pension of any individual beneficiary can be ascertained by a more or less simple arithmetical calculation.
7. The accuracy of the pension tables thus depends upon two factors, first the closeness of the approximation of the mortality experienced to that assumed in the mortality table adopted, and secondly the accuracy of the actuarial process by which the pension tables are deduced from the mortality table and the rules of the Fund. It may, I think, be assumed that the state of actuarial science is such that the latter factor may be neglected as a source