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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 Fand 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 inanimously 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 Bongkong 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 muleted for the benefit of their married brother officers.
In
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 [0, 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, 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 trunsfer-to which they had previously animously agreed-and that you thereupon decided to take no further steps in the matter but siniply 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 Honghong 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 cole of rules governing the general constitution of the system, such as that ench member shall contribute 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 cui 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 this depends upon two factors, first the closeness of the approximation of the mortality experienced to that assumed in the mortality table adopted, and secon lly the accuracy of the actuarial process by which the pension tables are delice from the mortality cable and the rules of the Fund. It may, I think, be assumed slust the state of actuarial science is such that the latter factor may be neglected as a source
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of error when actuaries of high standing like Messrs. Young and RYAN are employed. For practical purposes therefore, the accuracy of the pension tables depends on how closely the mortality experienced by the Fund approximates to that embodied in the table of mortality.
8. When the Hongkong Widows' and Orphans' Pension Fund was foundel, there were hardly any precise data of the mortality experienced by Government officers and their wives in tropical colonies, and the Northampton Table of Mortality was accordingly used as the most satisfactory basis then available. Similar funds have however been established in several other colonies as mentioned above, and during the last twenty years statistics of the mortality experience of those funds have become available and a table of mortality has recently been framed after an examination of the data furnished by Ceylon. Jamaica, Trinidad and the Straits Settlements. The actuaries' report on the subject was enclosed in Mr. CHAMBERLAIN's despatch No. 447 of the 17th of December, 1963: you will observe from it that the actual number of deaths was compared with the number allowed for by the Barbados Mutnal Table, which was considered to afford a good standard for the measurement of the rate of mortality prevailing among a body of persons residing in a tropical climate but otherwise favourably situated, and the result was that the ratio of the actual number of deaths to the number allowed for, was 69 among Asiatics and Eurasians, and .79 among Europeans in Ceylon, .66 in Jamaica, 90 in the Straits Settlements; and 1.06 in Trinidad. The actuaries accordingly framed a table on the combined Ceylon and Jamaica experience and recommended the adoption for the Straits Settlements and Trinidad of the Barbados Mutual Mortality Table and of Pension Tables framed on it.
9. In this investigation the statistics of the Hongkong Fond were after careful consi- deration rejected as being too scanty to furnish any indication of the probable future ex- perience of that Fund, and the great difficulty of dealing satisfactorily with so small an institution had previously been emphasized in Mr. Youse's Report on the Valuation of the Fund as it existed on the 31st of December, 1900,
10. That valuation, which was of course based on the old Peusion Tables, after making allowance as far as possible for the peculiar character of the experience of the Fund, showed that the gross liabilities of the Fund then amounted to $232,837 and the surplus to $10,275.54 or that the surplus was between 4 and 5 per cent of the liabilities. In the case of the valuation of the Straits Settlements Fund (also as on the 31st of December 1900) the surplus disclosed was a little under 10 per cent of the gross liabilities (the same pension Tables being used) so that the Straits Fund was found to be in a rather better position than the Hongkong Fund, But as I have statel in paragraph 8 above, the mortality experience of the Straits Settlements was 90 as compared with .66 in Jamaica anÏ .69 and 79 in Ceylon. In the adoption of the pension tables framed upon the more favourable mortality experience of Jamaica al Ceylon, the service of the Straits Settlements has, as you will see, been treated liberally; and, as far as the small size of the Hongkong Fund allows a definite opinion to be expressed, the position of that Fund is such that the adoption of the Ceylon Pension Tables for use in Hongkong would also be quite as liberal a measure as in the Straits Settlements. It is however very desirable that the pension rates in Hongkong, the Straits Settlements, and the Federated Malay States should be the same, especially as for some purposes the three administrations are mammed by a joint service; and, after a somewhat rough actuarial examination of the effect on the reserve of the Fund of adopting the Ceylon Tables, my predecessor came to the conclusion that, while not completely clearing up the question, this examination was sufficient to justify their adoption in the event of the Hongkong Government taking over the Fund. But the actuary has never committed himself to recommending the adoption of of the Ceylon Tables in the ease of the Hongkong Fund not being taken over, and the same applies to the concessions to bachelors and "widowers without pensionable children. It must be borne in mind, that if the Fund is not taken over by the Government, it would only be possible to sanction the adoption of such revised tables as the actuary might definite- ly recommend as suitable for the circumstances of Hongkong.
11. I will now proceed to explain the reasons for the abolition of the Fund. By this course the interests of members of the Fund are in no way injured. The Government binds itself to pay pensions according to Pension Tables mentioned in the Ordinance, and the rates contained in those Tables are based on the assumption that compound interest at 6 per cent is, and will continue in effect to be, paid by the Government. The only advantage which Government obtains is that it is relieved from the necessity (inherent in the old system of these Funds) of contributing 6 per cent compound interest on surpluses, should such exist,