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prescribed in Section 2 A of the Pension Minute (subject, of course, to temporary provisions framed to meet the period of transition).
14. It may be that if actuarial opinion is taken, this will result in considerable delay in the settlement of the whole question of Order in Council pensions. The delay which has already taken place is a source of disquietude in the services, and must, I think, be admitted to be unfortunate, particularly now that the Order in Council has been published. I would, therefore, suggest that if the question of commutation appears to you to require further prolonged consideration this should not delay the publication of the regulations: in that event I might be authorized to substitute for the table now included in draft Regulation 4 (annexure C to enclosure I) a reference
a table to be prescribed by the Secretary of State."
to
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15. Whenever the terms are published and whatever they may be, they will certainly attract unfavourable comment from the Ceylonese political Press and plat- form. I do not desire that public attention should be focussed on these terms, and I think that my object is far more likely to be achieved if the regulations embodying them are published at an early date. There will probably be in the new Council a bent solely on bringing the new constitutional scheme into discredit, recalcitrant group and I can foresee that this group would make the most of the sudden appearance on the political scene of regulations which, though seeming to us moderate and reason- able enough, will be interpreted by them as a device to enable European officers to retire on large pensions at the expense of the people of Ceylon. In any case, of course, the scheme of compensation will receive its due share of hostile attention from certain quarters, but I see certain definite advantages in publishing the terms while the State Councillors are preoccupied with duties which are still unfamiliar to them. That consideration, though important, I should regard as secondary to the con- sideration that, now that the Order in Council is in operation, the Services have every reason to expect an early announcement in regard to their terms of retirement. For these reasons I would urge that if Your Lordship agrees with the scheme which I now propose and strongly recommend, I may be informed by telegram to that effect and authorized to publish the regulations herewith forwarded (annexure C to enclosure I), with or without the reservation relating to partial commutation to which I have referred in the preceding paragraph.
16. I cannot conclude this despatch without adding an expression of indebted-
my noss to the Treasurer, Sir Wilfrid Woods, for the assistance which he has given me in dealing with this difficult problem. The lucidity with which he has expressed his views throughout has made it comparatively easy for me to grasp the details of a necessarily complicated problem; and the casting of the scheme approved by me into its final form has involved very heavy work at a time when the Treasurer was already overburdened with the preparation of the Annual Estimates. Every new proposal raised a host of subsidiary problems, with all of which Sir Wilfrid Woods has dealt with his accustomed thoroughness and clearness of vision.
SIR,
+3
I have, &c.,
GRAEME THOMSON,
Governor.
Enclosure I in No. 6.
General Treasury, Colombo, 9th May, 1931.
WITH reference to your C.A. 735/29 of the 27th March last, on the subject of " proportionate pensions, I have the honour to refer to the provisional instruc- tions given to me verbally by His Excellency the Governor at Nuwara Eliya on the 25th April.
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2 Terms of Provisional Instructions. I understood these verbal instructions to be that I should submit a revised scheme which should follow generally the lines of the Phillipson "' scheme and should retain 90/720ths as the maximum compensa- tory pension, but should give rather more liberal terms to officers retiring between 40 and 45. I was also to give consideration to the opinion expressed by the President of the Civil Service Association that the compensatory pension should be based on prospective service, without necessarily accepting that view in its entirety. I was
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also to bear in mind the representation made by the President of the Public Service Association that in so far as the compensatory pension is based on prospective service, it should be based on prospective service to 60, in order partly to correct what was considered by professional and technical officers who have joined at about 29 or 30 years of age to be an unfair advantage in the matter of pension to officers who join young, as compared with those who join at a later age after obtaining their experience elsewhere.
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3. Apart from modification of the Phillipson scheme in the light of the above considerations and provisional decisions, I was to submit draft rules regarding (4) commutation of pensions granted under the Order in Council, (b) notice of retire- ment, (c) leave, and (d) passages. It was decided as regards (4) that commutation should be permitted, but details were not discussed. The general lines which the rules regarding (b), (c), and (d) were to follow were decided.
1. Revised Scheme now Submitted. I will first of all describe the revised scheme which has been prepared in the Treasury in pursuance of the above-mentioned instruc- tions. So far as its results are concerned, it follows the main lines of the original Phillipson "scheme, though it is appreciably more liberal where the age of retire- ment exceeds 40 after not less than 10 years' service.
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5. This revised scheme postulates that an officer who feels compelled to terminate his career between 40 and 43 after not less than 10 years' gross service suffers the maximum degree of injurious affection as a result of the change in the Constitution, and it awards to such an officer, as a pension compensating him for loss of his career :-
(a) the pension for which he would have been eligible under the Pension Minute if he had retired on medical grounds at the date on which he actually retired because of his dislike of the new conditions (* ́ Medical Certificate " pension); and in addition thereto :
(b) a pension of ninety seven-hundred and twentieths (or seven and a-half
sixtieths) of his salary at retirement (compensatory pension). (Overriding limitation in all cases to be 3rds of the officer's highest pensionable emolu- ments in Ceylon). It is convenient to refer to these two component parts of the pension granted under the Order in Council as the "Medical Certificate "and "Com- pensatory pensions, respectively, but in combination they form a single pension (Order in Council pension), the whole of which in the majority of cases will, in reality, be compensation to be given to the officer for the loss of his career, since at the date at which it is to be awarded (unless the officer is already 55) the pension actually grantable to him under the Pension Minute is nil. Ex hypothesi, he is not actually qualified by ill-health for a "Medical Certificate pension.
6. It is next assumed, still in the case of an officer with 10 years' gross service or more, that if he retires before 40 or after 43 the degree of injurious affection decreases as the age of retirement recedes from 40 towards the threshold of his official career and also as the age of retirement advances beyond 43 towards the normal date of its termination. In conformity with this assumption, the fraction regulating the amount of the compensatory pension falls below 90/720ths by 1/720th for each period of two months by which the officer's age at retirement has fallen short of 40 or advanced beyond 43, and reaches zero at 25 (supposing it to be possible for an officer to have had 10 years' pensionable service at that age) in the one direction and at 58 in the other. Owing to the intrusion of the "abolition of office" terms into this scheme of reduction of the maximum compensatory fraction, the even step of the reduction process is broken between 49 and 52 after 19 years' service, but this is unavoidable and has no serious consequence. The extensions from 55 to 58 of the age up to which prospective service is counted is a concession, not very considerable, I admit, which I propose to make to certain views put forward on behalf of the technical officers to which I shall refer later (vide paragraph 20).
7. Finally, the scheme deals with cases where the officer retires with less than 10 years' gross service and in these cases it awards a compensatory pension strictly in accordance with past service and without reference to age at retirement. Such an officer would receive :--
(a) the gratuity (his gross service being less than 10 years) for which he would have been eligible under the Pension Minute if he had retired on medical grounds; and in addition thereto
(b) a pension of one seven hundred and twentieth of his salary for each complete
period of two months in his service counting for pension
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8. Defence of the main features of this scheme. The scheme described above has been embodied in the draft Regulations under Article 88 of the Order in Council annexed to this letter. I shall refer to these regulations later. Before examining the results which the scheme will produce it is necessary that I should defend features of the original Phillipson scheme reproduced in this scheme which are out of harmony with principles either explicitly stated or implied in the Secretary of State's despatch on this subject. Although the Secretary of State has not given final instruc- tions. I apprehend that His Excellency would be reluctant to put forward proposals which do not follow guiding lines drawn by the Secretary of State without a full statement of reasons for doing so.
9. The features to which I refer, and the contrasts which they present with features of the Secretary of State's proposals, are the following:-
(1) the maximum compensatory addition to "Medical Certificate" pension is 90/720ths as conpared with 120/720tha under the Secretary of State's schieme I and 861/720ths under his scheme II, but his additions are to a basic pension calculated on 50ths; (2) the compensatory addition is awarded mainly on the basis of age at retirement with length of service as a subsidiary factor without value in regard to net service an excess of 10 years in both the Secretary of State's schemes the compensatory addition is awarded entirely on the basis of service except in so far as ite specific limitation to 100/600the or 72/600ths of salary, and the general limitation of the whole Order in Council pension to 3rds of the officer's highest pensionable emoluments, operate to cancel the effect of length of service beyond points which vary according to individual cases;
(3) the basic pension calculated according to years of service, and the compensatory addition as in (2) above, are both alike expressed as sixtieths of salary in the Secretary of State's schemes they are both expressed as fiftieths of salary.
10. It must, of course, remain always a matter of opinion as to what the maximum compensatory addition should be, but I submit that since the conditions of an officer's service provide for a maximum compensatory addition of only 60/720ths if he is compelled to retire on abolition of office, there is a strong prima facie reason for the view that a 50 per cent addition to that maximum, making it 90/720ths, would suffice to bring it to the level demanded by any reasonable estimate of the requirements of the situation in which officers find themselves as a result of the change in the Constitution. I should take this view even if I conceded, what the services appear to take for granted, that the mere fact of the change in the Constitution is equivalent to forcible termination of an officer's career. I am not, however, prepared to make such an admission. In a world of rapidly changing conditions Public Servants cannot expect to be entirely immune from, or to be fully compensated for, all the consequences of the shifting of political authority, but must count thern- selves fortunate in being presented with a no more disagreeable alternative to continuance of service in conditions which are no longer congenial to them than retirement on appreciably better terms than they would have received if retirement was forced upon them by ill-health. They are encountering an accident of life such as everyone is liable to experience. The Secretary of State promised them no indemnity for such an accident when they joined the service and it would have been impossible for him to have done so. They cannot reasonably expect to be compensated to the extent of being offered an alternative fully equal to the value of their lost privilege of service under the conditions which have passed away. They must expect, like other people, to hear some of the burden imposed by new conditions either by con- tinuing to serve in spite of them or contenting themselves with a modest compensation for loss of the offices which they feel they must abandon. Another mistake the Services are apt to make in appraising the extent of the compensation which they think they ought to be given is to compare conditions of service under the new Constitution with conditions 21 years ago, when unofficial influence had scarcely penetrated into Govern- ment circles. The correct comparison is between conditions in 1930 and conditions under the new Constitution, and when this comparison is made the Services' exag- gerated estimate of the degree of injurious affection which they will suffer is seen in correct perspective.
11. The marked contrast which will be presented by the one case of, say, a Civil Servant who retires at 42 after 19 years' service because of a breakdown in health, due quite possibly not to any weakness of constitution but to the hazards of tropical residence, and the other case of a Civil Servant of the same age and with the same service who decides to retire under the Order in Council, is another con- sideration that cannot be entirely ignored. The first will, to take a concrete case. receive his Medical Certificate " pension of, say (24/60ths x £1,300 =) £520 and no more. The other will receive this same £520 with an addition which under my scheme would be £162 10s., under the Secretary of State's scheme £190 13s. 4d.. and under the Intest proposals of the Civil Service Association would be £221. This
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sort of contrast will present itself repeatedly--the man who has attempted to carry the burden retiring with £520 per annum and the man who has not with (if the Civil Service Association has its way) £741. Twenty-five years hence, when the two cases relate to officers who both joined a short time only before the change of the Constitu- tion, and both have spent practically the whole of their career under the new conditions, the liberality in the one case will contrast even more sharply with the treatment meted out in the other. Admittedly the two cases cannot be given equal treatment, but I think the contrast is sufficient with my proposed maximum of 7/60ths and that it is unnecessary to accentuate it by greater liberality to the officer who will not stay.
12. In these circumstances I confidently submit that a maximum compensatory addition of 90/720ths (practically identical with the maximum addition for which the Secretary of State's scheme II provides) is sufficient and that to go beyond that limit would lay the Government open to a charge of extravagance which it would not be easy to rebut.
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Under
13. Coming now to the principle of making age instead of service the basis of the compensatory fraction, it is obvious that if all officers concerned entered at the same age a given age would connote a definite number of years of service and con- versely any number of years of service would connote a definite age. Owing, however, to the great variations in age of entry, service as the basis of the compensatory pension does not operate equitably. Thus A, a Superintendent of Police, at 43 years of age may have had 23 years of service, while B, a Civil Servant, at that age has had 19 years, C, a District Engineer in the Public Works Department, who was recruited in England, only 13, and D, a Railway Officer recruited from a Home Railway, has possibly had no more than 11. As in all these cases the officer has served 10 years, and has thereby acquired full pensionable status, it does not seem unreasonable to treat them alike in awarding an additional fraction of salary as compensation for loss of career. the Secretary of State's scheme No. I, service being the basis of the compensatory addition, A would receive as a compensatory addition, 115/720ths, B 106/720ths, C 65/720ths, and D 46/720ths. The Policeman's total pension fraction would then be more than twice that of the Railway Officer's, the latter, because of his shorter service, "Medical being given a smaller fraction of his salary in the calculation of both his Certificate pension (which is as it should be) and his pension for loss of prospective service (which does not seem equitable). What we are trying to do is to give the officer compensation for the loss which he will suffer after retirement. In doing so we have at the same time to give him what may be loosely described as his accrued pension rights. There seems to be no practical way of assessing these "accrued " pension rights except by calculation of his "Medical Certificate" pension. The total grant, therefore, seems to be properly divided into two parts, one based entirely on past service and the other mainly on prospective service irrespective of past service (subject always to a minimum of past service). Another point for consideration is that if the compensatory addition is based on service the addition is altogether excessive in cases where the officer retires at an age near the date of ordinary retirement. In both the Secretary of State's two schemes the maximum effective additional fraction is awarded very late in the officer's service--at about 48 and 50 in the case of officers who joined at 23. Now the ages 48 to 50 are just those where retirement is likely to be very attractive in itself, quite apart from any apprehensions on the score of political changes. It is then that the average European feels the effects of tropical residence and then that he has his family in England. I think there is a not inconsiderable number of Medical officers who just at that age might be sorely tempted even by the offer of a Certificate "pension. If at this age a liberal maximum fraction comes into operation the scales will be heavily weighted in favour of retirement, and Government will lose many of its officers just when their experience has become so considerable as to be invaluable and their mental powers are probably at their best.
14.
Even at 55, when the officer might be called upon to retire under the con- ditions of his service without reason assigned, an officer who has 31 years' service would receive as much as 48/720ths under the Secretary of State's schemes in spite of the operation of the limitation which the schemes place upon the maximum addition grantable. On the other hand, where the compensatory addition is based on service a relatively inadequate fraction is awarded to officers whose service does not much exceed 10 vears. A Public Officer, for example, with 11 vears' service would receive under the Secretary of State's schemes as additional fraction only 46/720ths (approxi mate) or 19/720ths, though the loss of his career at the critical age of 44 would seem to justify more liberal treatment if the additional fraction awarded to the officer retiring