Sessional_Paper_1908 — Page 401

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7. It will be observed that the contributions at first largely exceed the pension payments, but that the contrary is the case after 15 years. The interest at 6 per cent has by that time become a valuable auxiliary to the income from contributions, and the Fund continues to increase until it amounts to Rs 21,391 at the time when the members having attained age 65 all income from contributions ceases.

8. By a separate calculation it has been ascertained that the actuarial value at 6 per cent interest of (a) the pensions current at the end of the period of 30 years and (6) the prospective pensions on account of the surviving members, together equal Rs 21,391 which shows that the Fund might be expected to exactly meet all pension payments up to the cessation of the last pension.

9. Columns are added showing the position if interest be earned at 33 per cent per aunum and also if no interest be credited to the Fund. In the former case the Fund at the end of the 30 years is considerably short of the amount required to meet the future pension payments, even if the rate of interest were then increased to 6 per cent; and obviously if only 34 per cent interest were earned by the Fund after the contributions ceased, a much larger sum than Rs 21,391 would be necessary to provide for the future pension payments.

10. The column headed " Fund without interest shows that on this assumption the pension payments could not be met in full after the 28th year, and that when all contributions had ceased there would be no assets of any kind to meet the large payments falling due for pensions.

11. The last column of Appendix A shows the percentage of the income from contributions and interest at 6 per cent absorbed by the pension payments. It will be observed that this percentage increases steadily year by year.

12. In Appendix B is set out for each year from the commencement of the Ceylon Widows' and Orphans' Pension Fund the percentage of the actual yearly income from contributions and interest absorbed by the actual pension payments of the year. This percentage, like that described in the preceding paragraph, shows a distinct tendency to increase; not indeed with the same rapidity and regularity because no new members are assumed to enter the Fund of Appendix A whereas in the case of the actual experience of the Ceylon Fund, set out in Appendix B, the percentage column is affected by the constant introduction of new contributors. It will be at once seen that although the Ceylon Fund has been in existence for 20 years yet the average period for which the present members have belonged to the Fund is very much less than 20 years, a considerable number of them having in fact entered during the last 10 years. Bearing this in mind and noting also that the actual experience of the Ceylon Fund as a whole might be analysed into 20 partial experiences, if separate accounts were kept, for the members who entered in each of the 20 years of its existence, and that each of such partial experiences would be similar in type to the experience of the Fund of Appendix A it is obvious that the Fund as a whole is working normally. It will also be apparent that the percentage of the income from contributions and interest which is absorbed by the pension payments will continue to increase as the average duration of membership grows larger, and as the number of members aged over 65 years increases.

13. Summing up the considerations presented in paragaphs to 12 above it may be confidently stated that if the Fund be continued on its present basis, the annual addition made to the corpus will tend to diminish, and that eventually the pension payments will exceed the receipts from contributions, and the income from interest will become a vital necessity to the preservation of the Fund. Should the rate of interest earned fall materially below 6 per cent the Fund will be unable to meet in full the pension payments calculated by the present Tables.

For we

14. The assumptions upon which the arithmetical illustrations in the Report by the Directors dated 16th March last are based are in our opinion as Actuaries acquainted with the practical and prolonged working of Widows' Pension Funds, entirely erroneous. must obviously regard the Fund in relation to its capacity of ultimately fulfilling all its existing contracts, and not simply in respect of any specific date, especially in the early stages of its history.