Sessional_Paper_1908 — Page 403

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The

than the total for the first decade, if the annual increases be assumed as above. Directors' calculations put the excess of second total over the first at Rs 770,000 which corresponds to an annual increase during the second decade of about Rs 8,273.

were

18. With respect to the proposals contained in the Minnte in Executive Council by the Auditor General enclosed with the despatch from Ceylon dated 14th April last, we have to point out that if the suggestions headed "If Government takes over the Fund' adopted, the Fund would not be in effect absorbed by the Government, revaluations would be periodically made, and moreover the suggested reduction in the rate of interest would necessitate the adoption of new Tables which would reduce the pensions.

19. The suggestions headed "If Fund not taken over by Government" include a proposal for the distribution annually to the pensioners of part of the income from interest which. for the reasons given above, is inadmissible.

20. In paragraph 12 of the Directors' Report it is stated that the sole advantage hitherto clainied for the transfer of the Fund to the Government so far as the Directors are aware would be that all trouble in connection with valuations and distributions of surpluses would be avoided. This remark is obviously inaccurate. The advantages of an unconditional transfer consist essentially of (a) the substitution of a permanent and fixed Government Gnarantee independent of any fluctuations in the experience of the Fund which might pro- duce a reduction of Pensions; (b) the continuance of interest at the rate of 6 per cent not only for the present Members as is already provided, but also for all future entrants and a consequent maintenance of the pensions at their present high rate which is alone secured by the adoption of 6 per cent interest; while (c) if in justice to the interests of the Colony generally, the rate of interest were reduced upon the Contracts made hereafter with new Members those Members must then submit to reduced Pensions compared with those of existing Members and the anomaly would be presented of the Fund comprising two series of Membership on different scales of Pension, which could not operate otherwise than to introduce dissatisfaction, the fresh Members resenting the higher benefits possessed by the present Members. This serious source of difficulty and dissension is avoided by the transfer.

21. Moreover if the proposed transfer be carried out and the above mentioned Government guarantee obtained it will be possible to distribute among the Members and pensioners the whole of the surplus ascertained by the contemplated valuation, whereas if the Fund be maintained on its present basis and a valuation be made with view to a distribution of surplus, it will be necessary to retain in hand some proportion of the surplus (such as 25 per cent) as a precautionary provision against possible adverse variations in the Fund's future experience.

22. A full reserve 'will also have to be provided, if the present organization be maintained, for future expenses of management (as was done in the valuation as at 31st December 1898) but we understand that if, on the other hand, the Fund be taken over by the Government no such provision need be made, so that the divisible surplus would be considerably augmented on this account also.

(Signed) (Signed)

T. E. YOUNG.

G. H. RYAN,