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^^^(PST} HOUSE OF EEPRESENTATIVES {^n^™ 
 
 RETIREMENT FROM 
 
 THE CLASSIFIED CIVIL SERVICE 
 
 OF SUPERANNUATED 
 
 EMPLOYEES 
 
 MESSAGE FROM THE 
 PRESIDENT OF THE UNITED STATES 
 
 TRANSMITTING 
 
 REPORT OF THE COMMISSION ON ECON- 
 OMY AND EFFICIENCY ON THE SUBJECT 
 OF RETIREMENT FROM THE CLASSIFIED 
 CIVIL SERVICE OF SUPERANNU- 
 ATED EMPLOYEES 
 
 May 6, 191 2. — Referred to the Committee on Reform in the Civil Service 
 and ordered to be printed, with illustrations 
 
62d Congress 
 
 ?d^Sor^} HOUSE OF REPEESENTATIVES {^No™'' 
 
 RETIREMENT FROM 
 
 THE CLASSIFIED CIVIL SERVICE 
 
 OF SUPERANNUATED 
 
 EMPLOYEES 
 
 MESSAGE FROM THE 
 PRESIDENT OF THE UNITED STATES 
 
 TRANSMITTING 
 
 H-5. '■.,, : 
 REPORT OF THE COMMISSION ON ECON- 
 OMY AND EFFICIENCY ON THE SUBJECT 
 OF RETIREMENT FROM THE CLASSIFIED 
 CIVIL SERVICE OF SUPERANNU- 
 ATED EMPLOYEES 
 
 May 6, 1912. — Referred to the Committee on Reform in the Civil Service 
 and ordered to be printed, with illustrations 
 
 WAShiivlGlCN 
 1912 
 
n. m n^ 
 
 itiV •-<; 
 
MESSAGE. 
 
 To the Senate and House of Representatives: 
 
 I transmit herewith a report of the Commission on Economy and 
 Efficiency on the subject of the retirement from the classified civil 
 service of superannuated employees. To the plan proposed in this 
 report and set forth in detail in the accompanying draft of a bill I 
 give my unqualified approval, because I believe it to be sound in 
 principle and just both to the Government and to its employees. 
 
 Necessity for a Retirement Plan. 
 
 It is unnecessary at this time to discuss at length the necessity for 
 adopting some plan by which the service may be relieved of the loss 
 from the inefficiency of the personnel caused by the retention on the 
 rolls, after long and faithful service, of those who have passed the 
 age when they can perform a full day's work. The subject is one 
 with which all administrative officers are familiar. It has been 
 referred to in several messages which I have sent to the Congress and 
 in many reports of the heads of departments. It is conceded by 
 everyone acquainted with the situation that some action must be 
 taken. Under present conditions the loss to the Government will 
 continue to increase. Some method other than the summary dis- 
 charge of employees when they become inefficient on account of age 
 must be adopted. The present practice of retaining such employees 
 on the rolls and, as they grow older, expecting from them a smaller 
 quantity and lower grade of work can not continue indefinitely with- 
 out seriously impairing the efficiency of the entire service and impos- 
 ing upon the Government a cost that will be in excess of the expense 
 to be incurred by the adoption of a reasonable plan for remedying 
 existing conditions. 
 
 Proposed Plan of Retirement. 
 
 The plan submitted by the commission contemplates that each 
 employee in the classified service in the executive departments and 
 estabhshments at Washington shall be retired as soon as he reaches 
 the age of 70 years and shall receive thereafter an annuity equal to 
 one-half of Ms annual salary, with the provision that no annuity shall 
 exceed $600. 
 
 I invite particular attention to the fact that the plan provides that 
 each person hereafter entering the service shall pay the entire expense 
 
 1 
 
2 RETIREMENT OF SUPERANNUATED EMPLOYEES. 
 
 of his own retirement by contribution from his salary, so that when he 
 reaches the age of 70 years the fund he has accumulated will provide 
 his retirement allowance. In such a case the only contribution of 
 the Government, if any, will be the difference between the interest 
 earned by his savings deposited in the Treasury and invested by the 
 Government and the rate of 4 per cent per annum. So far as con- 
 cerns this class of persons, there certainly can be no reasonable ob- 
 jection to the plan, and I doubt if any plan more beneficial both to 
 the Government and to the employee could be devised. 
 
 Employees Now in the Service. 
 
 It is evident that the application of the plan only to those who 
 hereafter enter the service would not relieve the present condition due 
 to superannuation nor save the Government from the constantly 
 increasing loss from that cause. It is not practicable for those now 
 70 years of age, or for those nearing that age, to provide the cost of 
 retirement entirely at their own expense. To meet the existing 
 situation and to put a retirement plan into effect immediately there 
 must be some contribution by the Government. This contribution 
 need be little more in the aggregate than is now the Government's 
 loss from inefficiency due to superannuation. After a comparatively 
 short period of years the annual payments made by the Government 
 will be less than the loss it would sustain if no plan were adopted. 
 
 It is proposed that an employee now in the service who has reached 
 the age of 70 years shall be retired and be paid by the United States 
 an annuity equal to one-half of his average annual pay for the last 
 five years, but no such annuity to exceed $600. As to an employee 
 less than 70 years of age, it is proposed that he shall be retired when he 
 reaches 70 on an annuity equal to one-half of his average annual pay 
 for the entire period of his service (no annuity to exceed $600), and 
 that there shall be deducted from his pay until he reaches 70 years 
 such an amount, not exceeding 8 per cent of his pay, as, with 4 per 
 cent interest, will purchase his annuity. In the case of an employee 
 who has but a few years to serve before reaching 70, some contribution 
 by the Government will be necessary to supplement his savings in 
 order to provide an annuity of a reasonable amount. 
 
 Annuities Limited to $600. 
 
 A retirement plan is only a means to an end and that end is an 
 increase of efficiency in the public service. The Government is not 
 required to take charge of an employee's finances, nor is it justified 
 in doing so except so far as it is necessary to protect the Government 
 against the inefficiency of the employee due to superannuation. It 
 is my opinion, therefore, that a plan of retirement should be so 
 adjusted as to make the least possible demand upon the Government 
 
EETIEEMEXT OF SUPEEAXXUATED EMPLOYEES. 3 
 
 and at the same time draw from his personal control as little of an 
 employee's money as possible. The proposed plan meets these re- 
 quirements. While the maximum annuity of S600 is not sufficient 
 to provide the luxuries of life, it is enough to insure an employee 
 against want, even if he has been so unfortunate as to have made no 
 other provision for his declining years. It is sufficient also to render 
 ineffectual the appeals so often made to the sympathy of adminis- 
 trative officers when they attempt to remove from office an employee 
 who has become inefficient through old age. At the same time the 
 amount withheld from an employee's salary in order to provide his 
 annuity is not sufficient to justify the thrifty in complaining that 
 they are being deprived of an excessive portion of their income which 
 they could invest more profitably. 
 
 Rate of Interest ox Savings. 
 
 In any compulsory saving plan it is but just that the Government 
 should guarantee a reasonable rate of interest to its employees. Four 
 per cent is the rate now paid by the Government on deposits of enlisted 
 men of the Army and Navy and it is the rate paid by many savings 
 banks. The plan recommended by the commission contemplates the 
 investment of the savings of employees in the highest class of secu- 
 rities and that the United States shall contribute such amount, if any, 
 as may be needed to insure the employees receiving 4 per cent per 
 annum. 
 
 Application of Plan to Employees in the District of Columbia. 
 
 I am convinced that the application of the plan should be hmited 
 for the present to the classified civil service in the executive depart- 
 ments and offices at Washington, where the loss from superannuation 
 is the greatest. While any plan is in its experimental stage it should 
 be kept within narrow fimits. If successful in operation in Wash- 
 ington it can be extended as the needs of the service require. 
 
 Cost to the Government. 
 
 It being conceded that no immediate benefit to the Government 
 could accrue without some temporary help from it, I cUrected the 
 Commission on Economy and Efficiency to make an investigation 
 of the loss due to superannuation in the service at Washington. Its 
 report sets forth in detail the results of this investigation. It has 
 involved an examination of the efficiency of 22,754 employees, as 
 such efficiency was reported by the departments. At no other time 
 has such a thorough investigation been made of the service in Wash- 
 ington. An earnest effort was made to ascertain and to state in 
 money the fuiancial loss which is sustained from the inefficiency of 
 aged persons in the service. While the loss shown as the result of 
 
4 EETIEEMENT OF SUPEEANNUATED EMPLOYEES. 
 
 the investigation is undoubtedly much less than the actual loss 
 from superannuation, the figures are sufficiently large to justify the 
 Government in giving temporary aid in putting the plan into opera- 
 tion. Accepting the very conservative figures as to the loss now sus- 
 tained, the inefficiency in the service which is due to old age can be 
 wiped out immediately and permanently in Washington by an 
 average annual expenditure during the next 20 years of $226,986 
 over and above the annual loss that will be sustained from superan- 
 nuation if no plan is adopted for avoiding it. The accompanying 
 report shows further that the saving to the Government that will 
 result from the adoption of the proposed plan will equal, in the 
 course of the succeeding 16 years, the entire cost of inaugurating the 
 plan. 
 
 Straight Pensions Not Advisable. 
 
 I am firmly convinced that the proposed plan is superior to any 
 form of straight pensions, in that an employee upon retirement at any 
 time may avail himself of his savings with the accrued interest, or his 
 representatives may do so in the event of his death, whereas any form 
 of pension or gratuity from the Government must inevitably be con- 
 sidered as a part of compensation and is available only to those 
 employees who succeed in living to a given age, in remainmg in the 
 service to that age, and in living a sufficient time beyond that age to 
 receive in pension payments the value of their deferred pay. Avoid- 
 ing, therefore, the dangers and disadvantages of the straight pension, 
 the proposed plan commends itself as satisfactory from the viewpoint 
 of the Government and the viewpoint of the employees. It is advan- 
 tageous to the Government, since the efficiency of the service will be 
 increased by providing the means of retiring those who have reached 
 the age of decline. It is advantageous to the employees, since it pro- 
 tects them from want in old a^'e with the least interference in their 
 private affairs, and makes the service more attractive to the younger 
 employees by facilitating promotions to higher salaries and grades at 
 earlier ages than is possible under present conditions. 
 
 Conclusion. 
 
 A careful study of the existing situation with reference to super- 
 annuation, and a consideration of the worse conditions that will 
 appear in the future, leads me again to commend the subject to the 
 earnest consideration of the Congress. I believe that the plan pro- 
 posed in the commission's carefully prepared and exhaustive report is 
 the best that has been devised for meeting the present and future 
 needs of the service, and therefore I urge the enactment of the 
 necessary legislation to put it into effect at an early date. 
 
 Wm. H. Taft. 
 
 The White House, May 6, 1912. 
 
I 
 
 REPORT TO THE PRESIDENT 
 
 ON 
 
 RETIREMENT ALLOWANCES 
 
 SUBMITTED BY 
 
 THE COMMISSION ON ECONOMY AND EFFICIENCY 
 
 APRIL, 1912 
 
TABLE OF OONTEI^TS. 
 
 Efficiency and economy in jDublic service require retirement plan 6 
 
 Need of retirement plan noted by Chief Executive and heads of departments.. 7 
 
 Straight-pension plans versus contributory plans 13 
 
 Objections to straight-pension plans 13 
 
 Costliness of straight-pension plan 14 
 
 Experience of England with straight-pension system 14 
 
 Demoralizing effect of straight-pension system on Government service 16 
 
 Straight-pension system would raise more questions than it would settle 18 
 
 Pension plans suitable for private corporations not appropriate for Gov- 
 ernment 18 
 
 Sound contributory plan solution of problem of superannuation in Government 
 
 service 20 
 
 Sound contributory plans proposed in recent years 20 
 
 Calculations as to the cost of establishing these plans 21 
 
 Table I, showing annual appropriation necessary to provide monthly 
 
 annuity to persons in classified service June 30, 1903 22 
 
 Table II, showing annual appropriation necessary to provide quarterly 
 
 annuity to persons in classified service June 30, 1907 23 
 
 Table III, showing total and comparative cost to the Government of 
 establishing plan for retiring employees under terms of Perkins and 
 
 Gillett bills 25 
 
 Difference in cost between straight-pension and contributory plan confer- 
 ring same benefits 28 
 
 Table IV, showing comparative cost to the Government during first 
 35 years of retiring employees on straight pensions and under the 
 
 Perkins bill 29 
 
 Table V, showing comparative cost to the Government during first 35 
 years of retiring employees on straight pensions and under the Gil- 
 lett bill 31 
 
 Reluctance of Congress to provide for retirement of civil employees on account 
 
 of expense 33 
 
 Expense of establishing proposed contributory plan justified 33 
 
 Arguments of employees against contributory plan answered 33 
 
 Deductions from salaries of employees now in service should be limited. . . 34 
 
 Government should not penalize employees leaving service 35 
 
 Government should pay liberal rate of interest on enforced savings 35 
 
 Both annuity and cash settlements should be arranged to protect interests 
 
 of employee 36 
 
 No danger in savings fund 36 
 
 Commission's effort to ascertain annual loss to Government through inefficiency 
 
 of aged employees 37 
 
 Table VI, showing the number of employees in the classified civil service 
 in the District of Columbia 70 years of age and over, the amount of sala- 
 ries paid, the amount and per cent of salaries earned, and the amount and 
 
 per cent of salaries unearned, or the loss due to superannuation 38 
 
 3 
 
4 TABLE OF CONTENTS. 
 
 Commission's effort to ascertain annual loss to Government, etc. — Continued. P'^g^- 
 Reluctance of officers to report on individual employees makes figures of 
 
 loss less than the fact 38 
 
 Basis of estimate of future losses from superannuation 39 
 
 Table VII, showing the number of employees in the classified civil service 
 in the District of Columbia, distributed according to age, the total salaries 
 I^aid, the total salaries earned, the per cent of salary earned, and the per 
 
 cent of salary not earned 39 
 
 Per cent of salary earned at various ages 41 
 
 Age at which loss justifies retirement 41 
 
 Method of calculating future loss to Government from superannuation. ... 43 
 Diagram showing the per cent of salary earned, based on department 
 
 reports, and the percentages found by graduation 44 
 
 Table VIII, showing the annual loss that will be sustained by the 
 Government during the next 36 years if no plan is adopted for retiring 
 employees now in the classified civil service in the District of Colum- 
 bia when 70 years of age 45 
 
 Commission's effort to determine what expense the Government is justified in 
 
 incurring to avoid loss from superannuation 45 
 
 Plan presented by the commission 47 
 
 Table IX, showing the total maximum cost of retiring at age 70 all employees 
 now in the classified civil service in the District of Columbia on annuities 
 equal to one-half jsay (maximum |600), maximum deduction from salary 
 
 8 per cent 48 
 
 ( 'ost of establishing proposed plan 48 
 
 Table X, showing the net cost to the Government of establishing the 
 
 plan and the gain to the Government from its establishment 50 
 
 Table XI, showing the deductions required from salaries at various ages. 51 
 
 Recommendations of the commission 52 
 
 Draft of bill 55 
 
 Appendixes 59 
 
EETIEEMENT ALLOWANCES. 
 
 April 18, 1912. 
 The President: 
 
 The Commission on Economy and Efficiency has the honor to sub- 
 mit the following report on ''Retirement allowances." The report 
 and recommendations apply to the employees in the permanent 
 classified service in the executive departments and independent 
 Government establishments in the District of Columbia. The plan 
 submitted provides for three classes of employees: 
 
 (a) Employees in that service who have reached the age of 70 
 years when the plan is put into operation. 
 
 (b) Employees in that service who are less than 70 years of age 
 when the plan is put into operation. 
 
 (c) Persons who enter that service after the plan is put into opera- 
 tion. 
 
 The essential features of the plan, which are set forth in detail in 
 the draft of bill at the end of this report, and which require legisla- 
 tion to carry them into effect, are the following: 
 
 1. That an employee now in the service who is 70 years of age be 
 retired, and be paid by the United States an annuity equal to one- 
 half of his average annual pay for the past five years, but no such 
 annuity to exceed $600. 
 
 2. That an employee now under 70 years of age be retired when he 
 reaches that age and be paid an annuity equal to one-half of his aver- 
 age annual pay for the entire period of service, but no such annuity 
 to exceed $600; provided, that there shall be deducted from the pay 
 of such employee until he reaches 70 years an amount which, with 
 interest at 4 per cent, compounded annually, will purchase such 
 annuity, but no monthly deduction shall exceed 8 per cent of the 
 monthly pay. 
 
 3. That a person first employed after the retirement plan is put 
 into operation shaU provide for the entire cost of his retirement allow- 
 ance (which shall be an annuity of one-half of his average annual 
 })ay during his entire service, but no annuity to exceed $600), by 
 deductions from his current pay of such amounts as may be required^ 
 with interest at 4 per cent, compounded annually, to pay his annuity. 
 
 4. That any person separated from the service before the age of 60 
 shall receive the amount of deductions made from his pay, with 4 per 
 cent interest, compounded annually; after the age of 60, and before 
 
 5 
 
6 EEPOET TO THE PEESIDENT ON RETIREMENT ALLOWANCES. 
 
 reaching 70, he shall receive the amount with interest in 10 annual 
 installments, unless the total amount is less than $600, in which case 
 the amount shall be paid at once. In case of death at any time before 
 reaching 70, the amount of deductions, with interest, shall be paid to 
 his legal representatives. In case of death after 70, the balance re- 
 maining to liis credit over and above the sums paid to him in annuities 
 shall be paid to his legal representatives. 
 
 5. That the Secretary of the Treasury shall invest the deductions 
 and accrued interest thereon in bonds of the United States, States, 
 and municipalities; and the United States shall appropriate a sum 
 sufficient to assure to employees interest at 4 per cent per annum, 
 compounded annually, on all deductions from salaries. 
 
 In the discussion of the subject in this report, the commission has 
 presented its reasons for the conclusions it has reached concerning the 
 best plan for relieving the Government of the large direct and indirect 
 loss due to superannuation among its clerical force in the executive 
 service in the District of Columbia. The total cost to the Govern- 
 ment during the next 30 years, in pa3aiient of annuities to employees 
 to be now retired and of a part of the annuities of those hereafter re- 
 tired, will be but a small amount in excess of the loss from superannua- 
 tion that will occur if no retirement plan is adopted. The cost for 
 those retired on an annuity paid in part by the United States will soon 
 thereafter be reduced to an inconsiderable sum, and be much less than 
 would be the loss from superannuation. All employees retired after 
 30 years from the taking effect of the plan will provide all the money 
 needed to pay their own annuities. 
 
 Without doing an injustice to any faithful employee, but on the 
 other hand conferring an immediate benefit on many by more rapid 
 promotion, the plan will confer a definite and substantial benefit on 
 the service as a whole and increase to a marked degree the efficiency 
 of the personnel. 
 
 SAVINGS AND ANNUITY PLAN PROPOSED FOR RETIREMENT OF 
 CIVIL-SERVICE EMPLOYEES. 
 
 Efficiency and Economy in Public Service Require Retire- 
 ment Plan. 
 
 The Commission on Economy and Efficiency has made a thorough 
 investigation of the personnel of the civil service in the District of 
 Columbia and is convinced that the service can never be brought up 
 to the highest possible standard of efliciency until a satisfactory plan 
 for the retirement of the aged employees is adopted by the Govern- 
 ment. Any comprehensive scheme for the improvement of the civil 
 service must include a proper plan of retirement for civil servants. 
 While it is true that the laws regulating the civil service do not 
 
REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 7 
 
 insure a permanent tenure of office, but on the contrary specifically 
 provide for the removal of the inefficient, the fact is well known that 
 this provision of law is disregarded whenever inefficiency is the result 
 of old age; nor does this commission believe that Congress will insist 
 upon administrative officers removing inefficient old people from the 
 service so long as no retiring allowance has been provided for them. 
 The work of the Government offices must therefore continue to be 
 retarded by the inefficiency of aged clerks until such time as a 
 retirement law is put into operation. The commission feels, there- 
 fore, that it can not lay too great emphasis on the fact that, without 
 a provision for retiring aged employees, it is idle to expect either 
 thorough efficiency in the public service or the closest economy in 
 the expenditure of salary appropriations. 
 
 Need of Retirement Plan Noted by Chief Executive and 
 Heads of Departments. 
 
 For years past heads of departments and chiefs of bureaus have 
 called attention in their annual reports to the need of a proper system 
 of retiring the aged employees, and recently the matter has received 
 the special attention of the Chief Executive. 
 
 The subject of superannuation in the public service has received the 
 attention of President Taft in three annual messages to Congress. In 
 his message to Congress in 1909, under the caption of "Reduction in 
 the cost of governmental administration," he recommended legisla- 
 tion for the retirement of superannuated civil servants, coupling 
 with it a recommendation for an increase of salaries. He said: 
 
 More than this, every reform directed toward improvement in the average efficiency 
 of Government employees must depend on the ability of the executive to eliminate 
 from the Government service those who are inefficient from any cause, and as the 
 degree of efficiency in all the departments is much lessened by the retention of old 
 employees who have outlived their energy and usefulness, it is indispensable to any 
 proper system of economy that provision be made so that their separation from the 
 service shall be easy and inevitable. It is impossible to make such provision unless 
 there is adopted a plan of civil pensions. 
 
 Most of the great industrial organizations and many of the well-conducted railways 
 of this country are coming to the conclusion that a system of pensions for old employees 
 and the substitution therefor of younger and more, energetic servants promotes both 
 economy and efficiency of administration. 
 
 I am aware that there is a strong feeling in both Houses of Congress, and jjossibly in 
 the country, against the establishment of civil pensions, and that this has, naturally, 
 grown out of the heavy burden of military pensions, which it has always been the 
 policy of our Government to assume; but I am strongly convinced that no other jjrac- 
 tical solution of the difficulties presented by the superannuation of civil servants can 
 be found than that of a system of civil pensions. 
 
 The business and expenditures of the Government have expanded enormously since 
 the Spanish War, but as the revenues have increased in nearly the same proportion as 
 the expenditures until recently the attention of the public and of those responsible 
 for the Government has not been fastened upon the question of reducing the cost of 
 administration. We can not, in view of the advancing prices of living, hope to save 
 
8 EEPOET TO THE PRESIDENT ON EETIEEMENT ALLOWANCES. 
 
 money by a reduction in the standard of salaries paid. Indeed, if any change is made 
 in that regard, an increase rather than a decrease will be necessary; and the only 
 means of economy will be in reducing the number of employees and in obtaining a 
 greater average of efficiency from those retained in the service. 
 
 In his next annual message to Congress (1910) President Taft went 
 still further and recommended a definite plan — the one discussed in 
 this report — and a definite bill, the Gillett bill (H. R. 22013), as 
 the one, in his judgment, best calculated to solve satisfactorily the 
 problem of superannuation in the civil service. He said: 
 
 It is impossible to proceed far in such an investigation without perceiving the need 
 of a suitable means of eliminating from the service the superannuated. This can be 
 done in one of two ways; either by straight civil pension or by some form of con- 
 tributory plan. 
 
 Careful study of experiments made by foreign governments shows that three serious 
 objections to the civil pension payable out of the Public Treasm-y may be brought 
 against it by the taxpayer, the administrative officer, and the civil employee, respec- 
 tively. A civil pension is bound to become an enormous, continuous, and increasing 
 tax on the public exchequer; it is demoralizing to the service since it makes difficult 
 the dismissal of incompetent employees after they have partly earned their pension; 
 and it is disadvantageous to the main body of employees themselves since it is always 
 taken into account in fixing salaries, and only the few who survive and remain in. the 
 service until pensionable age receive the value of theii- deferred pay. For this reason 
 after a half century of experience under a most liberal pension system, the civil 
 servants of England succeeded, about a year ago, in having the system so modified 
 as to make it virtually a contributory plan with provision for refund of their theoretical 
 contributions. 
 
 The experience of England and other countries shows that neither can a contributory 
 plan be successful, human nature being what it is, which does not make provision for 
 the return of contributions, with interest, in case of death or resignation before pen- 
 sionable age. Followed to its logical conclusion this means that the simplest and 
 most independent solution of the problem for both employee and the Government is a 
 compulsory savings arrangement, the employee to set aside from his salary a sum suffi- 
 cient, with the help of a liberal rate of interest from the Government, to purchase an 
 adequate annuity for him on retirement, this accumulation to be inalienably his 
 and claimable if he leaves the service before reaching the retu'ement age or by his 
 heirs in case of his death. This is the principle upon which the Gillett bill now 
 pending is drawn. 
 
 The Gillett bill, however, goes fm'ther, and provides that the Government shall 
 contribute to the pension fund of those employees who are now so advanced in age 
 that their personal contributions will not be sufficient to create their annuities before 
 reaching the retirement age. In my judgment this provision should be amended so 
 that the annuities of those employees shall be paid out of the salaries appropriated 
 for the positions vacated by retirement, and that the difference between the annuities 
 thus granted and the salaries may be used for the employment of efficient clerks at the 
 lower grades. If the bill can be thus amended, I recommend its passage, as it will 
 initiate a valuable system and ultimately result in a great saving in the public ex- 
 penditures. 
 
 In the President's message to Congress, December 21, 1911, it was 
 said: 
 
 I have already advocated, in my last annual message, the adoption of a civil-service 
 retirement system, with a contributory feature to it so as to reduce to a minimum the 
 cost to the Government of the pensions to be paid. After considerable reflection, I am 
 
REPORT TO THE PEESIDENT ON EETIEEMENT ALLOWANCES. 9 
 
 very much opposed to a pension system that involves no contribution from the em- 
 ployees. I think the experience of other Governments justifies this view; but the 
 crying necessity for some such contributory system, with possibly a preliminary gov- 
 ernmental outlay, in order to cover the initial cost and to set the system going at once 
 while the contributions are accumulating, is manifest on every side. Nothing will so 
 much promote the economy and efficiency of the Government as such a system. 
 
 In his report for 1911 the Secretary of the Treasury expressed him- 
 self in favor of a retiring allowance for the superannuated, as follows: 
 
 The executive departments are suffering extremely for want of a retirement law; 
 and all improvements of the public service have to constantly meet the discourage- 
 ments of this condition, while much improvement is by this condition discouraged 
 even from a beginning. I appeal, therefore, to Congress again, as I have done each 
 year, in behalf of such a law. Every consideration of humanity, economy, and 
 efiiciency that is conceivably related' to the question calls for action at this session. 
 
 The retirement system which I consider most in the interest of the clerks themselves 
 is the contributory system; and that would cost the Government no money whatever — • 
 if that were thought to be desirable. That this system could be put into operation 
 without increased expenditures, I believe is entirely true; and I think it could be 
 adopted with the provision that each department should put it into operation without 
 any cost to the Government; but it is at the same time a question whether that would 
 be the best course to pursue. This contributory system, if adopted, would leave the 
 claims of the clerks to revised or higher salaries unaffected. On the other hand, the 
 so-called straight pension — the pension paid wholly by the Government — would take 
 the place of any possible advance in salaries for, at any rate, a considerable period, 
 notwithstanding the fact that under such a system comparatively few of the clerks 
 would ever become beneficiaries. 
 
 However, some system of retiring allowance is so greatly needed as an aid to economy 
 and efficiency that I would be glad to see any system adopted which could be put 
 into effect immediately; for any system could be changed after experience showed 
 its defects. (Annual Report of the Secretary of the Treasury, 1911, p. 7.) 
 
 In his report for 1911 the Secretary of War called attention to the 
 need of a plan for the retirement of the aged employees as follows: 
 
 I am heartily in favor of some measure by which employees of the Federal Gov- 
 ernment may be retired and pensioned when they reach a condition of impaired use- 
 fulness after years of faithful service. In taking such action we should only be fol- 
 lowing the world-wide trend of national Governments and large business corporations, 
 whether we find warrant for such action in humanitarian principles or considerations 
 of a sound business policy, or both combined. 
 
 The purely monetary rewards and opportunities of the Government service ought 
 not to be and never will be so great as those offered in the business and professional 
 world elsewhere, and if the Government service is to be maintained upon a high and 
 increasing level of proficiency it must meet the competition from other quarters by ^ 
 some compensating features that will attract the best talent to its service and retain it. '>^ 
 
 While I am not prepared to express a decided conviction as between a straight-out V 
 Government pension and one to which the employee himself shall have contributed \ 
 a portion, there is abundant proof that the Government, in effect, though indirectly, 
 has for many years throughout its service maintained a pension system without retire- 
 ment, and if it should now establish a pension system with retirement there is good 
 reason to believe that in the long run it would not only suffer no pecuniary loss, but 
 on the contrary would reap a substantial gain in the increased efficiency and improved 
 morale of the service. (Annual Report of the Secretary of War, 1911, p. 33.) 
 42245— H. Doc. 732, 62-2 2 
 
10 REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 
 
 In his report for 1911 the Postmaster General called attention to the 
 need of a system of retiring the aged employees, as follows : 
 
 Almost without exception foreign nations provide for the pensioning of civil-service 
 employees when they become superannuated. Large corporations in this country are 
 rapidly adopting the same principle in the retirement of their aged employees. On 
 business grounds, if for no other reason, the Government should do likewise. 
 
 While the compensation of postal employees has been considerably increased dur- 
 ing the last few years, it is hardly more than sufficient to meet necessary living expenses 
 and consequently does not permit the putting aside of any considerable savings against 
 old age. It is believed that a civil pension based on length of employment should be 
 granted by the Government. Benefits to the service far outweighing the expense of 
 such pensions would undoubtedly result. (Annual Report of the Postmaster General, 
 1911, p. 15.) 
 
 The Secretary of the Navy said in his annual report for 1911: 
 
 Not only should increased compensation be provided for the clerks, but legislation 
 should be enacted looking to the establishment of some form of civil-service retirement. 
 I am not prepared at this time to advocate any particular system, believing that this 
 is a matter which should be determined by Congress after careful consideration; but 
 unless some provision be made for the pensioning or retiring of superannuated civil 
 -employees the Government can never hope to secure the most efficient and satisfactory 
 service. 
 
 There is no class of employees who are more deserving of increased compensation 
 and retirement with reasonable pay than the employees of the Government. Very 
 few of them are able to accumulate much, if anything, during their long years of 
 service, and when old-age disability does come to them they must either be carried 
 as a burden on the Government's rolls or thrown out on the world with no suitable 
 provision for their last years. 
 
 But, aside from all sentimental considerations, 1 believe that civil-service retire- 
 ment by the Government would be along the line of sound business management. 
 Many railroads and industrial corporations have found it advisable to adopt such a 
 system, and the practice is a growing one. 
 
 I earnestly recommend that suitable legislation be had in this matter. (Annual 
 Report of the Secretary of the Navy, 1911, p. 18.) 
 
 In his last annual report (1911) the Secretary of the Interior treats 
 of the subject as follows. He says: 
 
 I earnestly recommend the enactment of legislation authorizing the retirement of 
 employees who, after long and faithful service, are disabled by age or infirmity from 
 the efficient performance of their duties. The civil servants of the Government, like 
 those in the military and naval service, are debarred from the chance of large gains, 
 the hope of which is a constant stimulus to men in private business. Moreover, those 
 of technical or superior administrative ability are and must continue to be paid smaller 
 salaries than they would command in private employment. It is therefore impossible 
 for them to acquire financial independence or make due provision for old age, either 
 by way of profits or by way of savings from their salaries. Considerations of humanity 
 and justice might well be urged against the dismissal of employees who have given the 
 years of their strength to faithful and efficient public service and against their assign- 
 ment to the lower grades of menial or clerical duties as an alternative to dismissal. 
 But 1 prefer to put the matter on other and more selfish grounds. The Government 
 simply can not afford not to retire these employees with due and honorable provision 
 for their old age, and this for two reasons. 
 
REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 11 
 
 In the first place, many able and energetic men serve the Government at salaries 
 far below the commercial standard for like services. They choose to do so because 
 the public service satisfies their best and highest ideals of personal integrity and 
 professional achievement. Such men are continually forced out of the service by the 
 necessity of making due provision for themselves and their families before old age 
 comes upon them. If the Government would insure them against this peril, it could 
 continue to employ them at salaries far less than a private corporation would be com- 
 pelled to pay. Every consideration of economy and sound business policy requires 
 that their services should be retained on terms so favorable to the Government. The 
 loss, taken in the mass, is irreparable, for the system operates as a survival of the 
 unfittest by continually drawing off the more energetic and abler men, leaving a 
 larger and larger proportion of the inefficient in the public service. In the second 
 place, the Government is paying much, if not most, of the cost of a proper retirement 
 system through the inevitable relative inefficiency of the present plan. Not only 
 are superannuated employees dropped to and retained in the lower grades because of 
 sympathy yielding to personal or politica} pressure, but in the higher grades, from 
 which the rank and file of the service inevitably derives its spirit and tone, there is a 
 tendency to retain men who have lost the alertness and enthusiasm essential to the 
 highest efficiency of their own work, and still more essential for inspiring in and 
 requiring of their subordinates such alertness and enthusiasm. Not only do they 
 thus fail to make the positive contribution to the general efficiency of the service 
 which is due from men in their position, but they have a negative effect in the same 
 direction by blocking the avenues of promotion and legitimate ambition. The men 
 below them not only fail to receive the proper stimulus of precept and example, but 
 are at the same time deprived of the hope of promotion which ought to be the reward 
 of efficient service. 
 
 This condition is now becoming apparent. It has been delayed by the fact that the 
 widespread application of the principle of permanency in the public service goes back 
 less than one generation, and by the further fact that the industrial and social problems 
 of recent years have forced the Government into new fields of activity and thus com- 
 pelled the organization of new bureaus and departments. These new administrative 
 units have been largely recruited from young men who are still m the prime of life. 
 Many of the older bureaus and departments have from similar causes largely increased 
 their personnel, recruiting them chiefly from young men. This sudden expansion of 
 governmental activities has postponed and mitigated the worst evils inherent in the 
 present system; but sudden expansion can not continue indefinitely. We must face 
 and provide for normal conditions of growth . Under such conditions general efficiency 
 in the public service is impossible without due provision for the retirement of aged 
 employees. This is attested by the experience and practice of foreign governments, 
 which have long had a permanent civil service, and by that of large railroad and com- 
 mercial corporations in our own country. (Annual Report of the Secretary of the 
 Interior, 1911, p. 17.) 
 
 In his annual report for 1911 the Secretary of Commerce and Labor 
 points with emphasis to the need of a suitable provision for the retire- 
 ment of the aged employees. He said: 
 
 Superannuation in the civil service and the proposed retirement of employees who 
 have passed their age of greatest usefulness have attracted much attention. Consider- 
 able discussion of the subject has appeared in the public press, and many Government 
 officials in reporting on conditions affecting the personnel of their respective depart- 
 ments or offices have laid more or less stress on the evils of superannuation in the 
 service and the necessity of providing, as has been done by a number of countries and 
 private business concerns, some equitable scheme of retirement of those who are no 
 
12 EEPOE.T TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 
 
 longer able to render a fair degree of service, but who would be left without adequate 
 means of support if dismissed . Many difficulties, of course, may be expected to attend 
 the passage of any law looking to the retirement on pay of superannuated employees in 
 the civil service, whether such retirement is accompanied by annuities paid outright 
 by the Government or whether it is made possible by contribution in whole or in part 
 by the employees themselves. 
 
 Incomplete reports recently received from the bureaus show that there are 72 
 employees of this department who ai-e more or less superannuated; that the aggregate 
 of their salaries is $73,385; and that their average age is 70 year-s. Perhaps a greater 
 amount of superannuation and consequent loss to the Government may be fouiid in the 
 older departments and offices. As this department last year reported its opinion on 
 the subject of superannuation, it is unnecessary to again point out the advantage and 
 economy that would result from the retirement, which practically eA^erybody admits 
 should be on an adequate annuity, of the civil employees of the Government who have 
 become inefficient through advancing age. (Annual Report of the Secretary of 
 Commerce and Labor, 1911, p. 33.) 
 
 The following is a partial list of references to reports and state- 
 ments of officers of the Government calling attention to the need of a 
 means of retiring the superannuated employees on proper allowances: 
 
 Annual messages to Congress of William Howard Taft, President of the United 
 States, 1909, 1910, 1911. 
 
 Annual reports of Franklin MacVeagh, Secretary of the Treasury, 1909, 1910, 1911. 
 
 Annual reports of Ethan A. Hitchcock, Secretary of the Interior, 1904, 1905. 
 
 Annual report of James P. Garfield, Secretary of the Interior, 1908. 
 
 Annual report of Richard A. Ballinger, Secretary of the Interior, 1909, 1910. 
 
 Annual report of Walter L. Fisher, Secretary of the Interior, 1911. 
 
 Annual report of Oscar S. Straus, Secretary of Commerce and Labor, 1908. 
 
 Annual reports of Charles Nagel, Secretary of Commerce and Labor, 1910, 1911. 
 
 Annual reports of Frank H. Hitchcock, Postmaster General, 1909, 1910, 1911. 
 
 Annual report of Joseph Stewart, Second Assistant Postmaster General, 1909. 
 
 Annual reports of Civil Service Commission, tenth, eleventh, nineteenth, twentieth, 
 twenty -second, twenty-fifth, and others. 
 
 Report of Committee on Department Methods (Keep Commission), 1907. 
 
 Annual reports of Merritt 0. Chance, Auditor for the Post Office Department, 
 1909, 1910. 
 
 Hearings before the House Committee on Reform in the Civil Service, 1896, 1904, 
 1908, 1912. 
 
 Statement of E. F. Ware, Commissioner of Pensions, February 9, 1904. 
 
 Statement of Gen. F. C. Ainsworth, Chief of the Record and Pensions Office, War 
 Department, February 12, 1904. 
 
 Statement of Frederick I. Allen, Commissioner of Patents, February 26, 1904. 
 
 Statement of William H. Moody, Secretary of the Navy, March 5, 1904. 
 
 It is apparent from the foregoing that the executive officers of the 
 Government are agreed in thinking that the highest economy and 
 efficiency are not possible in the administration of the public offices 
 untn legislation is enacted for the retirement of superannuated 
 employees. Most of them hesitate to indicate preference for any 
 particular plan of retirement, feeling, apparently, that it is a matter 
 to be worked out by experts. 
 
eeport to the president on retirement allowances. 13 
 Straight-Pension Plans versus Contributory Plans. 
 
 Tlie Commission on Economy and Efficiency has given consideration 
 to the various plans that have been proposed for the retirement of 
 superannuated employees, and finds that they may be divided into 
 two groups: 
 
 First, noncontributory plans — commonly referred to as straight 
 pensions— proposing the payment of annuities to the superannuated 
 employees out of the Federal Treasury; and, 
 
 Second, contributory plans proposing the deduction of stated 
 sums — more or less adequate for the purpose in view — from the 
 salaries of all employees out of which to pay annuities to retiring 
 employees. 
 
 Objections to Straight-Pension Plans. 
 
 The first group of plans — those proposing the payment of annuities 
 out of the Federal Treasury- — are found on analysis to be so costly 
 and so demoralizing to the service as to make them incompatible with 
 any general scheme for economy and efficiency in the public service. 
 
 The cost of a civil pension in every country where it has been tried 
 for any considerable length of time is admittedly very great. How- 
 ever modest the pension roll in the beginning, it is bound inevitably 
 to grow in length and increase in costliness as time goes on. This is 
 due to the fact that, under any system which legalizes a draft on the 
 Public Treasury, there is a constant tendency to extend its benefits 
 to new classes of public servants and to the dependents of deceased 
 employees. Under an elective Government, where those who control 
 the pension must depend on popular favor for their power, there is 
 a constant tendency also to lower the retirement age in order to 
 serve some political interest by creating a vacancy. Indeed, a pen- 
 sion system may easily become, in the hands of unscrupulous poli- 
 ticians, a means of removing political opponents to make places for 
 political adherents. This situation may even develop in a country 
 where there is a strong sentiment in favor of promotion on merit, for 
 a certain number of offices are likely always to be in the appointive 
 class and therefore not filled by promotion from below. If the 
 incumbents of these offices can be removed without serious oppo- 
 sition on their part by retiring them in the prime of life on life pen- 
 sions, the ministers of a hostile party are very likely to be strongly 
 tempted, as was the case 20 years ago in Canada, to eliminate them 
 thus at the expense of the pubhc. This can be accomplished only 
 at immense expense to the people, since the cost of a life annuity at 
 the younger ages is so much greater than at the older ages. 
 
14 EEPOKT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 
 COSTLINESS OF STRAIGHT-PENSION PLAN. 
 
 A system of pensions paid from the Public Treasury usually starts 
 with a simple provision that employees who have served a given 
 number of years shall, on reaching a certain age, be retired on an 
 allowance. This allowance is customarily on the average salary 
 received by the employee during the last three or five years of service. 
 In the beginning, the system is attractive to the employee because 
 the pension appears to be an addition to his compensation. The 
 system once established, the pension is, in the very nature of thmgs, 
 regarded by the employee as something to which he has a right. 
 Before long the families of employees who die a short time before 
 being placed on pension, or soon after retirement, begin to complain 
 that the loss of the pension on the death of the employee, who perhaps 
 has served the Government long and faithfully, is a hardship to 
 which they should not be subjected, and a movement is then set on 
 foot to continue the pension to the widows and orphans of such 
 employees. This extension of the pension benefits to the families of 
 deceased employees increases the expenditures for pensions at an 
 enormous rate, and finally the expenditures for pensions are regarded 
 by the Government as a part of the expenditures for salaries, being 
 spoken of, for instance, in England as "the ineffective vote" in con- 
 trast to "the efi^ective vote" or salary list. Salaries are naturally 
 fixed thereafter with respect to the value of the prospective pension, 
 and persons considering the advisability of entering the public service 
 must, m the very nature of things, consider the pension in deciding 
 whether they -wdll accept Government employment. With new en- 
 trants, the prospective pension is even a greater and more direct con- 
 sideration for the service rendered than it is with the old incumbents, 
 showing that it comes inevitably to be regarded as part of the com- 
 pensation of the office. The result is that the pension tends to keep 
 the current pay inadequate. In England, for instance, pensionable 
 employees receive less compensation than nonpensionable employees. 
 Furthermore, until the benefits are extended to the widows and 
 orphans, the pension system works an injustice against the families 
 of those who die in the service, since it prevents them from receiving 
 the deferred portion of the employees' pay. Viewed in its proper 
 light, therefore, the civil pension must be regarded as a pure tontine 
 in which all persons lose except those who succeed in three things: 
 Living to a certain age, remaining in the service until that age, and 
 living beyond that age long enough to get back the value of their 
 theoretical contributions. 
 
 EXPERIENCE OP ENGLAND WITH STRAIGHT-PENSION SYSTEM. 
 
 In this connection, the experience of England is especially note- 
 worthy and illuminating. A free and universal pension system for 
 
EEPOET TO THE PRESIDENT OjST EETIEEMENT ALLOWANCES. 15 
 
 the benefit of civil servants was established in 1859. The system was 
 popular at first, but soon came to be regarded with dislike by the 
 civil servants. They ceased to consider it as a pure gratuity and 
 came to think of it as a benefit paid for by themselves out of reduc- 
 tions in salary, since nonpensionable employees were shown to be 
 better paid than pensionable. Since statistics showed also that not 
 more than one out of seven entrants into the service remained to 
 pensionable age, they saw that their pensions were subject to large 
 chances of forfeiture by death or resignation and that their families 
 were then worse off than would have been the case had there been 
 no pension system. Approximately 70,000 of the 100,000 individ- 
 uals in the service in 1902 organized themselves into a committee 
 called the deferred-pay committee, in order to agitate for a change 
 in the pension system. Their claim that pensions were deferred 
 pay was sustained by the royal commission appointed to inquire into 
 the matter, and the employees then demanded that, on separation 
 from the service, the value of part of their theoretical contributions, 
 should, in justice to their families, be returned to them either in the 
 form of insurance or in cash. The pension system was accordingly 
 modified as follows : The pensions have been reduced from one-sixtieth 
 to one-eightieth of salary for each year of service, but in addition to his 
 pension the employee is given a cash sum equal to one-thirtieth of 
 his salary for each year of service, with a maximum of a year and a 
 half's pay, and the families of those who die after five years of service 
 receive a lump sum equal to one year's salary. 
 
 England's experience in granting pensions to its civil employees 
 is fully discussed in a recent report entitled ''Civil Service Retire- 
 ment in England and New Zealand," published as Senate Docu- 
 ment No. 290, Sixty-first Congress, second session. The conclusions 
 reached in that report are as follows : 
 
 The important point to note is that the commission conceded that something was 
 deducted from the employee's pay for the purpose of pensioning him at the end of his 
 period of service. The English pension is therefore not a free and absolute system 
 of gratuities at all, but a system of theoretical contributions from the employees' 
 salaries, more or less adequate to pay the benefits given. Whatever it may have been 
 in the beginning, that is what it has become through the policy — a policy sure to 
 develop under a system of gratuities, human nature being what it is — of taking the 
 pension into consideration in fixing salaries. * * * 
 
 The question whether the present improved system is absolutely equitable as be- 
 tween individuals is difficult of satisfactory answer. It has been shown that it is more 
 equitable than the old system; but it can not be shown whether the amounts received 
 by the employee in the form of pension, insurance, and cash-surrender values corre- 
 spond with the amounts contributed by him, since it has not; been ascertained what 
 percentage of salary is withheld as a contribution. The Courtney commission main- 
 tained that the theoretically contributed sum is no more, in the aggregate, than the 
 amount required for pensions, but this does not prove that the sum contributed by any 
 individual may not be more or less than what he should equitably contribute. A 
 deduction of a given percentage of salary may be entirely adequate to furnish given 
 
16 REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 
 
 benefits for a young man, while a deduction of the same percentage of salary will be 
 quite inadequate to provide the same benefits for an old man. The failure of the 
 Coin-tney commission to gratify the request of the employees for a full investigation 
 into the subject so that the amounts actually withheld might be definitely determined 
 makes any redistribution of benefits merely a guess rather than an exact calculation. 
 In the absence of the necessary data it is therefore impossible to answer the question: 
 Is the present system absolutely equitable as between individuals? 
 
 While it is to be assumed that the calculations made by the actuaries are unimpeach- 
 able, it IS to be noted that those calculations were limited in scope and undertaken 
 merely to ascertain what benefits could be given by reducing the pension one-quarter. 
 The problem of the actuaries was to distribute equitably a definite sum. They were 
 not asked to go further back and devise a contributory scheme that would be just as 
 between the state and the individual or equitable as between different classes of 
 individuals. The amended system is held to be merely a scheme of redistribution, 
 but it should not be forgotten that only one-quarter of the amount to be distributed 
 has been subject to actuarial calculation. Whether the other three-quarters have been 
 equitably distributed can not be stated. 
 
 One thing, however, can be definitely stated regarding the present system in com- 
 parison with a system where the contributions are actually instead of only theoreti- 
 cally paid, and where they are funded and invested at interest. It is less economical. 
 Under the existing system, the necessary sum is appropriated each year out of the 
 Treasury for the payment of pensions. This sum amounts to from 16 to 20 per cent, in 
 the various departments, of the sums paid for salaries. Under a contributory system, 
 the necessary sum would be accumulated gradually from many contributions invested 
 at interest. By reason of the fact that with the help of compound interest at the rate of 
 3 per cent per annum, the sum of a given contribution per annum will double itself in 
 the course of a service of 42 years, and at 3J per cent in 36 years, and at 4 per cent in 
 31 years, it follows that the total contributions of an employee who serves 40 years 
 need be less than half the amount required by direct appropriation from the Treasury 
 to give the same pension. The question naturally suggests itself then: Why would it 
 not be a wiser distribution of funds, if the British Government in appropriating a sum 
 for the maintenance of civil establishments (including an amount for salaries and 
 another amount for pensions) should increase the salaries by the amount of the sum 
 spent for pensions, but require employees to pay out of their salaries a contribution 
 sufficient to meet the cost of pensions? The net result of thus preferring a scheme of 
 actual contributions to one of theoretical contributions would be a general increase in 
 salaries without increasing the appropriations for either salaries or pensions, thus 
 effecting a saving of money to the employees that, under present conditions, is lost. 
 (See Civil Service Retirement in Great Britain and New Zealand, S. Doc. No. 290, 
 61st Cong., 2d sess., pp. 183-185.) 
 
 In view of this experience, the commission can not recommend any 
 system of retirement allowances to be granted as a reward for services 
 inadequately paid for at the time the service is rendered, for it believes 
 that the civil employees should receive proper and adequate compen- 
 sation for their ser\dces at the time the services are rendered. 
 
 DEMORALIZING EFFECT OF STRAIGHT-PENSION SYSTEM ON GOVERN- 
 MENT SERVICE. 
 
 Besides burdening the Government with an enormous expense for 
 personal services, which, in the nature of the contract, can not be 
 distributed among the employees in proportion to the value of the 
 
REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 17 
 
 services rendered, a straight pension is objectionable because it pro- 
 motes inefficiency. The argument is advanced by those who favor 
 the straight pension that the pension should be regarded not as part 
 payment for services rendered but as a reward for continuity of 
 service. This is in fact a distmction without a difference, since a 
 reward must, in the nature of things, be a compensation for some 
 service rendered. Whatever the theory advanced, the Government 
 is unable in practice to prevent the employee from taking the value 
 of the pension into consideration, whether his service be of long or 
 short duration. The promise of the reward is considered by the 
 employee as a part of his contract of employment. As soon as the 
 Government establishes this system of rewards for continuity of 
 service, it must immediately devise ways and means of honorably 
 terminating the contract with employees whom it is desirable to 
 remove. This means that it is necessary to establish a scale of sur- 
 render values which must be given employees dismissed from the 
 service to compensate them for the loss of the pension which they 
 have partly earned. This agam results in an enormous increase in 
 the expense of running the Government offices, but there is no escape 
 for the Government that has once adopted a straight pension unless 
 it abandons its standard of efficiency. The two horns of the dilemma 
 which it thus creates for itself are either retention in office of all the 
 inefficients who are under the age of retirement or the increase of the 
 pension charge by the amount paid to all those removed before pen- 
 sionable age. There is no escape through the contention that the 
 pension is to be awarded only in case of faithful or efficient service, 
 smce whether the service rendered has been of a quality that would 
 entitle the employee to a pension is always debatable. Certainly 
 without a system of ''gratuities" or ''compensation for loss of office" 
 in addition to the pension system the dismissal of the inefficient 
 becomes difficult, if not almost impossible, smce it is hard for the 
 superior officer to cause his subordinate not only loss of position, 
 especially if he is without resources and has a family dependent on 
 him, but also loss of the pension which he has partly earned and 
 which he counts as an asset of office as much as he does his salary. 
 The result of this reluctance in such cases must be a breaking down 
 of the moral tone of the whole service. 
 
 Nor is this the whole catalogue of evils sure to spring from adopt- 
 ing the theory that a pension is a reward for continuity of service. 
 Not only is the Government forced to protect itself against the reten- 
 tion of the incompetent by granting them a compensation for loss of 
 office, but it is logically obliged then to grant a gratuity to those who 
 voluntarily retire from the service before reaching pensionable age. 
 To do otherwise would be to put a premium on inefficiency. 
 
18 eepoet to the president on eetirement allowances. 
 
 Straight-Pension System Would Raise More Questions Than 
 
 IT Would Settle. 
 
 The commission desires, therefore, to em.phasize the point that, 
 in considering the adoption of a system of pensions for Federal em- 
 ployees, the problem is not merely the cost and advisability of pen- 
 sioning the comparatively few employees now eligible for retirement, 
 but embraces a great deal more than that. It includes the question 
 of extending pension benefits to widows and orphans and giving the 
 commuted values of pensions or gratuities to all who leave the service 
 before pensionable age. In the opinion of the commission the estab- 
 lishment of a civil pension payable out of the Federal Treasury would 
 thus raise more questions than it would settle. 
 
 pension plans suitable for private corporations not appro- 
 priate FOR government. 
 
 It is true that in recent years many of our railroads and other large 
 business institutions have established pension systems under which 
 superannuated employees are retired on allowances provided by the 
 institution, without contribution by the employees, and that the 
 employers generally declare that such provision for the employees is 
 good business policy, since it results in creating among their subor- 
 dinates a sense of loyalty and an interest in the business, as well as a 
 feeling of permanency in their employment, which are of benefit to 
 the employer as well as to the employee. It would seem, at first 
 thought, that a policy that had been found advantageous by our 
 great commercial institutions in dealing with their employees would 
 be equally advantageous to the Government. A more careful com- 
 parison of the commercial and the Government services discloses the 
 fact, however, that conditions of employment in the two services 
 are wholly different, and that what has proved beneficial to one 
 would prove equally harmful to the other. This is clearly brought 
 out in the report entitled, ''Savings and Annuity Plan Proposed for 
 Retirement of Superannuated Civil-Service Employees" (S. Doc. 
 No. 745, 61st Cong., 3d sess., pp. 56, 57, 58), and since the commission 
 concurs in the conclusions there set forth, the argument is given 
 below: 
 
 The question may be raised why a straight pension should be demoralizing to the Gov- 
 ernment service, when the testimony of private employers is to the effect that they have 
 found it helpful in the maintenance of discipline. The answer is that conditions of em- 
 ployment in the Government service are diametrically different from those in private 
 service. A straight pension is a powerful aid to the ordinary employer in holding 
 his men and in keeping up their standard of efficiency, as brought out by the Hon. 
 Frank A. Vanderlip, president of the National City Bank of New York, in an article 
 on "Insurance for workingmen," published in the North American Review in Decem- 
 ber, 1905. Said he: 
 
EEPOET TO THE PRESIDENT ON EETIREMENT ALLOWANCES. 19 
 
 "When employees realize that unsatisfactory conduct may at any time lose them 
 not only their present position, a loss which in such a labor market as ours might be 
 easily made good, but that it entails further the loss of a very valuable asset — the 
 employee's right to a pension — the incentive to good conduct is greatly increased. It 
 operates especially as an incentive to hold men between the ages of 40 and 50, when 
 they have acquired the experience and skill which makes them especially valuable, 
 and prevents their being tempted away by slightly increased wages for a temporary 
 period." 
 
 This statement is entirely correct when applied to business institutions. It is not 
 wholly correct when applied to the Government service. A straight pension is a 
 powerful aid to the Government as well as to a corporation in holding its employees, 
 but there is this radical difference in its operation under the two conditions: In the 
 case of the Government it operates to hold the poor employees rather than the good 
 and to break down rather than to keep up the standard of efficiency. This is ex- 
 plained by two fundamental differences in the conditions of labor when a private 
 corporation is the employer and when the United States Government acts in that 
 capacity. These are, first, the fact that there is seldom any relationship between the 
 value and the cost of a Government output such as there always is in the case of a 
 commodity produced by a private corporation, and, second, the fact that the man 
 at the head of a Government office' or shop has much less authority over his sub- 
 ordinates than has an executive officer similarly placed in a private business. 
 
 Business enterprises are conducted for the purpose of paying dividends, and as 
 inefficiency on the part of an employee has a direct bearing on the dividends it will 
 not be tolerated. On the other hand, the great majority of Government employees 
 are not engaged in the production of commercial articles which must be sold at a profit 
 in competition, and the loss to the Government through inefficiency is not so apparent 
 or so easily measured. It may, for instance, cost the Government a hundred thousand 
 dollars to get out a highly scientific or technical report which is, economically, either 
 at the time or ultimately in the course of years, well worth that sum of money to the 
 people of the United States, but which, commercially, would not bring in a thousand 
 dollars if placed on the market for sale. Since the inefficiency of an employee 
 engaged in work that has such an uncertain market value is not so easily detected or 
 so likely to be regarded as serious as would be the case in private business, he is 
 usually permitted to remain in the Government service, whereas he would be very 
 promptly dismissed by a private house. 
 
 The fact that the administrative officials at the head of Government offices have 
 not entire control over the selection of their subordinates makes it impossible for those 
 officials to be held as strictly responsible for residts as is the case in private business. 
 What is everybody's business is nobody's business. Since also the position of the 
 executive head of the office is not greatly endangered by the incompetency of his 
 assistants, especially where the effect of the incompetency can not be readily meas- 
 ured by reduction in actual output of some kind, it follows that he can afford to be 
 lenient with them. He is especially inclined to be so if the employee's inefficiency 
 is known to be the result of old age or any other cause which makes an appeal to the 
 natural feelings of humanity. In case the inefficient employee is working imder a 
 pension system whereby he is entitled on reaching a certain age to retire on a com- 
 petence, the head of the office will be all the more reluctant to dismiss him before he 
 reaches that age. But a pension system has exactly the opposite effect where the 
 private corporation is the employer. In that case the administrative official at the 
 head of an office is held directly responsible either to the owner of the business or a 
 board of directors for the inefficiency of his subordinates. The output can usually be 
 measured in terms of tons or dollars, and if it falls below the required amount the posi- 
 tion of the man in charge is jeopardized. In self-defense, therefore, he is obliged to 
 hold every subordinate up to the highest standard of efficiency and to stifle any feeling 
 
20 REPOET TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 
 
 of humanity or sympathy which might otherwise tempt him to show leniency. That 
 being his state of mind, a pension system becomes a powerful aid to him in his effort 
 to maintain discipline and secure obedience and industry, as explained by Mr. Van- 
 derlip in the article quoted above. Undoubtedly, the reason why railroads and 
 other corporations are disposed to favor the straight pension with entire control of the 
 pension fund, rather than any contributory plan with a fund in any way controlled 
 by the employees, is that it helps them to approximate the establishment of military 
 discipline among their subordinates. They look on a pension as a useful kind of 
 strike insurance. For fear of forfeiting his pension, the employee, like the soldier, 
 will sacrifice much of his personal liberty, including his right to strike for better wages 
 or shorter hours. 
 
 It would seem proper to point out also the fact that a scale of bene- 
 fits that would be satisfactory for employees of a corporation would 
 be wholly inadequate for employees of the Government. 
 
 Sound Contributory Plan Solution of Problem of Super- 
 annuation IN Government Service. 
 
 The noncontributory form of pension being burdensome to the 
 taxpayer and detrimental to the service, the commission believes 
 that the only way to solve the problem of superannuation in the 
 service is to establish a sound contributory plan of retirement. Of 
 the various contributory plans proposed for the retirement of Govern- 
 ment employees in the years when the subject was first agitated, 
 some were unscientific and unsound, and all were inequitable as 
 between different classes of employees. Most of these early plans 
 contemplated the creation of a common fund made up of deductions 
 from the salaries of employees of different salaries and ages on a scale 
 that would be sufficient to pay the annuities to all employees without 
 any aid from the Government in the payment of annuities to those 
 who were too old to provide their own annuities. This meant that 
 the young employees would be taxed sums not only sufficient to 
 provide their own annuities, but sums that would be sufficient to pay 
 the annuities to the aged employees as well. This method of provid- 
 ing for those who were too old to create their own annuities by 
 monthly deductions from their salaries was naturally opposed by the 
 younger employees, and very properly so. 
 
 Sound Contributory Plans Proposed in Recent Years. 
 
 Since 1908, however, a number of bills have been introduced in 
 Congress which are sound in principle and equitable as between 
 individuals. Briefly, these bills provide that each employee shall 
 receive an annuity based on his salary and length of service. They 
 are all based on two fundamental principles, that of graduating 
 deductions from salary according to the age of entrance into the 
 service and that of keeping separate present and future liabilities. 
 
REPOET TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 21 
 
 The annuities corresponding to service rendered prior to the adoption 
 of the plan are to be paid out of the Federal Treasury, and all annui- 
 ties corresponding to services rendered after the adoption of the plan 
 are to be provided by monthly deductions from the salaries of the 
 employees, improved at compound interest. 
 
 CALCULATIONS AS TO THE COST OF ESTABLISHING THESE PLANS. 
 
 This proposal that annuities for services rendered prior to the 
 adoption of the plan be paid out of the Federal Treasury naturally 
 raised the question, For how long a period would the Government 
 be required to make appropriations for that purpose and how much 
 would have to be appropriated each year? Several elaborate cal- 
 culations have been made to ascertain what the cost would be under 
 various bills that have been introduced into Congress embodying 
 this principle. The results of these calculations are shown on page 
 159 and following of the report entitled "Savings and Annuity Plan 
 Proposed for Retirement of Superannuated Civil Service Employees." 
 (S. Doc. 745, 61st Cong., 3d sess.) 
 
 The first calculation was made for the Committee on Department 
 Methods (Keep Commission), and was based on table 67 of Census 
 Bulletin No. 12, entitled "The Executive Civil Service of the United 
 States," covering the classified employees as of June 30, 1903. The 
 total number of employees included in that calculation was 103,030, 
 and the maximum cost of paying to the survivors annuities for 
 services rendered prior to the adoption of the plan equal to 1.5 per 
 cent of aggregate salary was found to amount to $66,985,778 in the 
 course of 67 years, as shown by the table following. 
 
22 REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 
 
 Table I. — Showing maximum amount of annual appropriation by the Federal Gov- 
 ernment necessary to provide a monthly annuity to each person in the classified civil 
 service June SO, 1903, upon attaining the retirement age of 70 years {the amount of 
 annuity to he 1.5 per cent of the employee's salary June 30, 1903, for each year of service- 
 completed prior to that date). 
 
 [Based on census of employees as of June 30, 1903.] 
 
 Year. 
 
 1907. 
 1908. 
 1909. 
 1910. 
 1911. 
 1912. 
 1913. 
 1914. 
 1915. 
 1916. 
 1917. 
 1918, 
 1919, 
 1920. 
 1921 
 1922 
 1923 
 1924 
 1925, 
 1926 
 1927 
 1928 
 1929 
 1930 
 
 Amount of 
 appropria- 
 tion. 
 
 $725,110 
 811,840 
 908,188 
 1, 025, 293 
 1,157,181 
 1,258,725 
 1,370,710 
 1,466,424 
 1,526,551 
 1,570,768 
 1,579,132 
 1,564,974 
 1,550,742 
 1,534,636 
 1,531,851 
 1,512,159 
 1,554,679 
 1,546,866 
 1,550,718 
 1,555,588 
 1,571,682 
 1,589,167 
 1,617,302 
 1,663,981 
 
 Year. 
 
 1931. 
 1932. 
 1933. 
 1934. 
 1935. 
 1936. 
 1937. 
 1938. 
 1939. 
 1940. 
 1941, 
 1942, 
 1943, 
 1944 
 1945, 
 1946 
 1947 
 1948 
 1949 
 1950 
 1951 
 1952 
 1953 
 1954 
 
 Amount of 
 appropria- 
 tion. 
 
 $1,699,374 
 
 1,713,035 
 
 1,724,385 
 
 1,734,603 
 
 1,736,047 
 
 1,744,512 
 
 1,746,561 
 
 1,736,974 
 
 1,718,542 
 
 1,684,723 
 
 1,635,423 
 
 1,568,188 
 
 1,492,830 
 
 1,406,199 
 
 1,314,000 
 
 1,211,837 
 
 1,103,182 
 
 990,583 
 
 889, 324 
 
 772, 735 
 
 669,126 
 
 572,770 
 
 484,069 
 
 403, 305 
 
 Year. 
 
 1955 
 
 1956 
 
 1957 
 
 1958 
 
 1959 
 
 1960 
 
 1961 
 
 1962 
 
 1963 
 
 1964 
 
 1965 
 
 1966 
 
 1967 
 
 1968 
 
 1969 
 
 1970 
 
 1971 
 
 1972 
 
 1973 
 
 1974 
 
 Total 
 
 Amount of 
 
 appropria* 
 
 tion. 
 
 S331,667 
 
 269,380 
 
 216,046 
 
 170, 947 
 
 133, 347 
 
 102,450 
 
 77,434 
 
 57,499 
 
 41,884 
 
 29,877 
 
 20, 829 
 
 14,152 
 
 9,354 
 
 5,971 
 
 3,697 
 
 2,199 
 
 1,251 
 
 679 
 
 346 
 
 163 
 
 66,985,778 
 
 The second calculation was made by the Bureau of the Census, and 
 was based on cards used in the compilation of Census Bulletin No. 94, 
 entitled '^ Statistics of Employees of the Executive Civil Service of 
 the United States," covering the classified employees as of June 30, 
 1907. The total number of employees included in this inquiry was 
 170,228, and the maximum cost of paying annuities for services 
 rendered prior to the adoption of the plan on the same basis of 1.5 
 per cent of the employee's aggregate salary was found to amount to 
 $130,581,273, in the course of 78 years, as shown by the following 
 table : 
 
REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 
 
 23 
 
 Table II. — Showing maximum amount of annual appropriation by the Federal Gov- 
 ernment necessary to provide a quarterly annuity to each person in the classified civil 
 service June SO, 1907, upon attaining retirement age {the amount of annuity to be 1.5 
 per cent of the employee's salary for each year of service completed prior to that date). 
 
 [Based on census of employees as of June 30, 1907.] 
 
 Years after the introduction of the plan. 
 
 Aggregate annuities payable quarterly. 
 
 Total. 
 
 To general 
 employees 
 retiring at 
 age of 70. 
 
 To letter 
 carriers and 
 rural car- 
 riers retir- 
 ing at age 
 of 65. 
 
 To railway 
 
 postal 
 clerks retir- 
 ing at age 
 of 60. 
 
 $1, 121, 795 
 
 $706,290 
 
 $166, 449 
 
 $259,056 
 
 1,261,819 
 
 803, 660 
 
 187, 943 
 
 270, 216 
 
 1,390,485 
 
 892,056 
 
 217,500 
 
 280,929 
 
 1,556,632 
 
 1,020,092 
 
 246,545 
 
 289,995 
 
 1, 705, 135 
 
 1,123,599 
 
 273,947 
 
 307,589 
 
 1,861,499 
 
 1,249,851 
 
 294,011 
 
 317, 637 
 
 2,003,086 
 
 1,358,948 
 
 312, 044 
 
 332,094 
 
 2,129,118 
 
 1,449,713 
 
 326, 639 
 
 352, 766 
 
 2,252,506 
 
 1,532,090 
 
 347, 075 
 
 373,341 
 
 2,317,860 
 
 1,553,682 
 
 371, 103 
 
 393,075 
 
 2,392,028 
 
 1,577,259 
 
 394, 799 
 
 419,970 
 
 2,441,271 
 
 1,570,667 
 
 424, 154 
 
 446, 450 
 
 2,491,484 
 
 1,556,937 
 
 459, 273 
 
 475,274 
 
 2,559,337 
 
 1,545,965 
 
 503, 673 
 
 509,699 
 
 2,621,035 
 
 1,537,544 
 
 542,928 
 
 540,563 
 
 2,679,979 
 
 1,511,480 
 
 597,995 
 
 570,504 
 
 2,726,937 
 
 1,485,348 
 
 648, 186 
 
 593,403 
 
 2,791,401 
 
 1,465,143 
 
 708, 207 
 
 618,051 
 
 2,871,945 
 
 1,456,133 
 
 776,330 
 
 639,482 
 
 2,940,921 
 
 1,438,410 
 
 839, 736 
 
 662,775 
 
 3,047,310 
 
 1,465,515 
 
 892, 680 
 
 689, 115 
 
 3,138,272 
 
 1,482,258 
 
 940,521 
 
 715, 493 
 
 3,235,543 
 
 1,508,111 
 
 989,799 
 
 737, 633 
 
 3,323,097 
 
 1,530,210 
 
 1,036,572 
 
 756, 315 
 
 3,390,712 
 
 1,549,001 
 
 1,072,848 
 
 768,863 
 
 3,442,268 
 
 1,548,476 
 
 1, 122, 372 
 
 771,420 
 
 3,469,245 
 
 1,544,175 
 
 1, 154, 148 
 
 770, 922 
 
 3,481,754 
 
 1,538,943 
 
 1,178,888 
 
 763, 923 
 
 3,495,463 
 
 1,543,358 
 
 1,197,461 
 
 754,644 
 
 3,483,861 
 
 1,546,149 
 
 1,197,318 
 
 740,394 
 
 3,454,704 
 
 1,547,352 
 
 1,188,837 
 
 718,515 
 
 3,419,266 
 
 1,552,364 
 
 1,172,208 
 
 694,694 
 
 3,373,275 
 
 1,561,293 
 
 1,146,978 
 
 665,004 
 
 3,314,099 
 
 1,564,071 
 
 1,114,770 
 
 635, 258 
 
 3,232,814 
 
 1,551,927 
 
 1,079,298 
 
 601,589 
 
 3,135,067 
 
 1, 529, 148 
 
 1, 040, 360 
 
 565,559 
 
 3,021,176 
 
 1,498,314 
 
 994,292 
 
 528,570 
 
 2,901,416 
 
 1,463,090 
 
 946,731 
 
 491,595 
 
 2,767,554 
 
 1,421,790 
 
 892,842 
 
 452, 922 
 
 2, 618, 430 
 
 1,367,819 
 
 836,651 
 
 413, 960 
 
 2,466,544 
 
 1,313,333 
 
 778, 416 
 
 374,795 
 
 2,302,036 
 
 1,245,255 
 
 720,110 
 
 336,671 
 
 2,132,720 
 
 1,169,589 
 
 662,490 
 
 300,641 
 
 1,964,236 
 
 1,094,285 
 
 602,976 
 
 266,975 
 
 1,792,997 
 
 1,014,722 
 
 542, 571 
 
 235,704 
 
 1,618,516 
 1, 449, 172 
 
 927, 968 
 842, 132 
 
 483, 713 
 426,686 
 
 206,835 
 180, 354 
 
 Less than 1 year 
 
 1 year 
 
 2 years 
 
 3 years 
 
 4 years 
 
 5 years 
 
 6 years 
 
 7 years 
 
 8 years 
 
 9 years 
 
 10 years 
 
 11 years 
 
 12 years 
 
 13 years 
 
 14 years 
 
 15 years 
 
 16 years 
 
 17 years 
 
 18 years 
 
 19 years 
 
 20 years 
 
 21 years 
 
 22 years 
 
 23 years 
 
 24 years 
 
 25 years 
 
 26 years 
 
 27 years 
 
 28 years 
 
 29 years 
 
 30 years 
 
 31 years 
 
 32 years 
 
 33 years 
 
 34 years 
 
 35 years 
 
 36 years 
 
 37 years 
 
 38 years 
 
 39 years 
 
 40 years 
 
 41 years 
 
 42 years 
 
 43 years 
 
 44 years 
 
 45 years 
 
 46 years.... 
 
24 KEPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 
 
 Table II. — Showing maximum amount of annual appropriation by the Federal Gov- 
 ernment necessary to provide a quarterly annuity to each person in the classified civil 
 service June SO, 1907, etc. — Continued. 
 
 Years after the introduction of the plan. 
 
 Aggregate annuities payable quarterly. 
 
 Total. 
 
 To general 
 employees 
 retiring at 
 age of 70. 
 
 To letter 
 carriers and 
 rural car- 
 riers retir- 
 ing at age 
 of 65. 
 
 To railway 
 
 postal 
 clerks retir- 
 ing at age 
 of 60. 
 
 47 years 
 
 48 years 
 
 49 years 
 
 50 years 
 
 51 years 
 
 52 years 
 
 63 years 
 
 54 years 
 
 55 years 
 
 56 years 
 
 57 years 
 
 58 years 
 
 59 years 
 
 60 years 
 
 61 years 
 
 62 years 
 
 63 years 
 
 64 years 
 
 65 years 
 
 66 years 
 
 67 years 
 
 C8 years 
 
 69 years 
 
 70 years 
 
 71 years 
 
 72 years 
 
 73 years 
 
 74 years 
 
 75 years 
 
 76 years 
 
 77 years 
 
 78 years 
 
 Total 
 
 $1,283,841 
 
 1,125,133 
 
 977, 446 
 
 840, 125 
 
 714,958 
 
 602, 139 
 
 502, 310 
 
 415, 013 
 
 339,457 
 
 274,814 
 
 220,096 
 
 174,269 
 
 136,301 
 
 105, 195 
 
 80,036 
 
 59,950 
 
 44,149 
 
 31,914 
 
 22,601 
 
 15,645 
 
 10, 562 
 
 6,937 
 
 4,413 
 
 2,709 
 
 1,600 
 
 902 
 
 483 
 
 248 
 
 124 
 
 54 
 
 23 
 
 6 
 
 $754,800 
 
 667,842 
 
 584,828 
 
 505,410 
 
 431,711 
 
 364,316 
 
 304,260 
 
 251,508 
 
 205,707 
 
 166,464 
 
 133,232 
 
 105,399 
 
 82,353 
 
 63,495 
 
 48,258 
 
 36, 114 
 
 26, 576 
 
 19,206 
 
 13, 608 
 
 9,432 
 
 6,386 
 
 4,212 
 
 2,700 
 
 1,677 
 
 1,007 
 
 581 
 
 320 
 
 171 
 
 89 
 
 42 
 
 18 
 
 6 
 
 $372,822 
 
 322,910 
 
 277,866 
 
 237,479 
 
 201,518 
 
 169, 715 
 
 141, 797 
 
 117,483 
 
 96,476 
 
 78,473 
 
 63, 182 
 
 50, 321 
 
 39,605 
 
 30,765 
 
 23,668 
 
 17,777 
 
 13, 181 
 
 9,588 
 
 6,830 
 
 4,752 
 
 3,219 
 
 2,117 
 
 1,344 
 
 819 
 
 477 
 
 264 
 
 137 
 
 66 
 
 30 
 
 12 
 
 5 
 
 $156,219 
 
 134,381 
 
 114,752, 
 
 97,236 
 
 81,729 
 
 68,108 
 
 56,253 
 
 46,022 
 
 37, 274 
 
 29,877 
 
 23,682 
 
 18, 549 
 
 14,343 
 
 10,935 
 
 8, 210 
 
 6,059 
 
 4,392 
 
 3,120 
 
 2,163 
 
 1,461 
 
 957 
 
 608 
 
 369 
 
 213 
 
 116 
 
 57 
 
 26 
 
 11 
 
 5 
 
 130,581,273 
 
 9,547,243 
 
 36,325,671 
 
 24,708,359 
 
 The following table, taken from the report above referred to (p. 
 174), shows the total and comparative cost to the Government of 
 establishing a plan of retirement for employees under the terms of the 
 Perkins bill (S. 1944, 61st Cong., 1st sess.) and the Gillett bill (H. R. 
 22013, 61st Cong., 2d sess.). The annuities under the Gillett bill 
 (H. R. 22013) are also 1.5 per cent of salary for each year of service, 
 but the amount which the Government will contribute toward any one 
 employee's annuity is limited to the difference between the amount 
 which the employee's own savings will purchase and $600 a year. 
 This table contemplates the retirement of railway , postal clerks at 
 age 60, of letter carriers at age 65, and of all other employees at age 70. 
 
REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 25 
 
 Table III. — Showing total and comparative cost to the Government of establishing plan 
 for retiring employees under terms of Perkins hill (S. 1944) and Gillett bill {H. R. 
 22013). 
 
 Period. 
 
 All employees. 
 
 Excess cost 
 of establish- 
 ing Perkins 
 bill (S. 1944) 
 for all em- 
 ployees over 
 cost of es- 
 tablishing 
 Gillett bill 
 (H.R. 22013) 
 for all em- 
 ployees. 
 
 Cost of es- 
 tablishing 
 Gillett bill 
 (H.R. 22013) 
 for all em- 
 ployees. 
 
 General employees. 
 
 Cost of es- 
 tablishing 
 Perkins bill 
 (S. 1944) 
 for all em- 
 ployees. 
 
 Excess cost 
 of establish- 
 ing Perkins 
 bill (S. 1944) 
 for general 
 employees 
 over cost of 
 establishing 
 Gillett bill 
 (H.R. 22013) 
 for general 
 employees. 
 
 Cost of es- 
 tablishing 
 Gillett bill 
 (H.R. 22013) 
 for general 
 employees. 
 
 Cost of es- 
 tablishing 
 
 Perkins bill 
 
 (S. 1944) 
 for general 
 
 employees. 
 
 $43,525,993 $87,055,280 
 
 $130,581,273 
 
 $37,366,001 
 
 $32,181,242 
 
 Immediately. . . 
 
 1 year 
 
 2 years 
 
 3 years 
 
 4 years 
 
 5 years 
 
 6 years 
 
 7 years 
 
 8 years 
 
 9 years 
 
 10 years 
 
 11 years 
 
 12 years 
 
 13 years 
 
 14 years 
 
 15 years 
 
 16 years 
 
 17 years 
 
 18 years 
 
 19 years 
 
 20 years 
 
 21 years 
 
 22 years 
 
 23 years 
 
 24 years 
 
 25 years 
 
 26 years 
 
 27 years 
 
 28 years 
 
 29 years 
 
 30 years 
 
 31 years 
 
 32 years 
 
 33 years 
 
 34 years 
 
 35 years 
 
 36 years 
 
 37 years 
 
 38 years 
 
 39 years 
 
 40 years 
 
 41 years 
 
 42245— H 
 
 143^251 
 169, 714 
 188,507 
 220,200 
 249,315 
 287,703 
 327,280 
 355, 677 
 389,989 
 407,830 
 429, 763 
 437,813 
 445,360 
 460,260 
 485,707 
 500,456 
 517,114 
 533,993 
 564,221 
 588,925 
 640, 838 
 686,504 
 742,475 
 804,487 
 864,296 
 908, 608 
 956,207 
 
 1,005,355 
 
 1,060,186 
 
 1,125,442 
 
 1,180,277 
 
 1,227,543 
 
 1,304,964 
 
 1,365,805 
 
 1,408,406 
 
 1,431,587 
 
 1,440,830 
 
 1,440,176 
 
 1,425,883 
 
 1,394,017 
 
 1,356,629 
 
 1,295,772 
 
 Doc. 732, 62 
 
 978,544 
 1,092,105 
 1,201,978 
 1,336,432 
 1,455,820 
 1,573,796 
 1,675,806 
 1,773,441 
 1,862,517 
 1,910,030 
 1,962,265 
 2,003,458 
 2,046,124 
 2,099,077 
 2,135,328 
 2,179,523 
 2,209,823 
 2,257,408 
 2,307,724 
 2,351,996 
 2,406,472 
 2,451,768 
 2,493,068 
 2,518,610 
 2,526,216 
 2,533,760 
 2, 513, 038 
 2,476,399 
 2,435,277 
 2,358,419 
 2,274,427 
 2, 191, 723 
 2,068,311 
 1,948,294 
 1,824,408 
 1,703,480 
 1,580,346 
 1,461,240 
 1,341,671 
 1,224,413 
 1,109,915 
 1,006,264 
 
 -2 3 
 
 1,121,795 
 1,261,819 
 1,390,485 
 1,556,632 
 1,705,135 
 1,861,499 
 2,003,086 
 2,129,118 
 2,252,506 
 2,317,860 
 2,392,028 
 2,441,271 
 2,491,484 
 2,559,337 
 2,621,035 
 2,679,979 
 2,726,937 
 2,791,401 
 2,871,945 
 2,940,921 
 3,047,310 
 3,138,272 
 3,235,543 
 3,323,097 
 3,390,712 
 3,442,268 
 3,469,245 
 3,481,754 
 3,495,463 
 3,483,861 
 3,454,704 
 3,419,266 
 3,373,275 
 3,314,099 
 3,232,814 
 3,135,067 
 3,021,176 
 2,901,416 
 2,767,554 
 2,618,430 
 2,466,544 
 2,302,036 
 
 125,977 
 
 152,962 
 
 171,345 
 
 202,051 
 
 228,645 
 
 266,036 
 
 303,523 
 
 329,671 
 
 360,856 
 
 375,951 
 
 392, 179 
 
 395,125 
 
 397,661 
 
 405,974 
 
 421,344 
 
 426,420 
 
 434, 885 
 
 442,684 
 
 461,991 
 
 476, 140 
 
 514,059 
 
 547, 619 
 
 589, 807 
 
 638,533 
 
 683, 759 
 
 717,688 
 
 756,450 
 
 799,975 
 
 849,367 
 
 907,003 
 
 961,377 
 
 1,019,701 
 
 1,091,157 
 
 1,156,078 
 
 1,203,244 
 
 1,233,396 
 
 1,250,015 
 
 1,256,497 
 
 1,251,669 
 
 1,229,301 
 
 1,201,914 
 
 1, 156, 808 
 
 580,313 
 
 650,698 
 
 720, 711 
 
 818,041 
 
 894,954 
 
 983,815 
 
 1,055,425 
 
 1,120,042 
 
 1,171,234 
 
 1,177,731 
 
 1,185,080 
 
 1,175,542 
 
 1,159,276 
 
 1,139,991 
 
 1,116,200 
 
 1,085,060 
 
 1,050,463 
 
 1,022,459 
 
 994, 142 
 
 962,270 
 
 951,456 
 
 934, 639 
 
 918,304 
 
 891, 677 
 
 865,242 
 
 830, 788 
 
 787, 725 
 
 738,968 
 
 693,991 
 
 639, 146 
 
 585,975 
 
 532, 663 
 
 470, 136 
 
 407,993 
 
 348,683 
 
 295, 752 
 
 248, 299 
 
 206,593 
 
 170, 121 
 
 138,518 
 
 111,419 
 
 88,447 
 
 9,547,243 
 
 706,290 
 803,660 
 892,056 
 1,020,092 
 1,123,599 
 1,249,851 
 1,358,948 
 1,449,713 
 1,532,090 
 1,553,682 
 1,577,259 
 1,570,667 
 1,556,937 
 1,545,965 
 1,537,544 
 1,511,480 
 1,485,348 
 1,465,143 
 1,456,133 
 1,438,410 
 1,465,515 
 1,482,258 
 1,508,111 
 1,530/ 210 
 1,549,001 
 1,548,476 
 1,544,175 
 1,538,943 
 1,543,358 
 1,546,149 
 1,547,352 
 1,552,364 
 1,561,293 
 1,564,071 
 1,551,927 
 1,529,148 
 1,498,314 
 1,463,090 
 1,421,790 
 1,367,819 
 1,313,333 
 1,245,255 
 
26 EEPOKT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 
 
 Table III. — Showing total and comparative cost to the Government of establishing plan 
 for retiring employees under terms of Perkins bill (S. 1944) and Gillett bill {H. R. 
 22013)— Continned. 
 
 Period. 
 
 i2 years.. 
 
 43 years.. 
 
 44 years.. 
 
 45 years.. 
 
 46 years.. 
 
 47 years . . 
 
 48 years.. 
 
 49 years.. 
 
 50 years.. 
 
 51 years., 
 
 52 years., 
 
 53 years. 
 64 years. 
 
 55 years. 
 
 56 years. 
 
 57 years. 
 
 58 years. 
 
 59 years. 
 
 60 years. 
 
 61 years. 
 
 62 years. 
 
 63 years. 
 
 64 years. 
 
 65 years . 
 
 66 years. 
 
 67 years . 
 
 68 years . 
 
 69 years. 
 
 70 years . 
 
 71 years . 
 
 72 years. 
 
 73 years. 
 
 74 years. 
 
 75 years. 
 
 76 years. 
 
 77 years. 
 
 78 years. 
 
 All employees. 
 
 Excess cost 
 of establish- 
 ing Perkins 
 bill (S. 1944) 
 for all em- 
 ployees over 
 cost of es- 
 tablishing 
 Gillett bill 
 (H.R. 22013) 
 for all em- 
 ployees. 
 
 ,230,176 
 
 ,161,0.36 
 
 ,087,321 
 
 ,004,177 
 
 918,052 
 
 827, 277 
 
 735,221 
 
 646,230 
 
 560, 782 
 
 481,136 
 
 407,756 
 
 342, 084 
 
 284,093 
 
 232,472 
 
 189,890 
 
 152, 794 
 
 121,568 
 
 95,576 
 
 74, 186 
 
 56, 796 
 
 42,844 
 
 31,810 
 
 23, 210 
 
 16,613 
 
 11,648 
 
 7,978 
 
 6,333 
 
 3,461 
 
 2,176 
 
 1,320 
 
 768 
 
 424 
 
 225 
 
 116 
 
 51 
 
 23 
 
 6 
 
 Cost of es- 
 tablishing 
 Gillett bill 
 (H.R. 22013) 
 for all em- 
 ployees. 
 
 Cost of es- 
 tablishing 
 Perkins bill 
 
 (S. 1944) 
 for all em- 
 ployees. 
 
 $902,544 
 
 803,200 
 
 705, 676 
 
 614,339 
 
 531, 120 
 
 456, 564 
 
 390, 112 
 
 331,216 
 
 279,343 
 
 233,822 
 
 194,383 
 
 160, 226 
 
 130,920 
 
 106, 985 
 
 84, 924 
 
 67, 302 
 
 52, 701 
 
 40, 725 
 
 31,009 
 
 23, 240 
 
 17, 106 
 
 12,339 
 
 8,704 
 
 5,988 
 
 3,997 
 
 2,684 
 
 1,604 
 
 962 
 
 533 
 
 280 
 
 134 
 
 69 
 
 23 
 
 9 
 
 3 
 
 12, 132, 720 
 
 1,964,236 
 
 1,792,997 
 
 1,618,516 
 
 1,449,172 
 
 1,283,841 
 
 1, 125, 133 
 
 977, 446 
 
 840, 125 
 
 714,958 
 
 602, 139 
 
 502,310 
 
 415,013 
 
 339, 457 
 
 274, 814 
 
 220,096 
 
 174,269 
 
 136,301 
 
 105, 195 
 
 80,030 
 
 59, 950 
 
 44, 149 
 
 31,914 
 
 22,601 
 
 15,645 
 
 10, 562 
 
 6,937 
 
 4,413 
 
 2,709 
 
 1,600 
 
 902 
 
 483 
 
 248 
 
 124 
 
 54 
 
 23 
 
 6 
 
 General employees. 
 
 Excess cost 
 of establish- 
 ing Perkins 
 bill (S. 1944) 
 for general 
 employees 
 over cost of 
 estabhshing 
 Gillett bill 
 (H.R. 22013) 
 for general 
 employees. 
 
 $1,100,377 
 
 1,039,998 
 
 974,326 
 
 897, 925 
 
 820, 240 
 
 739, 200 
 
 657,001 
 
 577, 508 
 
 600, 626 
 
 428, 702 
 
 362,504 
 
 303,226 
 
 250, 955 
 
 205, 432 
 
 166,338 
 
 133, 181 
 
 105,381 
 
 82,348 
 
 63, 493 
 
 48,258 
 
 36,114 
 
 26, 576 
 
 19, 206 
 
 13, 608 
 
 9,432 
 
 6,386 
 
 1,212 
 
 2,700 
 
 1,677 
 
 1,007 
 
 681 
 
 320 
 
 171 
 
 89 
 
 42 
 
 18 
 
 6 
 
 Cost of es- 
 tablishing 
 Gillett bill 
 (H.R. 22013) 
 for general 
 employees. 
 
 $69, 212 
 
 54, 287 
 
 40, 396 
 
 30,043 
 
 21,892 
 
 15,600 
 
 10, 841 
 
 7,320 
 
 4,784 
 
 3,009 
 
 1,812 
 
 1,034 
 
 553 
 
 275 
 
 126 
 
 51 
 
 18 
 
 6 
 
 2 
 
 Cost of es- 
 tablishing 
 Perkins bill 
 (S. 1944) 
 for general 
 employees. 
 
 $1,169,589 
 
 1,094,285 
 
 1,014,722 
 
 927, 968 
 
 842, 132 
 
 754, 800 
 
 667, 842 
 
 584, 828 
 
 505,410 
 
 431,711 
 
 364,316 
 
 304,260 
 
 251,508 
 
 205, 707 
 
 166,464 
 
 133,232 
 
 105, 399 
 
 82,353 
 
 63, 496 
 
 48,268 
 
 36, 114 
 
 26, 676 
 
 19,206 
 
 13,608 
 
 9,432 
 
 6,386 
 
 4,212 
 
 2,700 
 
 1,677 
 
 1,007 
 
 581 
 
 320 
 
 171 
 
 89 
 
 42 
 
 18 
 
 6 
 
REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 27 
 
 Table Ill.—Shotving total and comparative cost to the Government of establishing plan 
 for retiring employees under tenns of Perkins hill (S. 1944) and Gillett bill (H. R. 
 22013)— Continned. 
 
 Period. 
 
 Mail carriers. 
 
 Excess cost 
 of establish- 
 ing Perkins 
 blll(S. 1944) 
 
 for mail 
 carriers over 
 cost of es- 
 tablishing 
 Gillett bill 
 (H.R. 22013) 
 for mail 
 carriers. 
 
 Cost of es- 
 tablishing 
 Gillett bill 
 (H.R. 22013) 
 for mail 
 carriers. 
 
 Cost of es- 
 tabhshing 
 Perkins bill 
 (S. 1944) 
 for mail 
 carriers. 
 
 Railway postal clerks. 
 
 Excess cost 
 
 of establish- 
 ing Perkins 
 
 bill (S. 1944) 
 for railway 
 
 postal clerks 
 over cost of 
 
 establishing 
 Gillett bill 
 
 (H.R. 22013) 
 for railway 
 
 postal clerks. 
 
 Cost of es- 
 tablishing 
 Gillett bill 
 
 (H.R. 22013) 
 for railway 
 
 postal clerks. 
 
 Cost of es- 
 tabUshing 
 
 Perkins bill 
 (S. 1944) 
 
 lor railway 
 postal clerks. 
 
 $1,393,306 
 
 $34, 932, 565 
 
 Immediately 
 
 1 year 
 
 2 years 
 
 3 years 
 
 4 years 
 
 5'years 
 
 6 years 
 
 7 years 
 
 8 years 
 
 9 years 
 
 10 years 
 
 11 years 
 
 12 years 
 
 13 years 
 
 14 years 
 
 15 years 
 
 16 years 
 
 17 years 
 
 18 years 
 
 19 years 
 
 20 years 
 
 21 years 
 
 22 years 
 
 23 years 
 
 24 years 
 
 25 years 
 
 26 years 
 
 27 years 
 
 28 years 
 
 29 years 
 
 30 years 
 
 31 years 
 
 32 years 
 
 33 years 
 
 34 years 
 
 35 years 
 
 36 years 
 
 37 years 
 
 38 years 
 
 39 years 
 
 40 years 
 
 41 years 
 
 42 years 
 
 43 years 
 
 789 
 352 
 515 
 616 
 
 758 
 
 833 
 
 1,070 
 
 1,141 
 
 1,500 
 
 1,914 
 
 2,159 
 
 2, 653 
 
 2,846 
 
 3,157 
 
 3,361 
 
 3, 991 
 
 4,744 
 
 4, 550 
 
 6,028 
 
 7,013 
 
 8,213 
 
 10, 120 
 
 12, 5.59 
 
 15,689 
 
 20, 100 
 
 25,237 
 
 29,099 
 
 32, 859 
 
 36,263 
 
 44, 234 
 
 46, 288 
 
 47, 214 
 
 46,975 
 
 47,062 
 
 47,721 
 
 48,613 
 
 48,674 
 
 50,036 
 
 49, 472 
 
 48, 877 
 
 47,566 
 
 42, 367 
 
 42,717 
 
 42, 981 
 
 155 
 
 187 
 
 216 
 
 245 
 
 273 
 
 293 
 
 310 
 
 325 
 
 345 
 
 369 
 
 392 
 
 421 
 
 456 
 
 500 
 
 539 
 
 594 
 
 643 
 
 703 
 
 770 
 
 832 
 
 884; 
 
 930 
 
 977 
 
 1,020 
 
 1,052 
 
 1,097; 
 
 1,125 
 
 1,146 
 
 1,161 
 
 1,153; 
 
 1,142; 
 
 1,124; 
 
 1,100 
 
 1,067 
 
 1,031 
 
 991 
 
 945 
 
 896 
 
 ■ 843 
 
 787, 
 
 730 
 
 677 
 
 619; 
 
 559 
 
 $36, 325, 671 
 
 $4,766,886 
 
 $19,941,473 
 
 156,449 
 
 187, 943 
 
 217, 500 
 
 246,-545 
 
 273,947 
 
 294, Oil 
 
 312,044 
 
 326, 639 
 
 347, 075 
 
 371, 103 
 
 394,799 
 
 424, 154 
 
 459, 273 
 
 503, 673 
 
 542, 928 
 
 597,995 
 
 648, 186 
 
 708, 207 
 
 776,-330 
 
 839, 736 
 
 892, 680 
 
 940,521 
 
 989, 799 
 
 1,0.36,572 
 
 1,072,848 
 
 1,122, .372 
 
 1,154,148 
 
 1,178,888 
 
 1,197,461 
 
 1,197,318 
 
 1,188,837 
 
 1,172,208 
 
 1,146,978 
 
 1,114,770 
 
 1, 079, 298 
 
 1,040,360 
 
 994, 292 
 
 946,731 
 
 892, 842 
 
 836,651 
 
 778, 416 
 
 720, 110 
 
 662, 490 
 
 602,976 
 
 16, 485 
 
 16, 400 
 
 16,647 
 
 17, .533 
 
 19,912 
 
 20, 834 
 
 22, 687 
 
 24, 865 
 
 27, 6.33 
 
 29,965 
 
 35, 425 
 
 40, 035 
 
 44, 853 
 
 51,129 
 
 61,002 
 
 70,045 
 
 77, 485 
 
 86,759 
 
 96, 202 
 
 105,772 
 
 118, 566 
 
 128,765 
 
 140,109 
 
 150,265 
 
 160,6-37 
 
 165,683 
 
 170,658 
 
 172,521 
 
 174, 556 
 
 174,205 
 
 172, 612 
 
 160, 628 
 
 166, 832 
 
 162, 665 
 
 157, 441 
 
 149, 578 
 
 142, 141 
 
 133,643 
 
 124,742 
 
 115, 839 
 
 107, 149 
 
 96,597 
 
 87,082 
 
 78,057 
 
 242, 571 
 253, 816 
 264, 282 
 272, 462 
 287, 677 
 296, 803 
 309, 407 
 327, 901 
 345,708 
 363, 110 
 384, .545 
 406, 415 
 430, 421 
 458, 570 
 479, -561 
 500, 459 
 515,918 
 5-31,292 
 543, 280 
 557,003 
 570, 549 
 586,728 
 597, 524 
 606,050 
 608, 226 
 605,737 
 600, 264 
 591,402 
 580, 088 
 566, 189 
 545, 903 
 534,066 
 498, 172 
 472, 593 
 444, 148 
 415, 981 
 386,429 
 357,952 
 328,180 
 298, 121 
 267, 646 
 240,074 
 213,559 
 188, 918 
 
 $24,708,359 
 
 259,056 
 270, 216 
 280,929 
 289, 995 
 307, 589 
 317,637 
 332, 094 
 352, 766 
 373,341 
 393,075 
 419, 970 
 446, 450 
 475, 274 
 509, 699 
 540,563 
 570, 504 
 593, 403 
 618,051 
 639, 482 
 662,775 
 689, 115 
 715, 493 
 737,6.33 
 756,315 
 768, 863 
 771,420 
 
 770. 922 
 
 763. 923 
 754, 644 
 740,394 
 718,515 
 694,694 
 665,004 
 635, 258 
 601,589 
 565, 559 
 528, 570 
 491,-595 
 452, 922 
 413, 960 
 374, 795 
 336, 671 
 300, 641 
 266, 975 
 
28 
 
 EEPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 
 
 Table 111 .—Showing total and comparative cost to the Government of establishing plan 
 for retiring employees under terms of Perkins hill (S. 1944) and Gillett hill (H. B. 
 22013)— Continued. 
 
 Period. 
 
 44 years. 
 
 45 years. 
 
 46 years . 
 
 47 years . 
 
 48 years . 
 
 49 years . 
 
 50 years . 
 
 51 years. 
 
 52 years . 
 
 53 years . 
 
 54 years . 
 
 55 years . 
 50 years. 
 
 57 years . 
 
 58 years. 
 
 59 years . 
 
 60 years. 
 
 61 years . 
 
 62 years . 
 
 63 years . 
 
 64 years . 
 
 65 years. 
 
 66 years . 
 
 67 years . 
 
 68 years . 
 
 69 years . 
 
 70 years . 
 
 71 years . 
 
 72 years. 
 
 73 years . 
 
 74 years . 
 
 75 years. 
 
 76 years . 
 
 77 years . 
 
 Mail carriers. 
 
 Excess cost 
 of establish- 
 ing Perkins 
 bill (S. 1944) 
 
 for mail 
 carriers over 
 cost of es- 
 tablishing 
 Gillett bill 
 (H.R. 22013) 
 for mail 
 carriers. 
 
 $43, 441 
 
 44, 656 
 
 43, 612 
 
 40, 704 
 
 36,894 
 
 33,277 
 
 29,840 
 
 26, 622 
 
 23, 612 
 
 20, 809 
 
 18,217 
 
 15,838 
 
 13,654 
 
 11,677 
 
 9,895 
 
 8,303 
 
 6,883 
 
 5,641 
 
 4,564 
 
 3,637 
 
 2,847 
 
 2,193 
 
 1,656 
 
 1,218 
 
 875 
 
 261 
 161 
 92 
 48 
 23 
 9 
 5 
 
 Cost of es- 
 tablishing 
 Gillett bill 
 (H.R. 22013) 
 for mail 
 carriers. 
 
 $499, 130 
 
 439,057 
 
 383, 074 
 
 332, 118 
 
 286,016 
 
 244,589 
 
 207, 639 
 
 174,896 
 
 146, 103 
 
 120, 988 
 
 99,266 
 
 80, 638 
 
 64,819 
 
 51,505 
 
 40,426 
 
 31,302 
 
 23,882 
 
 17, 927 
 
 13,213 
 
 9,544 
 
 0,741 
 
 4,637 
 
 3,096 
 
 2,001 
 
 1,242 
 
 736 
 
 411 
 
 216 
 
 103 
 
 45 
 
 18 
 
 7 
 
 3 
 
 Cost of es- 
 tablishing 
 Perkins bill 
 (S. 1944) 
 for mail 
 carriers. 
 
 $542,571 
 
 483, 713 
 
 426, 686 
 
 372,822 
 
 322, 910 
 
 277,866 
 
 237, 479 
 
 201,518 
 
 169, 715 
 
 141, 797 
 
 117,483 
 
 96, 476 
 
 78,473 
 
 63, 182 
 
 50, 321 
 
 39, 605 
 
 30,765 
 
 23,568 
 
 17,777 
 
 13, 181 
 
 9,588 
 
 6,830 
 
 4,752 
 
 3,219 
 
 2,117 
 
 1,344 
 
 819 
 
 477 
 
 264 
 
 137 
 
 66 
 
 30 
 
 12 
 
 5 
 
 Railway postal clerks. 
 
 Excess cost 
 of establish- 
 ing Perkins 
 bill (S. 1944) 
 
 for railway 
 postal clerks 
 
 over cost of 
 estabhshing 
 
 Gillett bill 
 (H.R. 22013) 
 
 for railway 
 postal clerks. 
 
 $69,554 
 
 61,596 
 
 54, 200 
 
 47, 373 
 
 41,126 
 
 35,445 
 
 30, 310 
 
 25,812 
 
 21,640 
 
 18, 049 
 
 14,921 
 
 11,202 
 
 9,898 
 
 7,936 
 
 6,292 
 
 4,925 
 
 3,810 
 
 2,897 
 
 2,166 
 
 1,597 
 
 1,157 
 
 812 
 
 560 
 
 374 
 
 246 
 
 153 
 
 91 
 
 52 
 
 26 
 
 12 
 
 6 
 
 3 
 
 Cost of es- 
 tablishing 
 Gillett bill 
 
 (H.R. 22013) 
 for railway 
 
 postal clerks. 
 
 $166, 150 
 
 145,239 
 
 126. 154 
 
 108,846 
 
 93,255 
 
 79, 307 
 
 66,920 
 
 55, 917 
 
 46, 468 
 
 38,204 
 
 31,101 
 
 26,072 
 
 19, 979 
 
 15,746 
 
 12,257 
 
 9,418 
 
 7,125 
 
 5,313 
 
 3,893 
 
 2,795 
 
 1,963 
 
 1,351 
 
 901 
 
 583 
 
 362 
 
 216 
 
 122 
 
 64 
 
 31 
 
 14 
 
 5 
 
 2 
 
 Cost of es- 
 tabUsliing 
 
 Perkins bill 
 
 (S. 1944) 
 for railway 
 
 postal clerks. 
 
 $235, 704 
 
 206,835 
 
 180, 354 
 
 156,219 
 
 134,381 
 
 114,752 
 
 97,236 
 
 81, 729 
 
 68, 108 
 
 56, 253 
 
 46,022 
 
 37,274 
 
 29,877 
 
 23, 682 
 
 18,549 
 
 14, 343 
 
 10,935 
 
 8,210 
 
 6,059 
 
 4,392 
 
 3,120 
 
 2,163 
 
 1,461 
 
 957 
 
 008 
 
 369 
 
 213 
 
 116 
 
 57 
 
 26 
 
 11 
 
 5 
 
 DIFFERENCE IN COST BETWEEN STRAIGHT PENSION AND CONTRIBU- 
 TORY PLAN CONFERRING SAME BENEFITS. 
 
 The following table, taken from the report referred to (p. 48), shows 
 that the cost of a civil pension conferring the same benefits as the 
 Perkins bill (S. 1944) and payable entirely out of the Public Treasury 
 would be .$232,773,690 during the next 35 years, as contrasted with 
 the cost of the Perkins bill for the same period at $97,553,023. 
 
REPOET TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 29 
 
 Table IV. — Showing comparative cost to the Government during first 35 years of retiring 
 employees on straight pensions and under the Perkins hill (S. 1944). 
 
 Period 
 
 All employees. 
 
 Excess cost 
 of retiring all 
 employees 
 on straight 
 pensions 
 over cost of 
 retiring all 
 employees 
 mider Per- 
 kins bill dur- 
 ing first 35 
 years. 
 
 Cost of retir- 
 ing all em- 
 ployees 
 under 
 Perkins bill 
 shown for 
 period of 
 35 years. 
 
 Cost of retir- 
 ing all em- 
 ployees on 
 straight pen- 
 sions confer- 
 ring benefits 
 of Perkins 
 bill during 
 first 35 years. 
 
 General employees. 
 
 Excess cost 
 of retiring 
 general em- 
 ployees on 
 straight pen- 
 sions over 
 cost of retir- 
 ing general 
 employees 
 under Per- 
 kins bill dur- 
 ing first 35 
 years. 
 
 Cost of retir- 
 ing general 
 employees 
 
 under 
 Perkins bill 
 during . 
 first 35 years. 
 
 Cost of retir- 
 ing general 
 employees 
 on straight 
 
 pensions 
 conferring 
 benefits of 
 Perkins bill 
 
 shown 
 during first 
 
 35 years. 
 
 Immediately. 
 
 1 year 
 
 2 years 
 
 3 years 
 
 lyears 
 
 g years 
 
 6years 
 
 7 years 
 
 8 years 
 
 9 years 
 
 10 years 
 
 11 years 
 
 12 years 
 
 13 years 
 
 14 years 
 
 15 years 
 
 16 years 
 
 17 years 
 
 18 years 
 
 19 years 
 
 20 years 
 
 21 years 
 
 22 years 
 
 23 years 
 
 24 years 
 
 25 years 
 
 26 years 
 
 27 years 
 
 28 years 
 
 29 years 
 
 30 years 
 
 31 years 
 
 32 years 
 
 33 years 
 
 34 years 
 
 35 years 
 
 $135,220,667 
 
 14,008 
 
 36, 503 
 
 76,513 
 
 127, 822 
 
 196,141 
 
 277, 148 
 
 370, 553 
 
 473,740 
 
 572,679 
 
 707,058 
 
 844,518 
 
 1,013,466 
 
 1,211,119 
 
 1,412,728 
 
 1,641,4.34 
 
 1,875,576 
 
 2,158,712 
 
 2,489,837 
 
 2, 688, 105 
 
 3,268,212 
 
 3, 667, 342 
 
 4,134,194 
 
 4,661,693 
 
 5,171,470 
 
 5,741,268 
 
 6,308,259 
 
 6,853,926 
 
 7, 472, 324 
 
 8,068,838 
 
 8, 700, 020 
 
 9,358,111 
 
 10,020,239 
 
 10,644,040 
 
 11,226,124 
 
 11,736,887 
 
 $97, 553, 023 
 
 1,121,795 
 1,261,819 
 1,390,485 
 1,5.56,632 
 1,705,135 
 1,861,499 
 2,003,086 
 2,129,118 
 2, 252, 506 
 2,317,860 
 2,392,028 
 2,441,271 
 2,491,484 
 2,559,337 
 2,621,035 
 2,679,979 
 2,726,937 
 2,791,401 
 2,871,945 
 2,940,921 
 3,047,310 
 3,138,272 
 3, 235, 543 
 3,323,097 
 3,390,712 
 3,442,268 
 3,469,245 
 3,481,754 
 3,495,463 
 3, 483, 861 
 3,454,704 
 3,419,266 
 3,373,275 
 3,314,099 
 3,232,814 
 3,135,067 
 
 $232, 773, 690 
 
 $52,850,870 
 
 $51,397,218 
 
 $104,248,088 
 
 1,121,795 
 
 1,275,827 
 
 1,426,988 
 
 1,633,145 
 
 1,832,957 
 
 2,057,640 
 
 2,280,2.34 
 
 2, 499, 671 
 
 2,726,246 
 
 2,890,539 
 
 3,099,086 
 
 3,285,789 
 
 3,504,950 
 
 3,770,456 
 
 4,033,763 
 
 4,321,413 
 
 4,602,513 
 
 4,950,113 
 
 5,361,782 
 
 5, 629, 086 
 
 6, 315, 522 
 
 6, 805, 614 
 
 7,369,737 
 
 7,984,790 
 
 8,562,182 
 
 9,183,536 
 
 9,777,504 
 
 10,335,680 
 
 10, 967, 787 
 
 11,5.52,699 
 
 12,154,724 
 
 12,777,377 
 
 13,393,514 
 
 13,958,139 
 
 14, 458, 938 
 
 14,871,954 
 
 6, 834 
 
 20, 428 
 
 45, 745 
 
 77, 505 
 
 125, 051 
 
 179, 179 
 
 240, 654 
 
 298, 473 
 
 341,583 
 
 405, 951 
 
 463,689 
 
 528,099 
 
 596, 568 
 
 669,621 
 
 738, 254 
 
 813,344 
 
 902, 076 
 
 1,006,032 
 
 1,107,669 
 
 1,284,459 
 
 1,428,818 
 
 1,611,255 
 
 1,814,9.30 
 
 2,010,982 
 
 2,192,352 
 
 2,375,382 
 
 2,513,964 
 
 2,721,595 
 
 2,927,127 
 
 3,177,801 
 
 3,449,223 
 
 3,762,363 
 
 4,061,247 
 
 4, 350, 884 
 
 4,601,733 
 
 706,290 
 803,660 
 892, 056 
 1,020,092 
 1,123,599 
 1,249,851 
 1,358,948 
 1,449,713 
 1,532,090 
 1,553,682 
 1,577,259 
 1,570,667 
 1,556,937 
 1,545,965 
 1,5.37,544 
 1,511,480 
 1,485,348 
 1,465,143 
 1,456,133 
 1,438,410 
 1,465,515 
 1,482,258 
 1,508,111 
 1,5.30,210 
 1,549,001 
 1,548,476 
 1,544,175 
 1,538,943 
 1,543,358 
 1,546,149 
 1,547,352 
 1,. 552, 364 
 1,561,293 
 1,564,071 
 1,551,927 
 1,529,148 
 
 706,290 
 810, 494 
 912, 484 
 1,065,837 
 1,201,104 
 1,374,902 
 1,538,127 
 1,690,367 
 1,830,563 
 1,895,265 
 1,983,210 
 2,034,356 
 2,085,036 
 2,142,533 
 2,207,165 
 2,249,734 
 2,298,692 
 2,367,219 
 2, 462, 165 
 2, 546, 079 
 2,749,974 
 2,911,076 
 3,119,366 
 3,345,140 
 3,559,983 
 3, 740,*828 
 3,919,557 
 4,052,907 
 4, 264, 953 
 4,473,276 
 4, 725, 153 
 5,001,587 
 5,323,656 
 5,625,318 
 5,902,811 
 6, 130, 881 
 
30 REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 
 
 Table IV. — Shoiving comparative cost to the Government during first 35 years of retiring 
 employees on straight pensions and under the Perkins hill {S. 1944) — Continued. 
 
 Period. 
 
 Immediately. 
 
 2 year 
 
 3 years 
 
 4 years 
 
 5 years 
 
 6 years 
 
 7 years 
 
 8 years 
 
 9 years 
 
 1 years 
 
 10 years 
 
 11 years 
 
 12 years 
 
 13 years 
 
 14 years 
 
 15 years 
 
 16 years 
 
 17 years 
 
 18 years 
 
 29 years 
 
 20 years 
 
 21 years 
 
 22 years 
 
 23 years 
 
 24 years 
 
 25 years 
 
 26 years 
 
 27 years 
 
 28 years 
 
 39 years 
 
 30 years 
 
 31 years 
 
 32 years 
 
 33 years 
 
 34 years 
 
 35 years 
 
 Mail carriers. 
 
 Excess cost 
 of retiring 
 mail carriers 
 on straight 
 pensions over 
 cost of retir- 
 ing mail car- 
 riers under 
 Perkins bill 
 during first 
 35 years. 
 
 $57,621,100 
 
 6,192 
 13,082 
 24,852 
 39, 109 
 53, 876 
 72, 925 
 94,918 
 126,468 
 166,020 
 214, 695 
 272, 414 
 345,597 
 435,729 
 523,164 
 638,916 
 757, 141 
 899,543 
 070,775 
 101,083 
 426, 888 
 589,794 
 774, 483 
 985, 086 
 182,184 
 453,504 
 717,028 
 001,041 
 290,758 
 555,998 
 828, 792 
 100, 427 
 369,182 
 005,161 
 833, 217 
 051,058 
 
 Cost of retir- 
 ing mail car- 
 riers under 
 Perkins bill 
 during first 
 35 years. 
 
 $26,153,595 
 
 156, 449 
 
 187,943 
 
 217,500 
 
 246,545 
 
 273, 947 
 
 294,011 
 
 312,044 
 
 326,639 
 
 347,075 
 
 371,103 
 
 394,799 
 
 424, 154 
 
 459, 273 
 
 503, 673 
 
 542,928 
 
 597,995 
 
 648, 186 
 
 708,207 
 
 776,330 
 
 839,736 
 
 892,680 
 
 940,521 
 
 989,799 
 
 1,036,572 
 
 1,072,848 
 
 1,122,372 
 
 1,154,148 
 
 1,178,888 
 
 1,197,461 
 
 1,197,318 
 
 1,188,837 
 
 1,172,208 
 
 1,146,978 
 
 1,114,770 
 
 1,079,298 
 
 1,040,360 
 
 Cost of retir- 
 ing maU car- 
 riers on 
 straight pen- 
 sion confer- 
 ring benefits 
 of Perkins 
 bill during 
 first 35 years. 
 
 3,774,695 
 
 156,449 
 
 194, 135 
 
 230, 582 
 
 271,397 
 
 313,056 
 
 347, 887 
 
 384, 969 
 
 421,557 
 
 473,543 
 
 537, 123 
 
 609, 494 
 
 696,568 
 
 804, 870 
 
 939, 402 
 
 1,066,092 
 
 1,236,911 
 
 1,405,327 
 
 1,607,750 
 
 1,847,105 
 
 1,940,819 
 
 2,319,568 
 
 2,530,315 
 
 2,764,282 
 
 3,021,658 
 
 3,255,032 
 
 3,575,876 
 
 3,871,176 
 
 4, 179, 929 
 
 4, 488, 219 
 
 4,753,316 
 
 5,017,629 
 
 5, 272, 635 
 
 5,516,160 
 
 5,719,931 
 
 5,912,515 
 
 6,091,418 
 
 Railway postal clerks. 
 
 Excess cost 
 of retiring 
 railway 
 postal clerks 
 on straight 
 pensions over 
 cost of retir- 
 ing railway 
 postal clerks 
 
 under 
 
 Perkins bill 
 
 during first 
 
 35 years. 
 
 Cost of retir- 
 ing railway 
 postal clerks 
 
 under 
 
 Perkins bill 
 
 during first 
 
 35 years. 
 
 $24,748,697 
 
 $20,002,210 
 
 982 
 
 2,993 
 
 5,916 
 
 11,208 
 
 17,214 
 
 25,044 
 
 34,981 
 
 48,799 
 
 65,076 
 
 86,412 
 
 108, 415 
 
 139,770 
 
 178, 822 
 
 219,943 
 
 264,264 
 
 305,091 
 
 357,093 
 
 413,030 
 
 479,413 
 
 556, 865 
 
 648,730 
 
 748,456 
 
 861,677 
 
 978,304 
 
 1,095,412 
 
 1,215,849 
 
 1,338,921 
 
 1,459,971 
 
 1,585,713 
 
 1,693,427 
 
 1,808,461 
 
 1,888,694 
 
 1,977,632 
 
 2,042,023 
 
 2,084,096 
 
 259,056 
 270,216 
 280,929 
 289,995 
 307, 589 
 317,637 
 332,094 
 352,766 
 373,341 
 393,075 
 419,970 
 446, 450 
 475,274 
 509,699 
 540,563 
 570,504 
 593, 403 
 018,051 
 639, 482 
 662,775 
 689,115 
 715, 493 
 737,633 
 756,315 
 768, 863 
 771,420 
 770, 922 
 763,923 
 754,644 
 740,394 
 718, 515 
 694,694 
 665,004 
 635,258 
 601,589 
 565,559 
 
 Cost of retir- 
 ing railway 
 postal clerks 
 on straight 
 pension con- 
 ferring bene- 
 fits of 
 Perkins bill ; 
 during first j 
 35 vears. 
 
 $44, 750, 907 
 
 259,056 
 
 271,198 
 
 283, 922 
 
 295,911 
 
 318,797 
 
 334, 851 
 
 357, 138 
 
 387,747 
 
 422, 140 
 
 458, 151 
 
 506,382 
 
 554, 865 
 
 615,044 
 
 688,521 
 
 760, 506 
 
 834,768 
 
 898, 494 
 
 975, 144 
 
 1,052,512 
 
 1,142,188 
 
 1,245,980 
 
 1,364,223 
 
 1,486,089 
 
 1,617,992 
 
 1,747,167 
 
 1,866,832 
 
 1,986,771 
 
 2, 102, 844 
 
 2,214,615 
 
 2,326,107 
 
 2,411,942 
 
 2,503,155 
 
 2, 553, 698 
 
 2,012,890 
 
 2,643,612 
 
 2,649,655 
 
 The following table, taken from the report referred to (p. 50)^ 
 shows that the cost of a civil pension conferring the same benefits as 
 the Gillctt bill (H. R. 22013) and payable entirely out of the Public 
 Treasury would be $232,773,690 (luring the next 35 years, as con- 
 trasted with the cost of the Gillett bill for the same period at 
 $73,136,765: 
 
REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 31 
 
 Table V. — Showing comparative cost to the Government during first 35 years of retiring 
 employees on straight -pensions and under the Gillett hill (H. R. 22013). 
 
 Period. 
 
 All employees. 
 
 Excess cost 
 
 of retiring all 
 
 employees 
 
 on straight 
 
 pensions 
 
 over cost of 
 
 retiring all 
 
 employees 
 
 under Gillett 
 
 bill during 
 
 first 35 years. 
 
 Cost of retir- 
 ing all em- 
 ployees un- 
 der Gillett 
 bill for first 
 35 years. 
 
 Cost of retir- 
 ing all em- 
 ployees on 
 straight pen- 
 sions confer- 
 ring benefits 
 of Perkins 
 bill shown 
 for first 35 
 years. 
 
 General employees. 
 
 Excess cost 
 of retiring 
 general em- 
 ployees on 
 
 straight pen- 
 sions over 
 
 cost of retir- 
 ing general 
 employees 
 
 under Gillett 
 
 bill for first 
 
 35 years. 
 
 Cost of retir- 
 ing general 
 employees 
 
 under Gillett 
 
 bill shown 
 
 for first 35 
 
 years. 
 
 Cost of retir- 
 ing general 
 employees 
 on straight 
 pensions con- 
 ferring bene- 
 fits of Per- 
 kins bill 
 shown for 
 first 35 years. 
 
 $159,636,925 
 
 S73, 136, 765 
 
 $232, 773, 690 
 
 $73,291,503 
 
 $30,956,585 
 
 1, 248, 088 
 
 Immediately 
 
 1 year 
 
 2 years 
 
 3 years 
 
 4 years 
 
 5 years 
 
 6 years 
 
 7 years 
 
 8 years 
 
 9 years 
 
 10 years 
 
 11 years 
 
 12 years 
 
 13 years 
 
 14 years 
 
 15 years 
 
 16 years 
 
 17 years 
 
 18 years 
 
 19 years 
 
 20 years 
 
 21 years 
 
 22 years 
 
 23 years 
 
 24 years 
 
 25 years 
 
 26 years 
 
 27 years 
 
 28 years 
 
 29 years 
 
 30 years 
 
 31 years 
 
 32 years 
 
 33 years 
 
 34 years 
 
 35 years 
 
 143,251 
 183, 722 
 225,010 
 296, 713 
 377, 137 
 483, 844 
 604, 428 
 726,230 
 863, 729 
 980,509 
 136,821 
 282, 331 
 458,826 
 671, 379 
 898,435 
 141, 890 
 392, 690 
 692, 705 
 054,058 
 277,090 
 909,050 
 353, 846 
 876, 669 
 466, 180 
 035,966 
 649,876 
 264, 466 
 859, 281 
 532,510 
 194,280 
 880,297 
 585, 654 
 325,203 
 009,845 
 634,530 
 ,168,474 
 
 978,544 
 1, 092, 105 
 1, 201, 978 
 1,336,432 
 1,455,820 
 1,573,796 
 1,675,806 
 1, 773, 441 
 1,862,517 
 1,910,030 
 1,962,265 
 2,003,458 
 2,046,124 
 2,099,077 
 2,135,328 
 2,179,523 
 2,209,823 
 2, 257, 408 
 2,307,724 
 2,351,996 
 2,406,472 
 2,451,768 
 2,493,068 
 2,518,610 
 2,526,216 
 2,533,660 
 2,513,038 
 2, 476, 399 
 2,435,277 
 2, 358, 419 
 2, 274, 427 
 2,191,723 
 2,068,311 
 1,948,294 
 1,824,408 
 1,703,480 
 
 1,121,795 
 1,275,827 
 1, 426, 988 
 1,633,145 
 1,832,957 
 2,057,640 
 2,280,234 
 2, 499, 671 
 2,726,246 
 2,890,539 
 3, 099, 086 
 
 3. 285. 789 
 3,504,950 
 3, 770, 456 
 4,033,763 
 4,321,413 
 4,602,513 
 4, 950, 113 
 5,361,782 
 5,629,086 
 6,315,522 
 6,805,614 
 7, 369, 737 
 
 7. 984. 790 
 8,562,182 
 9, 183, 536 
 9,777,504 
 
 10, 335, 680 
 10, 967, 787 
 11,552,699 
 12,154,724 
 12,777,377 
 13,393,514 
 13,958,139 
 14,458,938 
 14,871,954 
 
 125,977 
 
 159, 796 
 
 191, 773 
 
 247, 796 
 
 306, 150 
 
 391, 087 
 
 482, 702 
 
 570,325 
 
 659,329 
 
 717,534 
 
 798, 130 
 
 858, 814 
 
 925, 760 
 
 1,002,542 
 
 1, 090, 965 
 
 1, 164, 674 
 
 1,248,229 
 
 1,344,760 
 
 1,468,023 
 
 1,583,809 
 
 1,798,518 
 
 1,976,437 
 
 2,201,062 
 
 2,453,463 
 
 2, 694, 741 
 
 2, 910, 040 
 
 3,131,832 
 
 3, 313, 939 
 
 3, 570, 962 
 
 3,834,130 
 
 4, 139, 178 
 
 4, 468, 924 
 
 4,853,520 
 
 5,217,325 
 
 5,554,128 
 
 5,835,129 
 
 580,313 
 
 650, 698 
 
 720,711 
 
 818,041 
 
 894,954 
 
 983,815 
 
 1,055,425 
 
 1, 120, 042 
 
 1,171,234 
 
 1, 177, 731 
 
 1,185,080 
 
 1,175,542 
 
 1,159,276 
 
 1,139,991 
 
 1,116,200 
 
 1,085,060 
 
 1,050,463 
 
 1,022,459 
 
 994, 142 
 
 962,270 
 
 951,456 
 
 934, 639 
 
 918,304 
 
 891, 677 
 
 865,242 
 
 830, 788 
 
 787, 725 
 
 738, 968 
 
 693, 991 
 
 639, 146 
 
 585,975 
 
 5.32,663 
 
 470, 136 
 
 407, 993 
 
 348, 683 
 
 295, 752 
 
 706,290 
 810, 494 
 912, 484 
 1,065,837 
 1,201,104 
 1,374,902 
 1,538,127 
 1,690,367 
 1,830,563 
 1,895,265 
 1,983,210 
 2,034,356 
 2,085,036 
 2,142,533 
 2,207,165 
 2, 249, 734 
 2, 298, 692 
 2, 367, 219 
 2,462,165 
 2,546,079 
 2, 749, 974 
 2,911,076 
 3,119,366 
 3,345,140 
 3, 559, 983 
 3,740,828 
 3,919,557 
 4,052,907 
 4, 264, 953 
 4,473,276 
 4,725,153 
 5,001,587 
 5,323,656 
 5, 625, 318 
 5,902,811 
 6,130,881 
 
32 EEPOET TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 
 
 Table V. — Showing comparative cost to the Government during first S5 years of retiring 
 employees on straight pensions and under the Gillett bill (H. R. 22013) — Continued. 
 
 Period. 
 
 Mail carriers. 
 
 Excess cost 
 of retiring 
 mail carriers 
 on straight 
 pensions over 
 cost of retir- 
 ing mail car- 
 riers under 
 Gillett bill 
 during first 
 35 years. 
 
 Cost of retir- 
 ing mail car- 
 riers under 
 GUlett bill 
 shown for 
 first 35 years. 
 
 Cost of retir- 
 ing mail car- 
 riers on 
 straight pen- 
 sions confer- 
 ring benefits 
 of PerkiQS 
 bill shown 
 for first 35 
 years. 
 
 Railway postal clerks. 
 
 Excess cost 
 of retiring 
 railway 
 postal clerks 
 on straight 
 pensions over 
 cost of retir- 
 ing railway 
 postal clerks 
 under Gillett 
 bill for first 
 35 years. 
 
 Cost of retir- 
 ing railway 
 postal clerks 
 under Gillett 
 bUl shown 
 for first 35 
 years. 
 
 Cost of retir- 
 ing railway I 
 postal clerks ] 
 on straight ' 
 pensions con-l 
 ferrlng bene- 
 fits of 
 Perkins bill 
 shown for first 
 35 years. 
 
 ,189,336 $25,585,359 
 
 3, 774, 695 
 
 $28,156,086 
 
 $16,594,821 
 
 Immediately 
 
 1 year 
 
 2 years 
 
 3 years 
 
 4 years 
 
 6 years 
 
 6 years 
 
 7 years 
 
 8 years 
 
 9 years 
 
 10 years 
 
 11 years 
 
 12 years 
 
 13 years 
 
 14 years 
 
 15 years 
 
 16 years 
 
 17 years 
 
 18 years 
 
 19 years 
 
 20 years 
 
 21 years 
 
 22 years 
 
 23 years 
 
 24 years 
 
 25 years 
 
 26 years 
 
 27 years 
 
 28 years 
 
 29 years 
 
 30 years 
 
 31 years 
 
 32 years 
 
 33 years 
 
 34 years 
 
 35 years 
 
 6,544 
 
 13,597 
 
 25,468 
 
 39,867 
 
 54, 709 
 
 73,995 
 
 96,059 
 
 127,968 
 
 167,934 
 
 216,854 
 
 275,067 
 
 348,443 
 
 438, 886 
 
 526,525 
 
 642, 907 
 
 761,885 
 
 904,093 
 
 1,076,803 
 
 1,108,096 
 
 1,435,101 
 
 1,599,914 
 
 1,787,042 
 
 2,000,775 
 
 2,202,284 
 
 2,478,741 
 
 2, 746, 127 
 
 3,033,900 
 
 3,327,021 
 
 3,600,232 
 
 3,875,080 
 
 4, 147, 641 
 
 4,416,157 
 
 4,652,223 
 
 4, 880, 938 
 
 5,099,671 
 
 155, 660 
 
 187,591 
 
 216,985 
 
 245, 929 
 
 273,189 
 
 293, 178 
 
 310, 974 
 
 325,498 
 
 345,575 
 
 369,189 
 
 392, 640 
 
 421,501 
 
 456, 427 
 
 500,516 
 
 539,567 
 
 594,004 
 
 643,442 
 
 703, 657 
 
 770,302 
 
 832, 723 
 
 884,467 
 
 930,401 
 
 977, 240 
 
 1,020,883 
 
 1, 052, 748 
 
 1,097,135 
 
 1,125,049 
 
 1,146,029 
 
 1,161,198 
 
 1,153,084 
 
 1,142,549 
 
 1,124,994 
 
 1,100,003 
 
 1,067,708 
 
 1,031,577 
 
 991,747 
 
 156,449 
 
 194,135 
 
 230,582 
 
 271,397 
 
 313,056 
 
 347, 887 
 
 384,969 
 
 421,557 
 
 473, 543 
 
 537,123 
 
 609,494 
 
 696,568 
 
 804,870 
 
 939,402 
 
 1,066,092 
 
 1,236,911 
 
 1,405,327 
 
 1,607,750 
 
 1,847,105 
 
 1,940,819 
 
 2,319,^8 
 
 2,530,315 
 
 2, 764, 282 
 
 3,021,658 
 
 3,255,032 
 
 3,575,876 
 
 3,871,176 
 
 4,179,929 
 
 4,488,219 
 
 4,753,316 
 
 5,017,629 
 
 5, 272, 635 
 
 5,516,160 
 
 5,719,931 
 
 5,912,515 
 
 6,091,418 
 
 16,485 
 
 17,382 
 
 19,640 
 
 23,449 
 
 31,120 
 
 38, 048 
 
 47, 731 
 
 59, 846 
 
 76,432 
 
 95,041 
 
 121,837 
 
 148,450 
 
 184, 623 
 
 229, 951 
 
 280,945 
 
 334,309 
 
 382,576 
 
 443,852 
 
 509, 232 
 
 585, 185 
 
 675,431 
 
 777,495 
 
 888, 565 
 
 1,011,942 
 
 1,138,941 
 
 1,261,095 
 
 1,386,507 
 
 1,511,442 
 
 1,634,527 
 
 1,759,918 
 
 1,866,039 
 
 1,969,089 
 
 2,055,526 
 
 2, 140, 297 
 
 2,199,464 
 
 2,233,674 
 
 242, 571 
 253,816 
 264,282 
 272,462 
 287, 677 
 296, 803 
 309,407 
 327,901 
 345, 708 
 363,110 
 384,545 
 406,415 
 430,421 
 458,570 
 479, 561 
 500,459 
 515,918 
 531,292 
 543, 280 
 557,003 
 570,549 
 586, 728 
 597,524 
 606,050 
 608,226 
 605, 737 
 600,264 
 591,402 
 580,088 
 566, 189 
 545,903 
 534,066 
 498,172 
 472,593 
 444,148 
 415,981 
 
 $44, 750, 907 
 
 259,056 
 
 271,198 
 
 283,922 
 
 295,911 
 
 318, 797 
 
 334,851 
 
 357, 138 
 
 387, 747 
 
 422, 140 
 
 458, 151 
 
 506,382 
 
 554,865 
 
 615,044 
 
 688,521 
 
 760,506 
 
 834, 768 
 
 898,494 
 
 975, 144 
 
 1,052,512 
 
 1,142,188 
 
 1,245,980 
 
 1,364,223 
 
 1,486,089 
 
 1,617,992 
 
 1,747,167 
 
 1,866,832 
 
 1,986,771 
 
 2,102,844 
 
 2,214,615 
 
 2,326,107 
 
 2,411,942 
 
 2,503,155 
 
 2,553,698 
 
 2,612,890 
 
 2,643,612 
 
 2, 649, 655 
 
eeport to the president on retirement allowances. 33 
 
 Reluctance of Congress to Provide for Retirement of Civil 
 Employees on Account of Expense. 
 
 Congress has not been willing to pass any of these bUls. Its reluc- 
 tance would seem to be due to the fact that it is not yet satisfied that 
 the expense incident to establishing these plans — through the pay- 
 ment of annuities from the Federal Treasury to those who were too 
 old to provide for themselves — is justified by the loss incurred through 
 the inefficiency of aged employees. No calculations were made to 
 show the saving that would result to the Government through removal 
 of the superannuated as an offset to the expense necessarily incurred 
 in retiring them. This calculation was not possible at the time, as 
 no statistics showing the actual amount of work performed by the 
 aged employees were available on which to base such calculations. 
 
 expense of establishing proposed contributory plan justified. 
 
 It can not be denied that any reasonably adequate plan of retire- 
 ment will probably require for a number of years an appropriation 
 fully equal to any reasonable estimate of the loss now suffered through 
 the inefficiency of the aged. The comixdssion believes, however, that 
 such expenditure would be more than justified if at the time the plan 
 takes effect a scale of deductions from the salaries of those below the 
 age of retirement or thereafter entering the service is established 
 which will result in the annual cost to the Government, say, in 20 
 years being reduced to an amount less than the loss that will then 
 be incurred by the Government if no plan of retirement is adopted, 
 and which ultimately, say by the time all employees now in the service 
 are dead, will be completely self-supporting except for the cost of 
 administration and any expense that might be incurred by the Gov- 
 ernment through failure to realize the rate of interest guaranteed on 
 the deposits of the employees. 
 
 Arguments of Employees Against Contributory Plan Answered. 
 
 Many of the employees have opposed these bills. Their opposi- 
 tion is based on the following arguments : 
 
 (1) That the deductions from salary would be burdensome and 
 could only be met by an increase in salaries, which would be in effect 
 a pension in disguise, since the Government would be meeting the 
 expense of retiring its employees. 
 
 (2) That a cash sum to the credit of an employee, which could only 
 be obtained by resignation, would offer a constant temptation to him 
 to leave the service. 
 
 (3) That the rate of interest guaranteed on deposits of the employ- 
 ees is below the rate at which the employees can safely invest their 
 own savings. 
 
34 EEPORT TO THE PEESIDENT ON EETIREMENT ALLOWANCES. 
 
 (4) That either of the two ways generally proposed on which an 
 employee's account with the Government could be settled on his 
 retirement from the service is objectionable; on the one hand, the 
 granting of annuities on terms which mean the forfeiture of the accu- 
 mulation not consumed in pension payments prior to death would 
 cause dissatisfaction to his family, and on the other hand, the return 
 in one cash sum of the entire amount to the credit of the employee 
 at retirement would, in many cases, result in unwise investments and 
 loss of savings, so that such employee would be worse off than if no 
 plan of retirement had been provided for him. 
 
 (5) That the fund accumulated would finally become so large as 
 to be a source of graft and political demoralization. 
 
 DEDUCTIONS FROM SALARIES OF EMPLOYEES NOW IN SERVICE SHOULD 
 
 BE LIMITED. 
 
 (1) In order to meet the objections of the employees concerning 
 the amount of the monthly deductions required by the proposed 
 contributory plans, the commission believes that the Government 
 should not only agree to pay the full amount of annuities to all em- 
 ployees retiring immediately, but that it should also agree to make up 
 any deficit in the sum which a maximum deduction of 8 per cent from 
 the salary of any employee will provide. The commission believes 
 that by limiting the deduction which may be made from the salary of 
 any employee to 8 per cent the objection as to the amount of the de- 
 ductions will, in the main, be removed. Certainly, if the salaries 
 of any of the Government's employees are so low that the saving of 8 
 per cent of such salaries would work a hardship on any considerable 
 number of employees, it is beyond argument that such salaries should 
 be increased. If the margin between the amount of the salary and 
 the cost of the bare necessities of life is so narrow as to make the 
 saving of this amount impossible, then employees so situated are as 
 certain to become a burden to the Government when age overtakes 
 them as they are to live. It is manifest that the more quicldy tliis 
 condition is remedied by the payment of adequate salaries the less 
 will be the future cost of superannuation. This commission would 
 certainly recommend an increase of salaries, if such an increase is 
 necessary to put the employees on a basis that w^ould make it possible 
 for them to save 8 per cent of their salaries. But the commission 
 holds that such an increase, which would be a reward for services at 
 the time they are rendered and for all those in the service, would be 
 distiiictl}'^ different from the grant of a straight pension, which would 
 be a reward for services after they were rendered, and for only the 
 very few who had lived to reach a certain age. As pointed out in the 
 r[uotation from the report on ci^^l-service retirement in Great Britain 
 hereinafter referred to, the operation of compound interest would 
 
KBPORT TO THE PRESIDENT ON EETIEEMENT ALLOWANCES. 35 
 
 make it possible to increase salaries and establish a contributory 
 system of retirement at less cost to the employees than to give them a 
 pension system under which the benefits are paid directly from the 
 Treasury, but considered a part of the payroll. An increase in salary 
 is, therefore, decidedly not "a pension in disguise." 
 
 GOVERNMENT SHOULD NOT PENALIZE EMPLOYEES LEAVING SERVICE. 
 
 (2) The commission believes that there is little foundation in fact 
 for the argument that a cash sum to the credit of an employee would 
 cause him to leave the service. If a cash sum to his credit would 
 enable him to better his condition outside the service, it is surely to 
 his interest to have such a cash sum, rather than that a plan of retire- 
 ment should be adopted which would attach a penalty to separation 
 from the service, as would be the case if a civil pension were estab- 
 lished under which an employee leaving the service would forfeit his 
 partly earned pension. The commission believes that the Govern- 
 ment should pay reasonable and fair compensation to its employees 
 at the time the services are rendered, and should endeavor to hold 
 its employees fairly in competition with private employers. No just 
 Government will wish to do anything that could be construed as 
 penalizing its employees. 
 
 GOVERNMENT SHOULD PAY LIBERAL RATE OF INTEREST ON ENFORCED 
 
 SAVINGS. 
 
 (3) The commission believes that the rate of interest guaranteed 
 on deposits of the employees should not be below the rate at which 
 the average employee can safely invest his savings. The rate of 
 interest named in most of the contributory plans that have been 
 proposed has been 3^ per cent, compounded annually. The com- 
 mission believes that it would be fair both to the Government and to 
 the employees to guarantee a minimum rate of interest of 4 per cent, 
 compounded annually, and that during a long period of years the Gov- 
 ernment would be able to realize nearly, if not quite, this rate of 
 interest if the fund were invested in the securities prescribed in the 
 contributory bills heretofore proposed. These bills authorize the 
 investment of the fund in substantially the classes of bonds m which 
 the New England savings banks may invest their funds. If any aid 
 is to. be given by the Government to a plan of retirement, other than 
 that necessary to establish the plan, such aid can be given most 
 equitably by guaranteeing the minimum rate of interest which shall 
 be paid to the employees on their deposits. On short periods of 
 service there is little diiTerence between the results obtained at 3^ 
 and 4 per cent, but on long periods the results at 4 per cent are con- 
 siderably greater than at 3^ per cent. A higher rate of interest 
 
36 REPORT TO THE PRESIDENT ON" RETIREMENT ALLOWANCES. 
 
 would be desirable for two reasons : (1) It would mean lower monthly- 
 deductions from salaries, and (2) a considerably greater return to the 
 employees who entered the service early in life and remained to the 
 age of retirement than to the employees who entered late and retired 
 early. It is believed also that the deposits of employees leaving the 
 service or dying in the service should be returned with interest at 4 
 per cent, compounded annually, the same rate as it is proposed to 
 pay to those who are retired for age. 
 
 BOTH ANNUITY AND CASH SETTLEMENTS SHOULD BE ARRANGED TO 
 PROTECT INTERESTS OF EMPLOYEE. 
 
 (4) The commission believes that either of the two ways generally 
 proposed for settling an employee's account on retiring is inadvisable, 
 but that these settlements could be so adjusted that either one of them 
 would be satisfactory. 
 
 The commission agrees with the arguments that annuities which 
 mean the forfeiture of the accumulation not consumed in pension 
 payments prior to death would cause dissatisfaction, and, therefore, 
 believes that the annuities should be based on rates of premium which 
 will enable the Government to return to the family of the deceased 
 employee any balance to his credit not paid to him prior to his death. 
 
 The commission agrees with those who contend that the return in 
 one cash sum of the entire amount to the credit of the employee at 
 retirement would result, in many cases, in unwise investments and 
 loss of savings, and believes that an employee leaving the service after 
 the age of 60 should be paid the sum to his credit, when in excess of 
 $600, in not less than 10 annual installments. The unpaid balance of 
 such deposit should be credited annually with interest at 4 per cent. 
 
 NO DANGER IN SAVINGS FUND. 
 
 (5) The commission believes that there is little, if anything, in the 
 history of any government to justify the argument that the fund ac- 
 cumulated under a contributory system would ultimately become so 
 larg'e as to cause graft and political demoralization. The system of 
 postal savings banks, so well thought of in other countries as well as 
 in the United States, provides for the accumulation of a trust fund at a 
 far greater rate than would be possible under any plan of retirement 
 based on savings of the employees. The neighboring Government of 
 Canada has, moreover, not only created a trust fund by the estab- 
 lishment of postal savings banks, but, satisfied with its success in that 
 field, has recently established a system of Government annuities which 
 enables not merely officeholders, but any citizen of the country, to 
 purchase annuities from the Government. 
 
report to the president on" retirement allowances. 37 
 
 Commission's Effort to Ascertain Annual Loss to Government 
 Through Inefficiency of Aged Employees. 
 
 With these ideas in mind, this commission has endeavored to 
 ascertain definitely the annual loss due to the incompetence of the 
 aged employees, as nearly as it can be calculated, and to determine 
 what expense the Government would be justified in incurring in 
 order to wipe out that loss. It has also sought to modify the sug- 
 gested bills in such a way as to answer the purpose of the Govern- 
 ment in passing a retirement bill and at the same time meet the 
 objections of the employees as far as possible. 
 
 The only statistics that have ever been compiled concerning the 
 loss sustained by the Government through superannuation were 
 collected by the Civil Service Commission in 1906 and covered 
 only the classified service in the District of Columbia. They showed 
 the loss for one year only, and were so presented that a satisfactory 
 basis for calculating the probable future loss could not be derived 
 from them. On the other hand, all of the statistics that have been 
 prepared thus far concerning the cost of estabHshing the various 
 plans have covered the entire classified civil service and have been 
 worked out to show the amount that would have to be appropriated 
 by the Congress, not only the first year after the adoption of the 
 plan but each year thereafter until all employees now in the service 
 will have died. It will thus be seen that the statistics as to cost 
 and those available as to loss were not comparable. The commis- 
 sion felt that the statistics as to loss should be made complete in 
 order that both sides of the account could be presented, i. e., the 
 amounts that will have to be appropriated annually, on one side, 
 and the savings that will result from such appropriations, on the 
 other side. 
 
 In order to consider both sides of the problem — the saving as 
 well as the cost — the commission prepared a schedule, the form of 
 which is shown as Appendix E of this report. The heads of depart- 
 ments and bureaus were requested to fill one of these schedules for 
 each member of the permanent classified civil service in the depart- 
 ments and independent offices at Washington, D. C. (excluding all 
 field or local service in the District of Columbia, but including per- 
 sons covered by Schedule A of the civil-service rules, and including 
 persons holding unclassified positions but having eligibihty for 
 transfer to the competitive classified service). Schedules covering 
 22,754 employees coming under this definition were returned to the 
 commission, and the statistics presented in this report are based 
 on the facts given in those schedules. They show that the loss from 
 superannuation in the classified service in the District of Columbia 
 
38 REPORT TO THE PRESIDENT ON" RETIREMENT ALLOWANCES. 
 
 at the time the schedules were filled amounted to $220,954, dis- 
 tributed according to ages as shown in the following tables : 
 
 Table VI. — Shoiving the number of employees in the classified civil service in the District 
 of Columbia 70 years of age and over, the amount of salaries paid, the amount and per 
 cent of salaries earned, and the amount and per cent of salaries unearned or the loss due 
 to superannuation. 
 
 Age. 
 
 80 years and over 
 
 79 years 
 
 78 years 
 
 77 years 
 
 76 years 
 
 75 years 
 
 74 years 
 
 73 years 
 
 72 years 
 
 71 years 
 
 70 years 
 
 Total 
 
 Number 
 of em- 
 ployees. 
 
 60 
 27 
 35 
 42 
 49 
 79 
 84 
 100 
 117 
 169 
 189 
 
 951 
 
 Total salaries. 
 
 Paid. 
 
 S71, 
 33, 
 44, 
 53, 
 64, 
 96, 
 103, 
 131, 
 144, 
 211, 
 240, 
 
 1,196,310 
 
 Earned. 
 
 Amount. Per cent. 
 
 $46,486 
 27, 980 
 31,499 
 42, 394 
 53,479 
 79,038 
 81,519 
 105,048 
 121,287 
 180,564 
 206,062 
 
 975,356 
 
 64.75 
 83.13 
 70.83 
 79.38 
 83.01 
 82.17 
 78.95 
 79.59 
 83.67 
 85.23 
 85.74 
 
 81.53 
 
 Unearned. 
 
 Amount. Per cent 
 
 $25,304 
 5,680 
 12,971 
 11,011 
 10,946 
 17,147 
 21,731 
 26,932 
 23,668 
 31,301 
 34, 263 
 
 220,954 
 
 35.25 
 16.87 
 29.17 
 20.62 
 16.99 
 17.83 
 21.05 
 20.41 
 16.33 
 14.77 
 14.26 
 
 18.47 
 
 Calculations based on these schedules show, furthermore, that this 
 loss is increasing steadily and will be doubled in the course of 20 
 years. These figures are not merely conservative; they are known to 
 be less than the fact. 
 
 RELUCTANCE OF OFFICERS TO REPORT ON INDIVIDUAL EMPLOYEES 
 MAKES FIGURES OF LOSS LESS THAN THE FACT. 
 
 In order to make the inquiry wholly impersonal, and thus remove, 
 as far as possible, the natural reluctance of officers to give facts con- 
 cerning the efficiency of individual employees, the commission re- 
 quested the heads of departments and bureaus to detach the stub 
 bearing the name of the employee at the head of the schedule before 
 returning the schedule to the commission. The commission is con- 
 vinced, however, that the officers making the reports were still 
 reluctant to turn in schedules that rated anyone as notably inefficient, 
 and that the schedules, in the aggregate, greatly understate the loss 
 which the Government is sustaining through the retention of em- 
 ployees who are no longer able to render efficient service. Believing, 
 however, that it would be preferable to accept the returns as made by 
 the departments rather than to undertake to secure any revision 
 which might make it appear that the commission was endeavoring to 
 ''make a case," and had thus presented statistics of loss due to super- 
 
REPORT TO THE PRESIDEJSTT ON RETIREMENT ALLOWANCES. 39 
 
 annuation that were greater than the fact, the commission has not 
 attempted to modify the returns in any way, although it is apparent 
 that the results are more than conservative, and perhaps do not show 
 much more than half the actual loss sustained by the Government. 
 The figures are useful, however, for it is possible to derive from them 
 tables showing the future growth of. superannuation that will take 
 place if no plan of retirement is adopted. They also enable the com- 
 mission to show, as an absolute offset to the cost which must be 
 incurred by the Government in establishing the plan, the minimum 
 amount the Government will save from the adoption of the plan of 
 retirement. 
 
 BASIS OF ESTIMATE OF FUTURE LOSSES FROM SUPERANNUATION. 
 
 The number of employees reported by the departments as belong- 
 ing to the classified civil service in the District of Columbia, distrib- 
 uted according to age, salary paid, salary earned, the per cent of 
 salary earned, and the per cent of salary not earned at the various 
 ages, is shown by the following table, which is the basis used in 
 estimating future losses from superannuation : 
 
 Table VII, — Showing the number of employees in the classified civil service in the District 
 of Columbia, distributed according to age, the total salaries paid, total salaries earned, 
 the per cent of salary earned, and per cent of salary not earned. 
 
 Age. 
 
 Niunber of 
 employees. 
 
 Salary. 
 
 Paid 
 (amount). 
 
 Earned 
 Earned I (percent), 
 (amount). (") 
 
 (c) 
 
 Unearned 
 
 (per cent). 
 
 100- (e) 
 
 (a) 
 
 16 years 
 
 17 years 
 
 18 years 
 
 19 years 
 
 20 years 
 
 21 years 
 
 22 years 
 
 23 years 
 
 24 years 
 
 25 years 
 
 26 years 
 
 27 years 
 
 28 years 
 
 29 years 
 
 30 years 
 
 31 years 
 
 32 years 
 
 33 years 
 
 34 years 
 
 35 years 
 
 36 years 
 
 37 years 
 
 (6) 
 
 17 
 134 
 190 
 247 
 279 
 372 
 397 
 491 
 505 
 612 
 553 
 564 
 564 
 547 
 666 
 638 
 624 
 623 
 625 
 645 
 636 
 589 
 
 (c) 
 
 $6, 575 
 55,728 
 91,695 
 158,787 
 197,371 
 313,780 
 336,089 
 429, 138 
 485,025 
 513,169 
 596,750 
 614,945 
 632, 416 
 618,371 
 792,012 
 727,416 
 739, 959 
 792,951 
 786, 547 
 795, 190 
 792,864 
 752, 496 
 
 (d) 
 
 $6,575 
 55,428 
 91, 185 
 158,009 
 197,111 
 313,350 
 335, 509 
 428,368 
 483,751 
 511,039 
 595,048 
 613, 103 
 628, 996 
 614,991 
 788, 376 
 724, 541 
 735, 737 
 790, 161 
 782, 472 
 791, 130 
 788, 729 
 749,683 
 
 (e) 
 
 100. 00 
 99.46 
 99.44 
 99.51 
 99.87 
 99.86 
 99.83 
 99.82 
 99.74 
 99.68 
 99.71 
 99.70 
 99.46 
 99.45 
 99.54 
 99.60 
 99.43 
 99.66 
 99.48 
 99.49 
 99.48 
 99.63 
 
 (/) 
 
 0.00 
 .54 
 .56 
 .49 
 .13 
 .14 
 .17 
 .18 
 .26 
 .42 
 .29 
 .30 
 .54 
 .55 
 .46 
 .40 
 .57 
 .35 
 .52 
 .51 
 .52 
 .37 
 
40 REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 
 
 Table VII. — Showing the number of employees in the classified civil service in the District 
 of Columbia, distributed according to age, the total salaries paid, total salaries earned, 
 the per cent of salary earned, and per cent of salary not earned — Continued. 
 
 Number of 
 employees. 
 
 Salary. 
 
 Paid 
 (amount). 
 
 Earned 
 (amount). 
 
 Earned 
 
 (percent). 
 
 (d)_ 
 
 (c) 
 
 (o) 
 
 38 years 
 
 39 years 
 
 40 years 
 
 41 years 
 
 42 years 
 
 43 years 
 
 44 years 
 
 45 years 
 
 46 years 
 
 47 years 
 
 48 years 
 
 49 years 
 
 50 years 
 
 51 years 
 
 52 years 
 
 53 years 
 
 54 years 
 
 55 years 
 
 56 years 
 
 57 years 
 
 58 years 
 
 59 years 
 
 60 years 
 
 61 years 
 
 62 years 
 
 63 years 
 
 64 years 
 
 65 years 
 
 66 years 
 
 67 years 
 
 68 years 
 
 69 years 
 
 70 years 
 
 71 years 
 
 72 years 
 
 73 years 
 
 74 years 
 
 75 years- 
 
 76 years 
 
 77 years 
 
 78 years 
 
 79 years 
 
 80 years 
 
 81 years 
 
 82 years 
 
 83 years 
 
 84 years 
 
 85 years and over. 
 
 (6) 
 
 615 
 603 
 495 
 620 
 609 
 570 
 474 
 500 
 444 
 405 
 382 
 388 
 397 
 401 
 386 
 380 
 303 
 301 
 267 
 260 
 261 
 203 
 220 
 202 
 218 
 201 
 207 
 188 
 242 
 236 
 211 
 196 
 189 
 169 
 117 
 100 
 
 S791,795 
 762,361 
 661,908 
 831,090 
 835, 573 
 772, 955 
 648, 285 
 702,532 
 602,346 
 555, 435 
 521,387 
 533, 208 
 554,740 
 571,574 
 530,320 
 499,682 
 401,540 
 406, 220 
 355, 043 
 341,386 
 344, 050 
 265,020 
 295, 893 
 250, 860 
 275,470 
 242,425 
 271,250 
 245,550 
 315,796 
 315,045 
 281,525 
 253,275 
 240,325 
 211, 865 
 144, 955 
 131,980 
 103,250 
 96,185 
 64, 425 
 53,405 
 44,470 
 33, 660 
 
 (d) 
 S785,351 
 758, 131 
 657,439 
 825, 225 
 828,588 
 766,635 
 642,665 
 696,472 
 594,874 
 548,893 
 514, 771 
 523,063 
 547,382 
 562, 842 
 519,138 
 493, 175 
 391,285 
 398, 436 
 344, 674 
 328,716 
 337,946 
 256,560 
 285,188 
 234,518 
 259,993 
 229,921 
 250,327 
 229,501 
 292, 816 
 285,391 
 253,816 
 222, 626 
 206,062 
 180,564 
 121,287 
 105,048 
 81,519 
 79, 038 
 53,479 
 42,394 
 31,499 
 27,980 
 
 («) 
 • 99.19 
 
 99.45 
 
 99.32 
 
 99.29 
 
 99.16 
 
 99.18 
 
 99.13 
 
 99.14 
 
 98.76 
 
 98.82 
 
 98.73 
 
 98.10 
 
 98.67 
 
 98.47 
 
 97.89 
 
 98.70 
 
 97.45 
 
 98.08 
 
 97.08 
 
 96.29 
 
 98.23 
 
 96.80 
 
 96.38 
 
 93.49 
 
 94.38 
 
 94.84 
 
 92.29 
 
 93.46 
 
 92.72 
 
 90.59 
 
 90.16 
 
 87.90 
 
 85.74 
 
 85.23 
 
 83.67 
 
 79.59 
 
 78.95 
 
 82.17 
 
 83.01 
 
 79.38 
 
 70.83 
 
 83.13 
 
 68.37 
 
 69.48 
 
 66.12 
 
 53.30 
 
 81.74 
 
 48.70 
 
EEPOET TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 41 
 
 It will be observed that the trend of the figures showing the per 
 cent of salary earned is slightly downward from a very early age. 
 Tliis does not mean that, on the average, efficiency begins to decline 
 from the earliest age given in the table, but it merely shows the effect 
 of the present system of promoting employees with length of service 
 without changing the character of their work. In order to take into 
 account the loss growing out of this system of promotions, and the 
 loss resulting from the practice of transferring the older clerks to 
 work of a lower class without a corresponding reduction in salary, 
 rating officers were requested to state the amount of salary earned 
 by each clerk on the basis of ''an efficient employee engaged on the 
 class of work assigned to the employee rated," and an "efficient 
 clerk" was defined to mean "such a clerk as the Government may 
 reasonably require for the salary paid." It will be seen, therefore, 
 that the loss reported and shown in the table as salary unearned is 
 due to the present system of disregarding to a large extent the char- 
 acter of an employee's work in fixing his salary; i. e., of (a) increasing 
 his salary with length of service without assigning him to a higher 
 class of work; (b) of not decreasing his salary when by reason of his 
 advanced age he is assigned to a lower grade of work; and (c) of not 
 decreasing his salary when at any age lie is found inefficient. 
 
 PER CENT OF SALARY EARNED AT VARIOUS AGES. 
 
 The per cent of salary earned at the various ages remains above 99 
 from the youngest age at which persons are employed in the classified 
 service up to age 46, at which age the per cent of salary earned falls 
 to 98.76. From age 46 to 51, inclusive, the per cent of salary earned 
 remains at 98 and a fraction. From this point on, two increasing 
 tendencies in the trend of the per cents are apparent — (a) an increase 
 in the variation from year to year and (b) an increase in the per 
 cent of salary unearned. The increasing variation from year to year 
 is due to two causes^ (a) the diminishing number of employees at the 
 higher ages and (b) the increasing variation in the degree to which 
 individuals retain their mental and physical activity as age advances. 
 It is common observation that while some aged people retain their 
 mental and physical activity, others are less fortunate. 
 
 AGE AT WHICH LOSS JUSTIFIES RETIREMENT. 
 
 One of the purposes of this inquiry was to ascertain at what age 
 the amount of loss is sufficient to justify retirement. If no aid were 
 to be given by the Government to employees below the ages at wliich 
 the salary unearned would be sufficient to pay their entire annuities, 
 it will be seen by reference to the foregoing table that the proper age 
 of retirement (assuming that the schedules show the full loss sus- 
 42245— H. Doc. 732, 62-2 4 
 
42 KEPOET TO THE PRESIDENT ON" RETIREMENT ALLOWANCES. 
 
 tained by the Government from superannuation) would perhaps be 
 85 years. Of the total salaries paid employees aged 85 years and 
 over, they are reported to earn but 48.70 per cent. (See Table VII, 
 p. 40.) It would seem apparent, therefore, that the Government 
 would be the gainer by retiring all employees 85 years of age or over, 
 on, say, half pay. The commission believes, however, that a plan 
 of retirement which would provide only for people 85 years of age 
 or over would be practically of no value, and that if the returns made 
 by the departments had expressed the full loss due to superannuation, 
 the results would have shown an immediate gain by retiring all persons 
 at an age much below 85. 
 
 Viewed in this light, the commission holds that it would be in the 
 interest of good administration to adopt some lower age than the one 
 at which the loss from superannuation equals the cost of retirement. 
 It is believed that the statistics justify the adoption of age 70 as the 
 proper age of retirement for employees in the departmental service in 
 Washington. This belief is based on three grounds: (1) The fore- 
 going table shows that at age 70 the loss from superannuation is con- 
 siderable (14.26 per cent); (2) an inquiry covering the employees in 
 one of the large offices of the Government in which the work is of such 
 a character as to be capable of accurate measurement, both as to 
 quantity and quality, and where it is known that the officer at the 
 head of the bureau undertook to answer the commission's inquiry by 
 basing the returns on an accurate record of work performed, shows 
 that employees 70 years of age and over earn but 56.31 per cent of the 
 salaries paid them. In this office there are 33 employees 70 years of 
 age and over, the total salaries paid them amount to $40,600, and of 
 this amount they are reported as not earning $17,740. Each of these 
 employees could therefore be retired on $600 a year at a total cost 
 to the Government the first year, over and above the present loss, of 
 but $2,060; (3) 70 years is the oldest age adopted by any foreign 
 Government for the retirement of civil employees. 
 
 For these reasons the commission has adopted age 70 as the proper 
 age for the retirement of employees in the classified service in Wash- 
 ington. The commission believes that age 70 would also be the 
 proper age of retirement for most of the employees engaged in clerical 
 and professional occupations in the various services outside of Wash- 
 ington. It is of course apparent that employees engaged in lines of 
 work requiring special physical activity, such as that required of rail- 
 way postal clerks, letter carriers, and persons employed in various 
 mechanical trades, should be retired at an earlier age than 70 years. 
 Earlier retirement for these classes of employment is justified because 
 the physical energy usually begins to fail at an earlier age than does 
 the mental. 
 
REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 43 
 
 METHOD OF CALCULATING FUTURE LOSS TO GOVERNMENT FROM SUPER- 
 ANNUATION. 
 
 Having adopted the age of 70 as the age of retirement, it will be 
 necessary to consider briefly the method of treating the statistics of 
 the departments in calculating the future loss which the Government 
 will sustain from superannuation if no retirement plan is adopted. 
 (The statistics themselves show the amount of the loss at the present 
 time.) While the percentages of loss due to superannuation given in 
 Table VII, printed above, show a general tendency to increase after 
 age 70, yet they present irregularities wholly inconsistent with nature, 
 due to the fact, as stated above, that in the advanced ages the number 
 of persons reported on is so small as not to give true averages, and 
 because of the fact that with increasing age comes greater variation 
 in the mental and physical activity of individuals. It would be 
 wholly inconsistent with nature to assume, as the table shows, for 
 example, that a greater degree of efficiency exists among persons 84 
 years of age than exists among persons 83 years of age. These 
 irregularities may be made to counterbalance each other, however, 
 by graduation, using either a mathematical formula or the graphic 
 method, or a combination of the two. In selecting a method of grad- 
 uating statistics of this sort it is essential to select a method which 
 will remove the inconsistencies, and yet follow faithfully the general 
 tendencies of the ungraduated material. 
 
 The method adopted by the commission for accomplishing this 
 purpose was a combination of a modification of a formula first used 
 by Woolhouse, the eminent English actuary, in graduating certain 
 English mortality tables, and the graphic method. The greatest 
 irregularities shown in the table were removed by two applications 
 of this modification of Woolhouse's formula. 
 
 The results of the second graduation were then plotted on cross- 
 section paper ruled 10 by 10 to the centimeter and the remaining 
 irregularities removed graphically by means of a spline. The 
 ungraduated per cents, together with the results of the first and 
 second graduations and the final results obtained by the use of the 
 spline, are shown in the diagram on the page following. 
 
 Having established the per cent of salary unearned at age 70 and 
 all ages above 70, it was possible, by making certain assumptions, to 
 calculate with fair accuracy the probable future loss which the 
 Government will sustain from superannuation during a period of 
 years to come if no plan of retirement is adopted. In this calcula- 
 tion it was assumed that the per cent of salary now unearned at a 
 given age will also be unearned by employees hereafter reaching that 
 age. Since the heads of departments and bureaus were requested 
 in filling the schedules to give the ages of employees at last birthday. 
 
44 EEPOET TO THE PRESIDENT ON EETIREMENT ALLOWANCES. 
 
 
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REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 45 
 
 it was also assumed that employees, on the average, were six months 
 older than the ages reported. For calculating the probability of 
 living from the various ages to age 70, the American Experience Table 
 of Mortality was used because that table was thought to represent 
 fairly the probable mortality among Government employees up to 
 age 70, but for calculating the probability of living from age 70, the 
 Combined or Actuaries' Table of Mortality was used because it shows 
 a greater expectation of life after the age of 70 than does the Ameri- 
 can table and was therefore a more conservative basis for the calcula- 
 tion. 
 
 The following table shows the annual loss which the Goveriiment 
 will sustain during the next 36 years if no plan of retirement is adopted: 
 
 Table VIII. — Showing the annual loss that vnll be sustained by the Governvient during 
 the next 36 years if no plan is adopted for retiring employees noiv in the classified civil 
 service in the District of Columbia when 70 years of age. 
 
 Year. 
 
 Amount. 
 
 Year. 
 
 Amount. 
 
 Year. 
 
 Amount. 
 
 
 
 1 $228, 387 
 253, 019 
 278,604 
 303,163 
 320, 751 
 332,943 
 342, 297 
 349,276 
 354,325 
 357, 967 
 360,367 
 362,970 
 367,308 
 
 13 
 
 $370,481 
 375,040 
 381,338 
 390, 221 
 403, 111 
 417,749 
 432, 277 
 444,267 
 453,885 
 463, 181 
 474,234 
 489,358 
 504,507 
 
 26 
 
 $520, 864 
 
 1 
 
 14 
 
 27 
 
 542, 952 
 
 2 .. 
 
 15. 
 
 28 
 
 565,615 
 580,885 
 592,148 
 
 3 
 
 16 
 
 29 
 
 4 . ... 
 
 17. 
 
 30 
 
 5 
 
 18 
 
 31 
 
 606, 004 
 
 6 
 
 19 
 
 .32 
 
 617,826 
 
 7 
 
 20 
 
 33 
 
 627,915 
 
 8 
 
 21 
 
 34 
 
 637, 618 
 
 9 
 
 22 
 
 23 
 
 24 
 
 25 
 
 35 
 
 645, 448 
 
 10 
 
 36 
 
 651,641 
 
 11 
 
 12 
 
 
 
 
 
 
 1 The amount of the loss reported by the departments and independent Government establishments is 
 shown at the bottom of Table VI, on p. 38, as $220,954. This amount represents the annual loss on Nov. 30, 
 1911, while the loss shown above represents the loss that will take place during the following year. The 
 difference in the amounts represents the increase that will take place during the year. 
 
 Commission's Effort to Determine What Expense the Gov- 
 ernment IS Justified in Incurring to Avoid Loss from Super- 
 annuation. 
 
 Having ascertained the amount of the loss which the Government 
 will sustain among employees 70 years of age and over if no plan of 
 retirement is adopted, the next step was to determine what expense 
 the Government may reasonably incur in order to avoid that loss. 
 Very little study of the problem suffices to show that the amount of 
 loss sustained by the Government from superannuation is not great 
 enough to justify the enormous expense of a straight pension system, 
 especially when the effect on the service is considered. Although the 
 less due to superannuation will increase as long as the service continues 
 
46 EEPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 
 
 to grow, tho cost of a straight pension will increase much more rapidly, 
 being twice as great the first year as the loss from superannuation and 
 continuing to grow at a, greater rate than the loss from superannua- 
 tion. There are in the departments at Washington 951 employees 
 70 years of age or older who would be eligible for retirement immedi- 
 ately. If each of these employees were pensioned at half pay with a 
 maximum of $600 a year, the cost the first year would be approxi- 
 mately $468,960, while the loss, as shown in the foregoing table, is 
 only $228, o87. This adchtional outlay of $240,573 the first year, and 
 an increasing amount each year thereafter, can not be justified on 
 any ground, when the abuses sure to result from a civil pension are 
 considered. It is probable, of course, that the losses reported by 
 the departments were greatly understated, but even if the loss is 
 twice as great, or $456,774 a year, it still would not warrant the estab- 
 lishment of a plan of retirement the probable future cost of which 
 can not be calculated. 
 
 A straight-pension plan being dismissed from consideration, the 
 alternative is a contributory plan. We have seen that even a con- 
 tributory plan that will ultimately be self-supporting can not be 
 estal)lished without some expense to the Government. The Gov- 
 ernment will have to incur expense in two ways: (1) In retiring 
 employees who are at or above the retirement age when the plan 
 takes effect, who will have no time to save the money on w^hich to 
 retire themselves; and (2) in assisting in the retirement of emplo3'ees 
 who are below the retirement age w^hen the plan takes effect, and 
 who wdll not have enough time to accumulate the whole of the amount 
 necessary to retire themselves. In considering the amount that the 
 Government can properly appropriate for such a purpose, two fac- 
 tors besides the loss from superannuation must be taken into account. 
 They are the maximum ileduction which can reasonably be withheld 
 from the employee's salary and the minijiium annuity which must 
 be providetl the employee on retirement in order to make practicable 
 his elimination from the service when he reaches the age at which 
 inefficiency usually begins to show. 
 
 In the opinion of the commission, 8 per cent of sahiry is the maxi- 
 mum amount whieh should be withheld from emplo3'ees already in 
 the service. Employees entering hereafter should be required, how- 
 ever, to lay aside whatever per cent of salary is necessary to provide 
 the required retiring allowance. Reference to Table XI, on pages 51 
 and 52, will show that the deductions from the salaries of new en- 
 trants will not be burdensome except in the case of those who enter 
 at ailvanced age. The commission thinks that the entrance of aged 
 people into the service should be discouraged. 
 
 In the opinion of (he commission the minimum annuit}^ which 
 should be adopted is liaH' i)ay, with a maximum of $600. The com- 
 
REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 47 
 
 mission believes that a scale of annuities governed entirely by salary 
 and length of service would in many cases retire employees who 
 entered the service late in life on annuities wholly inadequate for their 
 maintenance, however simple their needs might be, while on the other 
 hand, employees who had received large salaries for long periods 
 might be retired on annuities considerably in excess of the amounts 
 necessary to maintain them. The commission believes that a plan of 
 retirement should be merely a means to an end, and that that end is 
 greater efficiency in the public service through the retirement of 
 employees after they have passed their period of greatest usefulness, 
 and that this should be accomplished with as little tax upon either 
 the employees or the Public Treasury as is possible. It is not the duty 
 of the Government to assume control of the finances of the employees 
 beyond the point that is necessary to protect itself against the reten- 
 tion through sympathy of employees who are no longer capable of 
 earning their salaries. The commission believes that a fair annuity 
 on which employees may be retired if retained in the service to age 70 
 is one-half pay, with a maximum annuity of $600. While $600 is not 
 sufficient to purchase the luxuries of life, it is nevertheless sufficient to 
 save the employee from destitution, even if he has been so unfortunate 
 as to make no other provision for his declining years. 
 
 Plan Presented by the Commission. 
 
 Having determined the amount of loss which the Government is 
 now sustaining through the inefficiency of the aged, and settled on the 
 maximum deduction from salaries which can be required, and the 
 maximum annuity that should be provided, the problem was to show 
 what it would cost to establish a savings and annuity plan with such 
 limitations and to compare that cost with the present loss through 
 superannuation. The plan therefore provides for the retirement of 
 all classified civil-service employees in the District of Columbia, at 
 the age of 70, on half pay, with a maximum annuity of 1600, the 
 annuity to be paid by the Federal Government in the case of those 
 retiring immediately, but by contributions from their salaries in the 
 case of all others, the Government to pay 4 per cent interest on all con- 
 tributions, and the contributions never to exceed, in the case of those 
 now in the service, 8 per cent of salary, the Government to provide 
 the difference whenever such deduction is not sufficient to provide 
 the annuity. (For the deductions from salary at various ages, see 
 Table XI, p. 51 .) The total cost of such annuities, minus the amount 
 contributed by the employees, would be the amount which the Gov- 
 ernment would be required to contribute. The table following shows 
 these three items. 
 
48 REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 
 
 Table IX. — Showing the total maximum cost of retiring at age 70 all employees now in 
 the classified civil service in the District of Columbia on annuities equal to one-half pay 
 {maximum, ^600), maximum deduction from salary, tV per cent. 
 
 Age. 
 
 Total 
 
 annuity 
 
 payments. 
 
 Total 
 
 annuity 
 
 payments 
 
 provided by 
 
 employees. 
 
 Total 
 appropria- 
 tions. 1 
 
 Ago. 
 
 Total 
 
 annuity 
 
 payments. 
 
 Total 
 
 annuity 
 
 payments 
 
 provided by 
 
 employees. 
 
 Total 
 appropria- 
 tions.! 
 
 95 
 
 S440 
 
 1,831 
 
 2, 840 
 
 2,743 
 
 3,815 
 
 8, 533 
 
 12,829 
 
 18,834 
 
 19, 103 
 
 45,987 
 
 66,406 
 
 96, 767 
 
 120, 603 
 
 150,596 
 
 248, 374 
 
 288,289 
 
 377,877 
 
 440, 793 
 
 682, 419 
 
 821,822 
 
 870,826 
 
 860,220 
 
 908,883 
 
 883,662 
 
 663,069 
 
 
 $440 
 
 1,831 
 
 2,840 
 
 2, 743 
 
 3,815 
 
 8,533 
 
 12,829 
 
 18,834 
 
 19, 103 
 
 45, 987 
 
 00, 400 
 
 90, 707 
 
 • 120,003 
 
 150, 596 
 
 248, 374 
 
 288,289 
 
 377,877 
 
 440, 793 
 
 682,419 
 
 821,822 
 
 861,711 
 
 831,181 
 
 850,791 
 
 812, 279 
 
 593, 635 
 
 64 
 
 03 
 
 $699,769 
 645, 381 
 685, 290 
 604, 578 
 669, 234 
 
 $91,910 
 96,897 
 124, 295 
 127,394 
 107.831 
 
 $607, 853 
 
 89 
 
 
 548, 484 
 
 88 
 
 
 62 
 
 61 
 
 60 
 
 560, 995 
 
 87 
 
 
 477, 184 
 
 85 
 
 
 501,403 
 
 84 
 
 
 59 
 
 594,045 1 163,110 
 
 721,096 1 227,740 
 
 718,241 244,931 
 
 729,886 277,896 
 
 - 804,545 341,960 
 
 . 799,299 j 302,722 
 
 978,348 485,594 
 
 988,731 ' 545,409 
 
 1,011,781 618.021 
 
 430, 92S 
 493, 950 
 
 83 
 
 
 58 
 
 82 
 
 
 473,310 
 
 81 
 
 
 56.... 
 
 451,990 
 
 80 
 
 
 55 
 
 54 
 
 53 
 
 52 
 
 51 
 
 50 
 
 462, 586 
 
 79 
 
 
 436, 578 
 
 78 
 
 
 492,754 
 443, 322 
 
 77 .. . 
 
 
 76 .. ... 
 
 
 393,760 
 
 75 
 
 
 915,718 
 807, 145 
 866, 990 
 819, 300 
 788, 195 
 902, 360 
 700,869 
 764, 682 
 656,828 
 685, 733 
 575, 422 
 
 550, 412 
 556, 588 
 598,878 
 579,828 
 582,994 
 709,016 
 572,033 
 646, 633 
 572,463 
 633,866 
 563,528 
 
 359,307 
 310, 557 
 
 74 
 
 
 49... . 
 
 73 
 
 
 48.. 
 
 268,112 
 
 72 
 
 
 47. . . 
 
 2,39,471 
 205, 201 
 
 71 
 
 
 46 
 
 70 
 
 
 45 . 
 
 193,343 
 128,836 
 
 69 
 
 $9, 115 
 29,038 
 52,092 
 71,382 
 70,034 
 
 44 
 
 68 
 
 43 
 
 118 049 
 
 67 
 
 42 
 
 84, 305 
 
 06 
 
 41. 
 
 51,867 
 
 65 
 
 40.. ' . . 
 
 11,894 
 
 
 
 
 1 For net cost to Ooverninenl after deducting future loss from superannuation, see Table X, p. 50. 
 
 COST OF ESTABLISHING PROPOSED PLAN. 
 
 The foregoing table shows merely the aggregate appropriations 
 required of the Government during the next 50 years, distributed 
 according to the present age of the employees who are to receive 
 them, and takes no account of the saving that would result from the 
 removal of the superannuated. In considering any plan of retire- 
 ment it is but fair to consider not only the expense which the Gov- 
 ernment must incur to establish the plan, but also the saving resulting 
 from its establishment. The total appropriations given in the pre- 
 ceding table are shown in the table that follows, distributed accorchng 
 to amount required each year until the plan is finally self-supporting, 
 and as an offset to these appropriations is given the loss that will 
 result each year from sui)erannuation if no plan of retirement is 
 established. In the last column of this table is shown the maximum 
 annual cost over the loss from superannuation, or the actual cost of es- 
 
BEPOKT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 49 
 
 tablishing the proposed plan. With each year, following the twentieth, 
 the annual appropriation required for the plan will be less than the 
 amount that the Government will lose through superannuation if no 
 plan is adopted. The amounts prefixed by a minus sign ( — ) in the last 
 column of the table are the annual and increasing gains to the Gov- 
 ernment under the plan. At the end of 36 years the saving under 
 the plan will exceed the amount advanced in excess of the loss from 
 superannuation during the first 20 years. With each succeeding 
 year the saving will increase, because the appropriation required will 
 diminish, until finally, at the end of 50 years, the plan will be self- 
 supporting and no further appropriations will be required. On the 
 other hand, if no plan of retirement is adopted the loss from super- 
 annuation will increase as long as the service continues to grow. 
 
 It should be remembered also that the estimate of loss from super- 
 annuation is based on the very conservative returns made by depart- 
 ment chiefs, and the commission believes that in fact the loss from 
 superannuation will equal the cost of the proposed plan in possibly 
 8 or 10 years instead of in 20 years, and that the Government will have 
 saved the entire cost of the plan in the course of 20 years instead of 
 in 36 years. 
 
50 KEPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 
 
 'J'ahi.e X. — Showirif/ (a) the maximum amount required to be appropriated by the Govern- 
 ment to retire 22,7.'i4 employees nov) in the permanent classified civil service in the Dis- 
 trict of Columbia on annuities equal to half pay (maximum, annuity, !f600), provided 
 each employee belov) 70 years of age be required to deposit vnth the Government monthly 
 such sum as will, with interest at 4 per cent, compounded annually, provide such annuity 
 on reaching age 10, provided that no monthly deposit by any employee nov) in the service 
 shall exceed 8 per cent of the monthly pay ('where such monthly deposit of 8 per cent, with 
 Interest, 'mill not 'pnndde the required annuity, the Govern'm,ent to provide the difference); 
 (b) the amount of salaries paid but not earned, that unndd, he saved if all employees 
 •were -retired at age 70; and (c) the net cost to l,he Government of establishing the plan, 
 and the gai;n to the Govern'rnent from its establishment. 
 
 In years. 
 
 0. 
 
 1. 
 
 I 
 
 li. 
 
 7. 
 
 8. 
 
 '.). 
 10. 
 II. 
 12. 
 I.}. 
 \4. 
 15. 
 l(i. 
 17. 
 18. 
 10. 
 20. 
 21. 
 22. 
 23. 
 24. 
 25. 
 
 Ma.ximuiii 
 
 annual 
 appropria- 
 tion. 
 
 (a) 
 
 •S4flS, 
 522, 
 .51)7, 
 (110, 
 r,4:i, 
 
 (I-IS, 
 
 0.51, 
 040, 
 042, 
 020, 
 014, 
 593, 
 580, 
 .500, 
 5.50, 
 537, 
 521, 
 514, 
 502, 
 480, 
 408, 
 440, 
 421, 
 39(j, 
 309, 
 .■{(( 
 
 577 
 099 
 838 
 405 
 525 
 309 
 058 
 101 
 085 
 424 
 837 
 ,015 
 
 .\imual 
 lo.ss from 
 siip(,'ran- 
 nuation if 
 no plan of 
 retirement 
 is adopted. 
 
 1228, 387 
 253,019 
 278,604 
 303,163 
 320,751 
 332, 943 
 342,297 
 349, 270 
 354,325 
 357,967 
 360,367 
 362,970 
 367,308 
 370,481 
 375,040 
 381,338 
 390,221 
 403,111 
 417,749 
 432, 277 
 444,267 
 4.53,885 
 403,181 
 474,234 
 489,358 
 504,507 
 
 Net annual 
 oo.st over 
 loss from 
 superan- 
 nuation 
 (a)-(6). 
 
 (c) 
 
 !B240,573 
 209, 497 
 288,8.56 
 307, 421 
 323, 153 
 315,229 
 309, 006 
 297, 025 
 287, 802 
 208,900 
 2,53,810 
 230, 594 
 213, 049 
 190,074 
 175, .537 
 1.5.5,701 
 131,017 
 111,3.54 
 84, 770 
 .54,092 
 23, 791 
 
 - 7, 724 
 
 - 41,490 
 
 - 77,810 
 -119,521 
 -159,892 
 
 In years. 
 
 20, 
 27, 
 28, 
 29, 
 30 
 31 
 32 
 .33, 
 34 
 35 
 .30 
 37 
 38 
 .39 
 40 
 41 
 42 
 43 
 44 
 45 
 4(1 
 47 
 48 
 49 
 50 
 
 Maximum 
 
 annual 
 appropria- 
 tion. 
 
 (a) 
 
 .«314, 
 
 280, 
 
 2.57, 
 
 227, 
 
 190, 
 
 167, 
 
 141, 
 
 118, 
 
 97, 
 
 80, 
 
 05, 
 
 .52, 
 
 41, 
 
 32, 
 
 24, 
 
 18, 
 
 1.3; 
 
 10 
 
 7, 
 
 Annual 
 loss from 
 
 superan- 
 nuation if 
 no plan of 
 retirement 
 is adopted. 
 
 (&) 
 .15520,864 
 542, 9.52 
 .505, 615 
 .580,885 
 .592, 148 
 606,004 
 017,820 
 027,915 
 0.37,018 
 045, 448 
 051,041 
 
 Net annual 
 cost over 
 loss from 
 superan- 
 nuation 
 (a)- (6). 
 
 (■) 
 
 (c) 
 -S206, 167 
 
 - 256, .396 
 
 - .308,109 
 
 - .353,104 
 
 - .395, .531 
 
 - 438,050 
 
 - 476, .555 
 
 - 509,720 
 
 - .539,074 
 
 - .505,117 
 
 - 586,486 
 
 n 
 
 • The increasing aimual loss that will take place if no plan of retirement is adopted can not be shown 
 beyond the Ihirty-sixth year because of the large number of persons who will hereafter enter the service 
 at ages above 34, and hence reach the age of 70 (from which age the loss is calculated) within the ne.xt 36 
 years. 
 
 2 The gain to the CJoverinnent from the establishment of the plan will continue to increase because the 
 (iovcrninent will be relieved of the increasing burden of superannuation, while the appropriation required 
 to put the plan into operation will diminish until finally at the end of .50 years it will cease. 
 
 The rollowing table shows the deductions that are required at 
 various ages to provide the annuities of half pay, with maxinium 
 annuity of $600. The deductions are based on the Combined Experi- 
 ence Table of Mortality and interest at 4 per cent, compounded 
 
REPORT TO THE PRESIDENT OX RETIREMENT ALLOWANCES. 
 
 51 
 
 annually, and are sufficient to permit (1) the return to an employee 
 leaving the service prior to the age of retirement, of all contribu- 
 tions with interest at 4 per cent, compounded annually; and (2) the 
 return to the legal representatives of an employee dying after retire- 
 ment, of any balance of the amount on hand at the date of retirement 
 not paid in annuities. These rates are made possible by the use of 
 4 per cent interest instead of 3^V per cent interest, and the elimination 
 of optional settlements with retiring employees under which a selec- 
 tion would be exercised against the Government, since employees in 
 poor health would take cash and employees physically above the aver- 
 age would take annuities. Under the proposed plan all employees 
 remaining in the service to age 70 are required to take the one form 
 of annuity settlement. 
 
 Table XI. — Shoinng the nrnov/nt required to he deposited monthly from various ages to 
 age 10 to 'provi/k an annuity payable cpxarterly during remainder of life (first payment 
 in 3 months after reaching age 10), such annuity to egv/il hxilf pay (maximum, annuity, 
 ■ffjOO), v:ith provision for return at death of annuitant of halamx on deposit at date of 
 retirem.ent and not thereafter paid in annuities. 
 
 [Combined Experience Table of ifortality; interest at 4 per cent, compounded annually.] 
 
 
 ! 
 
 
 
 ?9.10 (purchase 
 
 
 
 Monthly de- 
 
 
 
 
 
 price of an an- 
 nuity of %\ , 
 
 Amount to 
 which a de- 
 posit of ?1 per 
 
 month will 
 accumulate at 
 4 per cent in- 
 terest com- 
 pounded an- 
 nually, in yearj 
 shown in col- 
 umn (c). 
 
 
 duction Tad- 
 justed to near- 
 
 Age of 
 retire- 
 ment. 
 
 Age of 
 entrance 
 to serv- 
 ice. 
 
 Years of 
 service. 
 
 Amount of 
 
 annuity. 1 
 
 payable fjuar- 
 terly, first pay- 
 ment in 3 
 monthS; with 
 jjrovLsion for 
 
 return at 
 death of bal- 
 
 Monthly 
 
 deduction 
 
 from 
 
 salary 
 
 (e)Mf). 
 
 est tenth of a 
 dollar; from 
 salary of em- 
 ployee. (For 
 employees in 
 .service when 
 law takes ef- 
 
 
 
 
 
 ance of pur- 
 chase price not 
 paid in an- 
 
 
 fect, maxinrium 
 deduction lim- 
 
 
 
 
 
 
 ited to 8 per 
 
 
 
 
 
 nuitiesjXSeOO. 
 
 
 
 centofsalarj'.;2 
 
 <M> 
 
 <h) 
 
 (C) 
 
 id) 
 
 (c) 
 
 (f) 
 
 (g) 
 
 (h) 
 
 70 
 
 20 
 
 .50 
 
 8600.00 
 
 $5,m().()() 
 
 ?1,871.48 
 
 2.917 
 
 2.90 
 
 70 
 
 21 
 
 49 
 
 600.00 
 
 .5, 460. Of) 
 
 1,787.71 
 
 3.0.54 
 
 3. 10 
 
 70 
 
 22 
 
 4S 
 
 6fXJ. fXJ 
 
 .5,460.00 
 
 1,707.16 
 
 3. 198 
 
 3.2fJ 
 
 70 
 
 23 
 
 47 
 
 600. W 
 
 .5.460.00 
 
 1,629.72 
 
 .3.3.50 
 
 3.40 
 
 70 
 
 24 
 
 46 
 
 6fX). OfJ 
 
 .5,460.00 
 
 1,-5.55.25 
 
 3. .Til 
 
 .3.50 
 
 70 
 
 2.5 
 
 4-5 
 
 600. 00 
 
 .5, 460. (JO 
 
 1,483.64 
 
 3.680 
 
 3.70 
 
 70 
 
 26 
 
 44 
 
 600.00 
 
 .5,460.W 
 
 1,414.79 
 
 3. 8.59 
 
 3.90 
 
 70 
 
 27 
 
 43 
 
 600.00 
 
 .5,460.(X) 
 
 1,348. .59 
 
 4.049 
 
 4.00 
 
 70 
 
 28 
 
 42 
 
 600.00 
 
 5,460.fX) 
 
 1,284.94 
 
 4.249 
 
 4.20 
 
 70 
 
 29 
 
 41 
 
 600.00 
 
 .5,4f;0.00 
 
 1,223.73 
 
 4.462 
 
 4.50 
 
 70 
 
 30 
 
 40 
 
 600.00 
 
 .5,460.00 
 
 1,164.87 
 
 4.687 
 
 4.70 
 
 70 
 
 31 
 
 39 
 
 600.00 
 
 .5,4(;0.00 
 
 1,108.28 
 
 4.927 
 
 4.90 
 
 70 
 
 32 
 
 38 
 
 600.00 
 
 5,460.00 
 
 l,a53.87 
 
 5. 181 
 
 5. 20 
 
 70 
 
 .^3 
 
 37 
 
 600.00 
 
 5,4f;0.00 
 
 1,001. .5.5' 
 
 .5.4.52 
 
 5. 50 
 
 70 
 
 34 
 
 36 
 
 600.00 
 
 5,460.00 
 
 951. 24 
 
 5. 740 
 
 5. 70 
 
 70 
 
 3.5 
 
 35 
 
 600.00 
 
 5,460.00 
 
 902. 87 
 
 6.047 
 
 6.00 
 
 70 
 
 36 
 
 34 
 
 600. 00 
 
 5,46fJ.OO 
 
 %.56..36 
 
 6.376 
 
 6.40 
 
 70 
 
 37 
 
 .33 
 
 600.00 
 
 5,46f).00 
 
 811.63 
 
 6. 727 
 
 6.70 
 
 1 For annual salaries of Sl,200 or less the aiinuity will be 50 per cent of salary 
 81,200 the annuity will be $600. 
 
 2 For aimual salaries of -«1 ,200 or less the figures shown in column (A) are per cents of salaries 
 salaries above 81,200 the figures are dollars. 
 
 For annual salaries above 
 
 For annual 
 
52 KEPOKT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 
 
 Table XI. — Showirifj the amount required to be deposited monthly from various ages to 
 age 70 to provide an annuity payable quarterly during remainder of life, etc. — Con. 
 
 
 
 
 " 
 
 $9.10 (purchase 
 price of an an- 
 
 Amount to 
 which a de- 
 posit of .11 per 
 
 mouth will 
 accumulate at 
 4 per cent in- 
 terest com- 
 pounded an- 
 nually, in years 
 shown in col- 
 umn (c). 
 
 
 Monthly de- 
 duction (ad- 
 
 
 
 
 
 nuity of m, 
 
 
 justed to near- 
 
 Age of 
 retire- 
 ment. 
 
 Age of 
 entrance 
 
 Years of 
 
 Amount of 
 
 payal)le quar- 
 terly, first pay- 
 ment in 3 
 months, with 
 
 Monthly 
 
 deduction 
 
 from 
 
 salary 
 
 (c)-^(/). 
 
 est tenth of a 
 dollar) from 
 salary of em- 
 ployee. ( For 
 
 to serv- 
 ice. 
 
 service. 
 
 annuity.' 
 
 provision for 
 
 return at 
 death of bal- 
 ance of pur- 
 chase price not 
 
 employees in 
 service when 
 law takes ef- 
 fect, maximum 
 deduction lim- 
 
 
 
 
 
 paid in an- 
 
 
 ited to 8 per 
 
 
 
 
 
 nuities) X $600. 
 
 
 
 cent of salary. )2 
 
 (a) 
 
 (6) 
 
 (0 
 
 (d) 
 
 ic) 
 
 (/) 
 
 (3) 
 
 (ft) 
 
 70 
 
 38 
 
 32 
 
 $600. 00 
 
 .15,460.00 
 
 S768. 63 
 
 7. 104 
 
 7.10 
 
 70 
 
 39 
 
 31 
 
 000. 00 
 
 5.400.00 
 
 727. 28 
 
 7.507 
 
 7.50 
 
 70 
 
 40 
 
 30 
 
 000. 00 
 
 5,400.00 
 
 687.52 
 
 7.942 
 
 7.90 
 
 70 
 
 41 
 
 29 
 
 000. 00 
 
 5,460.00 
 
 649. 29 
 
 8. 409 
 
 8.40 
 
 70 
 
 42 
 
 2S 
 
 000. 00 
 
 5,460.00 
 
 612. 53 
 
 8.914 
 
 8.90 
 
 70 
 
 43 
 
 27 
 
 000. 00 
 
 5,460.00 
 
 577. 18 
 
 9.460 
 
 9.50 
 
 70 
 
 44 
 
 20 
 
 000. 00 
 
 5,460.00 
 
 543. 20 
 
 10.052 
 
 10.10 
 
 70 
 
 45 
 
 25 
 
 000. 00 
 
 5,400.00 
 
 510.52 
 
 10. 695 
 
 10.70 
 
 70 
 
 40 
 
 24 
 
 000. 00 
 
 5,400.00 
 
 479. 10 
 
 11.396 
 
 11.40 
 
 70 
 
 47 
 
 23 
 
 000. 00 
 
 5,460.00 
 
 448. 88 
 
 12. 164 
 
 12.20 
 
 70 
 
 4,S 
 
 22 
 
 000. 00 
 
 5,460.00 
 
 419.83 
 
 13. 005 
 
 13.00 
 
 70 
 
 49 
 
 21 
 
 000. 00 
 
 5,400.00 
 
 391. 90 
 
 13. 932 
 
 13.90 
 
 70 
 
 50 
 
 20 
 
 000. 00 
 
 5,460.00 
 
 305.04 
 
 14. 957 
 
 15.00 
 
 70 
 
 51 
 
 19 
 
 000. 00 
 
 5,460.00 
 
 339.21 
 
 16.096 
 
 16. 10 
 
 70 
 
 52 
 
 IS 
 
 000. 00 
 
 5,460.00 
 
 314. 38 
 
 17. 368 
 
 17.40 
 
 70 
 
 53 
 
 17 
 
 liOO. 00 
 
 5,400.00 
 
 290.50 
 
 IS. 795 
 
 18.80 
 
 70 
 
 54 
 
 10 
 
 000. 00 
 
 5.460.00 
 
 267.54 
 
 20. 408 
 
 20.40 
 
 70 
 
 55 
 
 15 
 
 000. 00 
 
 5,460.00 
 
 245.46 
 
 22. 243 
 
 22.20 
 
 70 
 
 5i; 
 
 14 
 
 000.00 
 
 5,460.00 
 
 224.23 
 
 24. 350 
 
 24.40 
 
 70 
 
 57 
 
 13 
 
 000.00 
 
 5,460.00 
 
 203.82 
 
 26. 788 
 
 26.80 
 
 70 
 
 58 
 
 12 
 
 000.00 
 
 5,460.00 
 
 184. 19 
 
 29. 043 
 
 29.60 
 
 70 
 
 59 
 
 11 
 
 000.00 
 
 5,460.00 
 
 165.32 
 
 33.027 
 
 33.00 
 
 70 
 
 00 
 
 10 
 
 000. 00 
 
 5,460.00 
 
 147. IS 
 
 37. 097 
 
 37.10 
 
 70 
 
 01 
 
 9 
 
 000. 00 
 
 5,460.00 
 
 129. 73 
 
 42.087 
 
 42.10 
 
 70 
 
 02 
 
 8 
 
 000.00 
 
 5,460.00 
 
 . 112.95 
 
 48.340 
 
 48.30 
 
 70 
 
 03 
 
 7 
 
 000. 00 
 
 5,400.00 
 
 96.82 
 
 56.393 
 
 56.40 
 
 70 
 
 04 
 
 
 
 000. 00 
 
 5,460.00 
 
 81.31 
 
 07. 150 
 
 67.20 
 
 70 
 
 05 
 
 5 
 
 000. 00 
 
 5,400.00 
 
 60. 40 
 
 82. 228 
 
 82.20 
 
 70 
 
 00 
 
 4 
 
 000. 00 
 
 5,460.00 
 
 52. 00 
 
 104. S79 
 
 104. 90 
 
 70 
 
 07 
 
 3 
 
 000. 00 
 
 5,4tU00 
 
 38.27 
 
 142. 070 
 
 147. 70 
 
 70 
 
 OS 
 
 2 
 
 000. 00 
 
 5,460.00 
 
 25.01 
 
 218.313 
 
 218. 30 1 
 
 70 
 
 09 
 
 1 
 
 600.00 
 
 5,460.00 
 
 12. 20 
 
 445. 351 
 
 445.40 
 
 ' For aunuul salaries of $1,200 or less the annuity will be 50 per cent of salary. For annual sal iries 
 above $1,200 the auniiity will be $600. 
 
 = For annual salaries of 31,200 or less the figures shown in column (/i) are per cents of salaries. For 
 annual salaries above $1,200 the figures are dollars. 
 
 Recommendations of the Commission. 
 
 ' As a result of its invest igat ion, the eommission makes lour rec- 
 ommendations . the first three referring respectively to those at the 
 age of retirement when the plan goes into effect, to those remaining 
 in the service after the })lan goes into effect, and to those who shall 
 come into the service after the i>lan goes into etfect. The fourth 
 
KEPOKT TO THE PRESIDENT ON RETIEEMENT ALLOWANCES. 53 
 
 recommendation merely limits the application of the plan for the 
 present. The recommendations are given below with the reasons 
 for each: 
 
 (1) Every employee who is 70 years of age or over should be 
 retired at once on an annuity paid from the Federal Treasury equal 
 to half pay, the maximum annuity to be -1600. 
 
 It has been shown that the age of 70 is the one most suitable as 
 the general age of retirement for members of the civil service of the 
 country. All employees at that age or over when a retirement plan 
 goes into effect should be retired at once in order that the benefit to 
 the service from the establishment of a retirement plan may begin 
 at once. The improved efficiency of the service is desired now, not 
 a generation hence. The Government must assume all liability for 
 annuities payable to these employees, because there is no other way 
 of retiring them. They can not provide for themselves at this late 
 date, .and it would not be just to tax the younger emi)loyees for their 
 benefit. Besides, the Government itself is the principal beneficiary 
 from their retirement. 
 
 (2) Every employee remaining in the service after the law takes 
 effect should be required to lay aside monthly such sum as will, with 
 interest at 4 per cent, compounded annually, provide an annuity of 
 half pay on retirement at the age of retirement, the maximum annuity 
 to be $600, such monthly deduction, however, to be in no case more 
 than 8 per cent of the employee's salary, and in case the fund accumu- 
 lated by the employee by this deduction is not sufficient to provide 
 the annuity of half pay, with a maximum of $600, the Government 
 should make up the difference between the sum so accumulated and 
 the amount necessary to provide the annuity. In the case of em- 
 ployees who retire before the age of 60, their contributions should 
 be returned to them with the interest credited thereon in one sum. 
 In the case of employees who retire after the age of 60 but before 
 reaching the age of 70 years, their contributions when in excess of 
 •1600 should be returned to them with the interest credited thereon 
 in not less than 10 annual installments. In the case of employees 
 who remain in the service to the age of 70, their contributions should 
 be returned only in the form of an annuity with a payment at death 
 of the difference between the amount on deposit at the date of 
 retirement and the amount paid in annuities. 
 
 The annuity has been limited to $600 a year because of the com- 
 mission's belief that the only interest which the Government has in 
 cooperating in the establishment of a retirement plan is to relieve 
 itself from the inefficiency due to superannuation, which is at present 
 causing it considerable loss and will inevitably cause it much greater 
 loss as the number of its aged employees increases. The commission 
 is of the opinion that, after the Government has protected itself 
 
54 KEPOET TO THE PRESIDENT ON EETIEEMENT ALLOWANCES. 
 
 against this loss by making retirement at a given age compulsory 
 mider conditions which make the destitution of the employee impos- 
 sible (and such would be the case on an annuity of S600 a year), it 
 has, on the one hand, little if any interest in compelling its employees 
 to save money, and, on the other hand, a very questionable right to 
 force those employees to make an investment which may be less 
 profitable than some of them can themselves make. 
 
 The per cent of deduction has been limited to 8 per cent of salary 
 because the commission believes that any greater deduction would be 
 very burdensome to many employees. 
 
 The commission's reasons for recommending the three methods of 
 settlement stated above, and only those three, at the various ages are: 
 That employees retiring before reaching the age of 60 years are 
 ordinarily fully capable of managing their own affairs, and if they 
 should, through unwise investment or otherwise, lose their savings, 
 they are still young enough to secure employment; that the amount to 
 the credit of employees between the ages of 60 and 70 would be con- 
 siderably larger than at the earlier ages, and its loss at those ages 
 would probably be a far more serious matter than at an earlier age, 
 and be more likely to result in an effort on the emplo3^ee's part to 
 reenter the service; that the amount to the credit of employees retiring 
 at age 70 should be paid only in the form of a life annuity, with return 
 at death of any balance of deposit not received in annuities, (a) because 
 cash settlements undoubtedly would, in many cases, result in the loss 
 of the employee's savings through unwise investments, so that the 
 employee would finally be worse off than if no plan of retirement had 
 been provided; (b) because if a straight annuity were granted in 
 which the employee forfeited his entire principal in case of death soon 
 after entering on the annuity, great dissatisfaction would result among 
 the families of employees who elected to take such settlements, and 
 possibly claims might be presented to the Government for the refund 
 of the money paid for such annuities, on the ground that the employee 
 was incompetent at the time of making the selection; (c) because by 
 requiring all employees 70 years of age to accept this settlement, the 
 so-called ''selection" against the Government — through robust 
 employees taking annuity settlements and employees in poor health 
 taking cash — would be removed, and the rates charged the employees 
 as a whole could safely be based on a mortality table that contem- 
 plated a somewhat higher rate of mortality, and consequently a lower 
 price fixed for the annuities. 
 
 (3) Persons entering the service after the law takes eftect should 
 be required to lay aside the full amount necessary, with interest at 4 
 per cent, compounded annually, to provide their own annuities of 
 half pay with a maximum of S600. The methods of settlement on 
 retirement for this group of employees should be the same as for those 
 employees already in the service as described in the preceding section. 
 
KEPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 55 
 
 To limit the deduction from the salary of a person entering the 
 service after the law takes effect to 8 per cent would place a continu- 
 ing burden on the Government, the amount of which could not be 
 calculated in advance, and put a premium on old people entering the 
 service. On the contrary, by limiting the aid from the Government 
 to those already in the service now eligible for retirement and to those 
 already in the service who can not provide the full annuity for them- 
 selves before reaching the age of retirement, the total maximum cost 
 to the Government can be definitely known in advance. The increas- 
 ing deduction required with advancing age of entrance to the service 
 would practically prohibit aged people from entering the service, and 
 this is, the commission believes, as it should be. 
 
 (4) This retirement plan should be restricted in the beginning to 
 employees in the District of Columbia. 
 
 As superannuation is very much greater in the District than it is 
 outside the District, the need of a retirem.ent plan is much more urgent 
 there than elsewhere. The statistics collected by the commission 
 show that of the 22,754 employees in the classified service in the 
 District of Columbia on November 1, 1911, 2,024 were 65 years of age 
 or over, or a little less than 1 in 11. Employees 70 years of age or 
 over numbered 951 . Aside from the fact that a retirement law is more 
 needed in the District of Columbia than elsewhere, the advisability of 
 thus restricting the plan at the outset is urged on the ground that it is 
 desirable to proceed slowly in the inauguration of new measures. If 
 the operation of the system adopted proves to be successful, it will be 
 comparatively easy to extend its application, with such modification 
 in detail as may seem desirable, to the Government service as a whole. 
 
 The commission believes that the proposed savings and annuity 
 plan meets all the objections that may be brought against it, and that 
 the cost of establishing it is kept within the sum which, it has been 
 shown in the course of this investigation, the Government will have 
 to lose in the next 36 years through superannuation if no plan is 
 adopted. In 20 years the annual loss from superannuation, which is 
 an increasing amount, will equal the annual cost of establishing the 
 retirement plan, which is a decreasing amount. In the last 16 years 
 of that 36-year period the saving to the Government will equal the 
 cost in the first 20 years. 
 
 The commission presents as a result otits investigation the draft 
 of a bill based on the same fundamental principles set forth in the 
 preceding recommendations : 
 
 Draft op a Bill for the Retirement of Employees in the Civil Service in 
 THE District op Columbia. 
 
 Section 1. That beginning with the first day of July next following the passage of 
 this act there shall be deducted and withheld from the monthly salary, pay, or com- 
 pensation of every officer or employee of the United States to whom this act applies 
 
56 EEPOET TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 
 
 an amount computed to the nearest tenth of a dollar that will be sufficient, with interest 
 thereon at four per centum per annum, compounded annually, to purchase from the 
 United States, under the provisions of this act, an annuity, payable quarterly through- 
 out life, for every such employee on arrival at the age of retirement, as hereinafter 
 provided. The deductions herein provided for shall, in the case of employees who 
 are in the service of the Government at the time this act goes into effect, not exceed 
 eight per centum of the said salary, pay, or compensation; and shall be based on 
 such annuity table as the Secretary of the Treasury may direct, and interest at the 
 rate of four per centum per annum, compounded annually, and shall be varied to 
 correspond to any change in the rate of salary, pay, or compensation of the employee. 
 
 Sec. 2. That the amount so deducted and withheld from the salary, pay, or com- 
 pensation of Svery employee to whom this act applies shall be deposited in the Treas- 
 ury of the United States and shall be credited, together with interest at four per centum 
 per annum, compounded annually, to an individual account of the employee from 
 whose salary, pay, or compensation the deduction is made, and the Secretary of the 
 Treasury is hereby directed to invest and reinvest such funds or any portion of such 
 funds in any of the following securities, viz: Bonds of the United States, bonds or 
 other interest-bearing obligations of any State of the United States or any legally 
 authorized bonds issued for municipal purposes by any city or town which has 
 been in existence as a city or town for a period of twenty-five years, and which for 
 a period of ten years previous to such investment has not defaulted in the payment 
 of any part of either principal or interest of any funded debt authorized to be con- 
 tracted by it, and which has at such date more than 25,000 inhabitants as established 
 by the last national census and whose net indebtedness does not exceed five per 
 centum of the valuation of the taxable property therein, to be ascertained by the last 
 preceding valuation of the property for the assessment of taxes; or any legally author- 
 ized bonds issued for municipal purposes by any city or town in the United States 
 which has been in existence as a city or town for a period of twenty-five years, and 
 which for a period of ten years previous to such investment has not defaulted in the 
 payment of any part of either principal or interest on any funded debt authorized to 
 be contracted by it, and which has at such date more than 200,000 inhabitants as 
 established by the last national census, and whose net indebtedness does not exceed 
 seven per centum of the valuation of the taxable property therein, to be ascertained 
 by the last preceding valuation for the assessment of taxes. In this clause the 
 words "net indebtedness" mean the indebtedness of any city or town, omitting 
 debts created for supplying the inhabitants with water and debts created in antici- 
 pation of taxes to be paid within one year and deducting the amount of sinking 
 funds available for the payment of the indebtedness included. 
 
 The moneys deducted from salaries and the income derived therefrom shall be held 
 and invested, as above described, by the Secretary of the Treasury until paid, as is 
 hereafter provided. Any deficiency in the fund hereby created to carry out the pro- 
 visions of this act shall be paid out of any money in the Treasury not otherwise 
 appropriated. 
 
 For the purpose of aiding the Secretary of the Treasury in investing the funds 
 created by this act, a board of investment is hereby created, composed of the Treasurer 
 of the United States, the Comptroller of the Currency, the person appointed by the 
 Secretary of the Treasury to enforce, under his direction, the provisions of this act, 
 and two persons to be designated by the President from among the employees of the 
 classified civil service. The members of the board of investment shall be sworn and 
 shall hold office until others are appointed and qualified in their stead. 
 
 Sec. 3. That the retirement age herein referred to shall be seventy years, and that 
 after this act takes effect no employee to whom it applies shall be permitted to remain 
 in the service of the United States after attaining the age of retirement. 
 
REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 57 
 
 Sec. 4. That upon absolute separation from the classified civil service covered by 
 this act prior to the age of sixty years, and only upon such separation, the employee 
 may withdraw his savings in one sum, together with interest at four per centum per 
 annum, compounded annually, then credited to his account, as hereinbefore provided. 
 In case of the death of an employee while in the service, the amount of his savings, 
 together with the interest then credited thereon, shall be paid to his legal repre- 
 sentatives. 
 
 Sec. 5. That upon separation from the classified civil service prior to the retirement 
 age, but after reaching the age of sixty years, the employee shall be entitled to receive 
 the amount of his savings, including the interest credited thereon, in one payment, 
 but if the amount exceeds six hundred dollars payment shall be made in ten annual 
 installments, the first (to be paid one year after separation) being one-tenth, with 
 one year's interest at four per centum per annum, and each installment thereafter 
 being one-tenth and interest at the same rate for the preceding year on the balance to 
 his credit at the beginning of the year. In case of the death of an employee so sepa- 
 rated from the service, the amount of his savings, together with the interest then 
 credited thereon, shall be paid to his legal representatives. 
 
 Sec. 6. That in case of reinstatement in the classified civil service any person 
 who at the time of his separation therefrom received a refund under section 
 four of this act shall for the purposes of this act be deemed to be a new entrant to 
 the service and the monthly deduction from his salary shall be computed from the 
 date of such reinstatement, unless he shall within ninety days after reinstatement 
 pay to the Treasurer of the United States the amount refunded to him, with interest 
 at four per centum per annum, compounded annually, in which case the same shall 
 be placed to the credit of his account and the former period of service shall be counted. 
 
 Sec. 7. That beginning with the first day of July next following the piissage of this 
 act every employee to whom this act applies who, at that time, shall have reached 
 the retirement age shall be retired from the service and shall receive from the United 
 States during the remainder of his life an annuity (payable quarterly) equal to one- 
 half of the average annual salary, pay, or compensation received during the five 
 years immediately preceding the taking effect of this act, such annuity not to exceed 
 a maxinium of six hundred dollars and to cease and determine at his death. 
 
 Sec. 8. That beginning with the first day of July next following the passage of this 
 act every employee who shall remain in the service to which this act applies shall, 
 on reaching the retirement age, be retired from the service and shall receive such 
 annuity, payable quarterly, as can be purchased from the United States with the de- 
 ductions theretofore made from his salary, pay, or compensation, and the interest 
 credited thereon as heretofore provided; and in case such annuity is less than one- 
 half of his average annual pay during his entire period of service, an annuity equal 
 to the difference between such annuity purchased from the United States and an 
 annuity equal to one-half of his average annual salary, pay, or compensation during 
 his entire period of service shall be paid to him by the United States during the 
 remainder of his life, but the one annuity or the sum of the two in no case to exceed 
 six hundred dollars. On the death of a person receiving an annuity under the 
 provisions of this section the annuities shall cease and determine; provided, that in 
 case he shall not have received in annuities sums equal to the amount of the de- 
 ductions from his salary, pay, or compensation, with interest as hereinbefore pro- 
 vided, the United States shall pay to his legal representatives the balance remaining 
 to his credit. 
 
 Sec. 9. That every employee to whom this act applies who shall enter the service 
 of the United States after the first day of July next following the passage of this act 
 shall, upon reaching the age of retirement, be retired from the service and shall receive 
 from the United States during the remainder of his life an annuity, payable quarterly, 
 equal to one-half of his average annual salary, pay, or compensation which he shall 
 42245— H. Doc. 732, 62-2 5 
 
58 EEPORT TO THE PRESIDENT ON EETIEEMENT ALLOWANCES. 
 
 have received during his entire period of service, such annuity not to exceed a 
 maximum of six hundred dollars. In case of the death of such an employee prior 
 -to the payment to him in annuities of sums equal to the amount of the deductions 
 from his salary, pay, or compensation, with interest as hereinbefore provided, the 
 United States shall pay to his legal representatives the balance remaining to his 
 credit. 
 
 Sec. 10. That every employee to whom this act applies who shall continue in the 
 classified service after the passage of this act, as well as every person to whom this act 
 applies who may hereafter be appointed to a position or place, shall be deemed to 
 consent and agree to the deductions made and provided for herein and shall receipt 
 in full for the salary, pay, or compensation which may be paid monthly or at any 
 other time, and such payment shall be a full and complete discharge and acquittance 
 of all claims and demands whatsoever for all services rendered by such person during 
 the period covered by such payment, except his claim for the benefits to which he may 
 ^be entitled under the provisions of this act, notwithstanding the provisions of sections 
 one hundred and sixty-seven, one hundred and sixty-eight, and one hundred and 
 sixty-nine of the Revised Statutes of the United States and of any other law, rule, or 
 regulation affecting the salary, pay, or compensation of any person or persons employed 
 in the classified civil service to whom this act applies. 
 
 Sec. 11. That the Secretary of the Treasury shall prepare and keep all needful 
 tables, records, and accounts required for carrying out the provisions of this act. The 
 records to be kept shall include data showing the mortality experience of the employ- 
 ees in the service to which this act applies and the rate of withdrawal from such 
 service, and any other information pertaining to such service that may be of value and 
 may serve as a guide for future valuations and adjustments of the plan for the retire- 
 ment of employees. The Secretary of the Treasury shall make a detailed comparative 
 report annually to Congress showing all receipts and disbursements under the provi- 
 sions of this act, together with the total number of persons receiving annuities and 
 the amounts paid them. 
 
 Sec. 12. That the provisions of this act shall apply only to persons in the classified 
 civil service in the executive departments and independent Government establish- 
 ments in the District of Columbia whose salary, pay, or compensation is paid from 
 moneys of the United States. No person serving in a position excepted from exami- 
 nation as defined in the civil-service rules shall be included within the provisions of 
 this act. WTaenever any person becomes separated from the classified civil service 
 by reason of appointment in the unclassified service, such separation shall operate 
 to take him out of the provisions of this act, except as to payment of any amount 
 that may be due him. The President shall have power, in his discretion, to exclude 
 from the operation of this act any group of employees whose tenure of office is inter- 
 mittent or of uncertain duration. 
 
 Sec. 13. That none of the moneys mentioned in this act shall be assignable, either 
 in law or equity, or be subject to execution or levy by attachment, garnishment, or 
 other legal process; nor shall any moneys paid to any employee, or to the legal repre- 
 sentatives of a deceased employee, be subject to the payment of the debts of such 
 employee. 
 
 Sec 14. That for the clerical and other service and all other expenses necessary in 
 carrying out the provisions of this act during the fiscal year nineteen hundred and 
 , including salaries and rent in the District of Columbia, there is hereby appro- 
 priated the sum of twenty thousand dollars, out of any money in the Treasury not 
 otherwise appropriated. No officer or employee receiving a regular salary or com- 
 pensation from the Government shall receive any additional salary or compensation 
 for any service rendered in connection with the system of retiring employees pro- 
 vided for by this act. 
 
REPORT TO THE PRESIDENT ON RETIREMENT ALLOWANCES. 59 
 
 Sec. 15. That the Secretary of the Treasury is hereby authorized to perform or 
 ■cause to be performed any or all acts, and to make such rules and regulations as may be 
 necessary and proper for the purpose of carrying the provisions of this act into full force 
 and effect; and his decision as to the amount to be deducted, the amount of interest 
 to be credited, the amount of an annuity or refund to be paid, in any case, shall be 
 final and conclusive, and shall not be subject to review by any other officer or 
 authority. 
 
 Appendixes. 
 
 The commission has not undertaken to discuss the actuarial prin- 
 ciples involved in the statistics presented for the reason that they 
 are fully set forth in Senate Document No. 745 (61st Cong., 3d sess.), 
 entitled " Savings and Annuity Plan Proposed for Retirement of Super- 
 annuated Civil Service Employees/' and it was thought better to 
 -attach that document as an appendix to this report. (Appendix A.) 
 
 The commission has not undertaken to review in its report the 
 history of other countries in retiring civil employees. The expe- 
 rience of England and two of its principal colonies in retiring their 
 civil employees has been fully discussed in Senate Document No. 
 290 (61st Cong., 2d sess.), entitled '' Civil Service Retirement, Great 
 Britain and New Zealand," and Senate Document No. 420 (61st 
 Cong., 2d sess.), entitled ''Civil Service Retirement, New South 
 Wales, Australia." It was thought better to attach these docu- 
 ments as appendixes rather than to repeat their substance in the 
 body of the commission's report. (Appendixes B and C.) 
 
 The commission has not undertaken to discuss in detail the vari- 
 ous bills presented to Congress for the retirement of civil employees. 
 Copies of House bill 9242, House bill 19399, and Senate bill 5863, 
 all of the Sixty-second Congress, are, however, attached to this 
 report. These bills, together with the bills set forth in Senate Docu- 
 ment No. 745, above referred to — namely, bills known as the Perkins 
 bill, Gillett bill, and the Austin bill — comprise the most important 
 bills that have been before Congress relative to the subject of retire- 
 ment allowances. (Appendix D.) 
 
 The commission attaches to this report a copy of the schedule 
 which it prepared and distributed through the offices of the civil 
 service in the District of Columbia, calling for information with 
 regard to each employee. It is the information collected on the 
 22,754 schedules returned by the departments and independent 
 Government establishments which formed the basis of the calcula- 
 tion as to the amount of loss sustained by the Government through 
 the inefficiency of its aged employees. (Appendix E.) 
 
 Respectfully submitted. 
 
 F. A. Cleveland, Chairman. 
 
 W. F. WiLLOUGHBY. 
 
 W. W. Warwick. 
 Frank J. Goodnow. 
 M. O. Chance, Secretary. 
 
APPENDIX A. 
 
 (Senate Document No. 745, 61st Congress, 3ci Session.) 
 
 SAVINGS AND ANNUITY PLAN PROPOSED FOR RETIREMENT OF 
 SUPERANNUATED CIVIL-SERVICE EMPLOYEES 
 
 BY 
 
 HERBERT D. BROWN. 
 
AUTHOE^S ]^OTE. 
 
 The principles of the retirement plan discussed in this report with 
 illustrative tables for representative ages were worked out by the 
 author in 1903 and presented in 1905 to the chairmen of the Senate 
 and the House Committees on Appropriations and the chairmen of 
 the Senate and the House Committees on Civil Service for their 
 consideration. Since then, elaborate statistical data have been col- 
 lected by the Bureau of the Census, on which the tables given in the 
 report are based. i 
 
 The author feels that it is not improper to state that the prepara- 
 tion of the tables in this report has required an enormous amount of 
 labor such as has never been undertaken, so far as he is informed, in 
 connection with any plan considered by any foreign Government. 
 
 Much space is given to what may be considered by some persons 
 as unnecessary discussion of elementary principles. In the opinion 
 of the author, however, this seems to be necessary, since questions 
 frequently asked him concerning the plan indicate that many people 
 interested in the subject are, however, not familiar with those prin- 
 ciples. 
 
 The author desires to express his gratitude to Benedict D. Flynn, 
 
 F. A. S., for reading the proof of this report and for making valuable 
 
 suggestions; to Hon. George E. Roberts, Director of the Mint, for 
 
 reading the proof of the chapter on investments; and to Frank J. F. 
 
 Thiel, Esq., secretary to the Treasurer of the United States, for 
 
 assistance in collecting the statistics contained in the same chapter. 
 
 The author wishes also to give credit to Harriet Connor Brown for 
 
 valuable assistance in the preparation of the report. 
 
 Herbert D. Brown. 
 
 Washington, D. C, May '£1, 1911. 
 
 3 
 
TABLE OF OOT^TEISTTS. 
 
 Introduction. 
 
 Page. 
 
 Need of plan for retiring superannuated civil employees 11 
 
 Lack of plan works injustice to aged employees 12 
 
 Lack of plan means pecuniary loss to Government 13 
 
 Lack of plan prevents promotion of younger employees 14 
 
 Need of retirement measure expressed by administrative officialp 14 
 
 Numerous retirement bills introduced into Congress 27 
 
 Plan embodied in Perkins (S. 1944) and Gillett (H. R. 22013) and Austin 
 
 (H. R. 729) bills and here proposed 27 
 
 Cost of putting proposed plan into operation 31 
 
 How this cost may be met 34 
 
 Difference between Perkins and Gillett bills 35 
 
 Statistical data contained in this report 35 
 
 Chapter I.— Principles Underlying Proposed Plan. 
 
 Four fundamental principles 37 
 
 Criticism of plans previously proposed : either civil pensions or flat- rate assess- 
 ment plans 38 
 
 Civil pension unpopular and unsound 38 
 
 Civil pension is expensive 39 
 
 Cost of civil pension in England .' 40 
 
 Abuses to which pension supported wholly or in part from Public 
 
 Treasury is liable which make it costly 43 
 
 Gratuities to employees leaving before retirement age 43 
 
 Compassionate allowances to dependents 44 
 
 Pensions increased on account of professional qualifications 44 
 
 Retirement on abolition terms 45 
 
 Abuse of abolition terms in England 45 
 
 Abuse of abolition terms in Canada 45 
 
 Abuse of abolition terms in New South Wales 46 
 
 Probable least cost of civil pension in United States 48 
 
 Table I. — Showing comparative cost to the Government during 
 first 35 years of retiring employees on straight pensions and 
 
 under the Perkins bill (S. 1944) 48-49 
 
 Table II. — Showing comparative cost to the Government during 
 fiirst 35 years of retiring employees on straight pensions and 
 
 under the Gillett bill (H. R. 22013).. 50-51 
 
 Chart showing comparative cost to the Government during the first 35 years 
 of savings and annuity plan embodied in the Perkins and Gillett bills and 
 a pension giving the same benefits as the Perkins bill, but wholly at Gov- 
 ernment expense 52 
 
 Difference between civil and military pension 53 
 
 Civil pension is demoralizing to the service 54 
 
 Difference between effect of civil pension in Government service and 
 
 private business - 56 
 
 Civil pension means wages below market price 58 
 
 Experience of England proves civil pension is ' ' deferred pay " 59 
 
 5 
 
6 CONTENTS. 
 
 Pafie. 
 
 Rul)H(il-iil.<i |)ln.ii a, form of civil pcMi^'ion 61 
 
 Flat-ral.d iiasoHHriKMil piiiiiH iii<u|iii table 62 
 
 IncHiiiilahlc if amiiiil-ioH arc basod on length of sorvioc 63 
 
 Table III.— Showing the annuity which a deduction of $5 a month during 
 
 variouH periods of Borvice will provide on rotiremont at ago 70 64 
 
 Inequitable if annuities are uniform, regardless of length of service 64 
 
 Table IV.- Showing amount required to be deducted from a monthly sal- 
 ary of $100 (per cent of other salaries) during various periods of service, 
 
 to provide an annuity of $900 a yc^ar beginning at ago 70 65 
 
 Actuarial dillicultioH of plann bawul on (lat-rato aaHosHinontH 65 
 
 Statonients of actuaricis agaiimt Mat-rate aHH(iH.sment plans 60 
 
 History of llat-rato aHHOssment i)la.ns a warning 00 
 
 Flat-rate assossmont plan unsatisfactory in lOnghuul 67 
 
 Flat-rate assessment ])lan unsatisfactory in Australia 08 
 
 Flat-rate assessment plan unsatisfactory in Canada 69 
 
 Flat-rate assessment iilan unsatisfactory in Franco 70 
 
 Savings and annuity plan based on adequate individual contributions the ideal 
 
 plan 71 
 
 Savings-l)ank plan approved by well-known actuaries 71 
 
 Savings-bank plan proposed for Franco 73 
 
 Roasona for failure of savings-bank plan in Canada and New Zealand 74 
 
 Assossmonts on salary should be based on ago of entrance into service 75 
 
 Two important principles observed in Perkins, Gillett, and Austin bills... 76 
 
 Payment of a liberal rate of interest the Government's best contribution... 77 
 Savings and annuity plan similar to that hero proposed adopted by English 
 
 fraternal organi/,a( ion 79 
 
 Advantages of proposed plan 81 
 
 Chatter If.- MATUiatAncM, Hasih ov ritoi'osEP Plan. 
 
 Annuity the central idea of this plan 85 
 
 Value of annuity determined by moans of mortality tables and interest tables. . 86 
 Four steps in discussion: Mortality tables; interest; annuities; deductions from 
 
 salaries 86 
 
 Mortality tables 87 
 
 Construction of mortality tables 88 
 
 Early Ronnin tables 90 
 
 Early German tables 90 
 
 Early English tabl(>s 91 
 
 NortJiampton Table 91 
 
 Carlisle Table 91 
 
 Mortality tables based on life insurance oxporionce 91 
 
 Recent English Government tables 92 
 
 Combined or Actuaries' tublo 92 
 
 Actuaries' 11™ and 11' tables 93 
 
 American Experience Table 93 
 
 Rritish Ollices' tables 94 
 
 Tables used in preparing this plan 94 
 
 Reasons for using Ihilish Ollicos' Select Annuitants' Mortality Table 
 
 as the basis for annuity rates under Part I of plan 95 
 
 Table V. — Showing number living at all ages under various tables of 
 
 mortality 96 
 
 Table VI. — Showing expectation of life at all ages under various tables 
 
 of n\ortality 97 
 
CONTENTS. 7 
 
 Page. 
 Mortality tables — Continued. 
 
 Tables used in preparing this plan — Continued. 
 
 Reasons lor using Ainoricaa Exporionce Table of Mortality in first st(;p 
 
 of dotcirmining cost of annuities for hack services 98 
 
 Table VII. — Showing probability of living from various ages to age of 
 
 70, according to different tables of mortalily 99 
 
 Reasons for usiJig Combined or Actuaries' Talde of Mortality in last 
 
 step of determining cost of annuities for hack services 99 
 
 Interest 100 
 
 Simple interest and compound interest 1 00 
 
 Cumulative power of compound interest J 00 
 
 Table VIII. — Showing percentage of annuity contributed by (!rii])h)y(!e 
 
 and percentage gained through increment of interest 101 
 
 Table IX. — Showing amount returned to the employee in cash after 
 
 various periods of service for each dollar deposited 101 
 
 Chart showing the amount of a deposit of $1 per annum at various nitos 
 
 of interest 102 
 
 Table X. — Showing the amount of a dtsposit of $1 per annum at vari- 
 ous rates of interest 103 
 
 Rate of interest 103 
 
 Rate of 3i per cent proposed 104 
 
 Objection to low-interest rate 104 
 
 Advantage of low-interest rate 105 
 
 Table XI.^ — Showing the value of an annuity of $1 at various ages, 
 based on the British Offices' Select Annuitants' experience!, with dif- 
 ferent rates of interest, annuity payable quarterly J06 
 
 Annuities 106 
 
 Annuity, 1^ per cent of aggregate salary 106 
 
 Annuity of 1 or 2 per cent of aggregate salary possible but not advisable. . 107 
 Table XII. — Showing differences in practicability of several bases of 
 computation for annuities, 1, IJ, and 2 par c(;nt of annual salary 
 
 for each year of service ] 08 
 
 Two forms of annuities granted 108 
 
 Table XIII. — Showing amount of annuity granted for a given sum of 
 
 money under option I and option II of the hill 109 
 
 Advisability of cash settlement as well as annuity settlement 109 
 
 Annuity rates used in proposed plan 112 
 
 Table XIV. — Showing how the value of an annuity is determined 112 
 
 Present value of an annuity of $1, for a male, beginning at age 70 113 
 
 Illustration 113 
 
 Present value of an annuity of $1, for a female, beginning at age 70. . . 114 
 Table XV. — Showing the present value of a life annuity of $1, for 
 males and females, payable quarterly, beginning at various ages, 
 
 first payment in three months after purchase 115 
 
 These rates conservative, as shown by comparison with Canadian Govern- 
 ment rates 115 
 
 Table XVI. — Showing immediate annuity rates of Canadian Govern- 
 ment, annuities payable quarterly, first installment three months 
 
 after purchase 116 
 
 Influence of longevity on annuity rates 116 
 
 Table XVII.- — Showing the deaths in the registration area per 1,000 of 
 population in 1890 and 1900, and the decreases and increases in the 
 
 rates 118 
 
 A life annuity is the converse of a life policy 119 
 
8 CONTENTS. 
 
 Page. 
 
 Deductions from salaries 120 
 
 IIow to determine the amount of deductions from salaries 121 
 
 Table XVIII. — Showing the amount to which a deposit of |1 a month 
 (first payment immediate) will accumulate at 3 J per cent per annum 
 
 compound interest at the end of a given term of years 121 
 
 Table XIX. — Showing amount required to be deducted from a 
 monthly salary of $100 (per cent of other salaries) to provide an 
 annuity at age 70 equal to 1^ per cent of annual salary for each year 
 
 of service - 122 
 
 Percentage of salary deducted varies with retirement age 123 
 
 Table XX. ^ — Showing per cent required to be deducted from a 
 monthly salary of $100 (per cent of other salaries) to provide an 
 annuity at age 65 eqiial to 1^^ per cent of annual salary for each year 
 
 of service 124 
 
 Table XXI. — Showing per cent required to be deducted from a 
 monthly salary of |100 (per cent of other salaries) to provide an an- 
 nuity at age 60 equal to 1^ per cent of annual salary for each year of 
 
 service 125 
 
 Percentage of salary deducted varies with entrance age, but not with salary. 125 
 Table XXII.— Showing amount of cash accumulation at end of various 
 years of service payable to employee on resignation or to his legal 
 heirs in case of death; and life annuity that may be granted on 
 
 resignation in lieu of cash 126 
 
 Amount of deduction from salary varies only with change in salary 127 
 
 Table XXIII. — Showing how deductions from salaries may be adjusted 
 
 to correspond to promotions 128 
 
 Average rate of deduction from salary only 5 per cent 129 
 
 Advantage to the service of increasing deduction with increase of entrance 
 age 130 
 
 Chapter III. — Minor Provisions of the Proposed Bill. 
 
 Provisions for separation from the service 131 
 
 In case of retirement because of superannuation 131 
 
 Ages of retirement, according to severity of occupation 132 
 
 Modes of procedure for retirement 132 
 
 Continuance in service after retirement age 135 
 
 Various options on retirement 135 
 
 In case of resignation , 136 
 
 Interest allowed on savings after six years' service 136 
 
 Annuity on separation from service before retirement age in case sav- 
 ings amount to $1,000 137 
 
 In case of dismissal 137 
 
 Superiority of this plan over civil pension illustrated 137 
 
 In case of death 140 
 
 In case of disability 140 
 
 Disability provision in so-called Keep bill 141 
 
 Necessity of determining cost of disability benefit 141 
 
 Difficulty of determining cost of disability benefit 141 
 
 German disability experience best available 142 
 
 Table XXIV. — Showing rates based on German disability experience 
 to provide an annuity of $1 (first payment immediate) to age of retire- 
 ment upon occurrence of total and permanent disability 143 
 
 Estimated cost of diaability provision in so-called Keep bill 143 
 
CONTENTS. 9 
 
 Page. 
 Provisions for separation from the service — Continued. 
 In case of disability — Continued. 
 
 Table XXV. — Showing cost of limited disability provision in Keep bill. 144 
 
 One-year term rates used in calculation 145 
 
 How cost of disability provision can be met 145 
 
 Desirability of more liberal disability benefits 146 
 
 Estimated cost of liberal disability benefits 147 
 
 Table XXVI . — Showing cost of a liberal disability provision 148 
 
 Separate records should be kept of superannuation and disability 149 
 
 Disability clause in proposed bill 150 
 
 Provision for reinstatement in service 152 
 
 Provision for payment of annuities for back services 153 
 
 Miscellaneous provisions of the proposed bill 153 
 
 Provision for keeping statistical records 153 
 
 Provision limiting operation of plan to District of Columbia 154 
 
 Provision making moneys under the act nonassignable and nonattachable. 154 
 
 Provision for cost of administering the plan 154 
 
 Enacting clause 154 
 
 Chapter IV.— Cost op Plan. 
 
 Cost of putting plan into operation under Perkins bill 155 
 
 Experience of New Zealand 156 
 
 Cost dependent on number of employees included 157 
 
 Two calculations of maximum cost of putting plan into operation for entire 
 
 classified service 159 
 
 The first calculation 159 
 
 Table XXVII. — Showing maximum cost of annuities for back services 
 for 103,030 employees, based on census of employees as of June 30, 
 
 1903 159 
 
 The second calculation 159 
 
 Table XXVIII. — Showing maximum cost of annuities for back serv- 
 ices for 170,228 employees, based on census of employees as of June 
 
 30, 1907, under Perkins bill 160 
 
 Method followed in preparing tables of cost 161 
 
 Tables XXIX and XXX. — Showing the method by which the data 
 
 were drawn off and the percentages of salaries determined 162-165 
 
 Comparison of two calculations shows agreement 166 
 
 Greater number of employees included in last calculation 166 
 
 Classes excluded from first calculation 168 
 
 Classes excluded from second calculation 168 
 
 Earlier retirement ages in last calculation 169 
 
 Test of accvuacy of two calculations 169 
 
 Probable cost much less than maximum 170 
 
 Because calculation makes no allowance for resignations 171 
 
 Because calculation is based on present salaries instead of average 
 
 salaries 172 
 
 Because calculation makes no allowance for retention in service past 
 
 age of retirement 172 
 
 Calculation includes payment on back services to all present mem- 
 bers of service 173 
 
 Cost of putting plan into operation under Gillett bill 173 
 
 Comparison of cost of Perkins and Gillett bills 174 
 
 Table XXXI. — Showing comparative cost to the Government of establish- 
 ing plan for retiring employees under terms of Perkins and Gillett bills. 174-176 
 
10 CONTENTS. 
 
 Cost of putting plan into operation under Gillett bill — Continued. Page. 
 
 Chart showing comparative cost to the Government of establishing the 
 
 savings and annuity plan embodied in the Perkins and Gillett bills 177 
 
 Table XXXII. — Showing by classes the per cent of employees whose annui- 
 ties would be reduced by the $600 limit provided by the Gillett bill .... 178 
 Calculation of maximum cost of putting Perkins bill into effect for classified 
 
 service in District of Columbia 178 
 
 Table XXXIII. — Showing estimate of maximum cost the first year of 
 
 annuities - 178 
 
 How the cost of putting the plan into operation may be met 179 
 
 Plan can be put into operation without additional appropriation by the 
 
 Government 180 
 
 Cost of administering the plan 185 
 
 Chapter V. — Provisions for Investment of Retirement Fund. 
 
 Two provisions for investment of fund 189 
 
 Not feasible at present to deposit fund in savings banks 189 
 
 Differences between eastern and western savings banks 190 
 
 Investment of fund should be restricted to public securities 191 
 
 Savings-bank investments 191 
 
 Table XXXIV. — Showing savings banks in the Commonwealth of Massa- 
 chusetts placed in the hands of receivers from 1834 to October 31, 1906, 
 
 which have not resumed business 193 
 
 Public bonds safe in vestments 194 
 
 Federal bonds 194 
 
 Various issues of Federal bonds 194 
 
 Table XXXV.- — Shomng principal outstanding bonds of the United States. 195 
 
 Federal bonds now issued to pay for public works 196 
 
 Federal bonds safest of investments 196 
 
 Rate of interest on Federal bonds low 196 
 
 Federal bonds attractive to life insurance companies during war 197 
 
 State bonds 198 
 
 State bonds now safe holdings 198 
 
 Rate of interest on State bonds not high 199 
 
 Municipal bonds 199 
 
 Large investments in municipal bonds 200 
 
 Table XXXVII. — Showing population living in cities at each decade 200 
 
 Table XXXVIII. — Showing purposes of municipal bond issues 201 
 
 Character of municipal bonds acceptable 201 
 
 Bonds of small municipalities 201 
 
 "Net indebtedness" defined 203 
 
 Essential points in considering safety of municipal bonds 203 
 
 Rate of interest on municipal bonds 204 
 
 Probable future course of rate of interest 204 
 
 Appendixes. 
 
 Appendix A. Text of Perkins bill (S. 1944, Sixty-first CongTOss, first session). . 210 
 Appendix B. Text of Gillett bill (H. R. 22013, Sixty-first Congress, second 
 
 session) 215 
 
 Appendix C. Text of Austin Bill (H. R. 729, Sixty -second Congress, first 
 
 session) 220 
 
SAVINGS AND ANNUITY PLAN PROPOSED FOR RETIREMENT OF 
 SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 INTRODUCTION. 
 
 The civil-service law has now been in operation over a quarter of 
 a century. Passed by a Republican Congress, it was sternly upheld 
 by a Democratic President. The best men of both parties have been 
 its disinterested supporters. Its beneficent effects have been felt 
 throughout the public service and few will be found to dispute them. 
 
 NEED OF PLAN TOR RETIRING SUPERANNUATED CPV^IL EMPLOYEES. 
 
 There is one problem of the service, however, that the law has not 
 solved, and that is the problem of superannuation. Without provi- 
 sion for retirement of the aged officeholder a law which in practical 
 operation insures him a permanent tenure of office works an injustice 
 to the Government, since it permits the retention in the service of 
 many who have outlived their usefulness. It is true that the law 
 does specifically provide for the removal of the incompetent on the 
 proper record of the existence of incompetency, but such a provision 
 has proved to be inadequate where incompetency is the result of old 
 age. That part of the law is practically a dead letter, as is acknowl- 
 edged in the following paragraph found in the Nineteenth Report of 
 the Civil Service Commission: 
 
 It has been urged by opponents of the competitive system that that system, 
 by securing comparative permanence of tenure, tends to promote superannuation 
 in the public service. The commission calls attention to the fact that the civil- 
 service law itself provides for no permanency of tenure. Under it any employee 
 can be dismissed at any time. The successor of such employee, however, is no 
 longer appointed through personal or political favor, and thus the civil-service 
 act has taken away the motive for making arbitrary removals. To this extent 
 the act has promoted permanency, and a very much smaller proportion of per- 
 sons are removed from the competitive classified service than from other parts 
 of the service. In order to secure justice in making such removals it \^as 
 further provided by Executive order that the appointing officer must give his 
 reasons, with proper notice and an opportunity for answer, to the person pro- 
 posed to be removed, and that removals should only be made for such reasons 
 as would promote the efficiency of the service. It is evident that under this 
 rule, rigidly enforced, no person ought to be retained in the public service whose 
 
 11 
 
12 RETIREMENT OP SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 dismissal is required In the interests of good administration. But it is also 
 true that from humane considerations appointing officers will be reluctant to 
 dismiss tliose who have become superannuated or otherwise incapacitated where 
 hardshii) is entailed upon the person so removed, and especially in cases where 
 the (Muployee in question has served the Government faithfully for years 
 (p. 25). 
 
 Such wei«>ht have these humane considerations that even the most 
 tiincerc and active advocates of the competitive system have found it 
 difficult to take advantage of the hiw in order to dismiss superan- 
 nuated or disabkHl employees from office, and the introduction of 
 modern business methods in the departments has in consequence been 
 retarded. The majority of executive officials are undoubtedly too 
 tender-hen ried to dismiss a subordinate whose only faults are attrib- 
 utable to his weight of years. The result is that he is allowed to 
 remain, quite unfit to perform all his duties, practically a pensioner, 
 and the work he is unable to do is divided among the younger clerks. 
 The consequence is that injustice is done the aged clerk, the service, 
 and all clerks in the same office who are rated below the aged incom- 
 petent. 
 
 LACK OF PLAN WORKS INJUSTICE TO AGED EMPLOYKES. 
 
 In the first place, the aged clerk suffers humiliation of spirit and 
 discomfort of body that it ill becomes a great nation to put upon 
 faithful employo^es. Pitiful cases of old employees who go to office 
 long after their days of usefulness have passed are numerous and well 
 known, for 1 out of every 14 Government employees in the city of 
 Washington is over 65 years of age. Many of them are past 80, and 
 nonagenarians have occasionally been on the Government pay roll. 
 Paralytics are sometimes brought to office in wheeled chairs, and 
 it frequently happens that a wife or child escorts the head of the 
 house to his desk each day. 
 
 The provident outsider may argue that tlie clerk should provide for 
 his old age. The point of that suggestion is considerably blunted, 
 however, on examination of three stubborn facts which greatly affect 
 the life and outlook of Government clerks, especially those in the 
 District of Columbia. The first of these is the fact that the average 
 Government salary is only $948; that is, $1,079 in the District of 
 Columbia and $928 outside of the District.^ The second is the fact 
 that the increased cost of living, which has been noted generally 
 throughout the country, but is especially great in the large cities, is 
 powhere more sharply felt than in the city of Washington. The 
 price of the essential articles of life, food, clothing, and rent, to say 
 nothing of entertainments and the extras that make life worth 
 living, is pitched to the highest notch that the congressional salary 
 
 > See Census Bulletin 94, p. 32. 
 
RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES, 13 
 
 of $7,500 a year will stand during the few months that Senators and 
 Representatives are in town, and it remains there after they have left, 
 to the despair of the year-long residents. 
 
 The inadequacy of the average Government salary of $948 or 
 $1,079 is more apparent when one reflects that two-thirds of the em- 
 ployees subsisting on that salary are engaged in clerical or research 
 work, which means that they are persons who have been brought up 
 in some degree of comfort and refinement, and have received a con- 
 siderable amount of education. It is fair to say that, under the oper- 
 ation of the civil-service law, they are really a " select class," above 
 the average in ability and training, a very large and increasing num- 
 ber of them college graduates, men and women who are the intel- 
 lectual and social peers of any official class in the world. Of the 
 more than 1,300 employees in the Bureau of Plant Industry, De- 
 partment of Agriculture, for instance, between 700 and 800 are doing 
 scientific work, and 500 of those are university graduates. While $1,079 
 a year might not be called an inadequate salary for some classes of 
 workers, in some localities, it certainly can not be called fair or ade^ 
 quate for a person of education in the city of Washington, or comr 
 parable with the salaries received all over the country by people of 
 equal abilities doing similar work in business fields. Finally, the fact 
 is plain that the Government clerk has few opportunities of making 
 money outside of his employment or of investing his savings. His 
 manner of life is not calculated to develop business acumen, and 
 information in regard to desirable investments is not likely to come 
 his way. He reaches old age more dependent than in his youth on 
 the stipend of his office, and he usually hangs on doggedly until death 
 releases him. 
 
 LACK OF PLAN MEANS PECUNIARY LOSS TO GOVERNMENT. 
 
 In the second place, the service suffers severely by the retention of 
 the aged in office, as less work is performed for the amoimt of money 
 appropriated than would be the case if each employee did his full 
 share. Just how much loss in actual number of dollars is sustained 
 by the Government through the inefficiency of the superannuated it is 
 difficult to estimate, but an attempt has been made to do so. In a 
 report on superannuation in the civil service made by a special com-, 
 mittee of the National .Civil Service Reform League in 1900, the Civil 
 Service Commission is quoted as authority^ for the statement that 
 those over 70 years of age do about three-quarters of the " maximum 
 quantity of work performed by a thoroughly efficient employee." 
 This loss to the Government through superannuation in the depart- 
 ments at Washington amounts therefore to about $400,000 a year. 
 
 * See Special Report U. S. Civil Service Commission to the President, p. 3. 
 
14 RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 The committee of the National Civil Service Reform League con- 
 tinues the computation as follows: 
 
 There are nearly five times as many classified United States employees out- 
 side Washington, but only two-fifths as large a per cent are over 70 ; therefore 
 there are ou+side Washington twice as many over 70. On the same basis of 
 efficiency the loss outside Washington would be $800,000, or, in the whole 
 classified service of the United States, $1,200,000/ 
 
 Since the service is now much larger than when the estimate was 
 made, the loss to the Government is probably considerably greater. 
 In other words, to the extent of that sum of $1,200,000 a year the 
 Government already has a civil pension list. 
 
 LACK OF PLAN PREVENTS PROMOTION OF YOUNGER EMPLOYEES. 
 
 In the third place, great injustice is done the whole body of em- 
 ployees by retention in office of the aged and infirm, since the younger 
 clerks not only have to do the work of their elders, but are also kept 
 from merited promotions. The great extent of the loss through 
 superannuation is partly due to the fact that the old employees are 
 usually drawing the highest salaries in their respective offices. This 
 fact is well brought out in the last annual report (1910) of the Hon. 
 M. O. Chance, formerly Auditor for the Post Office Department. 
 Says he : 
 
 An unusually large proportion of the employees in this office are persons who 
 have passed the age of greatest usefulness. While the efliciency records of 
 some of them are equal to those of the younger clerks, it is nevertheless a fact 
 that the general average of efficiency among the aged clerks is below the 
 standard. On account of their infirmities, both they and the service would be 
 better off were they to be honorably retired on adequate annuities and their 
 places given to younger and more active men. Many of these aged people, by 
 reason of long service, are receiving the highest clerical compensation of the 
 office, and thus handicap the work and the finances of the service. 
 
 In a speech made at a meeting of the Civil Service Retirement 
 Association on January 29, 1907, the late Hon. Charles H. Treat, 
 Treasurer of the United States, said that he had never seen anything 
 more beautiful than the way in which employees habitually carried 
 along one of their number who had grown too old for the work, shar- 
 ing his labors among them uncomplainingly. While such a spec- 
 tacle may be inspiring to the idealist, its practical effect on the young 
 and ambitious is discouraging. 
 
 NEED OF RETIREMENT MEASURE EXPRESSED BY ADMINISTRATIVE 
 
 ornciALS. 
 
 These, then, are the conditions which confront every administrative 
 official in the executive offices. Accustomed to the alertness and dis- 
 
 > See Report on Superannuation In the Civil Service, 1906, p. 6. 
 
KETIE.EMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 15 
 
 patch characteristic of business offices in private life, he usually 
 plans, on first coming to Washington, to do some departmental house 
 cleaning that shall put his office on a strictly business basis, but 
 whatever his ability as an organizer, he soon finds himself powerless, 
 without some means of retiring the aged members of his force, to 
 effect any considerable reforms. A statement to this effect will be 
 found in the annual reports for years past of Cabinet officers and 
 chiefs of bureaus in the several departments as well as in the pub- 
 lished reports of hearings before congressional committees.^ 
 
 The present Secretary of the Treasury, the Hon. Franklin Mac- 
 Veagh, expressed himself in favor of a retiring allowance for the 
 superannuated in his 1909 report, as follows : 
 
 KETIRING PENSIONS. 
 
 Any inquiry into the efficiency of administration very soon involves a consid- 
 eration of a policy of civil-service retiring pensions. And it seems to me that 
 the conclusion is unavoidable that a really efficient service is out of the question 
 without a method of honorably and justly retiring persons whose efficiency is 
 seriously impaired. It is quite true that the older clerlvS of the service are no 
 more likely than the younger clerks to be inefficient. Indeed, their experience 
 and their settled relations to the service could easily compensate for the lack 
 of some other personal equipment. But just as there are instances where the 
 younger clerks should be disciplined or dismissed, so there are many cases among 
 the older clerks where, in justice to both themselves and the service, they ought 
 to be honorably relieved. 
 
 The service is blocked in many instances by the unwillingness of the rfficials 
 in charge to throw out of place worthy men and women who have given the 
 best of their lives to the work of the Government. So that, in a very imperfect 
 and wholly unsatisfactory manner, practically a pension system is and long has 
 been in operation. 
 
 The United States is the only nation that has no general legal retiring pension 
 for the employees of its civil service. W^e have this unique position in the 
 
 lAnnual Messages to Congress of William Howard Taft, President of the United States, 
 1909 and 1910. 
 
 Reports of Franklin MacVeagh, Secretary of the Treasury, 1909 and 1910. 
 
 Reports of Ethan A. Hitchcock, Secretary of the Interior, 1904 and 1905. 
 
 Report of James R. Garfield, Secretary of the Interior, 1908. 
 
 Reports of Richard A. Ballinger, Secretary of the Interior, 1909 and 1910. 
 
 Report of Oscar S. Straus. Secretary of Commerce and Labor, 1908. 
 
 Report of Charles Nagel, Secretary of Commerce and Labor, 1910. 
 
 Report of Frank A. Hitchcock, Postmaster General, 1909. 
 
 Report of Joseph Stewart, Second Assistant Postmaster General, 1909. 
 
 Reports of Civil Service Commission, 10th, 11th, 19th, 20th, 22d, 25th, and others. 
 
 Report of Committee on Department Methods (Keep Commission), 1907. 
 
 Reports of M. O. Chance, Auditor for the Post Office Department, 1909 and 1910. 
 
 Hearings before the House Committee on Reform in the Civil Service, 1896, 1904, 1908. 
 
 Statement of E. F. Ware, Commissioner of Pensions, February 9, 1904. 
 
 Statement of Gen. F. C. Ainsworth, Chief of the Record and Pension Office, War 
 Department, February 12, 1904. 
 
 Statement of William Dudley Foulke, Member of the National Committee on Super- 
 annuation, Civil Service Reform League, February 23, 1904. 
 
 Statement of Frederick I. Allen, Commissioner of Patents, February 26, 1904. 
 
 Statement of W. H. Moody, Secretary of the Navy, March 5, 1904. 
 
16 KK'riKKMhlN'l' Oh' SU I'KIIA N NUATbiU CIVI L-SKKVICE EMPLOYEES. 
 
 world, mIoiik wil.li a roi»ii<)><i<»n for great wealth and for otherwise liberal 
 ('xpciKliluros. The oiiUn' civili/cd world has shown great and growing recog- 
 nilioii (»r ixMisions or rotlriiiK allowances; and while the United States is so far 
 beliind (lie rest of llie world in eivil pensions, it lias by fur the larsest pension 
 list anioiiK' Mu^ nnlions. The war and n.-ivy pensions are a reeoKnized part of 
 our policy, and in tlie civil service pensions liave l)een extended to the judiciary. 
 And though as a government we have halted at a general n^liring allowance for 
 civil employees, the great universities of our country and the great corporations 
 have been taking innnense steps along this very line, and the Federal Govern- 
 ment is becondng more and more isolated. While I have spoken only of the 
 effect upon the service itself of the lack of a system of retiring pensions, there 
 are, as everyone knows, otlier claims upon the (government to establish this 
 I)oIicy. I hope that the (>)ngress will take nj) and consider favorably one of the 
 various forms of law that are proposed. This sub.i(>ct has l)een before the coun- 
 try and before the ({overnment for a long while, and if the policy were to be 
 adopted at this time it would Tindoubledly give a strong inii)u]se to that improve- 
 ment of every branch of the service which is now so much desired by the people 
 and which is a matter of so much interest to the Congress and to tlie adminis- 
 tration. In expressing my opinion in favor of the retiring allowance, I pur- 
 posely avoid the exi)ression at this time of a preference for any particular plan 
 or system. 
 
 Til his next and most recent report (1910) Secretary MacVeiip^h 
 wont Jhirdier and declared liiinsell' in I'avor of the " contributory 
 plan." Said ho: 
 
 I now beg to n>l\>r. as T did last year, to another re(iuisi(-e — another absolute 
 requisite -of a satisfactory sei;vice. Tliere is no [)ractical way to put the 
 Covernment service properly on its feet without a fair and .just method of civil- 
 service r(>tiri>nu>nt. This is not only :i requisite, it is a preri>quisite; and unless 
 (longi'css shall give the lOxecutive this nci-essary method of improving the serv- 
 ice (lie country nnist accept a service that is not fully satisfactory and whicli 
 can not be made fully satisfactory. 
 
 Fortunately this retiring provision can be made — and this is mathematically 
 demonstrable — without the exjiense of one dollar to the Government. The con- 
 tributory system of retiring allowances is not only the only system that has any 
 cliance wliatever of being adopted, but it fortunately is the l)est system by far 
 for the men and wouumi of the service; and it is, therefore, the i)art of wisdom 
 for all tlie friends of tins movement to concentrate upon this method. Of 
 course, there must be i)aid liy the Governn\ent the retiring allowances until 
 tl\e contributions l)y tlie members of the service liave become sullicient to take 
 care of the iiayments; but these preliminary payments l)y the Government need 
 not cost tlie Government anything wliatever. All of the executive departments 
 which have so far been consulted stand ready to carry out such n law without 
 asking any addition whatever to their ordinary ai»propriations. The ob.iection, 
 tlierefore, that we might lie introducing another pension roll has no justification. 
 It liad conipl(>te justiUcation as long as tlie straight pension was in contemplation. 
 The I'diilriliutory allowance, however, is an entirely different matter and eliiiii- 
 nales tliis objection altogether. The Government, therefore, can without any 
 exiiense to itself, and by the mere passing of a law, set this whole matter right. 
 It is only necessary to mention two things about tlie contributory plan, as con- 
 trasted with the pension plan, to make clear its advantages to the people in the 
 service. It could never be taken as an answer to a claim for increased pay. 
 It is a contribution of their own and not a contribution of the Government, and 
 it is in no sense an estoiipol of any argument in favor of increased pay at any 
 
RETIEEMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 17 
 
 time during its operation. On the other hand, a straight pension paid by the 
 Government would always be taken as an additional salary and would per- 
 petually have a tendency to estop any argiuneut for increased compensation. 
 
 The other consideration is that under a pension system a man must not only 
 live beyond the retiring age, but he must continue always in the service until 
 that period in order to receive any pension at all; whereas under the con- 
 tributory system, under all the accidents of life, he gets what belongs to him 
 of the savings of the system. It is impossible not to regard a straight pension 
 as a part of the salary, and if a man loses it altogether, owing to the accidents 
 of life, he loses a part of his aggregate salary. 
 
 The Treasuiy Department is engaged in the worl< of Increasing Its effiflency 
 inid diminishing the relative expense of operation. It has made considerable 
 progress, but has not nearly reached the end. At least 400 positions have been 
 abolished. So far we have been able to take care of all the dis])lacod em- 
 ployees, except in the case of the mint at Philadelphia and in other odioes 
 outside of Washington and New York, where, in the nature of the case, there 
 were no opportunities for transfer. We have succeeded in transferring those 
 who were displaced to places becoming vacant in the normal way, such va- 
 cancies having been allowed to accumulate by temporary appointments. Whether 
 It will be possible to continue to take care in this way of the employees whose 
 positions we are abolishing I do not know. But this is clear, that any suc- 
 cessful effort to improve the administrative operations of a large department 
 like the Treasury is immediately handicapped and might well be discoui'aged 
 entirely by the absence of a just method of retirement. And even when it Is 
 possible to protect these displaced clci-ks from being thrown into the streets 
 it is done, in many cases, in denial of the right of an oflice to efficient help. 
 Working in these improvements brings constantly to mind the hopelessness of 
 ever arriving at a complete state of efficiency without a way of retiring clerks 
 in a just and humane manner. I have no doubt that this very discouiaging 
 feature has in the past stood in the way of many attempts to improve the 
 elHciency and economize the expense of operation in the dei)artments. 
 
 The Hon. Ethan A. Hitchcock, while Secretary of the Interior, 
 said in his annual report of 1905 : 
 
 It has been the policy of the department to select persons for employment 
 therein of ability and integrity, and to insist upon the strict performance of 
 the duties assigned them. Many branches of the service, however, have suf- 
 fered by reason of the growing incapacity of some of the clerical force, for 
 which there is no adequate I'cmedy without doing injustice in many cases. 
 On July ], 100.3, the nun)ber of emr)Ioyecs of the department in Washington 
 aggregated 4,166, of which 758 wore between 50 and 59 years of age, and SIO 
 GO years and over. The total number of employees of the department on the 
 Jst day of July, 1905, was 4,082. The most recent census among the bureaus 
 and oflices of the department is that taken in the Pension Office, whicli shows 
 a total of 1,634 employees. Of this number there are 516 over 60 years of age, 
 and the average age of all being .50 years and 3 months. This average, however, 
 will doubtless be less at this time in other branches of the service. ♦ * • 
 
 The system now in use relative to the maintenance of the clerical force is 
 unsatisfactory and expensive, and some provision by way of retirement should 
 be provided to meet the conditions that exist. I therefore renew the recom- 
 mendation contained in n)y last annual report that appropriate legislation be 
 enacted by Congress for the retirement from duty of superannuated clerks or 
 aged employees. 
 
 7419G°~S. Doc. 745, 61-3 2 
 
18 KBTIKEMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 In his annual report of 1908, the next Secretary of the Interior, 
 the Hon. James Kudolph Garfield, reenforced the sentiments of his 
 predecessor, saying : 
 
 It is to be hoped that Congress will provide for a reclassification of all the 
 employees of the Government and a readjustment of the salaries. ?Qo one 
 administrative change is more needed than this. It would enormously increase 
 the efficiency of the public service. In addition to reclassification, adequate 
 provision should be made for the retirement of employees who have given long 
 and meritorious service.^ 
 
 The late Secretary of the Interior, the Hon. Richard A. Ballinger, 
 made similar recommendations in his annual reports. In 1909 he 
 said : 
 
 The Department of the Interior in all of its bureaus in Washington is labor- 
 ing under a great disadvantage in trying to introduce modern business methods 
 and to keep pace with the increasing volume of work, because of its inability 
 to retire members of the clerical and laboring force after they have become 
 incapacitated by age or other causes. Intermittent efforts have been made to 
 secure congressional aid to retire them upon a basis that will recognize their 
 long service and protect them against want. An involuntary retirement and 
 sustenance statute, by which all persons after arriving at a prescribed age, 
 or for other reasons, should be required to stand an examination before a 
 competent board as to physical and mental ability, with a fund created by 
 national appropriation — in the first instance, and maintained by some equitable 
 system of contribution from salaries — would seem to me to be advisable. 
 
 The need of a retirement plan for Government employees was again 
 noted by Secretary Ballinger in his 1910 report: 
 
 The appropriations for the maintenance of the service of the department and 
 of its buildings and grounds can be lessened only by a unification and simplifi- 
 cation of business methods in the several bureaus and the establishment of a 
 retirement fund for Government employees. So long as a retirement fund is 
 withheld, the practice of pensioning superannuated and defective, though 
 deserving, clerks by retaining them on the salary rolls must continue. This 
 necessarily results in many competent persons receiving inadequate salaries 
 and a reluctance to reward the highest grade of service by compensatory 
 remuneration. 
 
 The work of the Treasury and Interior Departments has probably 
 suffered more than that of other departments through the incompe- 
 tence of aged employees, while the Department of Commerce and 
 Labor, being most recently organized and therefore full of "new 
 blood," is the least hampered. Twenty-five years from now, however, 
 when its middle-aged employees are old, like so many employees of 
 the Land Office, the Pension Office, and the Treasury, the need of a 
 retirement plan for civil employees will be as strongly felt in the 
 Department of Commerce and Labor. It is significant, therefore, that 
 the Lion. Oscar S. Straus, formerly Secretary of Commerce and 
 Labor, stated in his annual report of 1908 the great need of a measure 
 
 » See p. 2. 
 
EETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 19 
 
 for the retirement of superannuated employees, and drew attention 
 to another difficulty in the way of enforcement of the civil-service 
 law ; that is, the activity of the inefficient clerks' political friends. 
 Said he: 
 
 On July 1, 1907, the chiefs of bureaus and divisions were directed to report the 
 efficiency ratings of all persons who were shown by the ratings of 1906 to be 
 below the required standard of ability either as to the quantity or quality of 
 work performed. These reports showed that the effect of the warning given in 
 January, 1907, that an immediate improvement was expected in their work, was 
 most salutary. A number of instances were reported in which there had been 
 a material improvement either as to quality or quantity, or both. There were 
 some cases, however, in which there was apparently no improvement. Several 
 of these cases have been adjusted by discontinuance without prejudice, reduc- 
 tion in salary, or by resignation. As a rule, the persons rated below the 
 required standard are employees of advanced age who have given many years 
 of service to the Government. The obstacles in the way of the separation of 
 such employees are real and not fancied. The head of the department, while 
 not forgetful of his responsibility, finds it a difficult task to direct removal, 
 although it is conceded that the persons are no longer rendering efficient service. 
 This is not so much due to the sympathy of the appointing officer — although it 
 is possible that this may have some weight — as to the great pressure immedi- 
 ately brought to bear by public and prominent men and women to prevent 
 dismissal. This is a condition and not a theory, and is perhaps the strongest 
 reason for the enactment of a law for the retirement of superannuated em- 
 ployees.^ 
 
 Mr. Straus's successor, the Hon. Charles Nagel, has given consid- 
 erable space in his last annual report (1910) to the discussion of the 
 problem of superannuation. Among other things he says: 
 
 Probably no question dealing with the personnel of the service has been so 
 seriously considered during the past year as that relating to superannuation. 
 Most civilized countries now provide equitable means for the retirement of their 
 employees, as do many of the State and municipal governments, as well as 
 corporations and large industries, of this country. The problem was encoun- 
 tered and dealt with in the United States Army and Navy 50 years ago. It is 
 now critically present and awaiting solution in the civil departments of the 
 Government, While many unacquainted with actual conditions have frequently 
 approached the subject in a spirit of humanitarianism, most of those in and out 
 of the service now look upon superannuation as an unavoidable contingency 
 which must be met by the application of modern ideas and strictly business 
 principles. Until this is done department oflacials will continue to bear the 
 burden of an inefficient force rather than place themselves on record as remov- 
 ing, or even reducing, a public servant who has become incapacitated while in 
 the faithful performance of duty. Therefore, while humanitarian reasons may 
 have at first suggested the advisability, and in fact the duty, of providing a 
 system of retirement, it is now being recognized quite generally that the condi- 
 tions are such as to more than justify it from a strictly economical point of 
 view. The retirement of aged and superannuated employees under some liberal 
 system would likely result in a positive financial saving by creating opportunity 
 for the employment of young men who are able to do two to three times as 
 much xfovk for the salaries paid. It is therefore important that the subject 
 
 1 See p. 2. 
 
20 KETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 have serious attention, to the end that the Government may be conducted in 
 the most economical manner and at the same time provision be made for faithful 
 servants who have devoted their entire lives to the transaction of the public 
 
 business. 
 
 In his last annual report (1910) the Secretary of War, the Hon. 
 J, M. Dickinson, treats of the subject at length, quoting numerous 
 officials of the War Department to the effect that a retirement measure 
 for civil employees is greatly needed. Says he : 
 
 I renew the recommendation made in my annual report last year that some 
 provision be made for the retirement on annuities of employees who have be- 
 come superannuated in the service, thus following the practice which many 
 railroads and other large business enterprises have found it advisable to adopt. 
 
 In his annual report for 1910 the Chief of Engineers, in acknowledging the 
 " most loyal and efficient support and assistance in the transaction of the 
 duties devolving upon him " received from the civilian employees of his office, 
 states : 
 
 " I take pleasure in joining my predecessor in the hope that some provision 
 will speedily be made for their financial relief when they become superannu- 
 ated in the public service, to which many of them have devoted the best years 
 of their lives — the salaries of the office clerks as fixed by law, and practically 
 unchanged for 50 years, being too small, excepting in rare instances, to permit 
 such accumulation as will provide for their support when they become inca- 
 pacitated for active duty." 
 
 The following extracts are taken from the annual reports of other chiefs of 
 bureaus of the War Department and of commanding generals of departments 
 who have made similar recommendations : 
 
 From report of the Paymaster General : 
 
 " The present movement for the retirement of clerks with sufficient compensa- 
 tion after they have reached an age which incapacitates them for the perform- 
 ance of their full duties is certainly worthy of favorable consideration, and I 
 hope that legislation will shortly be enacted which will establish a retired-pay 
 list for Government clerks." 
 
 From report of the Inspector General : 
 
 " In my annual reports for several years past I have recommended the enact- 
 ment of legislation that will provide a system for the retirement of the faithful 
 employees in the classified service who become superannuated. I renew this 
 recommendation." 
 
 From report of the Quartermaster General : 
 
 " The need of some provision for superannuated clerks is more pressing than 
 ever before in the history of the department. During the year it has again 
 become necessary to demote a number of deserving clerks, for causes which can 
 De stated only' as worn out in service. For the protection of the Government's 
 interests it will be necessary to continue this action and even to take the final 
 step of discharging those whose capacity for service has reached the point where 
 their retention can be no longer justified, and they will, unless some provision 
 is made for them by legislative action, have to be set adrift under conditions 
 which preclude every opportunity for obtaining remunerative employment else- 
 where." 
 
 From report of the Commissary General : 
 
 " I also earnestly recommend the passage of a measure providing for the re- 
 tirement, on some equitable plan, of old and faithful superannuated employees 
 
RETIREMENT OP SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 21 
 
 of the Government, for the reason that it would result in marked improvement 
 in the service: 
 
 " First, by attracting a better class of employees, a large percentage of vphom 
 by reason of the provision for old age would remain in and make the service 
 their career, becoming expert in their particular line of work, to the distinct 
 advantage of the Government; and there never was a time when the highest 
 qualification and equipment were more needed in the service than at present. 
 
 " Second, by the added incentive held out to each employee to do his best 
 in order to obtain promotion to higher grades, and later profiting by increased 
 retired pay. 
 
 "Third, by the periodic and automatic elimination of those whose efficiency 
 has been impaired by age or infirmity and the introduction of younger and more 
 vigorous men, thereby maintaining an active and efficient working force and 
 making it possible in time to transact the business with fewer employees. 
 
 " Fourth, aside from all sentimental consideration, it is believed that the 
 service would be greatly improved if it should be known to all who enter it 
 that a provision is made for the support of themselves and their families when 
 old age comes upon them. It would be an inducement for them not only to 
 remain in the service, but to deport themselves in such a manner as to do noth- 
 ing to forfeit so valuable a provision. 
 
 " Fifth, because in cases of protracted illness employees worry over the pos- 
 sibility of being discharged, and the anxiety tends to retard their recovery and 
 return, whereas if they were free from this apprehension and felt secure of 
 being provided for in the event of becoming incapacitated their strength and 
 courage would be sustained and recovery assisted rather than impeded. 
 
 " Sixth, because railroads, corporations, and commercial houses recognize and 
 reward long and faithful service by retirement, and regard it as a good business 
 investment; and other governments also make some provision for their aged 
 and worn-out civil servants." 
 
 From report of the Surgeon General : 
 
 " Some discussion of the cognate question of the superannuation of civil 
 employees may also be deemed pertinent. This office has perhaps been fortunate 
 In having suffered little burden from its elderly and aged employees. The 
 majority of the clerks of advanced years came into this office in the full tide 
 of youth shortly after the close of the Civil "War, nearly all of them either 
 directly or indirectly from the Army. Their military experience and familiarity 
 with Army customs, methods, and principles have lent the greatest value to 
 their work. They have grown old in the service ; and age has in some instances 
 dimmed the keenness of their faculties or diminished the vigor of their industry. 
 Most of them are of the highest usefulness, and by reason of their natural 
 gifts, experience, and continued efficiency are kept in the positions of greatest 
 trust and responsibility. Their absence record compares favorably with that 
 of their younger colleagues, while their capacity, as a rule, remains unimpaired. 
 In some cases it has been found necessary, in their own interest as well as in 
 that of the service, to assign them' to less onerous tasks with which their failing 
 powers were better able to cope; and this has been accompanied by an appro- 
 priate reduction of grade and pay, a procedure which is distressing alike to 
 those who must cause such reductions and to those who suffer by them. But 
 these veterans, even at the reduced pay, still were able to earn a livelihood. 
 I am bound to admit, however, that one or two instances have come to my 
 notice where men enfeebled by disease and the infirmities of age have after 
 long service been unable to continue the performance of duty of any character, 
 and under the law have, after a brief indulgence of leave, found themselves 
 
22 RETTKEMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 dropped from tlie rolls. Few men In ttie lower grades of public service in 
 Washington, Imving due regard to the great cost of the comforts of life, of the 
 decent maintenance of their families, and of the education of their children, 
 are able to make adequate provision for an unproductive old age. When, there- 
 fore, such disability comes to these old men, as it will to some, it appears a 
 harsh reward for a lifetime's service to thi'ow them out upon the cold sympa- 
 thies of the world. Suitable provision for their last years is a fair call of 
 humanity. At the same time it would serve a valuable public purpose as well, 
 for it would attract to and retain in the service of the Government a class of 
 employees of exceptional capacity who, without such inducement, now turn 
 to a private career, because of the greater opportunities there found for the 
 accumulation of a reasonable competency for their old age." 
 
 From report of Brig. Gen. F. A. Smith, commanding Department of the 
 Missouri : 
 
 " ♦ * * It is also recommended that some measures be taken to provide a 
 pension or a system of retirement for clerks and employees who have become 
 superannuated and who have devoted the greater part of their lives to the 
 Government service." 
 
 From report of Brig. Gen. C. L. Hodges, commanding Department of Dakota : 
 
 " * * * I also recommend that steps be taken to have such legislation 
 enacted as will provide a system of retirement for all clerks and employees of 
 the War Department who have become superannuated in the Government 
 service." 
 
 Adjt. Gen. F. C. Ainswortli, when Chief of the Kecord and Pension 
 Office, War Department, in his testimony before the House Commit- 
 tee on Keform in the Civil Service on February 12, 1904, compared 
 the present need of the civil service for a satisfactory retirement 
 j)lan to the need of a similar measure once felt by the military serv- 
 ice. He v^ent so far as to say that our present system of retaining 
 the superannuated in office amounts in effect to the maintenance of a 
 civil pension list. Said he: 
 
 In the absence of some measure of relief it is the inevitable result of per- 
 manence of tenure of office in the civil as well as in the military establishment 
 that there shall be an accumulation of superannuated or otherwise incompetent 
 oflicials. The truth of this statement is well illustrated by the condition which 
 existed in the Army of the United States for many years prior to the Civil War. 
 There being no retired list at that time, officers were as a rule retained on 
 the active list until they died. The result of this was that the Army, especially 
 in the higher grades, was burdened with a large number of disabled or super- 
 annuated otficers. some of whom rendered no actual service for many years, 
 and all of whom hold the grades and received the salaries which should have 
 been held and received by junior officers who actually performed the duties of 
 these grades. At the beginning of the Civil War Congress enacted a retirement 
 law, and this relieved the Army of the incubus which it had borne so long. 
 A similar state of affairs exists in the civil service to-day, although, of course, 
 the evil has not yet attained, and possibly may never attain, very dangerous 
 proportions. But, disguise the situation as we may, the fact remains that so 
 long as any employees of the civil establishment are retained on the pay rolls 
 beyond the period of their ability to render a fair return in service for the 
 Balaries paid them to that extent a civil pension list or civil retired list has 
 
RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES, 23 
 
 been established. Such a list, although not a large one, and perhaps a compara- 
 tively unimportant one at the present time, is in existence to-day and will 
 continue to exist until the situation is materially changed by legislation. 
 
 The present Postmaster General, the Hon. Frank A. Hitchcock, dis- 
 cussed the need of making provision for the retirement of super- 
 annuated employees in his annual report of 1909, as follows : 
 
 In recent years the subject of making provision for the retirement of super- 
 annuated employees in the civil service has received much consideration. It is 
 believed that the interests of the employees and of the Government alike de- 
 mand legislation to this end. 
 
 The work of the postal service, like that of every great business institution, 
 public or private, requires special training. Years of experience are necessary 
 for the attainment of a high degree of proficiency in the discharge of the duties 
 devolving on postal employees. The department's policy is therefore to recruit 
 its force from young men, and to retain them until such time as their usefulness 
 is impaired by advancing a^e. 
 
 In view of the increased cost of living, the salaries paid are barely sufiicient 
 to enable the employees to meet current needs, and the opportunity to make 
 provision for old age is small. These conditions suggest the adoption of 
 measures that will insure Government employees against want after they pass 
 the period of active service. Private business establishments in this and foreign 
 countries find that such a course brings practical returns in the increased 
 loyalty and zeal of employees. 
 
 Experience has shown that in default of such provision administrative officers 
 hesitate to recommend the dismissal or the reduction in salary of superannuated 
 employees who have spent their lives in the Government service. The drain on 
 the national finances by their retention at full pay after they have become in- 
 capacitated for efficient service is far greater than would be the cost of a 
 reasonable system of civil pensions. 
 
 The Second Assistant Postmaster General, the Hon. Joseph 
 Stewart, emphasized in his report of the same year the special need 
 of a retirement measure for the benefit of the Railway Mail Service : 
 
 * * * Recommendation has been submitted from time to time that suitable 
 provision be made for the retirement of railway postal clerks who have become 
 unfit for active service by reason of advanced age or physical disability. The 
 need for this in the Railway Mail Service is more urgent, perhaps, than in other 
 branches of the postal service, because the character of the work demands young 
 and active men. Old men can not stand the excitement and nervous strain of 
 service on our heavy lines, and an endeavor to retire them, as far as practicable, 
 to lighter runs usually finds opposition because it necessarily involves a reduc- 
 tion in salary, and in some cases the breaking of home ties by change of 
 residence. If retained on the heavy lines the burden of performing some portion 
 of their duties necessarily falls on younger clerks, or is met by an additional 
 clerical force. There has been a general discussion for some years with ref- 
 erence to a suitable provision for the retirement of civil-service employees upon 
 terms fair and equitable to both the Government and the employees, which I 
 favor. If such provision be made it will no doubt cover the Railway Mail 
 Service. If, however, there is no prospect for early action it is recommended 
 that consideration be given a provision covering the Railway Mail Service. 
 
24 KETIKEMENT OF SUPEKAIi] NUATED CIVIL-SEEVICE EMPLOYEES. 
 
 The former Auditor for the Post Office Department, the Hon. M. O. 
 Chance/ has dwelt on the need of a suitable and adequate superannua- 
 tion measure in his reports for 1909 and 1910. He states also that he 
 has considered the various solutions offered to the problem of super- 
 annuation and that the only plan that commends itself to him as 
 sound and equitable is the one embodied in Senate bill 1944, the plan 
 discussed in this report. His reasons are thus set forth : 
 
 I wish to repeat, with emphasis, what I said in my last annual report In 
 regard to the need in this office of a suitable and adequate superannuation 
 measure * * *. 
 
 The various straight-pension and contributory plans of retirement proposed 
 have received my careful attention, and I have no hesitation in saying that the 
 only plan that commends itself to me as a thoroughly sound and equitable solu- 
 tion of this most difficult problem is that embodied in Senate bill 1944, com- 
 monly referred to as the Perkins bill, and found in a modified form in the Gillett 
 bill. This bill makes provision for retiring civil employees on annuities pur- 
 chased by themselves by means of monthly deductions from salary. It is in 
 effect f! compulsory savings scheme, the Government merely to stand back of it 
 by guaranteeing a certain rate of interest, taking care of the small expense of 
 administration, and providing the annuities for services rendered up to the 
 passage of the bill. 
 
 As compared with a straight civil pension paid out of the Federal Treasury, 
 this plan has many advantages, both for the Government and for the employees. 
 The principal obligation of the Government would be to establish the plan by 
 providing for those already grown old in the service, an obligation that would 
 ultimately cease ; whereas under a pension the burden on the Public Treasury 
 would coutinunlly increase. The chief advantage to the employee m this plan 
 over a civil pension is the fact that his contributions remain his property under 
 all conditions, and in case of resignation from the service before the age of 
 retirement, or in case of death, they are returned to him or his estate with 
 compound interest. On the other hand, under a civil pension scheme only those 
 who live and are able to remain in the service to a stated age receive any benefit. 
 This means, furthermore, that the employee works below the market price, since 
 the pension is invariably taken into account in fixing salaries, and unless he 
 lives and remains in the service to pensionable age and enough longer to draw 
 the full value of his deferred pay his family is worse off through all the years 
 of his service than they would have been had there been no civil pension list. 
 
 It is manifest also that this contributory plan would tend to stimulate 
 strongly the independence of the individual, as it should do, while a pension 
 paid out of public funds on condition that the employees survive and remain in 
 the service to a stated age must of necessity have the opposite effect and destroy 
 the independence of the employee. A straight pension would have a numbing 
 effect also on the public service, since it would interfere with the removal of 
 young or middle-aged employees who are incompetent, dismissal under a pen- 
 sion system meaning forfeiture not only of salai'y but of prospective pension 
 already partly earned. 
 
 For these reasons, chiefly, I most heartily indorse the plan embodied in Sen- 
 ate bill 1944. 
 
 The subject of superannuation in the public service has received the 
 attention of President Taft in two annual messages to Congress. In 
 
 1 Now secretary of the Efficiency and Economy Board, recently appointed by President 
 Taft. 
 
RETIEEMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 25 
 
 his message to Congress in 1909, under the caption of " Reduction in 
 the cost of governmental administration," he recommended legisla- 
 tion for the retirement of superannuated civil servants, coupling with 
 it a recommendation for an increase of salaries. He said : 
 
 More than this, every reform directed toward improvement in the average 
 efficiency of Government employees must depend on the ability of the executive 
 to eliminate from the Government service those who are inefficient from any 
 cause, and as the degree of efficiency in all the departments is much lessened 
 by the retention of old employees who have outlived their energy and useful- 
 ness, it is indispensable to any proper system of economy that provision be made 
 so that their separation from the service shall be easy and inevitable. It is 
 impossible to make such provision unless there is adopted a plan of civil 
 pensions. 
 
 Most of the great industrial organizations, and many of the well-conducted 
 railways of this country, are coming to the conclusion that a system of pensions 
 for old employees, and the substitution therefor of younger and more energetic 
 servants, promotes both economy and efficiency of administration. 
 
 I am aware that there is a strong feeling in both Houses of Congress, and 
 possibly in the country, against the establishment of civil pensions, and that this 
 has, naturally, grown out of the heavy burden of military pensions, which it 
 has always been the policy of our Government to assume; but I am strongly 
 convinced that no other practical solution of the difficulties presented by the 
 superannuation of civil servants can be found than that of a system of civil 
 pensions. 
 
 The business and expenditures of the Government have expanded enormously 
 since the Spanish War, but as the revenues have increased in nearly the same 
 proportion as the expenditures until recently, the attention of the public, and 
 of those responsible for the Government, has not been fastened upon the ques- 
 tion of reducing the cost of administration. We can not, in view of the ad- 
 vancing prices of living, hope to save money by a reduction in the standard 
 of salaries paid. Indeed, if any change is made in that regard, an increase 
 rather than a decrease wj^l be necessary ; and the only means of economy will 
 be in reducing the numbef of employees and in obtaining a greater average of 
 efficiency from those retained in the service. 
 
 In his next and most recent annual message to Congress (1910) 
 President Taft went still further and recommended a definite plan — 
 the one discussed in this report — and a definite bill — the Gillett bill 
 (H. R. 22013) — as the one, in his judgment, best calculated to solve 
 satisfactorily the problem of superannuation in the civil service. 
 He said: 
 
 It is impossible to proceed far in such an investigation without perceiving the 
 need of a suitable means of eliminating from the service the superannuated. 
 This can be done in one of two ways, either by straight civil pension or by some 
 form of contributory plan. 
 
 Careful study of experiments made by foreign governments shows that three 
 serious objections to the civil pension payable out of the Public Treasury may 
 be brought against it by the taxpayer, the administrative officer, and the civil 
 employee, respectively. A civil pension is bound to become an enormous, con- 
 tinuous, and increasing tax on the public exchequer; it is demoralizing to the 
 service since it malies difficult the dismissal of incompetent employees after they 
 
26 EETIREMEJSrr OP SUPERANNUATED CIVIL-SEEVICE EMPLOYEES. 
 
 Lave partly earned their pension ; and it is disadvantageous to the main body of 
 employees themselves since it is always taken into account in fixing salaries and 
 only the few who survive and remain in the service until pensionable age receive 
 the value of their deferred pay. For this reason, after a half century of expe- 
 rience under a most liberal pension system, the civil servants of England suc- 
 ceeded, about a year ago, in having the system so modified as to malie it vir- 
 tually a contributory plan with provision for refund of their theoretical contri- 
 butions. 
 
 The experience of England and other countries shows that neither can a con- 
 tributory plan be successful, human nature being what it is, which does not 
 make provision for the return of contributions, with interest, in case of death or 
 resignation before pensionable age. Followed to its logical conclusion this 
 means that the simplest and most independent solution of the problem for 
 both employee and the Government is a compulsory savings arrangement, the 
 employee to set aside from his salary a sum sufficient, with the help of a liberal 
 rate of interest from the Government, to purchase an adequate annuity for him 
 on retirement, this accumulation to be inalienably his and claimable if he leaves 
 the service before reaching the retirement age or by his heirs in case of his 
 death. This is the principle upon which the Gillett bill now pending is drawn. 
 
 The Gillett bill, however, goes further and provides that the Government shall 
 contribute to the pension fund of those employees who are now so advanced 
 In age that their personal contributions will not be sufficient to create their 
 annuities before reaching the retirement age. In my judgment this provision 
 should be amended so that the annuities of those employees shall be paid out of 
 the salaries appropriated for the positions vacated by retirement, and that the 
 difference between the annuities thus granted and the salaries may be used for 
 the employment of efficient clerks at the lower grades. If the bill can be thus 
 amended, I recommend its passage, as it will initiate a valuable system and 
 ultimately result in a great saving in the public expenditures. 
 
 It would seem from these and similar statements that the chief 
 executive officials of the Government are agreed in feeling that the 
 highest degree of effectiveness and economy is impossible in the ad- 
 ministration of the public offices so long as Congress fails to enact 
 legislation for the retirement of superannuated employees. Most of 
 them hesitate to indicate preference for any particular plan of retire- 
 ment, feeling apparently that that is a matter to be worked out by 
 experts. The Secretary of Commerce and Labor has, however, de- 
 clared himself in favor of a " straight pension system " if salaries 
 remain as they are; the Secretary of the Treasury and the Secretary 
 of the Interior have expressed preference for a " contributory plan," 
 and President Taft and Auditor Chance have recommended, respec- 
 tively, the Gillett (H. E. 22013) and Perkins (S. 1944) bills, two 
 bills covering a contributory plan which are identical in principle and 
 almost so in detail. Nearly every joublic officer who has discussed the 
 problem has made reference also to the inadequacy of Government 
 salaries, seeming to appreciate the fact that the question of salaries 
 and of retirement are two phases of the same general problem — 
 efficiency in the civil service. 
 
RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 27 
 
 Two things therefore seem clear from all these statements: 
 
 (1) That the interests of the service demand the elimination of the 
 superannuated employee; and 
 
 (2) That elimination of the superannuated employee from the 
 service after he has been poorly paid for years is not just unless it 
 is accomplished by retirement of the employee on a competence. 
 
 This means that an adequate plan for the retirement of super- 
 annuated employees of the civil service is necessary as a logical com- 
 plement of the civil-service law and that the absence of such a plan 
 practically nullifies much of the good that the law would otherwise 
 accomplish. 
 
 NUMEROUS RETIREMENT BILLS INTRODUCED IN CONGRESS. 
 
 The truth of this conclusion having long been recognized, many 
 bills providing for the retirement of Government employees have 
 been introduced in Congress. Some of the proposed measures 
 have been carefully considered by the proper congressional com- 
 mittees, but until February 23, 1909, no bill had ever been favorably 
 reported out of committee. The bill then reported to the House of 
 Representatives by its Committee on Reform in the Civil Service, of 
 which Hon. Frederick H. Gillett was chairman, was first considered at 
 hearings held before that committee on March 10, 11, 13, 20, and 21, 
 and on April 13, 1908. While lack of time prevented the members 
 of the committee from investigating thoroughly some of the ques- 
 tions involved in the proposed measure and reporting on it before 
 the close of the first session of the Sixtieth Congress, they agreed 
 to take up the subject on the opening of the second session, and 
 requested that further data bearing on the plan be prepared in the 
 interval. 
 
 PLAN EMBODIED IN PERKINS, GILLETT, AND AUSTIN BILLS. 
 
 The plan under consideration is found embodied in three bills 
 introduced in the House of Representatives in the spring of 1908 
 and known, respectively, as H. R. 17969, H. R. 18982, and H. R. 
 21261, a fourth bill favorably reported on February 23, 1909, and 
 known as H. R. 28286, a fifth bill introduced in the Senate on April 
 21, 1909, and known as Senate bill 1944, a sixth bill favorably re- 
 ported by the House committee on April 4, 1910, and known as H. R. 
 22013, and finally a seventh bill introduced for the second time April 
 4, 1911, as H. R. 729. The groundwork of the seven bills is identical, 
 the differences being of minor consideration, though in some cases of 
 no little importance. The proposed plan first found public expression 
 in a preliminary report of the subcommittee on personnel of the Com- 
 mittee on Department Methods, commonly known as the " Keep 
 
28 RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 Commission," of which the author had formerly been a member, 
 and was distributed in a circular sent out by the Civil Service Ketire- 
 ment Association on August 9, 1907. The bill drawn up to embody 
 this plan was criticized by the National Civil Service Keform League 
 in its convention held at Buffalo in November, 1907, for certain fea- 
 tures relating to the interest which the Government was required to 
 pay on the clerks' savings. To meet these objections the subcommit- 
 tee modified these features, and the resulting bill, popularly known 
 as the "Keep bill," was introduced in Congress on February 18, 
 1908, by Hon. Joseph A. Goulden, of New York, as H. R. 17969. 
 Later, the objections of the League were met by the author in another 
 way — in a bill introduced in Congress on March 10, 1008, by Hon. 
 Frederick H. Gillett, and known as H. R. 18982. At the hearings 
 held in the spring of 1908 members of the subcommittee of the Keep 
 Commission, representatives of the Civil Service Retirement Asso- 
 ciation, and various individuals with ideas on the subject of retire- 
 ment funds had an opportunity to speak for and against this plan 
 and any other, and as a result of the sifting and weighing to which 
 each clause of the two proposed bills was subjected a third bill was 
 evolved, which was introduced on April 20 by Mr. Gillett, and is 
 known as H. R. 21261. 
 
 After study of all the ideas advanced at these hearings and the 
 history of retirement plans in other countries, the author prepared the 
 text for a fourth bill, which is the one presented and discussed in this 
 report. The full text of this proposed bill is found on page 210. It 
 was introduced in the Senate on April 21, 1909, by Senator Perkins, 
 formerly chairman of the Committee on Civil Service and Retrench- 
 ment, and is knoAvn as Senate bill 1944. In the meantime, late in the 
 second session of the Sixtieth Congress (February 23, 1909) , the House 
 Committee on Reform in the Civil Service reported favorably a bill, 
 . which is known as H. R. 28286. It differs from the bill here discussed 
 in providing that annuities for back services shall be paid out 
 of a fund created by deductions from the salaries of new entrants 
 and the salaries of those promoted, instead of by the Government. 
 A new administration coming in and a special session of Congress 
 being called a few days after this bill was favorably reported, no 
 action could be taken on it. Late in the following session, the first 
 session of the Sixty-first Congress, another bill (H. R. 22013) was 
 favorably reported by the House committee (April 4, 1910). This 
 bill approaches much more nearly to the ideal here discussed than did 
 the bill favorably reported the previous year, for it provides, like 
 Senate bill 1944, that annuities for back services shall be paid by the 
 Government, but puts a limit of $600 a year on the amount that can 
 be paid by the Government to any one individual. On the other 
 hand, it makes extremely liberal provision for retirement in case of 
 
EETIREMENT OP SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 29 
 
 disability. Both the bills favorably reported (H. K. 28286 and H. E. 
 22013) are frequently referred to as ihe " Gillett bill," but it should 
 be noted that they differ radically in regard to the method proposed 
 for paying annuities on past services, and that the second Gillett 
 bill (H. K. 22013), the latest expression of the House committee's 
 judgment,^ is identical in principle and in almost every detail also 
 with the Perkins bill (S. 1944), here expounded. This report is, 
 therefore, a report on the last ^ Gillett bill as well as the Perkins bill.^ 
 
 Through all the modifications suggested in these several bills the 
 plan itself remains unchanged. It divides itself naturally into two 
 parts. Part I provides annuities for employees rendering service 
 from now on. Part II provides annuities for employees who ren- 
 dered service prior to the adoption of the plan. Part I is really the 
 plan proper, since the operation of the second part will ultimately 
 cease with the death or separation from the service of all the present 
 employees. 
 
 Part I of the plan proposes that each employee in the classified 
 civil service shall, on reaching the age of retirement, receive an an- 
 nuity equal to 1-^ per cent of his salary for each year of his service, 
 or, as it may be differently stated, an annuity equal to 1-^- per cent 
 of the total compensation received by him during his entire service. 
 The theoretical basis of this provision is the assumption that three- 
 quarters pay, or 75 per cent of his average salary, is a reasonable 
 einnuity for a. person who has given his entire working life — that is 
 about 50 years — to the service. Dividing 75 per cent by 50 years 
 of service, l-l per cent for each year of service is obtained as a basis 
 for computing annuities for any period of service. The annuity is 
 created by the employee himself, who is required to set aside during 
 each month of his continuance in the service a sum sufficient with 
 compound interest, at 3-| per cent, to create that annuity at the age 
 of retirement. These deductions from salary represent no fixed per- 
 centage of salary, but vary with the age of entrance into the service, 
 ranging in the case of employees to be retired at the age of 70 from 
 4.3 per cent for the individual who enters the service at the age of 
 20 to 11.2 per cent for the individual who enters at the age of 69. 
 The amount deducted remains constant throughout the years of 
 service, except in case of promotion or demotion, when it is increased 
 or decreased accordingly on the basis of the employee's attained age. 
 
 ^This Is the bill indorsed by Tresident Taft in liis recent annual message. 
 
 2 Since this report went to press Mr. Gillett has introduced a third Gillett bill (H. R. 
 750, 62d Cong., 1st sess. ), a bill which expresses more nearly his personal ideas than did 
 either of the two previous bills bearing his name. It contains no disability clause, but 
 provides that the Government shall pay 4 per cent interest on the employees' savings 
 rather than only 'Al per cent. 
 
 3 This is practically a report also on the Austin bill (H. R. 729), which was introduced In 
 Congress by Hon. Richard W. Austin after this report was in proof. The Austin bill is 
 based on the same principles and embodies the best features of both the Gillett and Per- 
 kins bills as to superannuation, providing in addition for an increase of salaries. 
 
30 RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 Each employee thus sets aside the amount of money necessary to create 
 his own annuity only, without regard to the deposits of others, so that 
 each one shall receive full return on the money which he thus accumu- 
 lates. The funds necessary for the payment of the annuities are 
 therefore furnished by the employees themselves, without expense 
 to the Government, except that involved in the administration of 
 the fund. The scheme is virtually a compulsory savings arrange- 
 ment with the requirement that the savings in each case be sufficient 
 for the purchase of an annuity at the age of retirement equal to 1^ 
 per cent of the aggregate salary. 
 
 In proposing that the Government pay 3^ per cent interest on the 
 savings of the employees, it was not felt that the plan could be criti- 
 cized on the ground of expense to the Government if provision were 
 made in the bill for the investment of the fund in public bonds. In 
 a long period of years these bonds would probably yield more 
 than 3^ per cent interest, and provision is made that whatever is 
 earned above the guaranteed rate of interest should be returned to 
 the employees.^ 
 
 On reaching the age of retirement, the employee may take his 
 savings in one of three ways— in an annuity payable quarterly 
 throughout life; in a smaller annuity payable quarterly throughout 
 life, with the provision that in case of the death of the annuitant 
 before he has received in annuities the amount of his savings, plus 
 the interest credited thereon, the balance shall be paid to his legal 
 heirs; and in one sum. The age of retirement varies, the service 
 being divided for this purpose into three groups — the first group 
 consisting of railway postal clerks who may retire at age 60, the 
 second group consisting of letter carriers to be retired at age 65, 
 and the third group comprising all the remaining branches of the 
 service and to be retired at age 70. Since it is often to the advantage 
 of the service that an old employee be retained because of some 
 special knowledge or skill, provision is made for the retention of 
 such an employee after the age retirement, for two years and for 
 successive periods of two years each, on certificate of the head of 
 the department in which he is employed that he is efficient and that 
 his services are advantageous to the Government. Upon absolute 
 separation from the service before reaching the age of retirement, 
 whether by resignation or dismissal, and only in such event, the 
 employee shall have the privilege of withdrawing his accumulations 
 in one sum, or, if the amount to his credit be at least $1,000, he may 
 use his savings to provide an annuity at his attained age. In case 
 of the death of an employee while in the service, the amount to his 
 credit shall be paid to his legal heirs. 
 
 1 In the opinion of the author, the Government could well afford to guarantee at least 
 4 per cent, and probably 5 per cent, as provided for in the Austin bill (H. R. 729). 
 
RETIREMENT OF SUPEEANNUATED CIVIL-SERVICE EMPLOYEES. 31 
 
 The so-called Keep bill (11. R. 179G9) contained a provision for 
 retirement after 20 years' service on an annuity of 1^ per cent of pay 
 for each year of service in case of permanent disability. While a 
 disability provision is recognized as very desirable in any scheme 
 which aims at the improvement of the service, the provision was 
 omitted from the two succeeding bills because no information as to 
 its cost was available. An estimate of the cost of the limited pro- 
 vision contained in the Keep bill has, however, been made by the 
 author and is presented in this report, with a suggestion as to how 
 that cost could be met, also without expense to the Government. This 
 estimate is based on German tables of disability, which are so ex- 
 tremely conservative, on account of conditions explained in the re- 
 port, as to make the rates very high, and the estimate accordingly 
 errs on the side of safety. It completely demonstrates, however, the 
 feasibility of accepting the proposed disability clause as stated above, 
 if the cost is met by the means suggested. A more liberal disability 
 provision could doubtless be provided in time, when, through the 
 operation of the plan, sufficient statistical data concerning the dis- 
 ability of the civil employees had been accumulated to warrant the 
 construction of more moderate disability rates, based on the Govern- 
 ment's own experience.^ 
 
 COST OF PUTTING PROrOSED PLAN IN OPERATION. 
 
 Part II of the plan proposes, as set forth in the first bills, H. li. 
 17969 and H. R. 18982, and in the Senate bill here proposed and 
 discussed, that the Government shall pay all employees now in the 
 classified civil service an annuity on arrival at age 70 equal to 1^ per 
 cent of his salary for each year of service prior to the passage of the 
 bill, and from that time on the employees shall provide their own 
 annuities as arranged for in Part I of the plan. Part II, as set forth 
 in the aforementioned bills, is thus kept consistent with the spirit of 
 the plan proper, which is based on the principle that each employee 
 shall provide his OAvn annuity, no younger employee being taxed for 
 the benefit of older employees. While not in any way essential to 
 the adoption of the plan proper (Part I), Part II is naturally in- 
 cluded in the whole scheme for two reasons: First, considerations of 
 justice and humanity dictate that provision be made for those already 
 superannuated in the service and those so near superannuation as to 
 lack time to accumulate, through their own savings, a fund sufficient 
 to give them an annuity on retirement; secondly, the lack of some 
 such provision for past services would delay the full benefit to the 
 
 1 Since the above was written the second " Gillett bill" (H. R. 22013) has been 
 favorably reported (Apr. 4, 1910), containing a disability provision which is much 
 more liberal than that contained in the Keep bill. No estimate as to its cost has been 
 made. 
 
32 EETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 Government under the plan proper for a period of about 40 years, or 
 until the majority of those now in the service had passed away. 
 
 If Part I alone is adopted, the plan can go into eli'ect at once, with- 
 out cost to the Government except that necessary to meet the ex- 
 penses of administration. In that case, however, it would be a full 
 generation before the public service would be benefited by a thorough 
 elimination of the superannuated. Bearing in mind the fact that the 
 estimated loss to the Government through superannuation in the 
 civil service is about $1,200,000 a year, the Keep Commission, in sub- 
 mitting to President Koosevelt its report of February 18, 1908, on 
 superannuation in the civil service, recommended as good business 
 policy the adoption of Part II along with Part I of the plan, since any 
 measure which will relieve the Government of the evil of superannua- 
 tion at a cost of $1,200,000 or less is plainly a saving of public funds. 
 It is apparent also that, even if the adoption of Part II should cost 
 considerably more than $1,200,000 a year for a while, it would still 
 be a wise expenditure of public funds, and a means of economy, for 
 such appropriations would be practically negligible in 50 years, and 
 cease completely by the time that all present employees are dead, 
 whereas, under present conditions, the Government's loss from ineffi- 
 ciency of its aged employees is a steady, permanent, and growing 
 annual loss. 
 
 What it will cost, or seem to cost, to put the plan in immediate 
 operation by adoption of Part II depends upon the number of em- 
 ployees that Congress may decide to include in its benefits. It might 
 seem desirable to limit the operation of the plan at the start to the 
 District of Columbia since superannuation there is much greater 
 than elsewhere in the service. Census Bulletin 94 (p. 49) shows 
 that in the District of Columbia practically 1 Government em- 
 ployee in 14 is at least 65 years of age, while elsewhere the correspond- 
 ing figures are but about 1 in 34. Over 15 per cent of the employees in 
 the State, War, and Navy Building and in the Treasury proper, over 
 14|- per cent in the War Department, and over 11 per cent in the 
 Interior Department are more than 65 years of age. Restriction of 
 the plan to the civil service of the District of Columbia — that is, to 
 23,254 employees as against 170,228 employees in the whole service — is 
 to be commended also on the general principle that it is always de- 
 sirable to proceed slowly and cautiously in the inauguration of any 
 new measure. Other branches of the service could be included 
 gradually, as seemed desirable, and as confidence in the wisdom of 
 the plan increased. 
 
 Two calculations of the cost of paying annuities for back services 
 have been made. The first calculation included 103,030 classified 
 employees, while the second included 170,228 employees. The in- 
 crease in the number of employees is due to the growth in the civil 
 
RETIREMENT OP SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 33 
 
 service during the interval which elapsed between the two reckonings, 
 and to the fact that a number of groups of employees were included 
 in the second calculation that were omitted from the first. It was 
 the intention to include in this second calculation all groups of em- 
 ployees that might possibly be embraced in any plan of retirement. 
 The first calculation was made under the direction of the Keep Com- 
 mission and was based on Census Bulletin 12, covering the classified 
 employees as of June 30, 1903. The second calculation was based 
 on the cards used in preparing Census Bulletin 94, covering the 
 classified employees as of June 30, 1907. 
 
 According to the first calculation, the total maximum sum required 
 for putting into effect the provisions of Part II of this plan was 
 $66,985,778, or about $725,000 in the first year, increasing gradually 
 and reaching a maximum of $1,746,561 about 30 years after the pas- 
 sage of the bill. After the thirty-third year the amount required 
 each year drops off very rapidly until in about 50 years, when all the 
 present employees are dead, the plan would be self-sustaining. 
 According to the last calculation, which embraces 67,361 more em- 
 ployees, and is based on earlier ages of retirement and slightly more 
 conservative mortality tables than the first estimate, the total maxi- 
 mum sum required to pay annuities for back services would be 
 $130,581,273, or about $1,120,000 the first year, increasing gradually 
 and reaching the maximum of $3,495,000 about 28 years after the 
 passage of the bill, and then dropping off gradually to nothing by 
 the time all of the present employees are dead. It should be under- 
 stood, however, that these calculations are necessarily exaggerated, 
 since they make no allowance for the savings in annuities for back 
 services that will be made through resignations before the age of 
 retirement, which may be fairly estimated to equal the mortality, and 
 because they are based on present salaries instead of average salaries, 
 and because they make no allowance for retention of employees in the 
 service past the age of retirement. The actual cost, therefore, of 
 annuities for back services will be much less than these figures — 
 probably not more than half as great, or about a million dollars a 
 year for 50 years, which is equivalent to an increase in the Govern- 
 ment pay roll of a little over one-half of 1 per cent. It should be 
 remembered also that all things are only large or small by compari- 
 son, and that even a million dollars a year for 50 years is a small sum 
 compared with a permanent expenditure of a million two hundred 
 thousand dollars a year, which is the sum computed to be lost annu- 
 ally through the inefficiency of aged employees. The plan can, in 
 other words, be put in immediate operation without increasing the 
 annual expenditures of the Government by one dollar. One needs to 
 be no profound mathematician to see that by paying the annuities 
 for back services and thus establishing a self-supporting plan of 
 74196°— S. Doe. 745, 61-3 3 
 
34 RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 retirement, which would do away with that annual loss, the Govern- 
 ment would effect an immediate and permanent economy. There 
 would be a small saving the first year, a larger saving the second 
 year, and so on, until by the time all present employees are dead the 
 cost to the Government of superannuation would have ceased. 
 
 HOW THIS COST MAY BE MET.* 
 
 If annuities are paid for services rendered prior to the adoption of 
 the plan, the obligation for their payment would seem to rest with the 
 Government, which has had the benefit of those services. The sug- 
 gestion was made, however, at the hearings held in the spring of 1908 
 that the plan proper might be put in operation without cost to the 
 Government by imitating the practices of the French Government in 
 raising the money to defray the expenses incident to the retirement 
 of civil employees. This is done by making deductions from the sal- 
 aries of new entrants and deductions from promotions. This idea 
 was embodied in the third bill (H. R. 21261) introduced in Con- 
 gress in the spring of 1908 and in the first bill (H. R. 28286) favor- 
 ably reported by the House committee. According to the provisions 
 of these two bills, a fund for the payment of annuities on services 
 rendered prior to the passage of the bill would be created from two 
 sources, (1) by a deduction for six months — that is, during the pro- 
 bationary period — of one-fifth of the monthly pay of persons newly 
 entering the service, and (2) by deductions from promotions of 25 
 per cent of the net annual increase, to be withheld during the first 
 three months after promotion. This proposal was held by many to 
 be open to serious objection as fundamentally unjust, since it requires 
 contributions which are never returned to the contributor and im- 
 poses a tax on efficiency. It is certainly contrary to the spirit of the 
 plan itself, which is based on the principle that each employee shall 
 provide for his own annuity and not become in any way a tax on 
 fellow employees. Such a fund, however, might be justly used to 
 defray the expense of a provision for disability as previously men- 
 tioned, since the contributions would not then be diverted from the 
 use of the contributors, as all would share in the protection furnished 
 by such a provision. 
 
 In the interval which elapsed between the favorable reporting of 
 the last two House bills — ^between February 23, 1909, and April 4, 
 
 ^ How the cost of putting the plan Into operation is to be met is a matter of bookkeep- 
 ing. President Taft's recommendation in his annual message of December 6, 1910, that 
 the annuities for back services shall be paid out of the salaries appropriated for the posi- 
 tions vacated by retirement, and that the difference between the annuities thus granted 
 and the salaries may be used for the employment of efficient clerks at the lower grades, 
 is a practical solution of the difficulty and avoids a call for increase of appropriation. 
 President Taft's recommendation is based on statistics collected in the Treasury Depart- 
 ment, the Post Office Department, and the Department of Commerce and Labor. For 
 details, see pp. 182-185. 
 
RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 35 
 
 1910 — the House Committee seems to have become convinced that it 
 would be unjust to require the younger employees to provide for the 
 retirement of the older ones, and the last bill favorably reported 
 (H. R. 22013) accordingly agrees in principle with the bill here pro- 
 posed and discussed (Senate bill 1944) in providing that annuities 
 for back services be paid by the Government. 
 
 DIFFERENCE BETWEEN PERKINS AND GILIiETT BILLS. 
 
 It thus appears that the two bills, S. 1944 and H. E. 22013, which 
 last had the attention of the Committees on Civil Service in the 
 Senate and the House, agree not only on a definite plan of retiring 
 civil employees, but also on the method by which it is to be put in 
 immediate operation. The only material differences between them 
 are two matters of detail. The House bill limits the amount payable 
 by the Government for past services to $600 a year, and the Senate 
 bill allows the full annuity for such services that would now be to the 
 credit of the individual had the proposed plan always been in opera- 
 tion. The House bill, on the other hand, makes more liberal pro- 
 vision than does the Senate bill for retirement of employees in case 
 of disability. 
 
 STATISTICAL DATA CONTAINED IN THIS REPORT. 
 
 This briefly is an account of the retirement plan which has been 
 considered by the Committees of Civil Service in the Senate and the 
 House and favorably reported by the House Committee. The Secre- 
 tary of Commerce and Labor was requested by these committees at 
 the close of the first session of the Sixtieth Congress to authorize the 
 Bureau of the Census to prepare new tables, based on the most recent 
 census of the executive civil service, showing the cost of annuities 
 for back services, together with other data bearing on the plan. 
 In this report, accordingly, are discussed the principles underlying 
 the proposed savings and annuity plan, the mathematical basis of the 
 plan, including the tables of mortality and interest on which the 
 annuities and the necessary deductions from salary are computed, the 
 minor provisions relating to separation from the service by reason of 
 retirement, resignation, dismissal, disability, or death, the cost of 
 paying annuities for back services as shown by the calculations made 
 in the Bureau of the Census, and the provisions in the bill for invest- 
 ment of the fund created by the savings of the employees. 
 
 The Government Actuary of New Zealand, who devised the plan 
 adopted there three years ago, made calculations to determine the 
 probable cost of his plan, which contemplates a perpetual subsidy 
 from the Government, but he carried his figures only through 
 the first year and gave only an estimate as to the probable ultimate 
 amount annually necessary. In calculating the cost of establishing 
 
36 EETIEEMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 the plan proposed in the Perkins bill (S. 1944) , the computations have 
 been carried through 78 years, to the time when every member of the 
 present civil service will be dead and the plan self-supporting, so that 
 the figures quoted are a more than safe maximum. Calculations 
 covering a period of 78 years have also been made to show the cost 
 of establishing the plan proposed in the Gillett bill (H. R. 22013). 
 Finally, calculations have been made covering a period of 35 years to 
 show the cost of a straight civil pension conferring the benefits of 
 the Perkins bill and paid wholly from the Public Treasury. 
 
 When not otherwise stated, all reference made in this report to " the 
 bill " is understood to apply to the bill proposed and discussed in this 
 report, S. 1944. 
 
 I 
 
CHAPTER I. 
 
 PRINCIPLES UNDERLYING PROPOSED PLAN. 
 
 The plan described in this report and embodied in the accompany- 
 ing bills ^ rests on four fundamental principles. 
 
 FOUR FUNDAMENTAL PRINCIPLES. 
 
 They are as follows : 
 
 (1) The funds necessary for the payment of annuities on services 
 rendered after the adoption of the plan should be supplied by the 
 employees themselves, without expense to the Government other than 
 possibly the payment by the Government of a reasonable rate of inter- 
 est on the money held by it and the payment of salaries to the clerical 
 force required to keep the accounts and distribute the funds. 
 
 (2) Each employee should set aside the amount necessary to cre- 
 ate his own annuity, without regard to the deposits of others, so that 
 each employee may receive full return on the money set aside by him. 
 It is important that the amount set aside should be sufficient to buy an 
 adequate annuity, else the condition of the superannuated employee 
 will be little improved, and the aid of the Government ultimately 
 be solicited. 
 
 (3) The annuities to be paid employees on retirement should be 
 graduated according to length of service and amount of salary and 
 in such manner that the monthly deposits required from employees 
 for the creation of such annuities shall be in no case excessive. 
 
 (4) The fund necessary for the payment of annuities on services 
 rendered prior to the adoption of the plan should be paid by the 
 Government rather than by any form of tax upon the younger 
 employees. 
 
 It will thus be seen that the plan divides itself naturally into two 
 parts, the first part, or plan proper, providing annuities for em- 
 ployees rendering services from now on, and the second part provid- 
 ing annuities for employees who rendered service prior to the adop- 
 tion of the plan and are still members of the civil service. 
 
 »See pp. 210-225. 
 
 87 
 
38 EETIKEMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 CRITICISM OF PLANS PREVIOUSLY PROPOSED. 
 
 These principles were adopted as essential to the construction of a 
 correct plan after careful study of the various plans which have been 
 brought to the attention of Congress during the past 20 years, and 
 those which have been tried by other Governments. These may be 
 divided generally into two classes. 
 
 First, noncontributory plans proposing the payment of annuities to 
 the superannuated out of the Federal Treasury ; and 
 
 Second, contributory plans proposing a uniform deduction of a 
 given per cent — more or less adequate for the purpose in view — from 
 the salaries of all employees to create a general fund out of which 
 to pay annuities to retiring employees. This second class may prop- 
 erly be subdivided into two divisions: 
 
 (a) Those proposing a uniform deduction of a given per cent from 
 all salaries and the payment of annuities based upon length of serv- 
 ice; and 
 
 (b) Those proposing a uniform deduction of a given per cent from 
 all salaries and the payment of a uniform annuity regardless of 
 length of service. 
 
 CIVIL PENSIONS UNPOPULAR AND UNSOUND. 
 
 The first group of plans — those proposing the payment of annui- 
 ties out of the Federal Treasury — are, of course, simply civil pen- 
 sions, such as England and Germany maintain for the benefit of their 
 civil employees. It is true that arguments in favor of a civil pension 
 are frequently heard in certain quarters in this country. It has 
 become the custom, in recent years, for large business institutions to 
 pension their old and worn-out employees. Many employers declare 
 that it is good business policy, since it results in creating among their 
 subordinates a sense of loyalty and an interest in the business, as well 
 as a feeling of permanency in their employment, which are of benefit 
 to the employer as well as the employee. Many of the most impor- 
 tant railroads of the country have adopted a system of retirement for 
 superannuated employees. It would seem as if a policy that the 
 railroads and other great industrial enterprises of the country have 
 found profitable might safely and wisely be followed by the Govern- 
 ment. Keasoning thus, many have contended that what the public 
 service needs as an adjunct to the civil-service law is a civil pension 
 list. Passing from the example of the railroads and the great corpo- 
 rations, they have pointed to the pensions granted by the Govern- 
 ment to those who have performed military service, and have argued 
 that the civil employee was as deserving of that recognition as is the 
 soldier or sailor. It has been shown that every great nation of the 
 
RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 39 
 
 world, except the United States alone, provides some kind of pension 
 for the superannuated civil employee, and some of them even provide 
 a pension for the widows and orphans of such employees. Again 
 and again the question is asked in all sincerity, and often by people 
 who have wide knowledge of conditions among officeholders and 
 among employees of private corporations in this and other countries, 
 Why should not the United States Government grant a pension to 
 its superannuated civil employees, as it does to its war veterans, as 
 other nations do to their employees in the civil as well as military 
 and naval branches of the public service, and as the great corpora- 
 tions do to their old and faithful servants? 
 
 On the other hand, there is no doubt but that the people of the 
 United States would generally look with disfavor on such a proposal. 
 The popular objection seems to be based mostly on a well-grounded 
 fear that a civil pension is bound to become enormously expensive, 
 especially in a Eepublic. That there are also sound economic reasons 
 why the adoption of any plan that is at all comparable to a civil pen- 
 sion would be unwise for the State and disadvantageous to the em- 
 ployees is not so well understood. Careful study of the history of 
 civil pensions in other lands gives conclusive proof, however, that the 
 pension payable out of the Public Treasury is not only costly for the 
 Government — that is, for the taxpayers of the country — but that it is 
 demoralizing to the service, and finally that, contrary to the general 
 impression, it works a real hardship on the employees themselves. 
 
 The Civil Pension is Expensive. 
 
 A civil pension is bound to become enormously expensive, especially 
 under a republican form of government, where the lawmakers must 
 depend on popular favor for election. The difficulty of controlling 
 legislation affecting pensions is well illustrated in the case of our own 
 military and naval pensions. Although the United States makes 
 provision for very few kinds of pensions,^ its outlay for pensions is 
 notoriously great. Since the Civil War it has paid out about four 
 billions of dollars in pensions to war veterans and their dependents. 
 It is not likely that the people of the country generally would wel- 
 come in addition a civil pension list with all its possibilities of abuse. 
 Even were the list to be of most modest dimensions at the time of its 
 establishment, it would be sure to grow in length and increase in cost- 
 liness as time went on, for there is a constant tendency, under a pen- 
 
 1 The only persons pensioned by the United States Government, besides war veterans 
 and their dependents, are officers and enlisted men of the Army, Navy, and Marine Corps, 
 and commissioned officers, warrant officers, and enlisted men of the Revenue-Cutter 
 Service, Army and Navy paymasters' clerks, and judges of the Supreme Court and of the 
 United States courts. It is customary to pension the widows of deceased Presidents and 
 to grant a year's salary to the widows of deceased Members of Congress, but this is done 
 by special act of Congress and not under any general statute. 
 
40 RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 sion system, to extend its benefits to new classes of public servants. 
 Such irresistible pressure would be brought to bear on Congress to 
 include one class of employees after another under the system that 
 ultimately all members of the executive civil service, classified and un- 
 classified, to the number of about 300,000, would be declared pen- 
 sionable. While the country as a whole looks with antagonism on 
 any increase of expenditures for pensions, yet everyone knows that 
 the individual citizen with a claim usually feels justified in urging 
 it upon Congress. 
 
 COST OF CIVIL PENSIONS IN ENGLAND. 
 
 It is hardly to be expected that, if the United States were to grant 
 pensions to its civil employees, its experience would be any more 
 favorable than that of England has been. When the Eidley Com- 
 mission was appointed in England in 1886 to inquire into " the con- 
 dition of the civil establishments," a subject which interested the 
 members of the commission particularly was the cost of superannua- 
 tion. Valuable data on this subject were supplied by Sir Herbert 
 Maxwell and Mr. Frank Mowatt, two prominent officials of the 
 Treasury. Sir Herbert showed the growth of the civil-service vote 
 for superannuation from the years 1833-34 to 1868-69 by the follow- 
 ing table : ^ 
 
 Years. 
 
 Amount. 
 
 Years. 
 
 Amount. 
 
 Years. 
 
 Amount. 
 
 1833 34 
 
 $272,363 
 286, 432 
 322, 250 
 359, 659 
 386, 079 
 404, 951 
 427, 206 
 442, 008 
 399, 053 
 408, 786 
 395, 646 
 417,546 
 
 1845-46 
 
 $390, 780 
 393,213 
 424, 359 
 375, 694 
 535,884 
 529,319 
 526, 580 
 658, 725 
 647,147 
 660, 734 
 674, 541 
 713, 122 
 
 1857-58 
 
 $777,871 
 
 1834-35 
 
 1846-47 
 
 1858-59 
 
 792, 699 
 
 1835-36 
 
 1847-48 
 
 1859-60 
 
 812,652 
 
 1836 37 . .. 
 
 1848-49 
 
 1860-61 
 
 864, 840 
 
 1837 38 
 
 1849-50 
 
 1861-62 
 
 900, 984 
 
 1838 39 . . - 
 
 1850-51 
 
 1862-63 
 
 898,872 
 
 1839 40 
 
 1851-52 
 
 1863-64 
 
 858, 752 
 
 1840-41 
 
 1852-53 
 
 1864-65 
 
 902, 585 
 
 1841 42 
 
 1853-54 
 
 1865-66 
 
 872, 963 
 
 1842 43 
 
 1854-55 
 
 1866-67 
 
 904, 624 
 
 1843 44 
 
 1855-56 
 
 1867-68 
 
 958,871 
 
 1844-45 
 
 1856-57 
 
 1868-69 
 
 1, 337, 640 
 
 
 
 
 
 The cost of superannuation in the Kevenue Departments, the 
 Admiralty, the War Office, and the Royal Irish Constabulary was not 
 included in the civil-service vote after 1832. In 1868-69 a number of 
 noneffective charges were transferred from various effective votes 
 to the superannuation estimate. After 1869-70 the appropriation 
 accounts, as given by Sir Herbert Maxwell, were as follows : ^ 
 
 1 Second Report of Commission on Civil Establishments. 18S8. Appendix, p. 422. 
 
RETIREMENT OP SUPERANISri) ATED CIVIL-SERVICE EMPLOYEES, 41 
 
 Years. 
 
 Superan- 
 nuation 
 allowances. 
 
 Compensa- 
 tion 
 allowances. 
 
 Compas- 
 sionate 
 allow- 
 ances. 
 
 Compensa- 
 tion and 
 compas- 
 sionate 
 
 allowances. 
 
 Gratui- 
 ties. 
 
 Total.' 
 
 1869-70 
 
 $802,530 
 851,190 
 912, 177 
 948, 724 
 1,014,023 
 1,050,984 
 1,089,449 
 1,106,856 
 1,136,269 
 1,160,140 
 1,178,837 
 1,238,018 
 1,203,450 
 1,202,536 
 1,279,734 
 1,321,269 
 1,356,736 
 
 (.') 
 
 (2) 
 (2) 
 C) 
 (') 
 
 $1,065,150 
 977, 402 
 962, 599 
 938,904 
 905, 140 
 891, 791 
 892, 297 
 876, 160 
 851, 535 
 
 (») 
 (^) 
 
 (') 
 m 
 
 $14,264 
 15, 349 
 15, 680 
 17, 320 
 18, 824 
 18, 984 
 19,850 
 19, 266 
 17, 568 
 
 $818, 467 
 
 971,626 
 
 1,052,809 
 
 1,055,422 
 
 1,061,826 
 
 1,030,224 
 
 1,002,752 
 
 1,029,425 
 
 1,079,414 
 
 992,751 
 
 978, 279 
 
 956, 224 
 
 923,964 
 
 910, 775 
 
 912,147 
 
 895, 426 
 
 869, 103 
 
 $5,742 
 77,226 
 25,402 
 28, 200 
 18,483 
 
 9,392 
 11,373 
 
 6,346 
 14, 132 
 12,565 
 13,592 
 14,089 
 11,782 
 11,816 
 12, 687 
 11,972 
 13,315 
 
 $1,622 798 
 
 1870-71 
 
 1,900,042 
 2,000,438 
 2,032,406 
 2, 094, 332 
 2, 090, 600 
 2, 103, 574 
 2, 142, 627 
 
 1871-72 
 
 1872-73 
 
 1873-74.. .. 
 
 1874-75 
 
 1875-76 
 
 1876-77 
 
 1877-78 
 
 2,229,815 
 2, 165, 456 
 2,171,194 
 
 1878-79 . . 
 
 1879-80 
 
 1880-81 
 
 2, 208, 330 
 2,199,449 
 2, 189, 735 
 
 1881-82 
 
 1882-83 
 
 1883-84 
 
 2,204,568 
 2,228,667 
 2,239,155 
 
 1884-85 
 
 
 
 1 The sum of the items does not equal this total; the figures are, however, the equivalents of the English 
 money, as computed by the Bureau of Labor. 
 
 2 Not separately reported. 
 
 For the year 1887-88 Sir Herbert stated that a vote of £476,082 
 ($2,316,853) was taken in the civil-service estimates for superannua- 
 tion and retired allowances, besides £1,412,622 ($6,874,525) provided 
 for superannuation in the estimates of the several departments. Thus 
 the total sum voted for superannuation of public servants (exclusive 
 of military and naval pensions) was £1,888,704 ($9,191,378). It is 
 not clear from Sir Herbert's statement whether this sum included 
 allowances to the Royal Irish Constabulary and the Dublin Metro- 
 politan Police or not, but comparison with Mr. Mowatt's statement of 
 the cost of civil pensions for the following year, 1888-89, would seem 
 to indicate that it did. Mr. Mowatt's statement shows that the total 
 sum voted for the superannuation of public officers in that year 
 amounted to £1,907,863 ($9,284,615), including the Royal Irish Con- 
 stabulary and Dublin Metropolitan Police, and to £1,581,992 ($7,698,- 
 764) excluding them. Besides this great sum voted by Parliament 
 for that year, civil pensions to the amount of £345,517 ($1,681,458) 
 were granted out of the Consolidated Fund, which would make a 
 total expenditure of £2,253,380 ($10,966,073) for civil pensions.^ 
 
 The increase in the cost of pensions did not cease in 1888 with the 
 dissolution of the Ridley Commission. Fourteen years later, in 1902, 
 when the Courtney Commission was appointed " to inquire whether 
 it is possible so to amend the existing system of superannuation of 
 persons in the civil service of the State as to confer greater and more 
 uniform advantages upon those to whom it applies without increasing 
 the burden which it imposes on the taxpayer," it was found that the 
 pension charge had continued to increase steadily from year to year, 
 the amount of the original estimate having risen from £1,592.597 
 ($7,750,373) in 1888-9 to £2,035,360 ($9,905,079) in 1902-3. Mr. 
 T. L. Heath, a principal clerk in the Treasury, presented to the com- 
 
 1 See Civil Service Retirement, Great Britain and New Zealand, S. Doc. 290, 61st Cong., 
 2d sess., p. 133. 
 
42 EETIEEMENT OF SUPERANNUATED ClYlL-SERVICE EMPLOYEES. 
 
 mission the following figures to show the amount of the original 
 estimates for pensions during each of the years that had elapsed 
 since the Kidley Commission reported in 1888. 
 
 Superannuation and retired allowances — original estimates. 
 
 I 
 
 al- 
 
 Superannuation 
 lowances 
 
 Compensation allow- 
 ances 
 
 Gratuities 
 
 Compassionate allow- 
 ances.. 
 
 Prison oflBeers' com- 
 mutations 
 
 Compassionate fund. . 
 
 Middlesex registry, 
 pensions, etc 
 
 Mercantile marine, 
 pensions, etc 
 
 Total 
 
 War office 
 
 Admiralty 
 
 Customs 
 
 Inland revenue 
 
 Post office, etc 
 
 County court officers, 
 Ireland 
 
 Total. 
 
 1888-89 1889-90 1890-91 1891-92 1892-93 1893-94 1894-95 1895-96 
 
 $1, 489, 568 
 
 756,896 
 9,733 
 
 16,507 
 
 36, 499 
 
 2,309,203 
 867,697 
 
 1,609,838 
 964,905 
 
 1, 138, 975 
 854,377 
 
 5,378 
 
 7,750,373 
 
 $1,533,911 
 
 735, 508 
 9,733 
 
 15,266 
 
 40,392 
 
 3,407 
 
 $1,543,873 
 
 717,337 
 14, 599 
 
 12,852 
 
 43, 798 
 3,407 
 
 2,338,217 
 864, 290 
 
 1, 636, 117 
 957,854 
 
 1,096,593 
 865, 634 
 
 5,377 
 
 7,764,082 
 
 2,335,866 
 791, 293 
 
 1,609,352 
 972, 531 
 
 1,044,083 
 886, 287 
 
 5,378 
 
 7, 644, 790 
 
 $1,637,422 
 
 673,767 
 13,626 
 
 10,940 
 
 45,988 
 3,407 
 
 2,385,150 
 779, 127 
 
 1,553,387 
 966, 078 
 
 1,018,889 
 931,964 
 
 5,377 
 
 7,639,972 
 
 $1,633,971 
 
 640,203 
 9,733 
 
 8,594 
 
 47,692 
 3,406 
 
 2,343,599 
 749,928 
 
 1,526,621 
 949,094 
 
 1,025,863 
 
 1,013,269 
 
 5,377 
 
 7, 613, 751 
 
 $1,793,602 
 
 600, 920 
 9,733 
 
 10,040 
 
 33,301 
 3,407 
 
 2,711 
 
 $1, 871, 797 
 
 553, 467 
 9,733 
 
 14,220 
 
 31,613 
 
 3,406 
 
 2,711 
 
 2, 453, 714 
 759, 661 
 
 1,519,321 
 957,956 
 
 1,019,001 
 
 1,066,153 
 
 5,377 
 
 17,781,392 
 
 2, 486, 947 
 801,513 
 
 1,519,321 
 931,380 
 
 1,028,574 
 
 1,117,606 
 
 5,377 
 
 17,888,008 
 
 $1,977,215 
 
 537, 140 
 9,733 
 
 14,010 
 
 27,296 
 3,407 
 
 2,711 
 
 2,571,512 
 824,385 
 
 1, 544, 140 
 916, 021 
 
 1,053,602 
 
 1,159,633 
 
 5,377 
 
 >8, 071, 475 
 
 Vote. 
 
 1896-97 
 
 1897-98 
 
 1898-99 
 
 1899-1900 
 
 1900-1901 
 
 1901-2 
 
 Superannuation al- 
 lowances 
 
 Compensation al- 
 lowances 
 
 Gratuities 
 
 Compassionate al- 
 lowances 
 
 Prison officers' com- 
 mutations 
 
 Compassionate fund 
 
 Middlesex registry, 
 pensions, etc 
 
 Mercantile martae, 
 pensions, etc 
 
 Total 
 
 War office 
 
 Admiralty 
 
 Customs 
 
 Inland revenue 
 
 Post office, etc 
 
 County court offi- 
 cers, Ireland 
 
 $2,071,469 
 
 500, 558 
 12, 166 
 
 17,821 
 
 23, 384 
 3,407 
 
 2,015 
 
 $2, 134, 345 
 
 459,835 
 12, 166 
 
 15,013 
 
 17,729 
 3,407 
 
 1,723 
 
 $2,171,418 
 
 422, 909 
 12, 166 
 
 14, 755 
 
 13, 490 
 3,406 
 
 1,723 
 
 $2,244,771 
 
 395,033 
 "12, 166 
 
 34, 980 
 
 9,402 
 3,407 
 
 1,324 
 
 59, 186 
 
 $2, 263, 312 
 
 381, 641 
 12, 166 
 
 19, 150 
 
 5,631 
 3,406 
 
 1,324 
 
 56, 266 
 
 $2,387,057 
 
 354,014 
 12, 166 
 
 33, 910 
 
 3,849 
 3,407 
 
 1,324 
 
 52, 183 
 
 $2, 523, 266 
 
 330,061 
 12,166 
 
 34, 280 
 
 2,350 
 3,406 
 
 1,324 
 
 49, 643 
 
 2,630,820 
 845,798 
 
 1, 578, 693 
 896,288 
 
 1,040,112 
 
 1,224,699 
 
 3,105 
 
 2, 644, 218 
 853,097 
 
 1, 593, 292 
 900,750 
 
 1,054,892 
 
 1,317,162 
 
 3,105 
 
 2, 639, 867 
 862, 830 
 
 1, 593, 292 
 908, 517 
 
 1, 145, 224 
 
 1,483,548 
 
 2,760,269 
 893,976 
 
 1,661,910 
 935, 249 
 
 1,223,063 
 
 1,717,821 
 
 2,742, 
 
 875, 970 
 1,671,643 
 
 941, 940 
 1,271,018 
 1,863,378 
 
 2,847,910 
 917,364 
 
 1,657,530 
 933,570 
 
 1,271,621 
 
 1,963,876 
 
 2, 956, 496 
 939, 234 
 
 1, 703, 762 
 934, 280 
 
 1,310,510 
 
 2,059,065 
 
 1,732 
 
 Total. 
 
 1 8, 217, 499 
 
 '8,364,793 
 
 I 8, 631, 555 
 
 19,256,983 
 
 1 9, 338, 453 
 
 19,538,335 
 
 9,905,079 
 
 1 The sum of the items does not equal this total; the figures are, however, the equivalents of those in the 
 original, as computed by the Bureau of Labor. 
 
 It will be noted that the return for 1902-3 showed that the charge 
 for civil pensions, gratuities, compensation allowances, and all those 
 allowances which came within the scope of the Courtney Commis- 
 sion's inquiry was £2,035,360 ($9,905,079), exclusive of pensions 
 awarded under separate acts to the Royal Irish Constabulary and the 
 Dublin Metropolitan Police, which brought the total up to something 
 like £2,500,000, or over $12,000,000.^ 
 
 1 See Civil Service Retirement, Great Britain and New Zealand, S. Doc. 290, 61st Cong., 
 2d sess., p. 149. 
 
EETIREMENT OF SUPEEANNUATED CIVIL-SERVICE EMPLOYEES. 43 
 
 It should be remembered also that this great and growing sum is 
 paid annually to a civil service of not one-half the size of our classified 
 service. It was stated in 1903 that the amount of money paid for 
 civil pensions in England was from 16 to 20 per cent — ^varying with 
 the department — of the amount of salaries.^ On that basis, since the 
 Government pay roll of the United States is upward of $200,000,000 
 a year, a civil pension in this country similar to that in England 
 would cost from $30,000,000 to $40,000,000 a year, and there would be 
 no likelihood of its ever growing less, but quite the contrary. 
 
 ABUSES TO WHICH PENSION SUPPORTED WHOLLY OE IN PART FROM PUBLIC TREASURY 
 IS LIABLE, WHICH MAKE IT COSTLY. 
 
 It will be noted that the English superannuation estimates include 
 large sums under the head of "gratuities," "compensation allow- 
 ances," and " compassionate allowances," as well as superannuation 
 allowances. This is an indication of the abuses to which a pension 
 system supported wholly or in part out of the public treasury is 
 always liable. 
 
 Q-ratuities to employees leaving before retirement age. 
 
 The pension charge is never limited to the payment of annual 
 allowances to those who have reached the legally pensionable age. 
 Complaints are always lodged in behalf of a large number of those 
 who retire before that age for one reason or another. It comes to be 
 generally customary, under any such system, that after an employee 
 has held office a number of years, usually 10, he is held to have a 
 vested right in the pension toward which those 10 years will count 
 if he remains in the service, and if he leaves the service after 10 
 years and before reaching pensionable age, it is argued that he should 
 be given either a pro rata portion of that pension or a gratuity cor- 
 responding to the surrender value of his pension. It can easily be 
 seen how great an increase to the pension charge this custom of 
 granting gratuities might cause and how difficult it must be to refuse 
 or control the bestowal of such recognition on an official serving even 
 a short time under a pension system. These gratuities are known to 
 have been a source of great abuse in other countries, large numbers 
 of employees retiring in the prime of life to engage in private busi- 
 ness, after having held public office only long enough to entitle them 
 to the privilege of an allowance. 
 
 Such a system once established, however, the rights of the em- 
 ployees are always insisted upon under it and the hardship entailed 
 on the taxpayers is likely to be ignored. The tenderness exhibited for 
 every person who has served the State even a very few years strikes 
 the American observer as highly absurd when it is borne in mind that 
 
 1 See Minutes of Evidence to Report of the Royal Commission on Superannuation in 
 the Civil Service, London, 1903, p. 7. 
 
44 RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 such consideration can only be shown at the expense of the general 
 public. When, for instance, the superannuation act of 1909, modifying 
 the civil pension system of England, was under discussion in the House 
 of Commons, the Financial Secretary to the Treasury, Mr. Hobhouse, 
 who had charge of the bill, explained its intent and purpose, laying 
 emphasis on the fact that the bill made much more liberal provision 
 for the civil servants than they had ever hoped to obtain, and criticiz- 
 ing another scheme previously proposed, as defective, because " there 
 was no provision made for those who retired from the civil service 
 before they had completed 10 years' service, and thus became pen- 
 sionable, except that gratuity of a month's pay for every year, which 
 really was quite inadequate." ^ To the ordinary self-reliant person 
 not corrupted by contact with a pension system it would seem as if 
 the State had treated an employee more than generously in giving 
 him a bonus, at public expense, of one month's pay for every year of 
 service when his devotion to the State had not been sufficient to hold 
 him through one decade. If he had been properly compensated dur- 
 ing his period of service, why should the State call on the taxpaying 
 public, already heavily burdened, to make him a parting gift — a 
 purse of $800 to the hundred-dollar-a-month clerk who took his leave 
 after eight years' service? And yet Mr. Hobhouse characterized 
 such recognition as " really quite inadequate." 
 
 Compassionate allotoances to dependents. 
 
 " Compassionate allowances " for widows and orphans, where the 
 pension system does not make definite provision for pensioning them, 
 are sure to be allowed in time. The payment of gratuities to relatives 
 of deceased officers was characterized by the actuaries employed to 
 value the retirement fund of New South Wales, Australia, as " re- 
 pugnant to the principles of a superannuation scheme." It leads 
 to abuses of air kinds, but not many officials engaged in the adminis- 
 tration of a pension fund would be likely to take the same view when 
 considering the case of dependents " in necessitous circumstances," 
 especially if the latter can be relieved out of the public treasury. 
 
 Pensions increased on account of professional qualifications. 
 
 One way in which the pension charge in England and Canada has 
 been increased is by a special show of consideration for members of 
 the civil service who have " professional or other peculiar qualifica- 
 tions not ordinarily to be acquired in the public service " — to quote 
 the English superannuation act of 1859. In such cases it has been 
 customary to add " a number of years not exceeding 20 " in comput- 
 ing the amount of superannuation allowance which may be granted 
 
 » See Civil Service Retirement, Great Britain and New Zealand. S. Doc. 290, 61st 
 Cong., 2d Bess., p, 176. 
 
RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 45 
 
 to the employee, a practice that has undoubtedly helped to swell the 
 annual vote for pensions. 
 
 Retirement on " abolition terms." 
 
 Probably the greatest abuse of pension systems has come through 
 provision for retirement on what are spoken of as " abolition terms ; " 
 that is, provisions for compensating officers removed from the pub- 
 lic service in consequence of the abolition of the oifices in which they 
 are employed. The defense advanced for such a practice is the theory 
 that by the abolition of offices "improvements may often be facili- 
 tated in the organization of a department by which greater efficiency 
 and economy can be effected." It would seem, however, as if places 
 could usually be found for the incumbents of abolished offices in 
 other departments until such time as they reached pensionable age 
 and could be legitimately retired. The opportunity of retiring indi- 
 viduals on abolition terms presents a temptation, however, which 
 politicians are not usually strong enough to resist, and a pension 
 system maintained under a form of government characterized by a 
 shifting of power from one political party to another is bound to 
 become at times the sport of political necessities. Such has been the 
 case in England under a straight pension system, and in Canada and 
 Australia under contributory schemes in which the Government has 
 been responsible — as it must always be — for the deficit. 
 
 ABUSE OF ABOLITION TERMS IN ENGLAND. 
 
 The hearings before the Eidley Commission in England in 
 1886-1888 abound in criticism of the custom of retiring officials on 
 abolition terms at the expense of the State. Complaint was made, too, 
 that the retirement of a particular individual was sometimes rightly 
 desired by the head of an office on the ground of incompetency, rather 
 than difference of political faith, but that there was no way to get 
 rid of him except by resort to the awkward but effectual device of 
 abolishing the office which he held and retiring him on a pension. 
 While this procedure might simplify the conduct of his office for the 
 head of a bureau, it was not fair to the taxpayers or to the other 
 clerks in the same office to thus reward incompetency. 
 
 ABUSE OF ABOLITION TERMS IN CANADA. 
 
 The history of superannuation and retirement legislation in Canada 
 o-ives even more striking evidence of the way in which a system for the 
 retirement of superannuated Government employees in which con- 
 tributions are collected into a common fund and which depends on 
 the Government to supply a deficit, and to that extent is a straight 
 pension system, can be grossly abused for party purposes. Study 
 of the parliamentary debates carried on^ year after year, until 
 the superannuation act of 1870 was superseded by the retirement act 
 
46 RETIEEMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 of 1898, shows conclusively that the change was brought about chiefly 
 through the persistent agitation of certain members of the Liberal 
 Party, who contended that the Conservative Party had administered 
 the superannuation scheme for party ends and purposes at an enor- 
 mous annual cost to the country. The point they brought out with 
 special emphasis was that any measure which puts into the hands of 
 a ministry the power to eliminate from public office an individual 
 whose political faith differs from that of the ruling powers, or whose 
 place is wanted for one of more congenial views, by retiring him, at 
 public expense, on a pension is a bad and dangerous law. It was 
 shown that men had been superannuated in the prime of life, at the 
 ages of 31, 42, 45, 50, etc., and were drawing pensions from the people 
 while other men were performing the duties those superannuated 
 were well able to discharge, that the evil was growing, the number 
 of those retired before the legal age increasing every year, and the 
 pension charge on the State growing annually heavier. The more 
 earnest opponents of the system did not attempt to deny that the 
 opposition, when placed in power, would probably behave as badly 
 as did the existing Government, but attacked the law as bad in prin- 
 ciple, whoever might administer it. 
 
 It was shown that the country with its little service of less than 
 5,000 people had suffered a net loss in 22 years of over two and a 
 half million dollars, that there were many individuals under the age 
 of 50 to be found on the superannuation list and a considerable 
 number even below the age of 40, some having been superannuated 
 when they had served less than 10 years (the minimum period on 
 which an application for superannuation could be made) by taking 
 advantage of the clause in the law which allowed years to be added 
 to the term of service for reasons such as efficient service, technical 
 knowledge, and so on. It was not, however, until the question was 
 made a party issue and the Liberal Party came into power, for the 
 first time in 18 years, on popularity given them largely by their de- 
 nunciation of these abuses, that a serious attempt was made to correct 
 them. The superannuation system was accordingly closed in 1898 
 to all future entrants to the service, and a system of compulsory 
 savings was established in its stead. This system, because of certain 
 inherent faults which will be explained later on, has not been found 
 satisfactory, but the agitation which led to the change is highly 
 instructive.^ 
 
 ABUSE OF ABOLITION TERMS IN NEW SOUTH WALES, AUSTRALIA. 
 
 No less instructive as to the way in which the cost of a retirement 
 system may be increased by the abuse of " abolition terms " is the 
 experience of the colony of New South Wales, Australia, where a 
 superannuation fund based on an unsound contributory plan of 
 
 1 See forthcoming report, Civil Service Retirement, Canada, by Herbert D. Brown. 
 
RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 47 
 
 retirement was established in 1881, speedily became insolvent, and was 
 abandoned after only 11 years' trial, leaving the Government no 
 choice except to assume the obligations of the fund. The first investi- 
 gation of the fund, only five years after its establishment, showed a 
 deficiency due largely to the fact that, in order to facilitate a scheme 
 of reorganization and retrencliment, the Government had dismissed 
 from the service a considerable number of employees who were 
 neither incapacitated nor yet of pensionable age. Some of these were 
 rewarded with gratuities which were paid by the Government and 
 others were allotted retiring allowances drawn from the fund in ac- 
 cordance with a provision in the law that when the services of any 
 officer were dispensed with in consequence of the abolition of his office 
 he might be retired upon a superannuation allowance. As many of 
 those thus forced into retirement were in the prime of life, some even 
 as young as 30 years of age, it is apparent that the cost of pensioning 
 them was very great. This policy was continued by an obstinate 
 Government year after year, despite the warnings of the actuaries. It 
 was computed in 1901 that the amount paid to pensioners retired 
 on abolition terms was at least $2,092,595, or nearly half the total 
 pension payments, which had been $4,771,267. Established in the 
 first place on an unscientific basis, the fund was quite unable to 
 bear the inroads made on it by the policy of pensioning whole offices 
 of employees in order to show a large apparent saving in salaries. 
 When it became exhausted, the Government, being partly responsible, 
 was impelled in common honor to assume its liabilities. The Govern- 
 ment is therefore engaged at present in paying pensions and gratuities 
 to the civil servants whom it had required to contribute to a fund it 
 had helped to make insolvent. It will have to continue to do so until 
 all those who entered the service before 1895, the year of the abandon- 
 ment of the plan, are dead, an obligation that will probably not be 
 fulfilled short of 40 years hence, and in the meantime the original 
 problem of superannuation in the Government service is no nearer 
 solution than it was in 1884, when the civil-service act established the 
 ill-fated retirement plan.^ 
 
 Enough has been said to show the difficulty of keeping a pension 
 list within bounds wherever the whole or a part of the expense is paid 
 out of the public exchequer. Instead of being able to reduce that 
 charge from a probable 16 per cent of the pay roll, such as the ex- 
 perience of England has shown necessary, it would seem more likely 
 that, beset with temptations on all sides, those entrusted with the 
 administration of a civil pension in the United States would show 
 themselves quite as human and fallible as have similar officials in 
 other countries, and the cost would be proportionately as great here 
 as under any other Government. 
 
 1 See Civil Service Retirement, New South Wales, Australia, Sen. Doc. 420, 61st Cong., 
 2d sess. 
 
48 EETIKEMENT OP SUPEEAISTNUATED CIVIL-SERVICE EMPLOYEES. 
 PEOBABLE LEAST COST OF CIVIL PENSION IN THE UNITED STATES. 
 
 The following table shows that the cost of a civil pension confer- 
 ring the same benefits as the Perkins bill (S. 1944) and payable en- 
 tirely out of the Public Treasury would be $232,773,690 during the 
 next 35 years, as contrasted with the cost of the Perkins bill for the 
 same period at $97,553,023. The difference in cost between the two 
 measures for that length of time would be $135,220,667, and it would 
 increase as the years went on, for the cost of the pension would grow 
 year by year, as shown by the table, whereas the cost of the Perkins 
 bill would be nil at the end of 78 years, or by the time every one now 
 in the service is dead.* 
 
 Table I. — Showing comparative cost to the Government during first 35 years 
 of retiring employees on straight pensions and under the Perkins hill {8. 
 
 im). 
 
 
 All employees. 
 
 General employees. 
 
 Period. 
 
 Excess cost 
 
 of retiring all 
 
 employees 
 
 on straiglit 
 
 pensions 
 over cost of 
 retiring all 
 employees 
 
 under 
 Perkins bill 
 during first 
 
 35 years. 
 
 Cost of retir- 
 ing all em- 
 ployees 
 under 
 Perkins bUl 
 shown for 
 period of 
 35 years. 
 
 Cost of retir- 
 ing all em- 
 ployees on 
 
 straight pen- 
 sion confer- 
 
 rmg benefits 
 of Perkins 
 bill during 
 
 first 35 years. 
 
 Excess cost 
 of retiring 
 general em- 
 ployees on 
 straight pen- 
 sions over 
 cost of retir- 
 mg general 
 employees 
 
 under 
 
 Perkins bill 
 
 during first 
 
 35 years. 
 
 Cost of retir- 
 ing gen- 
 eral em- 
 ployees under 
 Perkins bill 
 
 during 
 first 35 years. 
 
 Cost of retir- 
 ing gen- 
 eral em- 
 ployees on 
 straight pen- 
 sion confer- 
 ring benefits 
 of Perkins 
 bill sho\vn 
 during first 
 35 years. 
 
 
 $135,220,667 
 
 $97,553,023 
 
 $232,773,690 
 
 $52,850,870 
 
 $51,397,218 
 
 $104,248,088 
 
 
 
 1,121,795 
 1,261,819 
 1,390,485 
 1,556,632 
 1,705,135 
 1,861,499 
 2,003,086 
 2,129,118 
 2,252,506 
 2,317,860 
 2,392,028 
 2,441,271 
 2,491,484 
 2,559,337 
 2,621,035 
 2,679,979 
 2,726,937 
 2,791,401 
 2,871,945 
 2,940,921 
 3,047,310 
 3,138,272 
 3,235,543 
 3,323,097 
 3,390,712 
 3,442,268 
 3,469,245 
 3,481,754 
 3,495,463 
 3,483,861 
 3,454,704 
 3,419,266 
 3,373,275 
 3,314,099 
 3,232,814 
 3,135,067 
 
 1,121,795 
 1,275,827 
 1,426,988 
 1,633,145 
 1,832,957 
 2,057,640 
 2,280,234 
 2,499,671 
 2,726,246 
 2,890,539 
 3,099,086 
 3,285,789 
 3,504,950 
 3,770,456 
 4,033,763 
 4,321,413 
 4,602,513 
 4,950,113 
 5,361,782 
 5,629,086 
 6,315,522 
 6,805,614 
 7,369,7.37 
 7,984,790 
 8,562,182 
 9,183,536 
 9,777,504 
 10,335,680 
 10,967,787 
 11,552,699 
 12,154,724 
 12,777,377 
 13,393,514 
 13,958,139 
 14,458,938 
 14,871,954 
 
 """"'6,' 834' 
 
 20,428 
 
 45,745 
 
 77,505 
 
 125,051 
 
 179,179 
 
 240,654 
 
 298,473 
 
 341,583 
 
 405,951 
 
 463, 689 
 
 528,099 
 
 696,568 
 
 669,621 
 
 738,254 
 
 813,344 
 
 902,076 
 
 1,006,032 
 
 1,107,669 
 
 1,284,459 
 
 1,428,818 
 
 1,611,255 
 
 1,814,930 
 
 2,010,982 
 
 2, 192, .352 
 
 2,375,382 
 
 2,513,964 
 
 2,721,595 
 
 2,927,127 
 
 3,177,801 
 
 3,449,223 
 
 3,762,363 
 
 4,061,247 
 
 4,350,884 
 
 4,601,733 
 
 706,290 
 803, 660 
 892,056 
 1,020,092 
 1,123,599 
 1,249,851 
 1,358,948 
 1,449,713 
 1,532,090 
 1,553,682 
 1,577,259 
 1,570,667 
 1,556,937 
 1,545,965 
 1,537,544 
 1,511,480 
 1,485,348 
 1,465,143 
 1,456,133 
 1,438,410 
 1,465,515 
 1,482,258 
 1,508,111 
 1,530,210 
 1,549,001 
 1,548,476 
 1,544,175 
 1,538,943 
 1,543,. 3.58 
 1,546,149 
 1,547,352 
 1,552,364 
 1,561,293 
 1,564,071 
 1,551,927 
 1,529,148 
 
 706,290 
 
 
 14,668 
 36, 503 
 
 76,513 
 
 127,822 
 
 196,141 
 
 277,148 
 
 370,553 
 
 473,740 
 
 572,679 
 
 707,058 
 
 844,518 
 
 1,013,466 
 
 1,211,119 
 
 1,412,728 
 
 1,641,434 
 
 1,875,576 
 
 2,158,712 
 
 2,489,837 
 
 2,088,165 
 
 3,268,212 
 
 3,667,342 
 
 4,131,194 
 
 4,661,693 
 
 5,171,470 
 
 5,741,268 
 
 6,308,259 
 
 6,853,926 
 
 7,472,324 
 
 8,068,8.38 
 
 8,700,020 
 
 9,358,111 
 
 10,020,239 
 
 10,644,040 
 
 11,226,124 
 
 11,736,887 
 
 810,494 
 
 
 912,484 
 
 
 1,065,837 
 
 
 1,201,104 
 
 
 1,374,902 
 
 
 1,538,127 
 
 7 years ,-.- 
 
 1,690,367 
 1,830,563 
 
 
 1,895,265 
 
 
 1,983,210 
 
 
 2,034,356 
 
 
 2,085,036 
 
 
 2,142,533 
 
 
 2,207,165 
 
 
 2,249,734 
 
 
 2,298,692 
 
 
 2,367,219 
 
 
 2,462,165 
 
 
 2,546,079 
 
 
 2,749,974 
 
 
 2,911,076 
 
 
 3,119,366 
 
 
 3,345,140 
 
 
 3,559,983 
 
 
 3,740,828 
 
 
 3,919,557 
 
 
 4,052,907 
 
 
 4,264,953 
 
 
 4,473,270 
 
 30 years 
 
 4,725,153 
 
 
 5,001,587 
 
 32 years 
 
 5,323,656 
 
 33 years 
 
 5,625,318 
 
 34 years 
 
 5,902,811 
 
 35 years 
 
 6, 130, 881 
 
 
 
 
 
 1 See Table XXVIII, p. 160. 
 
RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 49 
 
 Table I. — FHimoing comparative cost to the Government during first 35 years 
 of retinng employees on straight pensions and under the Perkins bill (8 
 Z944)— Continued. 
 
 
 Mail carriers. 
 
 Railway postal clerks. 
 
 Period. 
 
 Excess cost 
 of retiring 
 mail carriers 
 on straight 
 pensions over 
 cost of retir- 
 ing mail car- 
 riers under 
 Perkins bill 
 during first 
 35 years. 
 
 Cost of retir- 
 ing mail car- 
 riers under 
 Perkins bill 
 during first 
 35 years. 
 
 Cost of retir- 
 ing mail car- 
 riers on 
 straight pen- 
 sion confer- 
 ring benefits 
 of Perkins 
 bill during 
 first 35 years. 
 
 Excess cost 
 of retiring 
 railway 
 postal clerks 
 on straight 
 pensions over 
 cost of retir- 
 ing railway 
 postal clerks 
 
 under 
 
 Perkins bill 
 
 during first 
 
 35 years. 
 
 Cost of retir- 
 ing railway 
 postal clerks 
 
 under 
 
 Perkins bill 
 
 during first 
 
 35 years. 
 
 Cost of retir- 
 ing railway 
 postal clerks 
 on straight 
 pension con- 
 ferring bene- 
 fits of 
 Perkins bill 
 during first 
 35 years. 
 
 
 S57, 621, 100 
 
 $26,153,595 
 
 $83,774,695 
 
 $24,748,697 
 
 $20,002,210 
 
 $44,750,907 
 
 Immediately 
 
 
 156,449 
 
 187, 943 
 
 217,500 
 
 246, 545 
 
 273,947 
 
 294, Oil 
 
 312, 044 
 
 326,639 
 
 347,075 
 
 371, 103 
 
 394,799 
 
 424, 154 
 
 459,273 
 
 503, 673 
 
 542,928 
 
 597, 995 
 
 648, 186 
 
 708,207 
 
 776, 330 
 
 839,736 
 
 892, 680 
 
 940, 521 
 
 989, 799 
 
 1,036, .572 
 
 1, 072, 848 
 
 1,122,372 
 
 1, 154, 148 
 
 1,178,888 
 
 1,197,461 
 
 1,197,318 
 
 1, 188, 837 
 
 1, 172, 208 
 
 1, 146, 978 
 
 • 1,114,770 
 
 1, 079, 298 
 
 1, 040, 360 
 
 156,449 
 
 194, 135 
 
 230,582 
 
 271,397 
 
 313,056 
 
 347,887 
 
 384,969 
 
 421,557 
 
 473,543 
 
 537, 123 
 
 609, 494 
 
 696, 568 
 
 804, 870 
 
 939,402 
 
 1,066,092 
 
 1,236,911 
 
 1, 405, 327 
 
 1,607,750 
 
 1,847,105 
 
 1,940,819 
 
 2,319,568 
 
 2, 530, 315 
 
 2,764,282 
 
 3,021,658 
 
 3,255,032 
 
 3,575,876 
 
 3,871,176 
 
 4,179,929 
 
 4, 488, 219 
 
 4,753,316 
 
 5, 017, 629 
 
 5,272,635 
 
 5,516,160 
 
 5,719,931 
 
 5,912,515 
 
 6,091,418 
 
 
 259,056 
 270, 216 
 280,929 
 289, 995 
 307,589 
 317,637 
 332,094 
 352,766 
 373,341 
 393,075 
 419,970 
 446, 450 
 475,274 
 509, 699 
 540,563 
 570,504 
 593,403 
 618,051 
 639,482 
 662,775 
 689, 115 
 715,493 
 737, 633 
 756,315 
 768,863 
 771,420 
 770,922 
 763,923 
 754, 644 
 740,394 
 718,515 
 694, 694 
 665,004 
 635, 258 
 601.589 
 565,559 
 
 259,056 
 271 198 
 
 1 year 
 
 6,192 
 
 13,082 
 
 24, 852 
 
 39, 109 
 
 53,876 
 
 72, 925 
 
 94,918 
 
 126, 468 
 
 166,020 
 
 214, 695 
 
 272, 414 
 
 345,597 
 
 435, 729 
 
 523, 164 
 
 638, 916 
 
 757, 141 
 
 899,543 
 
 1,070,775 
 
 1,101,083 
 
 1, 426, 888 
 
 1,589,794 
 
 1, 774, 483 
 
 1,985,086 
 
 2, 182, 184 
 
 2,453,504 
 
 2,717,028 
 
 3,001,041 
 
 3,290,758 
 
 3,555,998 
 
 3,828,792 
 
 4, 100, 437 
 
 4,369,182 
 
 4, 605, 161 
 
 4, 833, 217 
 
 5,051,058 
 
 982 
 
 2,993 
 
 5,916 
 
 11,208 
 
 17,214 
 
 25, 044 
 
 34,981 
 
 48,799 
 
 65,076 
 
 86, 412 
 
 108, 415 
 
 139,770 
 
 178, 822 
 
 219,943 
 
 264, 264 
 
 305,091 
 
 357,093 
 
 413,030 
 
 479,413 
 
 556,865 
 
 648,730 
 
 748, 456 
 
 861, 677 
 
 978, 304 
 
 1,095,412 
 
 1,215,849 
 
 1,338,921 
 
 1, 459, 971 
 
 1,585,713 
 
 1,693,427 
 
 1,808,461 
 
 1,888,694 
 
 1,977,632 
 
 2,042,023 
 
 2,084,096 
 
 
 283, 922 
 295,911 
 318,797 
 334,851 
 357 138 
 
 3 years 
 
 4 years 
 
 5 years 
 
 () years 
 
 
 387,747 
 422 140 
 
 8 years 
 
 9 years 
 
 458, 151 
 506 382 
 
 10 years 
 
 11 years 
 
 554,865 
 615, 044 
 688,521 
 760,506 
 834,768 
 898,494 
 975 144 
 
 12 years... 
 
 13 years 
 
 
 15 years 
 
 
 17 years 
 
 
 1,052,512 
 1,142 188 
 
 19 years 
 
 20 years 
 
 1,245,980 
 1,364,223 
 1,486,089 
 1,617,992 
 1,747,167 
 1,866,832 
 1,986,771 
 2,102,844 
 2,214,615 
 2,326,107 
 2,411,942 
 2,503,155 
 2,553,698 
 2, 612, 890 
 
 21 years 
 
 22 years 
 
 
 24 years 
 
 25 years 
 
 26 years 
 
 27 years 
 
 28 years 
 
 29 years 
 
 30 years 
 
 31 years 
 
 
 33 years 
 
 
 2,643,612 
 2,649,655 
 
 
 
 74196°— S. Doc. 745, 61-3- 
 
50 hETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 The difference in cost between the civil pension and the Gillett bill 
 (H. R. 22013) would be still more striking, as shown by the following 
 table. The cost of the Gillett bill during the next 35 years would be 
 $73,136,765, or $159,636,925 less than the cost of the straight pension. 
 
 Table II. — Showing comparative cost to the Oovernment during first 35 years 
 of retiring employees on straight pensions and under the Qillett hill {H. R. 
 22013). 
 
 Period. 
 
 All employees. 
 
 Excess cost 
 
 of retiring all 
 
 employees 
 
 on straight 
 
 pensions 
 
 over cost of 
 
 retiring all 
 
 employees 
 
 under Gillett 
 
 bill during 
 
 first 35 years. 
 
 Cost of retir- 
 ing all em- 
 ployees un- 
 der Gillett 
 bill for first 
 35 years. 
 
 Cost of retir- 
 ing all em- 
 ployees on 
 straight pen- 
 sions confer- 
 ring benefits 
 of Perkins 
 bill shown 
 for first 35 
 
 General employees. 
 
 Excess cost 
 of retiring 
 general em- 
 ployees on 
 
 straight pen- 
 sions over 
 
 cost of retir- 
 ing general 
 employees 
 
 under Gillett 
 
 bill for first 
 
 35 years. 
 
 Cost of retir- 
 ing general 
 employees 
 
 under Gillett 
 
 bill shown 
 
 for first 35 
 
 years. 
 
 Cost of retir- 
 ing general 
 employees 
 on straight 
 pensions con- 
 ferring bene- 
 fits of Per- 
 kins bill 
 shown for 
 first 35 years. 
 
 $159,636,925 
 
 $73,136,765 
 
 §232,773,690 
 
 $73,291,503 
 
 $30,956,585 
 
 $104,248,088 
 
 Immediately 
 
 1 year 
 
 2 years 
 
 3 years 
 
 4 years 
 
 5 years 
 
 6 years 
 
 7 years 
 
 8 years 
 
 9 years 
 
 10 years 
 
 11 years 
 
 12 years 
 
 13 years 
 
 14 years 
 
 15 years 
 
 16 years 
 
 17 years 
 
 18 years 
 
 19 years 
 
 20 years 
 
 21 years 
 
 22 years 
 
 23 years 
 
 24 years 
 
 25 years 
 
 26 years 
 
 27 years 
 
 28 years 
 
 29 years 
 
 30 years 
 
 31 years 
 
 32 years 
 
 33 years 
 
 34 years 
 
 35 years 
 
 143,251 
 
 183,722 
 
 225,010 
 
 296,713 
 
 377,137 
 
 483,844 
 
 604,428 
 
 726,230 
 
 863,729 
 
 980,509 
 
 1,136,821 
 
 1,282,331 
 
 1,458,826 
 
 1,671,379 
 
 1,898,435 
 
 2,141,890 
 
 2,392,690 
 
 2,692,705 
 
 3,054,058 
 
 3,277,090 
 
 3,909,050 
 
 4,353,846 
 
 4,876,669 
 
 5,466,180 
 
 6,035,966 
 
 6,649,876 
 
 7,264,466 
 
 7,859,281 
 
 8,532,510 
 
 9,194,280 
 
 9,880,297 
 
 10,585,654 
 
 11,325,203 
 
 12,009,845 
 
 12,634,530 
 
 13,168,474 
 
 978,544 
 1,092,105 
 1,201,978 
 1,336,432 
 1,455,820 
 1,573,796 
 1,675,806 
 1,773,441 
 1,862,517 
 1,910,030 
 1,962,265 
 2,003,458 
 2,046,124 
 2,099,077 
 2,135,328 
 2,179,523 
 2,209,823 
 2,257,408 
 2,307,724 
 2,351,996 
 2,406,472 
 2,451,768 
 2,493.068 
 2,518,610 
 2,526,216 
 2,533,660 
 2,513,038 
 2,476,399 
 2,435,277 
 2,358,419 
 2,274,427 
 2,191,723 
 2,068.311 
 1,948,294 
 1,824,408 
 1,703,480 
 
 1,121,795 
 1,275,827 
 1,426,988 
 1,633,145 
 1,832,957 
 2,057,640 
 2,280,234 
 2,499,671 
 2,726,246 
 2,890,539 
 3,099,086 
 3,285,789 
 3,504,950 
 3,770,456 
 4,033,763 
 4,321,413 
 4,602,513 
 4,950,113 
 6,361,782 
 5,629,086 
 6,315,522 
 6,805,614 
 7,369,737 
 7,984,790 
 8, 562, 182 
 9,183,536 
 9,777,504 
 10,335,680 
 10,967,787 
 11,552,699 
 12,154,724 
 12,777,377 
 13,393,514 
 13,958,139 
 14,4.58,938 
 14,871,954 
 
 125,977 
 
 159,796 
 
 191,773 
 
 247, 796 
 
 306,150 
 
 391,087 
 
 482,702 
 
 570,325 
 
 659,329 
 
 717,534 
 
 798,130 
 
 858,814 
 
 925,760 
 
 1,002,542 
 
 1,090,965 
 
 1,164,674 
 
 1,248,229 
 
 1,344,760 
 
 1,468,023 
 
 1,583,809 
 
 1,798.518 
 
 1,976,437 
 
 2,201,062 
 
 2,453,463 
 
 2,694,741 
 
 2,910,040 
 
 3,131,832 
 
 3,313,939 
 
 3,570,962 
 
 3,834,130 
 
 4,139,178 
 
 4,468,924 
 
 4,853,520 
 
 5,217,325 
 
 5,554,128 
 
 5,835,129 
 
 580,313 
 
 650,698 
 
 720,711 
 
 818,041 
 
 894,954 
 
 983,815 
 
 1,055,425 
 
 1,120,042 
 
 1,171,234 
 
 1,177,731 
 
 1,185,080 
 
 1,175,542 
 
 ■1,159,276 
 
 1,139,991 
 
 1,116,200 
 
 1,085,060 
 
 1,050,463 
 
 1,022,459 
 
 994,142 
 
 962,270 
 
 951,456 
 
 934,639 
 
 918,304 
 
 891,677 
 
 865,242 
 
 830, 788 
 
 787,726 
 
 738,968 
 
 693,991 
 
 639,146 
 
 685,975 
 
 532,663 
 
 470,136 
 
 407,993 
 
 348,683 
 
 295,752 
 
 706,290 
 810,494 
 912,484 
 1,065,837 
 1,201,104 
 1,374,902 
 1,538,127 
 1,690,367 
 1,830,563 
 1,895,265 
 1,983,210 
 2,034,356 
 2,085,036 
 2,142,533 
 2,207,165 
 2,249,734 
 2,298,692 
 2,367,219 
 2,462,165 
 2,546,079 
 2,749,974 
 2,911,076 
 3,119,366 
 3,345,140 
 3,559,983 
 3,740,828 
 3,919,557 
 4,052,907 
 4,264,953 
 4,473,276 
 4,725,153 
 5,001,587 
 5,323,656 
 5,625,318 
 5,902,811 
 6,130,881 
 
RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 51 
 
 Table II. — Showing comparative cost to the Government during first 35 years 
 of retiring employees on straight pensions and under the Gillett bill {H. B. 
 22013)— Continxxed. 
 
 Period. 
 
 Mail carriers. 
 
 Excess cost 
 of retiring 
 mail carriers 
 on straight 
 pensions over 
 cost of retir- 
 ing mail car- 
 riers under 
 Gillett bill 
 during first 
 35 years. 
 
 Cost of retir- 
 ing mail car- 
 riers under 
 Gillett bill 
 shown for 
 first 35 years. 
 
 Cost of retir- 
 ing mail car- 
 riers on 
 straight pen- 
 sions confer- 
 ring benefits 
 of Perkins 
 bill shown 
 for first 35 
 years. 
 
 Railway postal clerks. 
 
 Excess cost 
 of retiring 
 
 railway 
 postal clerks 
 on straight 
 pensions over 
 cost of retir- 
 ing railway 
 postal clerks 
 under Gillett 
 bill for first 
 35 years. 
 
 Cost of retir- 
 ing railway 
 postal clerks 
 under Gillett 
 bill shown 
 for first 35 
 
 Cost of retir- 
 ing railway 
 postal clerks 
 on straight 
 pension con- 
 ferring bene- 
 fits of 
 Perkins bill 
 shown for first 
 35 years. 
 
 $58,189,336 
 
 Immediately 
 
 1 year 
 
 2 years 
 
 3 years , 
 
 4 years 
 
 5 years 
 
 6 years 
 
 7 years 
 
 8 years 
 
 9 years 
 
 10 years 
 
 11 years 
 
 12 years.... .. 
 
 13 years 
 
 14 years 
 
 15 years 
 
 16 years 
 
 17 years 
 
 18 years 
 
 19 years 
 
 20 years 
 
 21 years 
 
 22 years 
 
 23 years 
 
 24 years 
 
 25 years 
 
 26 years 
 
 27 years 
 
 28 years 
 
 29 years 
 
 30 years 
 
 31 years 
 
 32 years, 
 
 33 years 
 
 34 years 
 
 35 years 
 
 825,585,359 
 
 $83,774,695 
 
 $28,156,086 
 
 $16,594,821 
 
 789 
 
 6,544 
 
 13,597 
 
 25,468 
 
 39,867 
 
 54,709 
 
 73,995 
 
 96,059 
 
 127,968 
 
 167,934 
 
 216,854 
 
 275,067 
 
 348,443 
 
 438,886 
 
 526,525 
 
 642,907 
 
 761,885 
 
 904,093 
 
 1,076,803 
 
 1,108,096 
 
 1,435,101 
 
 1,599,914 
 
 1,787,042 
 
 2,000,775 
 
 2,202,284 
 
 2,478,741 
 
 2,746,127 
 
 3,033,900 
 
 3,327,021 
 
 3,600,232 
 
 3,875,080 
 
 4,147,641 
 
 4,416,157 
 
 4,652,223 
 
 4,880,938 
 
 5,099,671 
 
 155,660 
 
 187,591 
 
 216,985 
 
 245,929 
 
 273,189 
 
 293,178 
 
 310,974 
 
 325,498 
 
 345,575 
 
 369,189 
 
 392,640 
 
 421,501 
 
 456,427 
 
 500,516 
 
 539,567 
 
 594,004 
 
 643,442 
 
 703,657 
 
 770,302 
 
 832,723 
 
 884,467 
 
 930,401 
 
 977,240 
 
 1,020,883 
 
 1,052,748 
 
 1,097,135 
 
 1,125,049 
 
 1,146,029 
 
 1,161,198 
 
 1,153,084 
 
 1,142,549 
 
 1,124,994 
 
 1,100,003 
 
 1,067,708 
 
 1,031,577 
 
 991,747 
 
 156,449 
 
 194,135 
 
 230,582 
 
 271,397 
 
 313,056 
 
 347,887 
 
 384,969 
 
 421,557 
 
 473,543 
 
 537,123 
 
 609,494 
 
 696,568 
 
 804,870 
 
 939,402 
 
 1,066,092 
 
 1,236,911 
 
 1,405,327 
 
 1,607,750 
 
 1,847,105 
 
 1,940,819 
 
 2,319,568 
 
 2,530,315 
 
 2,764,282 
 
 3,021,658 
 
 3,255,032 
 
 3,575,876 
 
 3,871,176 
 
 4,179,929 
 
 4,488,219 
 
 4,753,316 
 
 5,017,629 
 
 5,272,635 
 
 5,516,160 
 
 5,719,931 
 
 5,912,515 
 
 6,091,418 
 
 16,485 
 
 17,382 
 
 19,640 
 
 23,449 
 
 31,120 
 
 38,048 
 
 47,731 
 
 59,846 
 
 76,432 
 
 95,041 
 
 121,837 
 
 148,450 
 
 184,623 
 
 229,951 
 
 280,945 
 
 334,309 
 
 382,576 
 
 443,852 
 
 509,232 
 
 585,185 
 
 675,431 
 
 777,495 
 
 888,565 
 
 1,011,942 
 
 1,138,941 
 
 1,261,095 
 
 1,386,507 
 
 1,511,442 
 
 1,634,527 
 
 1,759,918 
 
 1,866,039 
 
 1,969,089 
 
 2,055,526 
 
 2,140,297 
 
 2,199,464 
 
 2,233,674 
 
 242,571 
 253,816 
 264,282 
 272,462 
 287,677 
 296,803 
 309,407 
 327,901 
 345,708 
 363,110 
 384,545 
 406,415 
 430,421 
 458,570 
 479,561 
 500,459 
 515,918 
 531,292 
 543,280 
 557,003 
 570,549 
 586,728 
 597,524 
 606,050 
 608,226 
 605,737 
 600,264 
 591,402 
 580,088 
 566,189 
 545,903 
 534,066 
 498,172 
 472,593 
 444,148 
 415,981 
 
 $44,750,907 
 
 259,056 
 
 271,198 
 
 283,922 
 
 295,911 
 
 318,797 
 
 334,851 
 
 357,138 
 
 387,747 
 
 422,140 
 
 458,151 
 
 506,382 
 
 554,865 
 
 615,044 
 
 688,521 
 
 760,506 
 
 834,768 
 
 898,494 
 
 975,144 
 
 1,052,512 
 
 1,142,188 
 
 1,245,980 
 
 1,364,223 
 
 1,486,089 
 
 1,617,992 
 
 1,747,167 
 
 1,866,832 
 
 1,986,771 
 
 2,102,844 
 
 2,214,615 
 
 2,326,107 
 
 2,411,942 
 
 2,503,155 
 
 2,553,698 
 
 2,612,890 
 
 2,643,612 
 
 2,649,655 
 
 The cost of a pension paid out of the Public Treasury compared 
 with the cost to the Government of establishing the Perkins or 
 Gillett bill is graphically illustrated in the following chart: 
 
52 RETIREMENT OP SUPEEANlSrUATED CIVIL-SEEVICE EMPLOYEES. 
 
 Chart showing comparative cost to the Government during the first thirty-five years of 
 the savings and annuity plan embodied in the Perkins and Gillett bills, and a pension 
 giving the same benefits as the Perkins bill, but wholly at Government expense. 
 
 Aw^rj. 
 
 10 ZO 30 
 
 *]sooam 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 / 
 
 
 
 
 
 
 
 
 / 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 mmm 
 
 
 
 
 
 
 1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 # 
 ^ 
 
 
 
 
 
 
 
 L 
 
 
 
 
 
 
 
 
 V 
 
 Si 
 
 
 
 %mooo 
 
 
 
 
 0/ 
 
 
 
 
 
 
 
 
 9/ 
 
 
 
 
 
 
 
 ^ 
 
 ^0^ 
 oX^ 
 
 ■^ 
 
 "^-MMwa^^ 
 
 -^ 
 
 
 
 ^ 
 
 P^ 
 
 STbi 
 
 LL ' 
 
 
 maaoo 
 
 ^ 
 
 
 G 
 
 
 
 
 
 ^ 
 
 
 
 
 
 
 
RETIREMENT OE SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 53 
 
 The computations made to show the cost of the straight pension are 
 minimum charges, no allowance being made for gratuities, compensa- 
 tions for loss of office, compassionate allowances, or any of the extras 
 that are sure to spring up and flourish under a pension system. On 
 the other hand, the computations made to show the cost of putting 
 into effect the Perkins or Gillett bill are maxim^um charges, as no 
 allowance is made for resignations, for the fact that the calculations 
 are based on present salaries rather than average salaries, or for the 
 retention in office of some employees past the age of retirement. In 
 an ordinary service the rate of resignation is usually equal to the rate 
 of mortality. The present salary of the individual is usually higher 
 than his average salary for his entire period of service. 
 
 The table showing the cost of civil pensions is carried out to 35 
 years only, and is below the actual cost of a civil pension by the 
 amount required to pension those who will come into the service here- 
 after at ages above 35 years and hence be entitled to pension within 
 the 35 years shown in the table. 
 
 DIFFERENCE BETWEEN CIVIL AND MILITARY PENSIONS. 
 
 The argument is sometimes advanced that, whatever the expense of 
 a pension, the members of the civil service are as much entitled to 
 that benefit as are members of the military and naval service. This 
 argument will not bear analysis. The State demands from the indi- 
 vidual who enters the military or naval service the surrender of 
 many rights and privileges of which the individual entering the 
 civil service is not deprived. First, the State requires a definite 
 term of service, all the best years of his life in the case of the officer 
 or a minimum number of years in the case of the enlisted man. Then 
 the State reserves the right of dismissing the individual when his 
 most useful years are past, since it is not only desirable but absolutely 
 imperative if an army or navy is to be maintained at a high stand- 
 ard of efficiency that the personnel be composed of men in the prime 
 of life. While in the service, the individual is, theoretically at least, 
 under orders constantly, not 7 hours a day, but 24, except when 
 granted definite leave of absence from duty. His personal liberty 
 is constantly curtailed, even his apparel, speech, and manners being 
 subject to scrutiny and criticism such as would not be endured by 
 members of the civil service. His pay is supposed to be sufficient for 
 his needs, but in the case of neither officer nor private is it sufficient 
 in itself to be an inducement to enter the Army or Navy. The at- 
 traction is supposed to be the honor and dignity attached to the serv- 
 ice, and the chance it offers him for winning distinction. Finally, in 
 case of war, he must go into battle and give his life, if necessary, 
 for the State. In return for his renunciation of personal liberty, his 
 willingness to defend the State with his life, and the forfeiture of his 
 
54 EETTREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 chance to provide for his old age by some other means, the State 
 agrees to grant him a pension when he reaches the age of retirement. 
 
 The civil servant, on the other hand, makes no agreement on taking 
 office to be subject to military discipline or to risk his life and limb in 
 time of war. His duties are seldom of a hazardous nature. The reg- 
 ulations to which he is obliged to conform are usually what would be 
 customary in an ordinary business office and no more. 
 
 Instead, however, of the practice regarding the pensioning of offi- 
 cers of the Army and the Navy being taken as a model for the civil 
 service, it may even be questioned whether the pensioning of Army 
 and Navy officers might not be wisely remodeled on the basis here 
 proposed for the civil service, with the addition of a provision for 
 special recognition in the matter of retiring allowances in the case of 
 those officers who actually go into battle. It is at least a subject open 
 to debate whether members of the military and naval services and 
 other police organizations might not be considered fairly treated in 
 times of peace if they were given adequate salaries and required to 
 set aside enough out of them every month to pay for their retiring 
 allowances. Nor is this suggestion so unprecedented as some may 
 think. In 1885 the British Parliament appointed a select committee 
 to inquire into the subject of national provident insurance. This 
 committee spent two years investigating conditions imposed by vari- 
 ous private emploj^ers of labor upon those in their employment in 
 order to provide for their superannuation. It was impressed with 
 the growing cost of pensions, and came to the conclusion that not only 
 the civil but the military establishments of the State also might well 
 follow the example of private business firms in requiring employees 
 to contribute to their pensions. They stated in their report that 
 they — 
 
 Are of opinion tliat all persons hereafter appointed to tbe service of the 
 Crown, whether civil or military, whose service at present connts toward pen- 
 sion, should contribute toward that pension by a percentage deduction from 
 salaries or pay. The steady and rapid growth of the pension list points to ap- 
 proximate revision of the entire policy of burdening the public with the pro- 
 vision of pensions; the enterprise of private individuals and firms indicates the 
 advantage of self-help as a condition of employment (which it might be proper to 
 supplement with State help) ; and your committee i-ecommend that not only in 
 service counting under the present system toward pension but also in the police 
 and other unpensioned branches of the public service contribution to a pension 
 fund should be made obligatory.^ 
 
 The Civil Pension is Demoealizing to the Service. 
 
 Setting aside all comparisons then of the civil service with the 
 military or naval, there are two sound arguments against a civil 
 pension besides the heavy charge that it makes on the resources of 
 
 1 Second Report of Commission on Civil Establishments, 1888, appendix, p. 423. 
 
KETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 55 
 
 the country which discredit it witL those who have the efficiency 
 of the civil service and the welfare of the civil servants at heart. 
 
 First, it is demoralizing to the service. It makes dismissal of the 
 inefficient difficult, since it is hard for the superior officer to cause his 
 subordinate not only loss of position but also loss of the pension 
 which he has partly earned and counts as an asset of office. The re- 
 sult is a breaking down of the moral tone of the members of the serv- 
 ice, esj)ecially of the younger employees, since they come to feel they 
 are safe however badly they do their work and unappreciated how- 
 ever well they do it. In an article entitled "The mischief of pen- 
 sions," an observer of the English system, named Michael Peters, 
 brings out the danger in words that will bear quoting: 
 
 There is this just scruple that besets the Government and hampers it on 
 every side — that men vrhom it vpould be desirable to remove or supersede have 
 not been fully paid for the work which they have done in the past until their 
 pension falls due, and that it can not be justice to make them forfeit this de- 
 ferred remuneration on account of present deficiencies. This difficulty gives 
 occasion for the very broad margin of conduct within which a Government 
 servant may maintain his position ; the reluctance to dispense with the services 
 of men lacking in energy or interest in their work; the system of shunting an 
 official, who has progressed on the ladder of routine to a position for which he 
 is not fitted, from one department, where he is "making a mess of it," to an- 
 other unfortunate department, where it is probable he will do the same; the 
 unwritten law which decrees that an official once in receipt of a certain salary 
 must in future, apart from any consideration of ability, occupy posts of equal or 
 higher value, but can not occupy one of less value, because the ultimate pension 
 is calculated in a certain ratio to the salary received at the date of retirement. 
 
 This tolerance of ineptitude reacts upon the officials themselves and upon the 
 junior officials in particular. These see that, however much energy and en- 
 deavor they may put forth, advance in their profession is cramped into a 
 matter of routine by the repletion of higher posts with men in whom slackness 
 or inability appears to be a matter of no importance. Moreover, they have to 
 suffer the gall of constant service under the thumb of such men, whose in- 
 fluence is necessarily repressive and numbing, who do not appreciate energy, 
 possibly even damp it, discouraging too much zeal because they are not them- 
 selves able to understand it, and because they have, nevertheless, a dread that 
 it might reflect disparagingly on themselves. This it is that, through monoto- 
 nous years of subordinate service, breaks the heart of many a young man full 
 of praiseworthy zeal and activity ; this it is that kills originality and initiative 
 in the young, so that, when they in turn reach those posts of higher responsi- 
 bility, they have learned to do their work as did their seniors before them — as 
 a machine makes matches. Added to which these young officials have the fact 
 constantly before their eyes, that whether they exert themselves or whether they 
 refrain from exerting themselves, they will ultimately, and with routine pre- 
 cision, arrive at those same posts and be able to stick to them, provided only 
 that they are able to quench their ardor and work themselves down to a soft 
 and convenient complacency.^ 
 
 1 See " The mischief of pensions," Part II, by Michael Peters, in the Gentleman's Maga- 
 zine, London, September, 1907, p. 227. 
 
56 RETIE^MEFT OP SUPERAiSTNUATED CIVlL-SEEVlCE EMPLOYEES. 
 DIFFERENCE BETWEEN GOVERNMENT SERVICE AND PRIVATE BUSINESS. 
 
 The question may be raised why a straight pension should be de- 
 moralizing to the Government service when the testimony of private 
 employers is to the effect that they have found it helpful in the main- 
 tenance of discipline. The answer is that conditions of employment 
 in the Government service are diametrically different from those in 
 private service. A straight pension is a powerful aid to the ordinary 
 employer in holding his men and in keeping up their standard of 
 efficiency, as brought out by the Hon. Frank A. Vanderlip, president 
 of the National City Bank of New York, in an article on " Insurance 
 for workingmen," published in the North American Eeview in 
 December, 1905. Said he — 
 
 When employees realize that unsatisfactory conduct may at any time lose 
 them not only their present position — a loss vphich in such a labor market as 
 ours might be easily made good — but that it entails further the loss of a very 
 valuable asset, the employee's right to a pension, the incentive to good conduct 
 is greatly increased. It operates especially as an incentive to hold men between 
 the ages of 40 and 50 when they have acquired the experience and skill which 
 makes them especially valuable, and prevents their being tempted away by 
 slightly increased wages for a temporary period. 
 
 This statement is entirely correct when applied to business institu- 
 tions. It is not wholly correct when applied to the Government 
 service. A straight pension is a powerful aid to the Government as 
 well as to a corporation in holding its employees, but there is this 
 radical difference in its operation under the two conditions: In the 
 case of the Government it operates to hold the poor employees rather 
 than the good and to break down rather than to keep up the standard 
 of efficiency. This is explained by two fundamental differences in the 
 conditions of labor when a private corporation is the employer and 
 when the United States Government acts in that capacity. These are, 
 first, the fact that there is seldom any relationship between the value 
 and the cost of a Government output such as there always is in the 
 case of a commodity produced by a private corporation, and, secondly, 
 the fact that the man at the head of a Government office or shop has 
 much less authority over his subordinates than has an executive 
 officer similarly placed in a private business. 
 
 Business enterprises are conducted for the purpose of paying divi- 
 dends, and as inefficiency on the part of an employee has a direct 
 bearing on the dividends, it will not be tolerated. On the other hand, 
 the great majority of Government employees are not engaged in the 
 production of commercial articles which must be sold at a profit in 
 competition, and the loss to the Government through inefficiency is 
 not so apparent or so easily measured. It may, for instance, cost the 
 Government a hundred thousand dollars to get out a highly scientific 
 or technical report which is, economically, either at the time or ulti- 
 
RETIREMENT OP SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 57 
 
 mately in the course of years, well worth that sum of money to the 
 people of the United States, but which, commercially, would not 
 bring in a thousand dollars if placed on the market for sale. Since 
 the inefficiency of an employee engaged in work that has such an 
 uncertain market value is not so easily detected or so likely to be 
 regarded as serious as would be the case in private business, he is 
 usually permitted to remain in the Government service, whereas he 
 would be very promptly dismissed by a private house. 
 
 The fact that the administrative officials at the head of Govern- 
 ment offices have not entire control over the selection of their subordi- 
 nates makes it impossible tor those officials to be held as strictly 
 responsible for results as is the case in private businesses. What is 
 everybody's business is nobody's business. Since also the position of 
 the executive head of the office is not greatly endangered by the in- 
 competency of his assistants, especially where the effect of the incom- 
 petency can not be readily measured by reduction in actual output 
 of some kind, it follows that he can afford to be lenient with them. 
 He is especially inclined to be so if the employee's inefficiency is 
 known to be the result of old age, or any other cause which makes 
 an appeal to the natural feelings of humanity. In case the inefficient 
 employee is working under a pension system whereby he is entitled, 
 on reaching a certain age, to retirement on a competence, the head 
 of the office will be all the more reluctant to dismiss him before he 
 reaches that age. But a pension system has exactlj'' the opposite 
 effect where a private corporation is the employer. In that case the 
 administrative official at the head of any office is held directly re- 
 sponsible either to the owner of the business or a board of directors 
 for the inefficiency of his subordinates. The output can usually be 
 measured in terms of tons or dollars, and if it falls below the required 
 amount the position of the man in charge is jeopardized. In self- 
 defense, therefore, he is obliged to hold every subordinate up to the 
 highest standard of efficiency and to stifle any feeling of humanity 
 or sympathy which might otherwise tempt him to show leniency. 
 That being his state of mind, a pension system becomes a powerful 
 aid to him in his effort to maintain discipline and secure obedience 
 and industry, as explained by Mr. Vanderlip in the article quoted 
 above. Undoubtedly, the reason why railroads and other corpora- 
 tions are disposed to favor the straight pension with entire control 
 of the pension fund rather than any contributory plan with a fund 
 in any way controlled by the employees, is that it helps them to 
 approximate the establishment of military discipline among their 
 subordinates. They look on a pension as a useful ]?ind of strike 
 insurance. For fear of forfeiting his pension, the employee, like the 
 soldier, will sacrifice much of his personal liberty, including his right 
 to strike for better wages or shorter hours. 
 
58 RETIREMEI^T OP SUPERA.NNUATED CIVIL-SERVICE EMPLOYEES. 
 
 It may be argued that commercial or military ideas and practices of 
 economy and discipline should be maintained in the Government serv- 
 ice. It is, however, an open question whether to do so is more than 
 theoretically possible and certainly it would be dangerous to count on 
 their successful introduction in considering the establishment of a 
 civil pension system. The whole question is more complicated than 
 the outside business man realizes, for the minute the head of an office 
 were given a free hand in the selection and removal of his subordi- 
 nates, as would be the case in a private business, political influence 
 would be brought to bear on him to employ this, that, or the other 
 individual, and the public offices would once more become the retreat 
 of the indigent friends of successful politicians. Whatever financial 
 losses may be occasioned by lack of authority or responsibility on the 
 part of executive heads is slight in comparison with the cost of the 
 frequent changes and corrupt practices sure to characterize the ad- 
 ministration of politically controlled offices. 
 
 It thus appears that, while the enforcement of that part of the civil- 
 service law relating to the dismissal of the incompetent is sufficiently 
 difficult at present, it would become greatly more so under a civil pen- 
 sion system, unless military discipline such as rules in the Army and 
 Navy and in commercial establishments were introduced into the civil 
 service. The straight pension in the Army and Navy may be de- 
 fended somewhat as a logical offset to the surrender of individual 
 independence. In private business it is on exactly the same footing, 
 though the attempt is usually made by the corporation to present it 
 to the employee in the guise of a beneficence. It may be disputed 
 whether such discipline in the civil service would be an improvement 
 over present conditions or not, but it should be established first if the 
 establishment of a civil pension system is undertaken, unless complete 
 demoralization of the service is desired, for to bestow the straight 
 pension on civil employees under present conditions would be to intro- 
 duce a temptation to even greater leniency with the incompetent than 
 is at present the case. On the other hand, the establishment of a sav- 
 ings and annuity plan like that in the proposed bill would have exactly 
 the opposite effect, since administrative officials would be less reluctant 
 to dismiss an incompetent clerk who was known to have a goodly sum 
 to his credit than one who would be penniless, as is more often the 
 case under present conditions. 
 
 The Civil Pension Means Wages Below Mabket Price 
 
 Finally, it is shown by the history of civil pensions in other lands 
 that they are not in the interest of the civil servants themselves. The 
 experience of Great Britain is especially instructive, for the states- 
 men of that country have been experimenting a full century with 
 legislation of one kind or another designed to remedy the evil of 
 
RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 59 
 
 superannuation in office. It would be the part of folly for the United 
 States to disregard the plain lesson taught by their experience, that 
 only those comparatively few members of the civil service who sur- 
 vive to pensionable age and remain in the service until that age derive 
 any benefit from the pension system, while the others who die or 
 drop out before reaching pensionable age are actually worse off than 
 if there were no pension list. This is due to the fact that, human 
 nature being as it is, the pension always comes to be taken into ac- 
 count in fixing salaries, even though established in the beginning as a 
 pure gratuity, and the result is that the pensionable employee works 
 below the current market price. In case he lives to receive the value 
 of this " deferred pay " — to use the phrase common in England — in 
 the form of a pension, he has no cause for complaint, but, according 
 to the English statistics, he either dies or leaves the service before 
 that time in six cases out of seven. During the years that the pen- 
 sionable employee is working for less than the market wage his fam- 
 ily has just so much less to live on than they would have were he a 
 nonpensionable employee, and in case he dies or leaves the service 
 before reaching pensionable age, his family has absolutely no return 
 for all those years of deprivation, unless they can get a gratuity or 
 compensation on one pretext or another, a concession which in itself is 
 an abuse of the system, as has just been shown. The civil pension, 
 in the last analysis, is therefore a pure tontine in which all persons 
 lose except those who succeed in three things: Living to a certain 
 age, remaining in the service until that age, and living beyond that 
 age long enough to get back the value of their contributions. As soon 
 as the members of a service begin to realize that the " theory of prob- 
 abilities " is against them, and that they have only one chance in seven 
 to recover the amount of their " deferred pay," expressions of dissatis- 
 faction with the pension system, once so ardently desired, will surely 
 be heard. 
 
 EXPEEIENCE OF ENGLAND PROVES CIVIL PENSION IS " DEFERRED PAY." 
 
 The experience of England with the civil pension is briefly as fol- 
 lows: A contributory scheme inaugurated in 1829 by treasury minute 
 and confirmed by the superannuation act of 1834 was abolished in 
 1857, because it was fundamentally unsound and therefore unsatis- 
 factory, and succeeded by a system of free pensions, established by 
 the superannuation act of 1859. This system, which remained un- 
 changed for a half century, was one of the most liberal ever devised 
 for the benefit of a civil service; but study of the grievances pre- 
 sented by representatives of the service to different royal commis- 
 sions appointed from time to time to inquire into the condition of the 
 civil establishments, reveals the astonishing fact that the civil servants 
 generally came to believe that in reality they were paying for their 
 
60 RETIKEMEKT OF SUPEBANNUATED CIVIL-SEEVICE EMPLOYEES. 
 
 own pensions, because the salaries in the " established "or pensionable 
 service are generally less than in the nonestablished or nonpension- 
 able service, and to feel that the Government was treating them un- 
 fairly. The theory that " pensions are deferred pay " gained ground, 
 especially after the investigation of the civil establishments made 
 by the Kidley Commission in 1886-1888. A committee of employees, 
 which took the name of the Deferred Pay Committee, was organized, 
 and of the 100,000 civil servants about 70,000 joined the organiza- 
 tion. As a result of their agitation, the Courtney Commission was 
 appointed in 1902 to investigate the grievances of the civil employees. 
 The latter held that not only were their salaries lower than they 
 would have been had the pension system not been adopted, but that 
 the amount withheld from their salaries was more than sufficient to 
 pay the pensions. They asked, therefore, that the difference should 
 be put into a fund and returned in the form of insurance benefits for 
 their dependents. The commission refused to concede that the 
 amount withheld from salaries was more than sufficient for the pay- 
 ment of pensions, but decided that it might be more satisfactory 
 to diminish the amount of the pension and turn the difference into 
 a cash sum to be paid at death or on withdrawal from the service. 
 By act of Parliament of September 20, 1909, the law of 1859 was ac- 
 cordingly modified so that new entrants to the service shall receive 
 a pension calculated on the basis of one-eightieth of salary for each 
 year of service instead of one-sixtieth, a cash sum in case of resigna- 
 tion after two years' service, equal to one-thirtieth of salary for each 
 year of service, and a cash sum, in case of death, after five years' 
 service, while still in the service, equal to one year's pay, provided 
 that if the employee died after reaching the age of 65 the amount 
 of the gratuity should be reduced by one-twentieth for each year 
 he had served after attaining that age. This last provision was to 
 discourage continuance in office after the age of 66, for, although all 
 persons in the established civil service in England are liable to com- 
 pulsory retirement at that age, the power of retention, in special cir- 
 cumstances, for a period not exceeding five years, is lodged with the 
 Treasury. 
 
 The present situation in England, then, is this: The Government 
 has acknowledged the contention of the employees that salaries are 
 less because of the pension, and that the employees are, in reality, 
 paying for their own retirement. The English law has been so 
 modified as to make the pension system virtually a contributory 
 system, the only difference being that the contributions are theoretical 
 rather than actual, i. e., the difference between the value of the em- 
 ployee's service and his actual pay. The result is that the present 
 arrangement, while more satisfactory to the employees than the old 
 system, is less equitable than it would be if it had been worked out 
 
RETIEEMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 61 
 
 on a priori principles, with a definite benefit for a definite contribu- 
 tion. At present, it can not be shown whether the amounts received 
 by the employee in the form of pension, insurance, and cash-sur- 
 render values correspond with the amounts contributed by him, 
 since it has not been ascertained what percentage of salaiy is with- 
 held as a contribution. 
 
 THE SUBSTITUTE PLAN A FORM OF CIVIL PENSION. 
 
 A form of civil pension that has seemed to be attractive to many 
 members of the civil service is what is known as the substitute plan. 
 Every argument that can be advanced against the straight pension 
 can be successfully brought against the substitute plan and a few 
 others besides. 
 
 It is a plan based on the theory that salaries increase with age, that 
 the oldest employees receive the highest salaries, and that employees 
 above a given age generally perform service which could be performed 
 with equal efficiency by new clerks at half the salary. In other words, 
 the plan is founded on the theory that the Government is already 
 paying an indirect pension to the old employees equal to half the 
 salary which they receive, and that it would therefore cost the Govern- 
 ment nothing (additional) to retire the old employees on half their 
 salaries and use the other half in the employment of new clerks. The 
 advocates of the plan declare, therefore, that it can be established and 
 maintained " without expense to the Government." Assuming for the 
 moment that their plan has all the merit which they claim for it, it 
 would be more accurate to say " without additional expense to the 
 Government," for it is manifest that if the employees eligible for 
 retirement are receiving salaries sufficient to retire themselves on 
 adequate annuities and enough more to employ younger men of equal 
 capacity, then the Government is already incurring an expense equal 
 to the amount on which they are retired. This is also a plea for 
 appropriation by indirection, since the difference between the salaries 
 paid and the salaries appropriated would be diverted to another pur- 
 pose than that for which the money was appropriated by Congress. 
 The policy of diverting money to a purpose other than that for which 
 it is appropriated is always to be condemned as dangerous. 
 
 It must be admitted, too, in favor of a straight pension that, in 
 some cases, the pensioning of the aged employees would result in the 
 promotion of the younger employees; but under the substitute plan, 
 if public expenditures are not increased, promotions must of necessity 
 be governed by two factors — the mortality among the pensioners and 
 the expansion in the service. The death of a pensioner would allow the 
 Government to apply his pension to an increase of some other person's 
 salary. As long as the service continues to expand the ratio of pen- 
 
62 KETIEEMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 oioners to members of the active service will be below normal. When 
 the service ceases to grow and the ratio of pensioners to active mem- 
 bers of the service begins to increase, or when the service begins to 
 grow smaller for any cause, a condition might easily be reached 
 under which a large percentage of the s'^^'vice would be compelled to 
 work at half pay in order that the Government might use the other 
 half to pay pensions, or persons coming into the service might be 
 required to serve at their initial salary — i. e., half pay — for many 
 years in order that the Government might use the other half to pay 
 pensions. Certainly any plan which thus contemplates the deferment 
 of promotions would be subject to criticism on the ground that such 
 deferment would be a tax on efficiency. 
 
 There is nothing new about the substitute plan, for long before 
 there was any regular system of granting superannuation allowances 
 in England many similar irregular practices were followed for mak- 
 ing provision for superannuated civil employees. Certain offices 
 were granted for life, others were openly maintained at public ex- 
 pense as sinecures, and pensions were paid in some cases out of 
 various contingent funds. What is now called the substitute plan 
 is merely the old custom of charging the salaries of public officers 
 with retiring allowances to their predecessors. The British records 
 are full of cases of pluralism, of officers holding one office and paying 
 out the salary of it to a predecessor while receiving in return the 
 salary of a successor in another office. It would seem too obvious 
 for argument that such appropriation by indirection, such misdirec- 
 tion of funds, would be sure to lead to corruption in office. What 
 the British commissioners of 1857 said of such practices still holds 
 good: 
 
 Any such mode of providing for retired servants is obviously most objection- 
 able in principle and liable to great abuse in practice, both as regards due econ- 
 omy in the public expenditure and the fair and equal remuneration of public 
 servants.* 
 
 FLAT-RATE ASSESSMENT PLANS INEQUITABLE. 
 
 The civil pensions or noncontributory plans being dismissed as 
 costly and undesirable, there remains for consideration the second 
 group of plans noted above — contributory plans proposing a uniform 
 deduction of a given per cent from all salaries, what is frequently 
 called a flat-rate assessment on salaries, to provide a general fund out 
 of which to pay annuities to employees. Aside from their financial 
 uncertainties, these prove in every instance on analysis to be inequita- 
 ble as between employees of different ages. This is true whether the 
 annuity paid is uniform or is based on length of service. 
 
 iSee Civil-Service Retirement, Great Britain and New Zealand, S. Doc. No. 290, pp. 
 16-21. 
 
RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 63 
 Inequitable if Annuities aee Based on Length of Service. 
 
 Plans proposing a uniform deduction of a given per cent from all 
 salaries and the payment of annuities based upon length of service are 
 unfair to the employees who enter the service at an early age, as part 
 of their savings must go to make up the annuities for the men already 
 old in the service when the plan is put into operation, or who came 
 into the service at an advanced age. Such a plan actually puts a pen- 
 alty on length of service, since it allows the employee who has been in 
 the service only a short time to profit by the savings of the one who 
 has been there longer. 
 
 Take the case of two men entering the service, one aged 20 and the 
 other aged 60, each receiving $100 a month, and deduct 5 per cent of 
 that salary, or $5 a month, with the object of paying each man on 
 retirement an annuity based on his length of service. Is it feasible? 
 The man of 20 will have 50 years to serve before reaching the age of 
 retirement and the man of 60 only 10 years. Now, a deposit of $5 a 
 month will earn much more interest in a period of 50 years than it 
 will in 10 years. Just what is the difference in this concrete case? 
 Eeference to an interest table shows us that a deposit of $5 a month 
 for 50 years, improved by 3^ per cent compound interest, amounts to 
 $8,008.90, which is sufficient to purchase an annuity of $1,054.50, 
 beginning at age TO, first payment in 3 months; but the same table 
 shows also that a deduction of 5 per cent from the same salary begin- 
 ning at the age of 60 years will provide a fund on retirement at age 
 70 of only $717.25, and this amount would purchase an annuity at 
 age 70 of but $94.44 a year, a sum too small to support any employee, 
 however simple his needs. To make this plan practical it would 
 therefore be necessary to put the deductions from all employees' sala- 
 ries into a general fund and divide the fund among all the annuitants 
 in proportion to their length of service. This arrangement would be 
 exceedingly unfair, however, to the men who entered the service at 
 an early age, as part of their savings would go to make up the 
 annuities for the men already old in the service when the plan was 
 put into operation, or who came into the service at an advanced age. 
 Under such an arrangement the man who entered the service at 60 
 and served only 10 years would be retired on more than $94.44, it is 
 true, but to have it so, the man who had entered at 20 and worked 
 for 50 years would have to give up part of the $1,054.50 his savings 
 had earned and content himself with a smaller annuity, a plan that 
 seems indefensible, as it actually takes the money of one man to put 
 it into the pocket of another who is less meritorious, judged by the 
 standard of length of service. A study of the following table will 
 show the inequitableness of any flat-rate assessment plan based on 
 length of service. 
 
64 KETIKEMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 Table III. — Shoiving the annuity tvhich a deduction of $5 a month, durini 
 various periods of service, will provide on retirement at age 10. 
 
 Age of retirement. 
 
 Age of entrance 
 into service. 
 
 c. 
 
 D. 
 
 E. 
 
 F. 
 Amount of 
 
 
 Amount of 
 
 
 SI a month 
 
 Years of 
 
 annuity 
 
 Cost of 
 
 at end of 
 
 service 
 
 E. 
 
 annuity 
 
 years 
 
 (A-B). 
 
 
 (FXG). 
 
 sbown in 
 
 
 
 S7.595 
 
 
 Column C. 
 
 50 
 
 $1,054.50 
 
 $8,008.90 
 
 $1,601.78 
 
 45 
 
 851. 51 
 
 6,467.25 
 
 1,293.45 
 
 40 
 
 680. 61 
 
 6, 169. 20 
 
 1,033.84 
 
 35 
 
 636.71 
 
 4, 076. .30 
 
 815. 26 
 
 30 
 
 415. 55 
 
 3, 156. 10 
 
 631.22 
 
 25 
 
 313. .54 
 
 2,381.30 
 
 476.26 
 
 20 
 
 227. 64 
 
 1,728.95 
 
 345.79 
 
 15 
 
 155. 33 
 
 1, 179. 70 
 
 235. 94 
 
 10 
 
 94.44 
 
 717. 25 
 
 143.45 
 
 5 
 
 43.17 
 
 327.85 
 
 65.57 
 
 1 
 
 8.05 
 
 61.15 
 
 12.23 
 
 Q. 
 
 Monthly 
 deduc- 
 tion from 
 salary. 
 
 70 years 
 70 years 
 70 years 
 70 years 
 70 years 
 70 years 
 70 years 
 70 years 
 70 years 
 70 years 
 70 years 
 
 20 years 
 25 years 
 30 years 
 35 years 
 40 years 
 45 years 
 60 years 
 55 years 
 60 years 
 65 years 
 69 years 
 
 $5.00 
 5.00 
 5.00 
 5.00 
 5.00 
 5.00 
 5.00 
 5.00 
 5.00 
 5.00 
 5.00 
 
 Inequitable if Annuities aee Uniform, Regardless of Length of Service. 
 
 Plans proposing a uniform deduction of a given per cent from all 
 salaries and the payment of uniform annuities, regardless of length 
 of service, put an even greater penalty on entrance into the service at 
 an early age, since the per cent deducted from all salaries has to be 
 sufficiently large to accumulate not merely annuities for those enter- 
 ing the service at an early age, but also to provide the amounts that 
 the older men lack in order to retire themselves on the same annuity. 
 
 Suppose it is desired to retire all employees receiving $1,200 salary 
 on three-quarters pay, or $900 a year. The value of a life annuity of 
 $900 a year, beginning at age TO, first payment in three months 
 after reaching that age, may be stated as $6,835.50. To accumulate 
 $6,835.50 during a service of 50 years requires a monthly deduction 
 from a monthly salary of $100 of but $4.27, if the deductions are im- 
 proved by 3^ per cent compound interest. That is all the man begin- 
 ning at age 20 would have to set aside each month. But, on the other 
 hand, to accumulate $6,835.50 during the 10 years of service of a man 
 who entered the service at age 60, or who was already 60 years of age 
 when the plan was put into operation, would require a deduction from 
 a salary of $100 a month of $47.65, or 47.65 per cent — an impossible 
 deduction under any circumstance. To make this plan practicable 
 it is therefore necessary to decide upon a per cent to be deducted from 
 all salaries which shall be sufficiently large to accumulate not merely 
 annuities for those entering the service at an early age, but also to 
 provide the amounts that the older men lack to retire themselves on 
 the same annuity. It thus appears that this plan puts even a greater 
 penalty than does the first on entrance into the service at an early 
 age, as is shown by the following table ; 
 
EETIREMEI>J'T OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES, 65 
 
 IIable IV. — Shoiving amount required to he deducted from a monthly salary of 
 $100 (per cent of other salaries) during various periods of service, to provide 
 an annuity of $900 a year beginning at age of 10. 
 
 Age of retirement. 
 
 70 years 
 70 years 
 70 years 
 70 years 
 70 years 
 70 years 
 70 years 
 70 years 
 70 years 
 70 years 
 70 years 
 
 Age of entrance 
 into service. 
 
 20 years 
 25 years 
 30 years 
 35 years 
 40 years 
 45 years 
 50 years 
 55 years 
 00 years 
 65 years 
 69 years 
 
 C. 
 
 Years of 
 service 
 (A-B). 
 
 D. 
 
 Amount of 
 annuity. 
 
 900 
 900 
 900 
 900 
 900 
 900 
 900 
 900 
 900 
 900 
 
 E. 
 
 Cost of 
 
 annuity. 
 
 (DX$7.595), 
 
 S6,835.50 
 6, 835. 50 
 6,835.50 
 6,835.50 
 6,835.50 
 6,835.50 
 6,835.50 
 6,835.50 
 0,835.50 
 6,835.50 
 6,835.50 
 
 F. 
 
 Amount of 
 $1 a monthi 
 
 at end of 
 years 
 
 stiown in 
 Column C. 
 
 $1,601.78 
 
 1,293.45 
 
 1,033.84 
 
 815. 26 
 
 631. 22 
 
 476. 26 
 
 345. 79 
 
 235. 94 
 
 143. 45 
 
 65.57 
 
 12.23 
 
 G. 
 
 Monthly 
 deduc- 
 tion from 
 salary. 
 
 E 
 F 
 
 $4.27 
 5.28 
 6.61 
 8.38 
 10.83 
 14.35 
 19.77 
 28.97 
 47.65 
 104. 25 
 558. 91 
 
 ACTUARIAL DIFFICULTIES OF PLANS BASED ON FLAT-RATE ASSESSMENTS. 
 
 These illustrations are sufficient to show how impossible it is to 
 devise an equitable plan as between all employees of various ages, 
 based upon a uniform deduction of a given per cent from all salaries, 
 either to pay annuities based upon length of service or to pay uni- 
 form annuities to all employees upon retirement at a given age. The 
 most perplexing problem, however, connected with plans proposing a 
 uniform deduction of a given per cent from all salaries is to decide 
 what annuities could safely be paid out of a common fund thus cre- 
 ated and what per cent of salaries would have to be deducted in order 
 to raise such a fund. There is no stable and permanent principle to 
 serve as a basis for these computations, no fixed or calculable relation 
 between the fund and the annuities to be paid out of it. The forfeit- 
 ure of interest or principal by those who resign or die before reach- 
 ing the retirement age is often relied upon to swell the fund out of 
 which annuitants are to be paid, but since the establishment of the 
 plan would in itself have a tendency to discourage resignations, this 
 source of income is likely to be overestimated. Apart from the injus- 
 tice to the individual of any plan that contemplates the commingling 
 of assets, the uncertain elements such as length of service, age of 
 entrance, rates of resignation, increase of salaries, frequency of for- 
 feiture, and the like, which encumber all such plans, make their unde- 
 sirability so patent as to permit of no defense. It should be remem- 
 bered also that any error of judgment as to what might be accom- 
 plished in the way of annuities by a uniform deduction of a given 
 per cent from all salaries would undoubtedly mean a call upon Con- 
 gress for assistance, and possibly lead ultimately to the establish- 
 ment of a civil pension. 
 
 74196°— S. Doc. 745, 61-S 5 
 
66 EETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 Statements of Various Actuaeies Against Flat-Rate Assessment Plans. 
 
 The actuarial weakness of retirement plans based on a flat-rate as- 
 sessment of salary has been pointed out, on various occasions, by 
 well-known authorities. In 1891 Mr. William Sutton made the fol- 
 lowing statement before a select committee of the British House of 
 Commons : 
 
 It may be said that, with a few exceptions, superannuation funds as gener- 
 ally constituted are radically wrong in principle when looked at from the 
 actuarial point of view. Instead of resting content with the introduction of 
 as few assumptions as possible, they are made to involve not only assumptions 
 as to the rates of mortality to be experienced among the members and as to 
 the rate of interest to be earned by the accumulated funds — these may be fairly 
 said to be indispensable — but they are also made to depend upon such 'capricious 
 elements as the rates of secession of members (that is, of members leaving 
 active service otherwise than by death or retirement), and the rates of salary 
 the members will receive, and on which the nature and amount of their con- 
 tributions to the fund will depend, as well as the amount of pension they will 
 receive. It thus follows that in bringing into the question rates of secession 
 and rates of salary, matters which can not be prognosticated with any cer- 
 tainty for any length of time, classes of members get lumped together whose 
 real circumstances and conditions in respect of these matters are as different 
 as possible. 
 
 The impossibility of defending the practice of making flat-rate 
 deductions from all salaries for the creation of a general-staff fund 
 has been set forth by Mr. George King, one of the vice presidents of 
 the Institute of Actuaries. In an article on " Staff-pension funds " 
 read before the Institute on January 30, 1905, he made the following 
 pertinent remarks on the subject: 
 
 When a fund is to be started and the intending members have formulated the 
 benefits they desire, the actuary is sometimes asked to quote the percentage of 
 salary necessary to provide them. Theoretically the question is not difficult, 
 but in practice it scarcely admits of trustworthy solution. * * * It is gen- 
 erally the case that at a few of the younger ages at entry the ordinary contri- 
 bution of 5 per cent is sufficient, or even a little more than sufficient, to provide 
 the benefits, but that from perhaps 25 at entry an extra is required. Sliould the 
 members themselves pay the whole of the contributions, then approximately 
 accurate graduation according to age is important, because it would not be 
 fair to one set of members if we were to make them contribute to the benefits 
 of another set.^ 
 
 HiSTOBY OF Plat-Rate Assessment Plans a Warning. 
 
 The history of contributory plans based on flat-rate assessments 
 on salary gathered into a common fund, which have been tried 
 by the Governments of England, Australia, Canada, and France at 
 different times, shows conclusively how unsatisfactory such plans 
 have been found, whether considered from the employees' viewpoint or 
 
 1 See Journal of the Institute of Actuaries, vol. 39, p. 170. 
 
EETIREMENT OP SUPERANNUATED CIVIL-SEEVICE EMPLOYEES. 67 
 
 the Government's. They are always inequitable as between different 
 classes of employees, since there is no definite relationship between 
 what is given and what is received. The contribution rates are almost 
 inevitably inadequate, leading to the ultimate insolvency of the fund, 
 for while theoretically it may be a simple matter to fix a flat rate 
 of contribution which will be adequate for a given problem, prac- 
 tically it is almost impossible, owing to the difficulty of valuation and 
 the difficulty of keeping those in authority from changing the rules 
 and benefits under a particular plan. 
 
 FLAT-BATE ASSESSMENT PLAN UNSATISFACTOKY IN ENGLAND. 
 
 The British contributory scheme established in 1829 by treasury 
 minute and confirmed by the superannuation act of 1834 was de- 
 servedly unpopular, because it was unjust and little better than a 
 lottery. So bitter were the complaints made against it by the em- 
 ployees that it was abolished in 1857 and followed, two years later, 
 under the superannuation act of 1859, by the straight pension sys- 
 tem of the last half century, which has also been found unsatisfac- 
 tory, as explained above, and modified under the superannuation 
 act of 1909. The contributory scheme required a flat contribution 
 of 2^ per cent of salary from all employees receiving less than £100 
 per annum, quite regardless of the age of the employee or any other 
 condition, and 5 per cent from all receiving more than £100. The 
 contributions of all employees were not merely commingled, as is 
 generally the case where there is a flat-rate assessment; they were 
 inextinguishably merged in the general exchequer. Not being funded 
 or set aside for the accumulation of interest, it was not even known 
 whether the sum total contributed was sufficient to pay the benefits 
 allowed under the plan. There was a general impression that the 
 rates were more than adequate to provide the benefits, and that the 
 Government was making money at the expense of its employees. It 
 is sometimes said that the British contributory plan was abandoned 
 because the fund was found to be hopelessly insolvent. Such was not 
 at all the case, for, in the first place, there was no fund to be insol- 
 vent, and, in the second place, it was not known until about a year 
 after the repeal of the superannuation act of 1834, when the investi- 
 gating actuaries made their report, that the rates of deduction from 
 salaries had been inadequate to provide the benefits under the act. 
 Had there been a fund, it is true, however, that it would have become 
 insolvent. The fact that eminent actuaries had generally shared 
 the popular impression that the rates were more than adequate, until 
 a minute and laborious investigation showed that quite the contrary 
 was the fact is striking proof of the difficulty of fixing a flat rate 
 of contribution which will be adequate in a given problem. The 
 
68 RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 discovery that the contributions were inadequate merely showed the 
 British public, hoAvever, a new weakness in a plan they had already 
 set aside for other reasons. 
 
 The plan was condemned by employees and actuaries alike as in- 
 equitable as between different classes of employees. It made no 
 provision for the refund of contributions in case of retirement or 
 in case of death before reaching pensionable age. This confiscation 
 of contributions was felt to be a particular hardship when an em- 
 ployee died in harness leaving a family in want, after having con- 
 tributed for years to the supposed superannuation fund. No serious 
 objection was expressed to the principle of deductions from salaries; 
 it was only the confiscation of those deductions that met with oppo- 
 sition. A large body of the employees in fact presented a petition 
 asking that the deductions be continued, but that they be returned 
 the employees in the shape of insurance for their families. The fact 
 that was resented was the fact that only one contributor out of every 
 seven received any benefit from thus contributing part of his salary 
 year after year, the other six dying or leaving the service before 
 reaching the age at which they could claim a superannuation allow- 
 ance. The system was denounced as a tontine. The situation was 
 thus summed up by Dr. William Farr, chief of the Statistical Office 
 of the Department of the Registrar General, and a famous actuary, 
 before a select committee appointed by Parliament to investigate the 
 subject, in the following words: 
 
 Under this arrangement for granting allowances out of deductions you neces- 
 sarily have to take the deductions from men who never derive any benefit 
 whatever from the fund. This is, I conceive, an insuperable objection to the 
 system. The families of the men who die are harshly dealt with; you take 
 from the widow and fatherless children the deductions of the men who die to 
 enable you to pension those who live. Now, it is impossible to convince the 
 widows or the orphan children of the oflicers who die in the service that it is 
 just to deprive them of the advantage derived from the contribution of the 
 parent to enable you to pay the superannuation allowances of those oflEicers 
 who are so fortunate as to live.^ 
 
 FLAT-RATE ASSESSMENT PLAN UNSATISFACTORY IN AUSTRALIA. 
 
 Particularly instructive, too, as showing the usual inadequacy and 
 inequity of a contributory plan based on a flat-rate assessment is 
 the experience of the colony of New South Wales, Australia. A plan 
 was established there in 1884 which provided for a general deduc- 
 tion of 4 per cent from salaries, with a Government subsidy of 
 £20,000 a year for five years. No provision was made for paying the 
 annuities on back services, and the Government subsidy of £100.000 
 was not sufficient to cover them, nor was the 4 per cent deduc- 
 
 ^ See Report on Civil Service Superannuation. 1856. Minutes of Evidence, p. 176. 
 
RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES, 69 
 
 tion sufficient to cover future liabilities. Unsound thus in its very- 
 constitution from the beginning, the fund was hastened to its de- 
 mise by being improperly administered, as explained on page 46, 
 to further the ends of politicians. The very first valuation, made 
 only five years after its establishment, showed the fund to be insol- 
 vent, and at the end of eleven years the plan was accordingly aban- 
 doned. Even had it been properly administered, it must have ulti- 
 mately come to grief, owing to the inadequacy of the contribution 
 rates and the debt with which it was burdened at the outset, and 
 even had the subsidy been sufficiently high and the rates quite ade- 
 quate to meet all demands, the plan would have been unsatisfactory 
 as inequitable between individual members, the amounts contributed 
 in each case not being commensurate with the amounts received.^ 
 
 FLAT-RATE ASSESSMENT PLAN UNSATISFACTORY IN CANADA. 
 
 The Dominion of Canada has passed two unsatisfactory laws, both 
 based on flat-rate assessments of salary for the benefit of its super- 
 annuated civil employees. The first one, known as the superannua- 
 tion act of 1870, was enacted three years after the formation of the 
 Dominion and was based on flat-rate deductions from salary. Like 
 all such plans, it is subject to the criticism of having been inadequate 
 and inequitable. The deduction from salary was fixed at the rate of 
 4 per cent per annum on salaries of over $600 a year and at 2^ per 
 cent on those of less than that amount. Grossly inadequate as these 
 rates were, they were still further reduced in 1873 from 4 to 2 per 
 cent and from 2^ to 2| per cent. Since there was no intention on the 
 part of the Government to make the contributions adequate for the 
 whole expense of superannuation, it is perhaps hardly fair to criticize 
 the law on that score, though proper to point out that had there been 
 a superannuation fund, it must have become insolvent. Owing to 
 the lowness of the rate of contribution, the employees were fairly 
 well satisfied with the law, their criticisms being confined to one point 
 only. They rebelled against the confiscation of those contributions, 
 small as they were. The law made no provision for the refund of 
 contributions in event of retirement before pensionable age, and this, 
 taken in conjunction with its failure to make provision for widows 
 and orphans, was held to be an injustice. It was thought that the 
 abatements from salary should be returned to the dependents of the 
 civil servant in the event of his death before pensionable age, and a 
 campaign was made against the law on this ground. The history of 
 superannuation schemes the Avorld over shows that employees are 
 never content with a plan which requires the forfeiture of their con- 
 tributions, and it is against all the instincts of human nature that 
 
 ^ See Civil Service Retirement, New South Wales, Australia, S. Doc. 420. 
 
70 EETIKEMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 they should be, especially when deductions from salary are made 
 under compulsion. 
 
 The overthrow of the Canadian superannuation act was accom- 
 plished, however, on other grounds than the complaint brought by 
 the civil employees. The contribution rates being inadequate to 
 pay for the benefits allowed, the deficit had to be made up by the 
 Government, and to this extent the contributory scheme under the 
 act of 1870 was simply a civil pension. As already explained on 
 page 45, it became the prey of political parties, advantage being 
 freely taken by partisan leaders of those clauses in the act which 
 allowed the removal of employees from the service on " abolition 
 terms " and the addition of years to the period of their service 
 when calculating the amount of superannuation allowance due them. 
 The result of these abuses was that the superannuation system be- 
 came a great expense to the country. The question became a political 
 issue and undoubtedly contributed to the defeat of the Conservative 
 party in the elections of 1896. The Liberal party came into power 
 then pledged to effect a reform, and in fulfillment of its pledge closed 
 the superannuation act of 1870 to all new entrants into the civil 
 service and passed in lieu thereof the retirement act of 1898, which 
 is now in force and has proved quite as unsatisfactory, in a different 
 way, as will be explained later on. 
 
 FLAT-RATE ASSESSMENT PLAN UNSATISFACTORY IN FRANCE. 
 
 France has had in operation since 1853 a retirement plan for civil 
 employees, which is based on a flat-rate deduction of 5 per cent from 
 salary, and illustrates the weakness of all such plans. To the pen- 
 sion fund thus created are also added deductions from the salaries 
 of new entrants and deductions from promotion salaries, but even 
 with these additional contributions from the employees, such are the 
 uncertain and incalculable elements of any plan which requires com- 
 mingling of assets that the public treasury, in 1902, was devoting 
 80,000,000 francs a year to civil pensions, with every prospect that 
 unless there were modifications in the law the amount would finally 
 reach 129,000,000 francs; so that the retirement plan in vogue for 
 civil employees is virtually a civil pension. In addition to this, the 
 plan is unsatisfactory to the beneficiaries themselves because of arbi- 
 trary and unjust distinctions made between employees of different 
 ages and classes, there being no fixed relation between the amount 
 which the particular employee contributes and the amount he may 
 receive from the fund.^ 
 
 1 See " Qiielques observations snr les ponsions de retraite des fonctionnaires civils et 
 les projets de rgforme," by Georges Cahen, in " Revue Politique et Parlementaire," Sept. 
 10, 1902, p. 497. 
 
KETIKEMENT OF SUPERANNUATED CIVIL- SERVICE EMPLOYEES. 71 
 
 SAVINGS AND ANNUITY PLAN BASED ON ADEQUATE INDIVIDUAL CONTRI- 
 BUTIONS THE IDEAL PLAN. 
 
 Not one of all the foreign retirement schemes, so far as known, 
 would seem to offer us a model. Germany, like England, grants a 
 straight jDension to its civil employees, while other countries, such as 
 France, Holland, Belgium, Austria, and Turkey, have plans which 
 require flat-rate assessments on salaries. All civil pension and gen- 
 eral fund assessment plans being discarded as undesirable and inequi- 
 table, the investigator is brought, by a process of elimination, to con- 
 sider as the soundest, the most equitable, and the most expedient plan 
 of retirement for civil-service employees a savings bank or " savings 
 and annuity plan" based on deductions from salary that are suffi- 
 cient in each case for the purchase of an adequate annuity at the age 
 of retirement. This is in accordance with the fundamental principles 
 laid down at the beginning of this chapter, that the funds necessary 
 for the payment of annuities on all services rendered after the adop- 
 tion of the plan must be provided by the employees themselves by 
 means of contributions which shall be sufficient to provide an ade- 
 quate annuity, based on length of service and amount of salary, and 
 which are so arranged as to be in no case excessive. The funds neces- 
 sary for the payment of annuities on all services rendered prior to the 
 adoption of the plan must be furnished by the Government, a sharp 
 distinction thus being made, in the interests of the younger members 
 of the service, between past services and future services. 
 
 Savings-Bank Plan Approved bt Well-Known Actuaries. 
 
 The simplicity of the savings-bank idea may account for the fact 
 that it has escaped special consideration, and yet it has been sug- 
 gested before and approved by well-known actuaries. 
 
 The subject of pension funds, for instance, is discussed by Mr. 
 Miles M. Dawson, a consulting actuary of New York, in an article 
 in the Railway Age, in which he brings out the enormous perplexities 
 and difficulties of the pension systems usually in force, especially 
 those in which the fund is created partly by contributions from the 
 employees and partly by contributions from the employers. He sup- 
 ports his statements largely by a quotation from the highest British 
 authority on the subject, Mr. Henry W. Manly, ex-president of the 
 Institute of Actuaries, actuary manager of the "Old Equitable," 
 and author of the most valuable actuarial treatise upon pension 
 funds. Mr. Dawson's conclusion is that— 
 
 Theoretically a pension fund could be created by exacting only the percentage 
 of each salary which was found equivalent, as an increase of the whole pay 
 roll, to the value of the pension. Practically this can not be done satisfactorily, 
 because the employer must guarantee the sufficiency of the fund or leave its 
 
72 RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 solvency doubtful, which is worse, and the rates of withdrawal and dismissal 
 are too unreliable to count upon in fixing the deductions from salaries, because 
 of the various demands described by Mr. Manly and because higher rates with 
 lower benefits would seem unjust to employees entering the service at the higher 
 ages. The only plan upon which the system can be operated without constant 
 annoyance is that of making the scheme a mere savings bank until the retire- 
 ment age is reached, the accumulation being returned at death, upon retirement 
 because of ill health, upon withdrawal, or even dismissal.^ 
 
 At a meeting of the Actuarial Society of America, held in Toronto, 
 October 10 and 11, 1907, Mr. Benedict D. Flynn, assistant actuary of 
 The Travelers Insurance Co. of Hartford, Conn., presented a paper 
 on " Staff pension funds," in which he made special reference to the 
 savings and annuity plan here under discussion, and commended it as 
 avoiding all the perils of flat-rate assessment plans. After pointing 
 out the great difficulty in creating a staff pension fund of obtaining 
 a true measure of the rate of withdrawal, he said : 
 
 And the salary scale, which is probably of greater importance in determining 
 the amount of contribution than any other element, is most difficult to determine 
 with reasonable accuracy. The presence of high-salaried offlicals in the older 
 ages of the staff and the probability of change in the methods of advancement 
 call for the greatest care and judgment in the adjustment of the salary scale. 
 Even when the work is completed in the most skillful manner there is a grave 
 question as to whether the result gives a fair estimate of the rate of increase 
 in salaries to be experienced in the future. 
 
 The fact that these assumptions with regard to the rates of withdrawal, 
 retirement, and salary increase can not be made with accuracy, however, would 
 not of itself be of great moment, provided the errors of judgment did not place 
 the fund in an unsafe condition, if it were not for the fact that in such a fund 
 individuals or certain classes are not treated equitably. 
 
 Proceeding to consider " the question of the proper plan to use in 
 the organization of a pension system," Mr. Flynn calls attention to 
 the fact that — 
 
 practically all pension schemes which depend in any degree upon compulsory 
 contributions from members contain in their rules the privilege of return of 
 the whole or part of the contributions with or without interest in case of with- 
 drawal or death before age of retirement is reached. 
 
 He then says: 
 
 The question which naturally arslses is what necessity there may be for 
 introducing the elements of mortality and withdrawal and of the erection of 
 this elaborate statistical structure. Why not eliminate these assumptions en- 
 tirely in so far as active members are concerned and simply accumulate the 
 contributions at compound interest? This savings-bank idea, although referred 
 to at various times throughout the discussion of staff pension funds, has never 
 been given the consideration that would seem to be its due. * * * 
 
 It is in the ease with which a plan based upon the savings-bank idea can be 
 started and operated, however, that its chief advantage lies. An account can 
 be kept for each member, and the proper return upon death or withdrawal or 
 
 1 See " Pension funds," by Miles M. Dawson, F. I. A., Railway Age, Sept. 9, 1904. 
 
RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 73 
 
 the amount of pension upon retirement can be determined with accuracy. 
 Another advantage which this plan possesses is in the case of change in the 
 rules of the plan. Mr. Manly states that in his experience rules were changed 
 about every five years and oftentimes without the knowledge and advice of the 
 actuary who made the original calculations. Funds which start with simple 
 benefits very often assume obligations of a more costly nature without a 
 corresponding increase being made in the contributions required. In cases 
 where such changes have been made and actuarial advice either ignored or not 
 sought at all the funds have become insolvent with consequent loss to members. 
 The result of increasing the benefits to the members under the savings-bank 
 plan would simply be to cut down the gains to the fund and to reduce the 
 surplus to be divided among the members — a simple adjustment compared with 
 the situation in a fund built upon assumptions. It can be said, therefore, if 
 the rules of a plan require the return of contributions with interest as will 
 most plans of to-day which make payments by members compulsory, that the 
 use of the savings-bank plan as outlined above has many advantages and that, 
 even in cases where the benefits to members are more restricted, it will prove 
 a safe and desirable method for starting and carrying the scheme until a reliable 
 experience can be obtained. 
 
 The value and adaptability of this method can best be shown in detail by 
 considering a plan which has been proposed recently for the retirement of the 
 employees of the classified branch of the United States civil service. 
 
 Mr. Flynn then proceeds to describe the savings and annuity plan 
 discussed in this report.^ 
 
 Savings-Bank Plan Proposed fob Feance. 
 
 The shortcomings of the law of 1853, under which the retirement 
 plan for the civil employees of the French Government was estab- 
 lished, have been noted above in the reference to Georges Cahen's 
 article in the Revue Politique et Parlementaire. According to that 
 same author, " the key to the problem " is to be found in a " system 
 of savings-bank accounts" proposed in 1877 and again in 1891 by 
 two great financiers, which was adopted by the Senate but rejected 
 by the Chamber of Deputies. An acount of this project, translated 
 from Cahen's article, is as follows: 
 
 In 1873 the National Assembly sent to the Council of State a study of a propo- 
 sition made by Admiral de Montaignac and three of his colleagues. The 
 secretary of the Council, M. de la Roque, devoted himself to minute researches 
 and laborious calculations. After two years of elaboration and discussion, a 
 vast project issued from the Council of State, which served as a basis for 
 that which M. Leon Say, minister of finance, announced in 1877, in the name 
 of the Government. 
 
 It creates a " provident fund ofiice," the duty of which is to bring together 
 to the credit of each civil employee the amounts deducted from his salary and 
 the proportional subsidies granted annually by the State. An individual 
 account is opened for each employee, where the sums thus paid are charged up 
 with compound interest at 4J per cent, reckoned each year. After two years of 
 
 I See " Staff pension funds, with special reference to a retirement plan for United States 
 civil-service employees," by Benedict D. Flynn, F. A. S., Transactions of the Actuarial 
 Society of America, Vol. X, p. 275. 
 
74 EETIREMENT OF SUPBRajSTNUATED CIVIL-SERVICE EMPLOYEES. 
 
 service the employee has a right to the portion of the fund which has come out 
 of his salary After 15 or 20 years, and at the age of 45 or 50 years, according 
 to circumstances, he can draw on the amount of the subsidies, under the form 
 either of a life annuity or of a right to perpetual income. The passing over 
 of this income to the widow is assured in certain cases and according to definite 
 conditions. 
 
 After being adopted, with modifications, by the Senate, upon the remarkable 
 report of M. Gouin (March 24, 1879), the bill was rejected by the Chamber, 
 conformably to the conclusions of M. Godefroy Cavaignac, who established the 
 fact that in adopting it the advantages granted by the law of 1853 to the minor 
 ofl3ceholders would be diminished and transitory charges, too burdensome and 
 insuflaciently compensated by the economics of the distant future, would be 
 imposed upon the treasury. 
 
 The question was not again taken up until eight years later. On June 27, 
 1891, M. Rouvier introduced a new bill, which was directly inspired by that of 
 M. Leon Say, but account was taken of the criticisms which had brought about 
 the latter's rejection. The interest in this later bill is calculated only at 3:| per 
 cent. The rate of the subsidy decreases, that of the salary deductions in- 
 creases, with the importance of the salaries. A common fund permits a supple- 
 mentary grant to be made to the employees least favored. The employee be- 
 comes proprietor of the fund accumulated from the deductions from his salary 
 only after 10 years of service, but his widow and heirs have right to it in case of 
 his decease after 5 years of service. The benefit of the subsidy is, however, 
 acquired only at the end of 25 or 30 years. In this scheme, as well as in that of 
 M. Leon Say, he can draw on this amount only in the form of an annuity, the 
 principal ultimately going to the common fund. The national bureau of retir- 
 ing pensions for old age, an old institution, protected from all interference with 
 its funds by the State, was to have charge of this new service. 
 
 Parliament never reached a discussion of the bill. Nevertheless, in certain 
 of its principles * * * ought to be found, in our opinion, the key to the 
 problem. * * * 
 
 The tontine system of the law of 1853 causes the greater part of the abuses 
 already mentioned; it entails an arbitrary and unscientific fixing of the 
 amount of the pension ; it does not take into account the entire career of the 
 pensioner; it necessitates percuniary sacrifices, increasing incessantly, always 
 indefinite. The system of the " savings-bank account," on the contrary, permits 
 a regulation of the rate of the pension according to the amount of the pay- 
 ments made into the individual's fund; it makes the rate depend on the serv- 
 ices rendered; at every period conserves the rights of the employees; it makes 
 the fund held back from his salary his property, and thus takes away from 
 this governmeutal act its character of spoliation. For annual charges in the 
 budget it substitutes fixed subsidies, easily calculable. By the accumulation 
 of interest it facilitates the formation of a reserve fund which will lighten the 
 charges of the future. * * * it brings clearness and economy into the public 
 finances. It is, to sum up, the only rational, just, scientific, and humane method. 
 
 Reasons for Failure of Savings-Bank Plan in Canada and New Zealand, 
 
 The suggestion that a savings-bank plan is the logical one to adopt 
 for the retirement of Government employees sometimes encounters 
 the criticism that such was the plan established in Canada by the re- 
 tirement act of 1898, that it has not given satisfaction, and that a 
 
KETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 75 
 
 movement is even now on foot to set it aside and adopt a plan which 
 shall depend, at least partly, on the Government for support. 
 
 It is true that the Canadian plan is a compulsory savings system, 
 pure and simple. The deductions from salary, together with interest 
 at 4 per cent, compounded annually, are placed to the separate ac- 
 count of the individuals from whose salaries the deductions are made, 
 and they are his unconditionally on separation from the service. 
 To this extent the Canadian plan resembles the savings and annuity 
 j)lan embodied in the Perkins, Gillett, and Austin bills. There is, 
 however, one radical difference between the two plans. The Canadian 
 scheme is based on a flat-rate assessment of 5 per cent on all salaries. 
 Since there is no commingling of assets, the uniformity of rate in the 
 deductions from all salaries does not result in any inequity as between 
 different classes of employees. Each employee gets back just what 
 he sets aside, plus interest, and can not complain that any of his 
 savings is diverted for the benefit of some older employee. An assess- 
 ment of 5 per cent of salary is not, however, sufficient at the older 
 ages to provide adequate benefits. The very complaint is made by 
 the civil employees of Canada that a student of the subject- might 
 expect to hear, that the annuities provided under the retirement act 
 for employees who entered the service at the older ages are insufficient. 
 Similar criticism can not be made of the savings and annuity plan 
 here proposed, because deductions from salary are graduated accord- 
 ing to the age at which the employee enters the service, and are 
 sufficient in each individual case to create a sum that will purchase 
 an adequate annuity at the age of retirement. Instead of a flat-rate 
 deduction of 5 per cent of salary for all ages the deductions for re- 
 tirement at the age of TO vary from 4.3 per cent in the case of an 
 employee who enters the service at the age of 20 to 11,2 per cent 
 in the case of the employee who enters at the age of 69, or is at that 
 age when the plan takes effect. Not only are retirement allowances 
 thus made adequate, but the general effect of such, a graduation in 
 deductions is to discourage the entrance of old people into the serv- 
 ice, which surely is as it should be. 
 
 A compulsory savings scheme was tried in New Zealand from 1886 
 to 1893 which was open to the same objection as that now brought 
 against the retirement act of Canada. It was based on a uniform 
 deduction of 5 per cent of salaries, the deductions credited separately 
 to the account of each employee, but it proved inadequate as a 
 retirement measure for those who entered the service late in life, 
 and other measures were brought forward to take its place. 
 
 Assessment on Salary Should be Based on Age of Entrance into Service. 
 
 The necessity of making the percentage of salary deducted depend 
 on the age of entrance into the service has been perceived by at least 
 
76 EETIEEMENT OF SUPERANNUATED CIVIL-SERVICE EMPLiOYEES. 
 
 two well-known actuaries. One of the actuaries employed to make 
 the valuation, on several occasions, of the New South Wales super- 
 annuation fund was Mr. John B. Trivett. In 1902, on the occasion 
 of the fifth and last actuarial valuation, Mr. Trivett made a very 
 exhaustive report discussing the causes which had operated to bring 
 about the failure of that fund and the principles which should under- 
 lie a perfectly safe scheme of superannuation, arguing that " it would 
 be in every way regrettable if the failure of a system which had been 
 devised on an unsafe plan should provide so great a prejudice as to 
 permanently prevent the adoption of some well-founded retirement 
 fund, a most essential attachment to any efficient public service.*' 
 Assuming retirement at the age of 60, and salaries in progress as at 
 present in the New South Wales civil service, he stated that the con- 
 tribution rates necessary to insure the sufficiency of a superannuation 
 fund would have to vary with the entrance age as follows : ^ 
 
 Under 20 years . 5 per cent per annum. 
 
 20 and under 25 years 5J per cent per annum, 
 
 25 and under 30 years 5f per cent per annum. 
 
 30 and under 35 years 6 per cent per annum. 
 
 35 and under 40 years 6i per cent per annum. 
 
 When Mr. Morris Fox, the Government actuary of New Zealand, 
 came to work out the plan for the retirement of New Zealand's civil 
 employees, which was enacted into law in 1907 under the name of the 
 " Public-service superannuation act," he evidently profited by the dis- 
 astrous experience of New South Wales, and heeding the advice of 
 Mr. Trivett carefully observed the fundamental principle that em- 
 ployees' contributions must be fixed according to the age of entrance 
 into the service or the age at the time of the passage of the law, and 
 not according to some uniform percentage of salary. The laAV as 
 finally enacted provides for contributions at 5 per cent of salary for 
 ages under 30 at age of entrance, with an increase of 1 per cent for 
 every five years' increase in the age of entrance or part thereof, until 
 for ages exceeding 50 they reach 10 per cent. 
 
 Two Important Principles Observed in Perkins, Gillett, and Austin Bills. 
 
 In the observation of this important principle and one other, the plan 
 embodied in the Perkins, Gillett, and Austin bills differs from all plans 
 previously proposed in this country or tried in other countries, with 
 the single exception of New Zealand, so far as known to the author. 
 Besides graduating deductions from salary according to entrance 
 age — and this is done with exactness for every age in the proposed 
 plan rather than for every five years only, as in the New Zealand 
 plan — the plan embodied in these bills makes a sharp differentiation 
 between past liabilities and future liabilities. It is through using the 
 
 1 See Civil Service Retirement, New South Wales, Australia, S. Doc. 420, pp. 43—44. 
 
E.ETIEEMENT OF SUPEEANNUATED CIVIL-SERVICE EMPLOYEES, 77 
 
 contributions of present employees to pay pensions on account of past 
 services to old employees that most contributory schemes have come 
 to grief, because it always haj)pens finally in such cases that when 
 those who have been paying for years want to retire there is no money 
 for them, as it has all been paid out as fast as it came in, instead of 
 having been set aside and accumulated for them. The Perkins, Gil- 
 lett, and Austin bills all provide that the annuities for services ren- 
 dered prior to the adoption of the plan shall be paid by the Govern- 
 ment, the contributions of present employees to be kept undisturbed 
 for them until they are ready to retire. The New Zealand law like- 
 wise provides that employees' contributions are not to be used for 
 paying annuities on back services, but that those annuities are to be 
 paid by the Government, which agrees to start the scheme with an 
 annual payment of £20,000, the subsidy to be increased if necessar}^ 
 
 While similar in these important essentials to the plan discussed 
 in this report, the New Zealand plan is widely different in detail 
 from that here proposed. The benefits under the plan would seem 
 to be greater, in many cases, than the contributions of the individual 
 employee would buy, and there is evidently no expectation that the 
 plan will ever be self-sustaining, nor no very clear idea of what it is 
 going to cost. It is not, therefore, a savings-banl^ scheme, but a civil 
 pension to the extent of the Government subsidy. The superannua- 
 tion fund consists of contributions from the employees, the annual 
 subsidy, fines levied on public servants, and the interest on the fund. 
 Out of this benefits are provided not only for the employees but for 
 their widows and orphans as well. While thoroughly sound in prin- 
 ciple, the objection may be brought against this plan, as against any 
 other which looks to the Government for partial support, that the 
 way lies open, as long as the Government is expected to make up a 
 deficit, whatever it is, for abuses in administration that may lead 
 to very great expense to the Government. 
 
 Payment of a Liberal Rate of Interest the Government's Best Contri- 
 bution, 
 
 The present sentiment in Canada would seem to be toward the 
 modification of the retirement system of that country in such a way 
 as to call on the Government, as in New Zealand, to pay part of the 
 expense. To the courtesy of Mr. M. D, Grant, of Liverpool, Nova 
 Scotia, formerly Government actuary, the author is indebted for a 
 memorandum concerning the Canadian situation, in which the fol- 
 lowing paragraph occurs : 
 
 Anyone who will analyze the commission bill or the Senate bill will be con- 
 vinced that 5 per cent will not provide the benefits guaranteed. It is generally 
 accepted as sound doctrine, however, that inasmuch as an effective retirement 
 system benefits the employer no less than employed, the former should equi- 
 
78 EETIREMENT OF SUPERANNUATED CIVIL-SEEVICE EMPLOYERS. 
 
 tably contribute. That is to say, tlie industry or business itself should stand 
 its share of the cost; and the modern trend is in the direction of making the 
 respective shares contributed 50 per cent each. The 5 per cent from the serv- 
 ice, therefore, is intended to be supplemented by 5 per cent from the Govern- 
 ment, or, what would amount to the same result, the Government may guar- 
 antee the actuarial solvency of the fund by lump contributions. Personally I 
 am much opposed to these indefinite guarantees as contrary to the best interests 
 of the public ; the more definite and known public financing is the better for aU 
 concerned. As to the view that no matter whether the employer contribute ot 
 not, the employee has always in the long run to bear the full cost of his own 
 retirement, I believe that this is stretching an economic principle to the break- 
 ing point ; but, admitting this, I believe it to be good policy that the reciprocal 
 nature of the benefits derivable from a proper retirement system should be 
 recognized by employers in some direct financial manner. 
 
 It is difficult to see wherein this scheme has any marked superiority- 
 over that embodied in Canada's superannuation act of 1870, Avhich 
 was so grossly abused, as explained above, for political purposes. 
 What is to prevent a similar situation developing again? Conceding 
 that "the reciprocal nature of the benefits derivable from a proper 
 retirement system" should be recognized by the Government, the 
 author feels that this can be done much more wisely and safely than 
 by fixing a flat and arbitrary assessment rate and then calling on the 
 Government to supply the deficit, which is sure to result when there 
 is no established and scientific relationship betAveen contributions and 
 benefits. The Government can do its part in a way that will be fairer 
 to the taxpayer and more helpful to the civil servant than any direct 
 contribution would be. It can make its contribution in the form of 
 a liberal rate of interest on the deduction from salary set aside by the 
 employees. In this respect both the Perkins and Gillett bills could, 
 in the opinion of the author, be greatly improved, for 3^ per cent 
 can surely not be called " a liberal rate of interest." By doing this 
 the Government not only keeps the plan self-supporting — doing away 
 with the opprobrious term of "pensioner" and fortifying the self- 
 respect of every contributor — but it shuts the door on all the possi- 
 bilities of abuse and corruption that will surely creep in if direct con- 
 tributions from the Government are allowed. Most important of 
 all, the Government's help will be most bestowed where it is most 
 deserved — on those employees who have been longest in the service, 
 since the results of compound interest are much more marked after a 
 long term of years than after a short period.^ 
 
 The payment of a liberal rate of interest would also be much more 
 economical for the Government than the direct appropriation of 
 lump sums. By reason of the fact that with the help of compound 
 interest at the rate of 3 per cent per annum the sum of a given con- 
 tribution per annum will double itself in the course of a service of 
 
 1 See interest chart, p. 102. 
 
RETIREMENT OF SUPEEANNUATED CI^'IL-SEEVICE EMPLOYEES. 79 
 
 42 years, and at 3^ per cent in 36 years, and at 4 per cent in 31 years, 
 it follows that the total contributions of an employee who serves 40 
 years need be less than half the amount required by direct appro- 
 priation from the Treasury to give the same pension. The Canadian 
 or American Government could, therefore, far better afford to in- 
 crease salaries by the amount of the contributions that will be neces- 
 sary under a bill like Senate bill 1944, requiring the employees to 
 meet unaided the full cost of their retirement, than to make direct 
 appropriations to supplement the flat-rate contributions of the em- 
 ployees. 
 
 SAVINGS AND ANNUPTY PLAN ADOPTED BY ENGLISH FRATERNAL ORGANI- 
 ZATION. 
 
 While no government, in the opinion of the author, offers a model 
 retirem^it plan which it would be safe to follow in all respects, the 
 record of at least one actual experiment with a savings and annuity 
 plan, which seems to be identical with the plan here proposed for the 
 civil employees of the United States Government, is available. An 
 account of this very humble and obscure experiment is given in an 
 article by John Martineau, entitled " Pensions and voluntary effort : 
 a suggestion and an experiment," which is contained in a volume of 
 short papers on old-age pensions, published in London and New 
 York in 1903. The contributors to the volume were all members of 
 a committee on old-age pensions formed of persons interested in the 
 controversy then going on in England with respect to the introduc- 
 tion of an old-age pension bill. All had had a large personal and 
 practical experience in the administration of friendly societies, of 
 poor-law relief, or of charity. They were generally strongly averse 
 to the movement for old-age pensions, and many of their reasons for 
 opposing such a policy are stated in this book. The introduction sets 
 forth some of the arguments advanced by friends of the movement, 
 and then continues thus: 
 
 But while such arguments as these are widely circulated, and schemes for 
 old-age pensions are so frequently discussed and in some countries set on foot, 
 it is hardly surprising that the attention of the people should be diverted from 
 the consideration of the methods by which they might themselves create the 
 funds required to provide for old age. What might be done is shown, for 
 instance, by the Sheffield and Hallamshire district of the Ancient Order of For- 
 esters. That district has imdertaken to provide an old-age pension fund for 
 its own members. At the commencement of 1901, 428 members were contribut- 
 ing to the fund ; at the close of it there were 468. Several courts having valua- 
 tion surpluses have seen the desirability of converting their courts into pen- 
 sion courts, and 19 of these have voluntarily required all future entrants to 
 subscribe for " old-age pensions " as a condition of membership. There are now 
 637 members in Sheffield assured of old-age pensions.' * * * 
 
 1 See Old-Age Pensions : A Collection of Short Papers, 1903, p. 4. 
 
80 RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 The members of the Ancient Order of Foresters above referred to are most 
 of them agricultural laborers, whose weekly wage generally does not exceed 10 
 shillings a week. * * * 
 
 But, though wages are low, the district is healthy, * * * and what is very 
 important, the lodge is being very well managed. At the beginning of 1896, 
 after an existence of 32 years, it found itself with 166 members, and after all 
 liabilities, present and future, were provided for, with a certified surplus of 
 £1,072. * * * Should the contributions be diminished? Or should the money 
 be taken out and shared among the members? 
 
 A new departure was suggested. Could not the surplus be made the founda- 
 tion for an old-age pension fund? It would not, of course, be enough of itself. 
 The contributions must be raised to augment it. Was this practicable? 
 
 And then came the difficulty. How about the older members? Three were 
 over pension age already, and would be unable to contribute anything. Others 
 were approaching it more or less nearly ; their contributions would not amount 
 to much, and if all alike were to have a pension at a certain age an unfair and 
 impossible burden would be thrown upon the younger members. To meet this 
 difficulty an honorary member of the society offered to provide such a subsidy 
 as would suffice, when added to the surplus, to enable every member, no matter 
 what his present age, to receive a pension of 5 shillings at 65, without making 
 an excessive addition to the contributions, and the addition being the same for 
 all members, old or young. * * * 
 
 The secretary thereupon prepared an elaborate statement of the assets and 
 liabilities of the lodge, showing each member's interest therein separately, and 
 the case with all its figures was submitted to Mr. Thomas Abbott, actuary, of 
 Sheffield. 
 
 His report is too long to quote in detail, but briefly the conclusion he arrived 
 at was that, by the help of the surplus, increased by a subsidy of £1,200 from 
 the honorary member, a pension of 5 shillings a week at the age of 65, and also 
 immunity at that age from further contributions, might be secured to every 
 member, no matter what his age, by raising the existing contributions rather 
 less than 20 per cent. * * * 
 
 New members entering the club do not benefit by the accumulated surplus, or 
 by the subsidy by which it has been increased. Their contributions have to be 
 such as are sufficient, unaided, to provide a pension. The necessary amount to 
 be appropriated to the pension fund by new members was certified by Mr. 
 Abbott to be : For persons entering at 18, 12s. 4d. a year, increasing, according 
 to a scale for age, to 38s. 9d. a year for members entering at 39 — the highest age 
 at which a member can be admitted. 
 
 The scheme was formally submitted to a general meeting of the members, in 
 September, 1896, and adopted. It was also made henceforth compulsory on all 
 new members to contribute for a pension. On January 1, 1897, the new scheme 
 came into operation, and the three members who were over 65 came at once into 
 the receipt of their pensions. 
 
 The scale for new members for securing first-class benefits ranges from 2s. 
 id. per lunar month for a person entering at 18 to 4s. 8d. for a person entering 
 at 39. This secures 12s. a week during sickness for 26 weeks; 6s. for the fol- 
 lowing 26 weeks; 4s. during the remainder of the sickness; a pension of 5s., 
 with cessation of contributions, at 65 ; and £12 for funeral," 
 
 It will be observed that the principles followed in the development 
 of this rural English experiment are exactly those laid down in the 
 
 1 See Old-Age Pensions : A Collection of Short Papers, 1903, p. 181. 
 
 I 
 
RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 81 
 
 construction of the savings and annuity plan discussed in this report. 
 The contributions are based on entrance age, and are sufficient to pro- 
 vide the necessary allowance in each case at the required age. A 
 separate account is kept with each individual. Allowances to the 
 older members already past the pension age are paid out of a subsidy 
 furnished by a friend, who corresponds in this British scheme to the 
 Government paying annuities for back services under Part II of the 
 plan for the United States civil servants. 
 
 It is gratifying to learn, therefore, that, in 1908 when the subject of 
 old-age pensions was agitating all England, an article by Sir William 
 Chance appeared in the London Financial Review of Reviews in 
 which the writer deprecated as unsound and unwise the proposed leg- 
 islation, and called attention to the success of the rural scheme de- 
 scribed above. Sir William Chance was chairman of the Council of 
 the British Constitutional Association and is the author of many 
 works upon the administration of the Poor Law. He said : 
 
 Old age is undoubtedly a cause of destitution, but there is much evidence to 
 show that the wage-earning classes have it in their power to provide against the 
 time when they will be unable to work for their living, just as they have 
 hitherto provided against sickness and death. When outdoor relief to the able- 
 bodied was put an end to by the Poor Law Act of 1834 there were many who 
 said that it was out of the power of these to make themselves independent. But 
 history has shown that the anticipations of the Reformers of 1832 have been en- 
 tirely fulfilled. The Friendly Societies have grown out of the ruins of the old 
 Poor Law. It is well known that just about the time when Mr. Joseph Cham- 
 berlain made old-age pensions a political cry, the societies were on the point of 
 working out a scheme for providing old-age pensions for their members, as they 
 could easily have done. Indeed, certain courts and lodges of the Manchester 
 Unity and Foresters have made it obligatory on their members to insure for 
 old-age pay as well as for sick pay and for death, and these courts and lodges 
 have become most popular. But whenever they have made an effort to get their 
 system applied over the whole of these two great Friendly Societies — and they 
 have tried to do this more than once — they have at any rate up to the present, 
 been met with the answer, " What is the use of it, when the State is going to 
 provide the pension?"^ 
 
 ADVANTAGES OF PROPOSED PLAN. 
 
 It should be plain from the foregoing explanations that the sav- 
 ings and annuity plan here proposed of retiring civil-service em- 
 ployees is in no sense a pension scheme, since it does not look to the 
 Government for support. It is self-sustaining, making no demand 
 on the Government beyond the guaranty of a reasonable rate of in- 
 terest on the money held by the Government and the expense of ad- 
 ministering the plan. It will improve the service by putting into 
 the hands of administrative officers power to remove the incompetent 
 
 1 See " The cost of old-age pensions : Does foreign experience justify an Englisli experi- 
 ment?" By Sir William Chance, Bart. (The Financial Review of Reviews, London, 
 Feb.. 1908, p. 9.) 
 
 74196°— S. Doc. 745, 61-3 6 
 
82 EETIEEMENT OF SUPEEANlSrUATED CIVIL-SERVICE EMPLOYEES. 
 
 and superannuated. It will benefit the employee by stimulating his 
 independence and self-respect while he is in office and by retiring 
 him on a competence when he reaches old age. And it is as simple in 
 its operation as a straight pension itself. 
 
 XoTE.^Since this report has been in proof the special committee on retire- 
 ment legislation of the Civil Service Reform Association of New York has sub- 
 mitted a report in which they " lay down the lines which sane, fair, and 
 economical pension legislation should follow." It is gratifying to note that the 
 principles promulgated in their report agree with those here set forth. The 
 full text of their report is as follows: 
 
 CrviL Pensions in New Yoek State and City. 
 
 EEPORT OF THE SPECIAL COMMITTEE ON RETIREMENT LEGISLATION OF THE CIVIL 
 SERVICE REFORM ASSOCIATION OF NEW YORK. 
 
 To the Executive Committee: 
 
 Your committee appointed to consider the subject of retirement legislation in 
 this State herewith submits its report. 
 
 If a retirement system can be devised — and it seems to your committee that 
 one can be devised — which, without imposing an undue burden upon the tax- 
 payers, will tend to increase the efficiency of the public service through caring 
 for the old age of those who have served long and faithfully, the New York 
 Civil Service Reform Association should heartily favor the establishment of 
 such a system and should aid in securing the necessary legislation to that end. 
 In so far, however, as any proposed retirement system fails either to increase 
 the efficiency of the public service or to be just and fair to the employees, or to 
 be just and fair to the taxpayers, the association should oppose the proposal. 
 And this because unless a retirement system does increase the efficiency of the 
 service it has no excuse for existence, and because a retirement system that 
 imposes unjust or unfair burdens either upon the employees or upon the tax- 
 payers who employ them will prove progressively demoralizing in its operation. 
 
 Approaching the subject from this point of view makes clear and sharp the 
 distinction between a straight pension and a retiring allowance for superan- 
 nuated employees. The former should be confined to civil employees engaged 
 in hazardous occupations who suffer injury or death in the performance of 
 duty. The entire expense of allowances or annuities granted in such cases 
 should be paid out of the public treasury. They should be regarded as a part 
 of the legitimate cost to the public of conducting a hazardous business. The 
 ordinary civil employee is in a very different situation. He should be paid a 
 proper and adequate compensation for the services he performs, and there would 
 seem no valid reason why government employees who have been in receipt of 
 such compensation should be erected into a special class to be supported in their 
 old age at public expense. On the other hand, if the public employee is not paid 
 a proper and adequate compensation for his services, any method which seeks 
 to supply the deficiency by pensioning him when superannuated is unjust to 
 the employee, economically wasteful, politically demoralizing, and detrimental 
 to the efficiency of the service. 
 
 A retiring pension provided in whole or in part at the public expense as a 
 reward for long and faithful services inadequately paid for at the time they 
 «re rendered is inevitably regarded as merely the deferred payment of moneys 
 already earned. This works a double injustice, for it helps to make and keep 
 the pay for current work inadequate, and the death of the employee before 
 Ms superannuation will prevent his ever receiving the deferred portion of his 
 
EETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 83 
 
 compensation. It is equally unfair to tlie public, for it has been shown by ex- 
 perience that each year an employee remains in the service with a portion of 
 his pay held back until he shall reach the age of superannuation is an added 
 obstacle to his discharge, though his work may have sensibly deteriorated. It 
 would be far better from every point of view for the government to pay ade- 
 quately and contemporaneously for the services as rendered than to weaken 
 the discipline and impair the efficiency of the public service by deferring the 
 payment of any portion of the earnings of its employees on the promise that if 
 they desired to remain and were not discharged before they reached the age of 
 superannuation they would thereafter be pensioned. 
 
 Your committee is unreservedly in favor of the following propositions : 
 
 Each employee in the civil service of the government should receive proper 
 and adequate compensation for his services at the time the services are ren- 
 dered. 
 
 If the salaries of the government's civil employees are adequate, as compared 
 with salaries for similar employment outside the public service, so that the 
 employees can properly be expected to lay by a sufficient amount year by year 
 to provide for their own old age, it is not reasonable, nor does it tend toward 
 personal thrift and economy, for the government to add to such salary a pen- 
 sion for life, at great expense to the taxpayers. 
 
 It is quite possible and, indeed, probable that in certain cases the salary 
 remaining to the employee after deduction has been made to provide for his 
 support in old age will not be sufficient to permit him to maintain the standard 
 of living to which his position entitles him. In such cases, however, it is clear 
 that the salaries as now fixed are inadequate, and your committee therefore 
 recommends that all such cases be inquired into and the necessary advances in 
 salary made. 
 
 That some private corporations have of late been establishing various pension 
 systems represented to be wholly or in part at the expense of the employing 
 corporation does not seem to your committee a convincing or even a strong 
 argument for introducing such a system in the public service. In the first 
 place, assuming it to be honestly believed that the expense of these pensions is 
 borne in whole or in part by the employing corporation, we may be very sure 
 that, if it turns out that any part of the pension is paid out of the capital of 
 the corporation, that part of the pension will stop. We may be equally sure 
 that, by so much as the payment of any part of the pension diminishes the 
 normal return upon capital the pension will stop. In the second place, in 
 each of these instances a private corporation is simply risking its own money 
 to try an experiment that may or may not prove to be successful as the years 
 go on ; while the Government has neither savings nor investments nor earnings 
 of its own, and if it ventures upon such an experiment must pay the expense 
 out of forced contributions from the taxpayers. The Government lacks the 
 stimulus to keen watchfulness and economical management constantly present 
 when one who fails in either respect must bear the loss occasioned. It would 
 be rashly imprudent in these circumstances to create a large dependent class 
 of voters directly interested in influencing legislation for its pecuniary profit. 
 
 Your committee therefore recommends that the following principles be ob- 
 served in drafting retirement legislation applicable to employees in the civil 
 service : 
 
 (1) A system of retiring annuities based upon length of service and an 
 attained age of retirement should be provided by compulsory contributions 
 from the employee's salary, which, invested by or under the supervision of the 
 Government at a reasonable rate of interest, compounded annually, will be suffi- 
 cient to provide the annuity at the age of retirement. The safety of the contri- 
 
84 EETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 butions and the reasonable rate of interest should be guaranteed by the 
 Government. 
 
 (2) An individual and separate account should be kept of the contributions 
 of each employee. In case of his voluntary separation from the service before 
 the age of retirement, these should be repaid to him. 
 
 (3) In order that the retirement system should increase the stability of the 
 service and add an inducement to capable men to remain in it, those who 
 separate themselves from the service prior to the age of retirement should 
 receive somewhat less than the full accumulation of interest upon their deposits 
 with the Government. 
 
 It is apparent that a system of retiring annuities embodying the principles 
 favored in this report can be made to rest upon a sound actuarial basis, and in 
 the case of a new entrant into the civil service need not require the contribution 
 of an undue proportion of his salary in order to secure the benefits sought. At 
 the present time, however, the data are almost wholly lacking for devising a 
 sound plan for retiring, at reasonable cost to the taxpayers, the civil employees 
 already in the public service. Those who are still young enough to provide for 
 their own retiring annuities without contributing an unreasonable amount of 
 their salaries should be required to do so ; but it is obvious that those already 
 above a certain age can not afford to contribute from their salaries an amount 
 sufficient to provide an adequate annuity on retirement. In the opinion of the 
 committee, the Government should make up the balance between what such 
 employees may reasonably be called upon to contribute and the amount needed 
 to secure them an adequate annuity on retirement. Such investigations as have 
 already been made into the conditions of employment in the Federal service 
 lead us to hazard the opinion that a thorough investigation of the problem here 
 will show that the amount which the Government is called upon to contribute 
 in order to carry out this plan will not much exceed the loss to the Government 
 occasioned by the retention of superannuated employees and the consequent 
 loss in efficiency all along the line through the blocking of the way to promotion. 
 What is needed at the present time is a thorough investigation which shall 
 ascertain and set forth accurately the facts essential to determining the cost 
 to the taxpayers of establishing upon a sound actuarial basis a retirement 
 system applicable to employees already in the public service. We need to know, 
 for example, the length of service and the age of each such employee, his salary 
 at entrance, all increases since, and his present salary. It is not necessary to 
 emphasize the unwisdom of enacting any retiring system into law without the 
 prior official collation and publication of such necessary statistical information. 
 Your committee, therefore, recommends the creation of a commission to be 
 appointed by the governor for the purpose of making a thorough study and 
 investigation of the entire subject and to report thereon with its recommenda- 
 tions. The commission should have power to subpoena and examine witnesses 
 and have an adequate staff of competent experts. 
 Kespectfully submitted. 
 
 Horace E. Deming, Chairman. 
 
 H. De F. Baldwin. 
 
 Charles A. Conant. 
 
 Elliot H. Goodwin. 
 
 Russell H. Loines. 
 Special Committee on Retirement Legislation. 
 April 12, 1911. 
 
CHAPTEE 11. 
 
 MATHEMATICAL BASIS OF PROPOSED PLAN. 
 
 The plan proposed is concisely stated as follows in the first para- 
 graph of both the Perkins and Gillett bills (see pp. 210 and 215) : 
 
 That beginning witli the first day of July next following the passage of this 
 act there shall be deducted and withheld from the monthly salary, pay, or com- 
 pensation of every officer or employee of the United States to whom this act ap- 
 plies an amount, computed to the nearest tenth of a dollar, that will be sufficient, 
 with interest thereon at three and one-half per centum per annum, compounded 
 annually, to purchase from the United States, under the provisions of this act, 
 an annuity, payable quarterly throughout life, for every such employee on 
 arrival at the age of retirement as hereinafter provided equal to one and one- 
 half per centum of his annual salary, pay, or compensation for every full year 
 of service or major fraction thereof between the date of the passage of this act 
 and the arrival of the employee at the age of retirement. The deductions 
 hereby provided for shall be based on such annuity table as the Secretary of 
 the Treasury may direct, and interest at the rate of three and one-half per 
 centum per annum, compounded annually, and shall be varied to correspond to 
 any change in the salary of the employee/ 
 
 ANNUITY THE CENTRAL IDEA OF THIS PLAN. 
 
 It will be seen from careful reading of the above paragraph that 
 the annuity is the central idea of this plan. While provision is 
 made in the bill for the withdrawal of accumulations on reaching the 
 age of retirement in a lump sum if so desired, the amount set aside 
 from month to month to create that sum is so calculated as to be 
 just sufficient in each individual case to purchase the desired annu- 
 ity. The amount desired as annuity is held to be 1^ per cent of salary 
 for each year of service. This standard was not chosen arbitrarily 
 as a basis, but was taken on the assumption that an employee's work- 
 ing life is limited to 50 years (from the ages of 20 to TO), and that 
 retirement on three-quarters pay after 50 years' service is not un- 
 reasonable. Dividing 75 per cent of salary by 50 years of service 
 gives 1^ per cent of salary for each year of service as a basis for 
 computing annuities to be granted after other periods of service. 
 
 1 The first paragraph of the Austin bill is identical with the above, except that pro- 
 vision is made for interest " at five per centum per annum, compounded annually," instead 
 of 3i per cent, and provision is made for an increase of salaries. 
 
 85 
 
86 RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 VALUE OF ANNUITY DETERMINED BY MORTALITY AND INTEREST TABLES. 
 
 The main object of this discussion is to show how the value of an 
 annuity is determined and what deductions from salary must be 
 made, at any age, from any salary, in order that a sum may be accu- 
 mulated sufficient to purchase the desired annuity from the Govern- 
 ment at the age of retirement. Since the price to be charged for an 
 annuity depends on the table of mortality and the table of compound 
 interest used in the computation, the mathematical basis of this plan 
 will be discussed under the following heads and in the following 
 order: Mortality tables, interest, annuities, and deductions from 
 salaries. The four steps in our course of reasoning must be as 
 follows : 
 
 FOUR STEPS IN DISCUSSION. 
 MORTALITY TABLES. 
 
 (1) Up to the age of retirement the proposed plan is merely a com- 
 pulsory savings arrangement, but on retirement from the service the 
 employee is entitled to withdraw his savings in the form of an an- 
 nuity payable to him as long as he may live, rather than in one lump 
 sum. The annuity provision, to be sound, must be based on the law 
 of averages as applied to human life, the so-called " law of mortality." 
 This is the law on which the operations of all sound insurance com- 
 panies are based. While nothing is more uncertain than the duration 
 of any individual life, the study of statistics pursued during the last 
 200 years among civilized nations shows that nothing is more certain 
 than the average continuance of life. In various parts of the world 
 during the last two centuries records have been kept showing the 
 births and deaths of individuals. From these records tables have 
 been constructed that are known as mortality tables, and upon these 
 tables the average duration of life has been calculated. Since they 
 were all compiled by different persons from different data, their re- 
 markable similarity constitutes strong proof of their accuracy. 
 While wonderfully alike in general, the accepted tables of mortality 
 vary, however, in detail, according to the conditions of environ- 
 ment^ — such as climate and occupation — to which the lives under ob- 
 servation were subjected. 
 
 While apparently small these differences are important, and it 
 requires a careful study of the various tables in order to determine 
 which one of them is best adapted to computing the rates for an- 
 nuities on the lives of civil-service employees in America. Among 
 those choosing annuities on retirement from the civil service will be 
 some who will live beyond the usual span of life; but, on the other 
 hand, there will be many who will die far short of it. It is impossible 
 to determine which of the individuals living at age 70 will survive to 
 age 100, but it is perfectly possible to determine with remarkable 
 
RETIEEMENT OE SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 87 
 
 accuracy by the use of a table of mortality constructed on the basis 
 of lives which were similar in their environment to those of the civil 
 service how many individuals out of a large number will survive to 
 that age. This being definitely known, we can thus adjust scientifi- 
 cally and absolutely the amount of the annuities so that the sums for- 
 feited by those who die early will carry the few to extreme old age. 
 The first step, then, is to make a study of the various mortality tables 
 and to select for our comjDutations the ones which best represent the 
 conditions of life among employees of the United States Government. 
 
 (2) The second step is to ascertain what rate of interest could be 
 obtained on the savings of the employees and whether such rate of 
 interest is sufficient, with a reasonable deduction from salary, to 
 create the desired annuity at the age of retirement. In this connec- 
 tion it is necessary to review the fundamental principles on which 
 tables of interest are based and to take special note of the results 
 obtained with compound interest at various rates. 
 
 ANNUITIES. 
 
 (3) The third step is to consider, theoretically and practically, the 
 provision in the plan for granting annuities at retirement equal to 1^ 
 per cent of the employee's annual salary for each year of service. In 
 order to compute annuity rates under this plan, it is necessary to 
 understand the method pursued in determining the value of an an- 
 nuity. The longevity of life having a direct bearing on the con- 
 struction of mortality tables, and consequently the computation of 
 annuity rates, some attention should be given to the question whether 
 or not it is increasing. How the conditions under which annuity 
 contracts are granted differs from those under which life insurance 
 contracts are issued should also be made clear, since the philosophy 
 underlying the two is diametrically opposed and capable of creating 
 confusion in the minds of those who have not given the matter much 
 attention. 
 
 DEDUCTIONS FROM SALARIES. 
 
 (4) The fourth step is to determine what per cent of salaries at 
 various ages of entrance into the service would have to be set aside by 
 each individual in order to provide himself with an annuity on re- 
 tirement equal to 1^ per cent of his salary for each year of service. 
 
 MORTALITY TABLES. 
 
 In order to understand why the three tables used in constructing 
 this plan were adopted for this work in preference to others, it may 
 be we]] to consider briefly the theory and history of mortality tables, 
 show how a mortality table is constructed, and review the most im- 
 portant ones in use. 
 
88 KETIEEMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 A mortality table may be defined as an instrument by means of 
 which is shown the decrement by death from one age to another 
 among a particular class of people. In other words, a table of mortal- 
 ity shows how many children out of a great number born alive die 
 in each year of age and exhibits the law of decrease through the whole 
 extent of life. The formation of such a table was not an easy task, 
 nor was it accomplished early in the history of mankind. In the 
 beginning, tables of mortality were based on the death records of 
 certain towns, which were necessarily incomplete and unreliable, but 
 more recently they have been based on the censuses of population in 
 various countries and on the records of life insurance companies. 
 These recent tables are far more accurate than the early ones. Before 
 the perfection of mortality tables life insurance calculations were 
 necessarily little better than a gamble. 
 
 CONSTRUCTION OF INIORTALITY TABLES. 
 
 The ideal way of constructing a mortality table would be to have 
 under observation for the whole period of their lives, a large number 
 of persons — say 100,000 — born on a given day, and to record the num- 
 ber dying in each year of age, and the number living at the end of 
 each year of age. That would make a perfect mortality table. Such 
 procedure is, of course, impossible in practice, but various means of 
 accomplishing substantially the same results have been devised. The 
 important consideration is the relative number at each age as com- 
 pared with the number alive at the preceding age. The actual num- 
 ber is of little consequence. In a brief way, the method adopted by 
 insurance companies is as follows: 
 
 As large a number of persons as possible is classified by age and 
 placed in a special group for observation. A record is made of the 
 number at each age living at the beginning and at the end of the 
 year. By dividing the number living at a given age at the end of 
 the year by the number living in that age at the beginning of the 
 year the probability of living one year is determined. In like man- 
 ner, by dividing the number dying during the year by the number 
 living at the beginning of the year, the probability of dying within 
 one year is obtained. As the number under observation is seldom 
 large enough, when divided into individual ages, as described above, 
 to give perfectly accurate probabilities, these differences must be 
 reconciled by one of several methods of graduation, either graphic 
 or mathematical. The simplest process is to plot the probability of 
 dying at the various ages. The result obtained, if a line is drawn 
 from one age to the next, and so on, will be a more or less irregTilar 
 curve, showing, as might be expected, that from about the tenth year 
 of age the probability of death increases with age. The irregularities 
 of the curve are, as above explained, due to the inadequate number 
 
EETIREMENT OF SUPEEANNUATED CIVII/-SERVICE EMPLOYEES, 89 
 
 under observation at the individual ages. By drawing a line through 
 the zigzag curve thus obtained a new set of probabilities may be 
 derived, with the irregularities due to the lack of original data for 
 the individual years greatly ironed out, as it were. 
 
 The accuracy of the graduation may be tested by placing in a 
 column the number under observation at the various ages, and in a 
 parallel column opposite each age the number of actual deaths that 
 took place each year. In a third column opposite each age should 
 be placed the number that would probably die, according to the 
 graduated tables of probabilites, and in a fourth column should be 
 noted the error, plus or minus. The accumulated error from year 
 to year may be shown in an additional column, and if the graduation 
 has been accurately performed, the pluses and minuses will in a 
 number of years substantially offset one another.^ From this mate- 
 rial a table of mortality may be deduced. This is accomplished by 
 assuming a given number of persons as living at the beginning of 
 the youngest age that is to be shown in the table. This number may, 
 for the sake of convenience, be stated as 100,000, while the initial 
 age in the table is usually 10, 15, or 20, although earlier ages may be 
 used if desired. * 
 
 The number shown as living at the beginning of the initial year is 
 then multiplied by the probability of living, obtained as above de- 
 scribed, and the number thus obtained represents the number of per- 
 sons out of 100,000 at the initial age adopted for the table that, 
 according to this experience, may be expected to survive to the begin- 
 ning of the second year. By subtracting this number from 100,000 the 
 number that might be expected to die during the first year is obtained. 
 This number is noted on the table opposite 100,000. By multiplying 
 the number thus computed as living at the beginning of the second 
 year by the probability of living during that year the number of 
 persons that may be expected to survive to the beginning of the 
 third year is obtained. By subtracting this number from the number 
 living at the beginning of the second year the number that might be 
 expected to die during the second year is obtained. This number is 
 noted on the table opposite the number living at the beginning of 
 the second year. By continuing this process on to the death of the 
 last survivor, using the probability of living in each instance corre- 
 sponding to the particular age, a table of mortality is constructed 
 such as forms the basis of all life-insurance calculations in which 
 there is a life contingency. 
 
 Generally speaking, there are two kinds of mortality tables — insur- 
 ance tables and annuity tables. The principal difference between 
 them is this: The insurance table usually contemplates a length of 
 
 1 For the purposes of this explanation it is not thought desirable to go into the details 
 of graduation by mathematical formulae. 
 
90 EETIEEMElSrT OF SUPERANNUATED CIVIL-SEEVICE EMPLOYEES. 
 
 life somewhat shorter than the fact, whereas the annuity table con- 
 templates a length of life somewhat longer than the fact. This dis- 
 crepancy is maintained as a margin of safety, since the insurance 
 table is used to calculate the premiums on policies calling for the 
 payment of a definite sum on the failure of the life insured, whereas 
 the annuity table is employed to compute the rates for annuities 
 which must be paid as long as the life continues. 
 
 EAKLY ROMAN TABLES. 
 
 While we find traces of speculation concerning "the theory of 
 probabilities" as far back as the time of Plato and while we know 
 that all civilized people have followed the practice of registering 
 births and deaths, we have no knowledge that anyone ever attempted 
 to make a mortality table before the third century of the Christian 
 era. Such a table was actually constructed, however, by the great 
 jurist, Ulpian, during the reign of the Emperor Alexander Severus 
 and was used as a basis for calculating annuities. 
 
 EARLY GERMAN TABLES. 
 
 The first mortality table of the Christian era was constructed by 
 Graunt from data obtained from transcripts of deaths entered in 
 London registers. The second mortality table was published in 1693 
 by the astronomer Halley, who secured his data from the registers of 
 Breslau, Germany, which was the only place where a record of the 
 ages of the dead was kept. His work was entitled "An Estimate of 
 the Degrees of Mortality of Mankind, Drawn from Curious Tables 
 of the Births and Funerals at the City of Breslau," and laid the 
 foundation of the science of life contingencies, Halley taught with 
 great clearness the conditions needful for the formation of rates of 
 mortality; but mortality tables constructed from data supplied by 
 parish registers proved to be in serious error where used for com- 
 puting annuities. As the registers furnished no information as to 
 the number who were exposed at any age, it was assumed " that the 
 data fairly represented the mortality which would successively apply 
 to a group equal to the whole number of decedents born on the same 
 day * * *. It must be evident that, unless the population were 
 precisely stationary, the births balancing the deaths each year, and 
 nobody removing from or into the field of observation, the assump- 
 tion that the mere number of deaths during any period could furnish 
 a radix for a mortality table constructed as if from lives observed 
 from the time of birth was sure to be erroneous. As the populations 
 of Breslau and other places which furnished statistics used to com- 
 pile these tables were in each case increasing, it followed that the 
 radix was in each case too small to correctly represent the mortality 
 at the younger ages, and this in turn made the mortality proportion- 
 
EETIEEMENT OP SUPEEAlSTlsrUATED CIVIL-SERVICE EMPLOYEES. 91 
 
 ately too small at older ages. "Where these tables were used for in- 
 surances, this proved an error on the safe side ; where used for annui- 
 ties, it was an unfortunate error." ^ 
 
 EARLY ENGLISH TABLES. 
 
 After Halley there were many investigators, some of whom de- 
 duced mathematical formulas from such records as they had, while 
 others improved the methods of making records. About TO years 
 after Halley the registration of persons living and dying in Stock- 
 holm from 1755 to 1763 was classified and arranged by Dr. Richard 
 Price into a mortality table. John M. Holcombe speaks of this as 
 " the first accurate deduction ever made of the length of life in a 
 city," ^ and comments on the fact that the old Roman Ulpian's cal- 
 culations were remarkably close to those reached 15 centuries later 
 by Dr. Price. 
 
 THE NORTHAMPTON TABLE. 
 
 From the records of the town of Northampton Dr. Price con- 
 structed in 1783 a table which became widely known as the North- 
 ampton table and which, though in some respects unreliable, was 
 adopted as the standard of life-insurance calculations. According 
 tc Moir^ it showed excessive mortality and large profits were made 
 by the life assurance companies which used its figures, whereas heavy 
 losses were sustained by the annuity companies which adopted it, 
 because their annuitants lived longer than the table indicated. 
 
 THE CARLISLE TABLE. 
 
 Since Dr. Price many mathematical experts have tried their skill at 
 constructing tables of mortality. In 1815 the Carlisle table was 
 prepared by Joshua Milne from the census of the population of two 
 parishes in Carlisle in 1780 and the deaths in the same parishes from 
 1779 to 1787. It was scientifically constructed and very satisfactory. 
 Even to-day it is considered of great value, especially in the calcula- 
 tion of survivorship benefits. 
 
 MORTALITY TABLES BASED ON EXPERIENCE OF LIFE INSURANCE COMPANIES. 
 
 As life assurance had its earliest development in England, it was 
 natural that more attention was paid there than elsewhere to the 
 making of mortality tables, since they are the basis of life insurance 
 as a science. The first life insurance company organized on a really 
 scientific foundation, with premiums graded according to age and 
 based on a mortality table, was the Old Equitable of London, incor- 
 
 1 See Practical Lessons in Actuarial Science, by Miles M. Dawson, p. 60. 
 * See Yale Insurance Lectures, p. 311. 
 See Life Assurance Primer, by Henry Moir, p. 38. 
 
92 EETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 porated in 1762, and still doing business. The actuary or manager of 
 the Old Equitable was William Morgan, a nephew of the celebrated 
 Dr. Price, by whose precepts he profited. No better example than 
 this oldest of English societies could be found to prove that no life 
 insurance institution established on a sound scientific basis need ever 
 fail, if managed with honesty and prudence, for it has been demon- 
 strated again and again that the rate of mortality is an absolutely 
 reliable basis for calculating the charges that must be made to meet 
 the obligations of life assurance. As one writer on the subject has 
 well said: 
 
 There is nothing more uncertain than any given human life, and yet by a 
 law of nature as certain in its operations as that which brings seedtime and 
 harvest, the rate of mortality among large numbers of people, for periods of 
 years, is uniform. 
 
 EECENT ENGLISH GOVERNMENT TABLES. 
 
 During recent years the English Government has given valuable 
 aid in the matter of constructing and perfecting mortality tables, 
 especially through the work of its statistical bureau and the experi- 
 ence of its life offices. One important work done by the English 
 Government has been the formation, on five different occasions, of 
 mortality tables from census returns. " In 1897," says Moir,^ " a 
 most usefuL series of tables was submitted, with details of mortality 
 in 100 different occupations, showing not only the mortality rates 
 in those occupations, but giving also the causes of death." The popu- 
 lation table which has received most prominence was published in 
 1861, and is known as The Healthy English Table. It was formed 
 by Chief of the Statistical Office of the Department of the Registrar 
 General, Dr. William Farr, from census returns of 1851 and the records 
 of the births and deaths from 1848 to 1853, inclusive, in 63 of the 
 healthiest registration districts of England and Wales. The mor- 
 tality of the sexes was investigated separately. 
 
 THE COMBINED OR ACTUARIES* TABLE. 
 
 In the meantime, the experience among life assurance companies 
 had increased so greatly that they found themselves in possession of 
 exceptional facilities for the construction of mortality tables. Know- 
 ing the ages of all policy holders and the ages at which they died, it 
 was easy for them, as the field of observation Avidened, to compile 
 very valuable statistics from their records. The first mortality table 
 compiled from the records of a life assurance company was published 
 in 1834 by Mr. Arthur Morgan, actuary of the Old Equitable of 
 London. The experience of one company is not, however, nearly so 
 
 1 See Life Assurance Primer, by Henry Moir, p. 39. 
 
EETIREMBNT OF SUPERANNUATED CI\ IL-SEBVICE EMPLOYEES. 93 
 
 valuable as the combined experience of several companies, since it is 
 very possible that peculiar circumstances in the case of any one 
 company may have caused its mortality experience to be exceptionally 
 high or unusually low. 
 
 The combined experience of 17 English companies was accordingly 
 collected and formed into a table, which is known in this country as 
 the Combined Experience or Actuaries' Table of Mortality, but in 
 England goes by the name of the Seventeen Offices' Table of Mortal- 
 ity. This compilation was begun in 1838 by a committee of actuaries 
 aiid was based on 62,537 insurances. The results were first published 
 in 1843, in London, in a book by Jenkin Jones, entitled "A Series of 
 Tables of Annuities and Assurances Calculated from a New Rate of 
 Mortality Amongst Insured Lives." Owing to the indorsement of 
 the Hon. Elizur Wright, commissioner of life insurance of Massachu- 
 setts and the father in this country of " the square deal " in life insur- 
 ance, the Combined or Actuaries' Table, was adopted as the legal 
 standard in Massachusetts, and has been popular throughout the 
 United States. In Great Britain, on the contrary, the Combined 
 Table has been superseded by the Institute of Actuaries' H'" and H' 
 tables, commonly spoken of as the Healthy Male and Healthy Female 
 Tables. 
 
 THE ACTUARIES' H"" AND H* TABLES. 
 
 These tables were constructed from data supplied by 20 British 
 companies belonging to the Institute of Actuaries, and are accordingly 
 often spoken of as the Twenty Offices' Tables. The most important 
 of these tables is that known as the Healthy Male or H"" Table. 
 It was constructed in 1869 on the lives of about 140,000 healthy males. 
 Finding that the low mortality of recent entrants had practically 
 disappeared after five years, another table was formed called the 
 H™(^) Table, in which the first five years from entry were excluded 
 from the statistics. In this table the mortality rates are higher than 
 those of the H™ Table. A separate table was formed dealing with 
 healthy female lives, the H* Table. Although popular in England 
 and Canada, this table has never found favor in the United States. 
 
 AMERICAN EXPERIENCE TABLE. 
 
 About the same time that the Institute of Actuaries published its 
 Healthy Male and Healthy Female Tables in England a table was 
 published in the United States that has come to be very popular, 
 and is known as the American Experience Table of Mortality. It 
 was constructed mainly on the experience of the Mutual Life In- 
 surance Co. of New York during its first 15 fiscal years, ending 
 February 1, 1858. The experience was compiled and the table con- 
 structed by Mr. Sheppard Homans, the actuary of the Mutual Life. 
 
94 RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 He is said to have availed himself of all the other statistics at hand 
 for ascertaining the laws of mortality applicable to healthy insured 
 lives in this country. In graduating and modulating the American 
 table Mr. Homans also made use of all the standard European 
 tables for the purpose of comparison. 
 
 The first actuary of the Mutual Life Insurance Co. had been 
 Prof. Charles Gill, who appears to have been the first American to 
 frame a mortality table and compute independent rates. He was 
 the author of a book entitled "Assurance Tables," and in 1851 he 
 made a report upon the company's experience for its first eight years 
 among its members residing in the Northern States. It is highly 
 probable that Prof. Gill's work aided Mr. Homans in his. 
 
 Mr. Homans's first report was made in 1858, and included an 
 adjusted table of mortality based on the whole experience of the 
 company for the 15 years. In the years 1859 and 1860 Mr. Homans 
 continued the compilation of the company's experience, and in 1860 
 framed what was afterwards known as the American Experience 
 Table of Mortality. While based in the main upon the experience 
 of the Mutual Life Insurance Co. it represented, in a considerable 
 degree, Mr. Homans's personal opinion of the probable rate of 
 mortality among insured lives after the immediate effects of medical 
 selection had worn off. " It is very remarkable," says Mr. D. P. 
 Fackler, "that this table, based largely upon judgment rather than 
 actual experience, should be so nearly the same as if it had been 
 based on the Makeham formula of several years later.^ 
 
 THE BRITISH OFFICES' TABLES. 
 
 The most recent and most valuable mortality experience published 
 is that of the " British Offices." It is the result of an exhaustive in- 
 vestigation of the subject made by a joint committee of the Institute 
 of Actuaries and of the Faculty of Actuaries. A large number of 
 tables, both life and annuity, based on the combined experience of 60 
 British companies covering a period of 30 years — from 1863 to 
 1893 — were produced. The most distinguished actuaries of the world 
 had charge of the work, and bestowed more care and scientific ac- 
 curacy on the assortment of the material from which the tables were 
 constructed than was ever before given to such a task. 
 
 TABLES USED IN PREPARING THIS PLAN. 
 
 Three different mortality tables have been employed in the con- 
 struction of the retirement plan proposed in this report ; the British 
 Offices' Select Annuitants' Mortality Table in connection with Part I, 
 
 1 See article entitled " The genesip of the American Experience Table," by David Parka 
 Fackler, in the Transactions of the Actuarial Society of America, Vol. X, p. 509. 
 
KETIEEMENT OF SUPEKANlSrUATED CIVIL-SERVICE EMPLOYEES. 95 
 
 and the American Experience Table of Mortality, together with the 
 Combined or Actuaries' Table of Mortality, in connection with 
 Part II. 
 
 REASONS FOB USING BRITISH OFFICES* SELECT ANNUITANTS' MORTALITY TABLE AS 
 THE BASIS FOR ANNUITY RATES UNDER PART I OF PLAN. 
 
 The first necessity for a mortality table presents itself in connec- 
 tion with this plan in computing the rate which the Government 
 must charge its employees for annuities due them on reaching the 
 age of retirement. The British Offices' Select Annuitants' Mortality 
 Table is recommended for that purpose. 
 
 In constructing Part I of the proposed plan it was necessary to 
 select a mortality table for computing the rates which the Govern- 
 ment should charge its employees for annuities purchased with their 
 savings. Since, under the bill, the employees are to be given the right 
 to take their savings on retirement either in a cash sum or in the 
 form of an annuity, it was very important to choose a table with a 
 mortality sufficiently low to overcome this selection against the Gov- 
 ernment. Manifestly, retiring employees would choose between the 
 cash and annuity according to their condition of health. An em- 
 ployee in poor health would in all cases prefer a cash sum, whereas 
 one in the enjoyment of excellent health would be likely to choose the 
 annuity. 
 
 Table V shows the number of persons living at all ages according 
 to various tables of mortality. A convenient method of comparing 
 the longevity of mortality tables is by means of the " expectation of 
 life," which is the average number of years which persons of a given 
 age will survive. The expectation at all ages, according to these 
 tables of mortality, is shown in Table VI. It will be noted that the 
 expectation of life under the British Offices' Select Annuitants' Table 
 is greater than under any other table.^ 
 
 The insurance companies in this country have issued few annui- 
 ties, and their experience therefore has not been very broad. On the 
 other hand, annuities in Great Britain have been popular for many 
 years, and the British companies have had a broad experience in is- 
 suing them. For these reasons, the fact, as shown above, that the 
 British Offices' Select Annuitants' Table shows a low mortality as com- 
 pared with other tables, and the fact that the British comjDanies have 
 had a large experience as compared with American companies, in 
 issuing annuities, that table is recommended as the safest and best 
 
 1 The " expectation of life " has no relation whatever to the time when any individual 
 is likely to die, or to the time when death is most likely to occur. It is merely an aver- 
 age, and can not be used in computations involving compound interest. It forms, how- 
 ever, a most convenient means of comparing the longevity of mortality tables, and is 
 derived by dividing the sum of the tabular number living above the given age, by the 
 number living at the age and adding one-half year to the quotient. 
 
96 EETIREMENT OF SUPEEANNUATED CIVIL-SEEVICE EMPLOYEES. 
 
 basis for the annuity rates under Part I of this plan. If the rates, 
 high as they are, should prove inadequate, the bill provides for the 
 adoption of a new table by direction of the Secretary of the Treasury.^ 
 
 Table V. — Shotoin^ num'ber living at all ages under various tables of mortality. 
 
 Age. 
 
 20 years... 
 
 21 years . . . 
 
 22 years... 
 
 23 years... 
 
 24 years 
 
 25 years 
 
 26 years. . . 
 
 27 years... 
 
 28 years. .. 
 
 29 years 
 
 30 years 
 
 31 years. .. 
 o2 years 
 
 33 years 
 
 34 years... 
 
 35 years. . . 
 
 36 years 
 
 37 years. . . 
 
 38 rears. .. 
 
 39 years... 
 
 40 years. . . 
 
 41 years.. . 
 
 42 years. . . 
 
 43 years. .. 
 
 44 years... 
 
 45 years. . . 
 
 46 years. . . 
 
 47 years. . . 
 
 48 years. . . 
 
 49 years... 
 
 60 years. . . 
 
 61 years... 
 
 62 years. . . 
 
 63 years. . . 
 
 64 years... 
 55 years... 
 
 66 years... 
 
 67 years... 
 
 68 years... 
 
 59 years... 
 
 60 years... 
 
 61 years... 
 
 62 years... 
 
 63 years... 
 
 64 years... 
 
 65 years... 
 
 66 years... 
 07 years... 
 
 68 years... 
 
 69 years... 
 
 70 years... 
 
 71 years... 
 
 72 years... 
 
 73 years... 
 
 74 years... 
 
 75 years... 
 
 76 years... 
 
 77 years... 
 
 78 years... 
 
 79 years... 
 
 80 years... 
 
 81 years... 
 
 82 years... 
 
 83 years... 
 
 84 years... 
 
 85 years... 
 
 86 years... 
 
 87 years... 
 
 88 years... 
 
 89 years... 
 
 90 years... 
 
 American 
 experience 
 
 table of 
 mortality. 
 
 637 
 914 
 
 192 
 471 
 751 
 032 
 314 
 596 
 878 
 160 
 441 
 721 
 000 
 277 
 551 
 822 
 090 
 353 
 611 
 862 
 106 
 341 
 567 
 782 
 985 
 173 
 345 
 497 
 627 
 731 
 804 
 842 
 841 
 797 
 706 
 563 
 364 
 104 
 779 
 385 
 917 
 371 
 743 
 030 
 ,230 
 341 
 ,361 
 ,291 
 133 
 ,890 
 ,569 
 178 
 ,730 
 243 
 ,73S 
 237 
 7iil 
 330 
 961 
 ,670 
 474 
 383 
 419 
 , 603 
 955 
 ,485 
 ,193 
 ,079 
 140 
 ,402 
 847 
 
 Northamp- 
 ton table of 
 mortality. 
 
 5,132 
 
 5,060 
 
 4,985 
 
 4,910 
 
 4,835 
 
 4,760 
 
 4,085 
 
 4,610 
 
 4,535 
 
 4,460 
 
 4,385 
 
 4,310 
 
 4, 235 
 
 4,160 
 
 4,085 
 
 4,010 
 
 3,935 
 
 3,860 
 
 3,785 
 
 3,710 
 
 3.635 
 
 3,559 
 
 3,482 
 
 3,404 
 
 3,326 
 
 3,248 
 
 3,170 
 
 3,092 
 
 3,014 
 
 2,936 
 
 2,857 
 
 2,776 
 
 2,694 
 
 2,612 
 
 2,530 
 
 2,448 
 
 2,366 
 
 2,284 
 
 2,202 
 
 2,120 
 
 2,038 
 
 1,956 
 
 1,874 
 
 1,793 
 
 1,712 
 
 1,632 
 
 1,552 
 
 1,472 
 
 1,392 
 
 1,312 
 
 1,232 
 
 1,152 
 
 1,072 
 
 992 
 
 912 
 
 832 
 
 752 
 
 675 
 
 602 
 
 534 
 
 4t;9 
 
 406 
 
 346 
 
 289 
 
 234 
 
 186 
 
 145 
 
 111 
 
 83 
 
 62 
 
 46 
 
 Farr's Eng- 
 lish table 
 No. 3. 
 
 Combined 
 or actua- 
 ries' table of 
 mortality. 
 
 333, 608 
 
 330, 844 
 
 328,043 
 
 325,207 
 
 322, 339 
 
 319,442 
 
 316,510 
 
 313, 562 
 
 310,581 
 
 307,572 
 
 304,534 
 
 301,466 
 
 298,366 
 
 295,232 
 
 292, 061 
 
 288,850 
 
 285,596 
 
 282, 296 
 
 278,944 
 
 275,538 
 
 272,073 
 
 268,544 
 
 264, 948 
 
 261,280 
 
 257,534 
 
 253,708 
 
 249, 796 
 
 245,795 
 
 241,700 
 
 237,508 
 
 233,216 
 
 228, 821 
 
 224, 195 
 
 219,437 
 
 214, 552 
 
 209, 539 
 
 204,395 
 
 199,114 
 
 193, 686 
 
 188, 102 
 
 182,350 
 
 170,421 
 
 170, 303 
 
 163,989 
 
 157,474 
 
 150, 754 
 
 143,833 
 
 136,718 
 
 129, 421 
 
 121,963 
 
 114,370 
 
 106, 675 
 
 98,919 
 
 91, 149 
 
 83,416 
 
 75, 777 
 
 68, 294 
 
 61,026 
 
 64, 036 
 
 47,381 
 
 41,115 
 
 35,283 
 
 29,922 
 
 25,060 
 
 20,711 
 
 16,877 
 
 13,540 
 
 10.709 
 
 8, 325 
 
 6, 360 
 
 4,770 
 
 93, 268 
 92,588 
 91,905 
 91,219 
 90,529 
 89, 835 
 89,1.37 
 88, 434 
 87,726 
 87,012 
 86, 292 
 85,565 
 84, 831 
 84,089 
 83,339 
 82,581 
 81,814 
 81,0.38 
 80,253 
 79,458 
 78, 653 
 77,838 
 77,012 
 76,173 
 75,. 316 
 74,435 
 73,526 
 72,582 
 71,601 
 70,580 
 69,517 
 68, 409 
 67,253 
 66,046 
 64,785 
 63,469 
 62,094 
 60, 658 
 59,161 
 57,600 
 55,973 
 64, 275 
 52,505 
 50, 661 
 48,744 
 46, 754 
 44, 693 
 42, .565 
 40, 374 
 38, 128 
 35,837 
 33,510 
 31,159 
 28,797 
 26, 439 
 24, 100 
 21,797 
 19.. 548 
 17,369 
 15,277 
 13,290 
 11, 424 
 9, 694 
 8,112 
 6, 685 
 5,417 
 4,. 306 
 3,348 
 2,5.37 
 1,864 
 1,319 
 
 British of- 
 fices' an- 
 nuitants 
 (select). 
 
 100,000 
 99,329 
 98,655 
 97,979 
 97,299 
 96,616 
 95,928 
 95,235 
 94,536 
 93, 829 
 93, 116 
 92, 394 
 91,663 
 90,921 
 90, 166 
 89,400 
 88,620 
 87,823 
 87,011 
 86, 179 
 85,. 327 
 84,4.53 
 83, 555 
 82, 631 
 81,678 
 80,096 
 79,680 
 78,630 
 77,541 
 76,413 
 75,240 
 74, 022 
 72,754 
 71,4.34 
 70, 060 
 OS, 627 
 67, 134 
 65,577 
 63,954 
 62, 262 
 60, 500 
 58,665 
 66, 758 
 64, 776 
 62, 722 
 50, 594 
 48,397 
 46, 133 
 43,806 
 41,423 
 38, 991 
 36,519 
 34,019 
 31,502 
 28,983 
 26, 477 
 24, 002 
 21,576 
 19,217 
 16, 945 
 14, 780 
 12, 7.37 
 10,835 
 9,086 
 7,502 
 6,090 
 4,853 
 3,790 
 2,895 
 2, 1.59 
 1,568 
 
 British of- 
 fices' an- 
 nuitants 
 (ultimate). 
 
 97,691 
 97,004 
 96,312 
 95,615 
 94,911 
 94, 201 
 93,483 
 92, 756 
 92,020 
 91,273 
 90,514 
 89,743 
 88,957 
 88,155 
 87,336 
 86,497 
 85,639 
 84,757 
 83, 852 
 82, 920 
 81,959 
 80,968 
 79,944 
 78,883 
 77,785 
 76, 645 
 75,462 
 74, 232 
 72, 952 
 71,619 
 70,231 
 68,785 
 67, 276 
 65,704 
 64,065 
 62, 356 
 60,577 
 68,724 
 56,799 
 54,799 
 62, 725 
 50,579 
 48,362 
 46,079 
 43, 734 
 41,333 
 38,884 
 36,396 
 33,881 
 31,351 
 28,820 
 26, .305 
 23,823 
 21,392 
 19,031 
 16,760 
 14, 598 
 12,561 
 10.668 
 8,930 
 7,3.59 
 5,961 
 4,739 
 3,091 
 2,812 
 2,091 
 
 1 See last sentence of sec. 1 of the proposed hill siven at the end of this report. 
 * Standard for annuities under the laws of New York State. 
 
RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 97 
 
 Table V. — Showing number living at all ages under various tables of 
 
 mortality — Continued. 
 
 91 years.. 
 
 92 years.. 
 
 93 years.. 
 
 94 years.. 
 
 95 years.. 
 
 96 years.. 
 
 97 years.. 
 
 98 years... 
 
 99 years.. 
 
 100 years. 
 
 101 years. 
 
 102 years. 
 
 103 years. 
 
 104 years. 
 
 105 years. 
 
 106 years. 
 
 107 years. 
 
 American 
 experience 
 
 table of 
 mortality. 
 
 462 
 
 216 
 
 79 
 
 21 
 
 3 
 
 Northamp- 
 ton table of 
 mortality. 
 
 Farr's Eng- 
 lish table 
 No. 3. 
 
 3,510 
 
 2,531 
 
 1,787 
 
 1,234 
 
 833 
 
 548 
 
 352 
 
 220 
 
 134 
 
 79 
 
 46 
 
 25 
 
 14 
 
 7 
 
 4 
 
 2 
 
 1 
 
 Combined 
 or actua- 
 ries' table of 
 mortality, 
 
 892 
 
 570 
 
 339 
 
 184 
 
 89 
 
 37 
 
 13 
 
 4 
 
 1 
 
 British of- 
 fices' an- 
 nuitants 
 (select). 
 
 1,107 
 
 757 
 
 501 
 
 319 
 
 195 
 
 114 
 
 64 
 
 33 
 
 17 
 
 11 
 
 6 
 
 3 
 
 1 
 
 British of- 
 fices' an- 
 nuitants 
 (ultimate). 
 
 1,513 
 
 1,064 
 
 725 
 
 477 
 
 303 
 
 184 
 
 107 
 
 59 
 
 31 
 
 15 
 
 7 
 
 3 
 
 1 
 
 McCUn- 
 tock's 
 
 annuity 
 table. 
 
 13,689 
 
 9,512 
 
 6,387 
 
 4,129 
 
 2,561 
 
 1,518 
 
 857 
 
 457 
 
 230 
 
 108 
 
 48 
 
 19 
 
 7 
 
 2 
 
 1 
 
 Table VI.- 
 
 -Showing expectation of life at all ages under various tables of 
 mortality. 
 
 Age. 
 
 American 
 experience 
 
 table of 
 mortality. 
 
 Actuaries 
 or com- 
 bined. 
 
 Northamp- 
 ton. 
 
 Farr's En- 
 glish table 
 No. 3. 
 
 Carlisle's. 
 
 British 
 
 offices' 
 
 aimuitants 
 
 (select). 
 
 British 
 
 offices' 
 
 annuitants 
 
 (ultimate). 
 
 20 years 
 
 21 years 
 
 22 years 
 
 23 years 
 
 24 years 
 
 25 years 
 
 26 years 
 
 27 years 
 
 28 years.. 
 
 29 years 
 
 30 years 
 
 31 years 
 
 32 years 
 
 33 years 
 
 34 years 
 
 35 years 
 
 36 years 
 
 37 years 
 
 38 years 
 
 39 years 
 
 40 years 
 
 41 years 
 
 42 years 
 
 43 years 
 
 44 years 
 
 45 years 
 
 46 years 
 
 47 years 
 
 48 years 
 
 49 years 
 
 50 years 
 
 51 years 
 
 52 years 
 
 53 years 
 
 64 years 
 
 55 years 
 
 56 years 
 
 57 years 
 
 58 years 
 
 59 years 
 
 60 years 
 
 61 years 
 
 62 years 
 
 63 years 
 
 64 years 
 
 65 years 
 
 74196 
 
 42.20 
 41.53 
 40.85 
 40.17 
 39.49 
 38.81 
 38.12 
 37.43 
 36.73 
 36. 03 
 35.33 
 34.63 
 33.92 
 33.21 
 32.50 
 31.78 
 31.07 
 30.35 
 29.62 
 28.90 
 28.18 
 27.45 
 26.72 
 26.00 
 25.27 
 24.54 
 23.81 
 23.08 
 22.36 
 21.63 
 20.91 
 20.20 
 19.49 
 18.79 
 18.09 
 17.40 
 16.72 
 16.05 
 15.39 
 14.74 
 14.10 
 13.47 
 12.86 
 12.26 
 11.67 
 11.10 
 
 41.49 
 40.79 
 40.09 
 39. 39 
 38.68 
 37.98 
 37.27 
 36.56 
 35.86 
 35.15 
 34.43 
 33.72 
 33.01 
 32.30 
 31.58 
 30.87 
 30.15 
 29.44 
 28.72 
 ■28.00 
 27.28 
 26.56 
 25.84 
 25.12 
 24.40 
 23.69 
 22.97 
 22.27 
 21.56 
 20.87 
 20.18 
 19.50 
 18.82 
 18.16 
 17.50 
 16.86 
 16.22 
 15.59 
 14.97 
 14. 37 
 13.77 
 13.18 
 12.61 
 12.05 
 11.51 
 10.97 
 
 33.43 
 32.90 
 32.39 
 31.88 
 31.36 
 30. 85 
 30.33 
 29.82 
 29.30 
 28.79 
 28.27 
 27.76 
 27.24 
 26.72 
 26.20 
 25.68 
 25.16 
 24.64 
 24.12 
 23.60 
 23.08 
 22.56 
 22.04 
 21.54 
 21.03 
 20.52 
 20.02 
 19.51 
 19.00 
 18.49 
 17.99 
 17. 50 
 17.02 
 16.54 
 16.06 
 15.58 
 15.10 
 14.63 
 14.15 
 13.68 
 13.21 
 12.75 
 12.28 
 11.81 
 11.35 
 10.88 
 
 39.48 
 38.80 
 38.13 
 37.46 
 36.79 
 36.12 
 35.44 
 34.77 
 34.10 
 33.43 
 32.76 
 32.09 
 31.42 
 30.74 
 30.07 
 29.40 
 28.73 
 28.06 
 27.39 
 26.72 
 26.06 
 25.39 
 24.73 
 24.07 
 23.41 
 22.76 
 22.11 
 21.46 
 20.82 
 20.17 
 19.54 
 18.90 
 18.28 
 17.68 
 17.06 
 16.45 
 15.86 
 15.26 
 14.68 
 14.10 
 13.53 
 12.96 
 12.41 
 11.87 
 11.34 
 0.82 
 
 41.46 
 40.75 
 40.04 
 39.31 
 38.59 
 37.86 
 37.14 
 36.41 
 35.69 
 35.00 
 34.34 
 33.68 
 33.03 
 32.36 
 31.68 
 31.00 
 30.32 
 29.64 
 28.96 
 28.28 
 27.61 
 26.97 
 26.34 
 25. 71 
 25. 09 
 24.46 
 23.82 
 23.17 
 22.50 
 21.81 
 21.11 
 20.39 
 19.68 
 18.97 
 18.28 
 17.58 
 16.89 
 16.21 
 15.55 
 14.92 
 14.34 
 13.82 
 13.31 
 12.81 
 12.30 
 11.79 
 
 42.972 
 42.246 
 41.521 
 40. 795 
 40.065 
 39. 333 
 38. 600 
 37. 866 
 37. 131 
 36. 396 
 35.659 
 34. 922 
 34. 184 
 33. 447 
 32. 710 
 31. 974 
 31.238 
 30.504 
 29.771 
 29.040 
 28.311 
 27. 584 
 26.862 
 26.141 
 25.425 
 24. 713 
 24. 004 
 23.302 
 22. 604 
 21. 912 
 21.227 
 20.548 
 19. 877 
 19.213 
 18. 557 
 17.910 
 17. 273 
 16.644 
 16.026 
 15.418 
 14. 821 
 14. 236 
 13. 662 
 13. 101 
 12.551 
 12.015 
 
 38. 918 
 38. 190 
 37. 461 
 36. 730 
 35.999 
 35.266 
 34.534 
 33. 800 
 33. 066 
 32. 333 
 31. 600 
 30. 867 
 30. 135 
 29. 405 
 28. 677 
 27. 950 
 27.225 
 26. 502 
 25. 784 
 25. 067 
 24.355 
 23.648 
 22. 944 
 22.246 
 21.552 
 20. 866 
 20.185 
 19.511 
 18.845 
 18.186 
 17. 536 
 16. 894 
 16. 262 
 15.639 
 15.026 
 14.424 
 13.833 
 13. 254 
 12.686 
 12. 131 
 11.588 
 
 -S. Doc. 745, 61-3- 
 
98 RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 Table VI. — Showing expectation of life at all ages under various tables of 
 
 mortality — Continued. 
 
 66 years.. 
 
 67 years . . 
 
 68 years.. 
 
 69 years.. 
 
 70 years. . 
 
 71 years.. 
 
 72 years . . 
 
 73 years.. 
 
 74 years. . 
 
 75 years.. 
 
 76 years . . 
 
 77 years . . 
 
 78 years.. 
 
 79 years . . 
 
 80 years.. 
 
 81 years . . 
 
 82 years . . 
 
 83 years. . 
 
 84 years . . 
 
 85 years . . 
 
 86 years. . 
 
 87 years . . 
 
 88 years . . 
 
 89 years . . 
 
 90 years - . 
 
 91 years . . 
 
 92 years . . 
 
 93 years. . 
 
 94 years . . 
 
 95 years . . 
 
 96 years . . 
 
 97 years . . 
 
 98 years . . 
 
 99 years . . 
 
 100 years . 
 
 101 years . 
 
 102 years . 
 
 103 years. 
 
 104 years . 
 
 105 years . 
 
 106 years . 
 
 107 years. 
 
 American 
 experience 
 
 table of 
 mortality. 
 
 10.54 
 10.00 
 9.47 
 8.97 
 8.48 
 8.00 
 7.55 
 7.11 
 6.68 
 6.27 
 5.88 
 5.49 
 5.11 
 4.74 
 4.39 
 4.05 
 3.71 
 3.39 
 3.08 
 2.77 
 2.47 
 2.18 
 1.91 
 1.66 
 1.42 
 1.19 
 .98 
 .80 
 .64 
 .50 
 
 Actuaries 
 or com- 
 bined. 
 
 10.46 
 9.96 
 9.47 
 9.00 
 8.54 
 8.10 
 7.67 
 7.26 
 6.86 
 6.48 
 6.11 
 5.76 
 5.42 
 5.09 
 4.78 
 4.48 
 4.18 
 3.90 
 3.63 
 3.36 
 3.10 
 2.84 
 2.59 
 2.35 
 2.11 
 1.89 
 1.67 
 1.47 
 1.28 
 1.12 
 .99 
 .89 
 .75 
 .50 
 
 Norttiamp- 
 ton. 
 
 10.42 
 9.96 
 9.50 
 9.05 
 8.60 
 8.17 
 7 74 
 7.33 
 6.92 
 6.54 
 6.18 
 5.83 
 5.48 
 5.11 
 4.75 
 4.41 
 4.09 
 3.80 
 3.58 
 3.37 
 3.19 
 3.01 
 2.86 
 2.66 
 2.41 
 2.09 
 1.75 
 1.37 
 1.05 
 .75 
 .50 
 
 Farr's En- 
 glish table 
 No. 3. 
 
 10.32 
 9.83 
 9.36 
 8.90 
 8.45 
 8.03 
 7.62 
 7.22 
 6.85 
 6.49 
 6.15 
 5,82 
 5.51 
 5.21 
 4.93 
 4.66 
 4.41 
 4.17 
 3.95 
 3.73 
 3.53 
 3.34 
 3.16 
 3.00 
 2.84 
 2.69 
 2.55 
 2.41 
 2.29 
 2.17 
 2.06 
 1.95 
 1.85 
 1.76 
 1.68 
 1.65 
 1.62 
 1.50 
 1.50 
 1.25 
 1.00 
 .50 
 
 Carlisle's. 
 
 11.27 
 10.75 
 10.23 
 9.70 
 9.18 
 8.65 
 8.16 
 7.72 
 7.33 
 7.01 
 6.69 
 6.40 
 6.12 
 5.80 
 5.51 
 5.21 
 4.93 
 4.65 
 4.39 
 4.12 
 3.90 
 3.71 
 3.59 
 3.47 
 3.28 
 3.26 
 3.37 
 3.48 
 3.53 
 3.53 
 3.46 
 3.28 
 3.07 
 2.77 
 2.28 
 1.79 
 1.30 
 .83 
 .50 
 
 British 
 
 offices' 
 
 annuitants 
 
 (select). 
 
 11.492 
 10. 983 
 10. 487 
 10. 005 
 9.537 
 9.084 
 8.646 
 8.222 
 7.812 
 7.417 
 7.037 
 6.671 
 6.320 
 5.983 
 5.660 
 5.351 
 5.056 
 4.774 
 4.606 
 4.250 
 4.006 
 3.775 
 3.555 
 3.346 
 3.148 
 2.961 
 2.783 
 2.616 
 2.457 
 2.307 
 2.165 
 2.030 
 1.901 
 1.777 
 1.488 
 1.266 
 1.080 
 .874 
 .500 
 
 British 
 
 offices' 
 
 annuitants 
 
 (ultimate). 
 
 11.059 
 10. 543 
 10.041 
 9.552 
 9.078 
 8.618 
 8.173 
 7.743 
 7.327 
 6.926 
 6.541 
 6.170 
 5.815 
 5.474 
 5.148 
 4.836 
 4.539 
 4.257 
 3.988 
 3.732 
 3.490 
 3.261 
 3.045 
 2.841 
 2.649 
 2.468 
 2.299 
 2.140 
 1.991 
 1.852 
 1.722 
 1.600 
 1.487 
 1.380 
 1.277 
 1.172 
 1.050 
 .870 
 .500 
 
 SEASONS FOK USING AMERICAN EXPERIENCE TABLE OF MORTALITY IN FIRST STEP 
 OF DETERMINING COST OF ANNUITIES FOR BACK SERVICES. 
 
 The next need for a mortality table is in computing the cost of 
 annuities for services rendered prior to the adoption of the plan. The 
 American Experience Table of Mortality, an insurance table, was used 
 in the first step of the calculation. It was employed in determining 
 the annuities that would be due the employees of various ages on 
 reaching the retirement age. This was accomplished by multiplying 
 the " immediate annuities " by the probability of living under the 
 American Experience Table of Mortality from the various ages at the 
 present time to the age of retirement. This table was selected be- 
 cause it has been found that in the ages up to about 70 the gradua- 
 tion is more nearly in harmony with the experience of the American 
 insurance companies, and because under it the probability of living 
 between the various ages and the ages of retirement is considerably 
 higher than under any of the other recognized insurance tables. The 
 
EETIREMENT OF SUPERANNUATED CIVIL-SEEVICE EMPLOYEES. 99 
 
 reason for selecting a table which shows a low mortality from the 
 various ages to the age of retirement is to avoid the mistake of 
 estimating the cost of these annuities at less than the amount required, 
 as would result if fewer deaths occurred than had been calculated. 
 Table VII shows that the probability of living up to the age of 70 
 is greater under the American table than under any of the others — 
 in other words, that the mortality is lower. 
 
 Table VII. — Shoicing the number out of 100 living at various ages that ^oill 
 survive to age 70 according to different tables of mortality. 
 
 Age. 
 
 Ameri- 
 can expe- 
 rience. 
 
 North- 
 ampton. 
 
 Carlisle. 
 
 Farr's 
 English 
 No. 3. 
 
 Com- 
 bined, 
 or actu- 
 aries'. 
 
 20 offices 
 
 20 offices 
 Hn.(5). 
 
 British 
 offices 
 annuity 
 (ulti- 
 mate). 
 
 20 years 
 25 years 
 30 years 
 35 years 
 40 years 
 45 years 
 50 years 
 55 years 
 60 years 
 65 years 
 
 41.63 
 43.32 
 45.14 
 47.14 
 49.38 
 52.00 
 55.25 
 59.74 
 66.59 
 78.17 
 
 24.01 
 25.88 
 28.10 
 30.72 
 33.89 
 37.93 
 43.12 
 50.33 
 60. 45 
 75.49 
 
 39.42 
 40.84 
 42. 55 
 44.78 
 47.31 
 50.79 
 54.60 
 58.95 
 65.91 
 79.56 
 
 34.28 
 35.80 
 37.55 
 39.59 
 42.04 
 45.08 
 49.04 
 54.58 
 62.72 
 75.86 
 
 38.42 
 39.89 
 41.53 
 43.40 
 45. 56 
 48.14 
 51. .55 
 56.46 
 64.02 
 76.65 
 
 39.62 
 40.97 
 42.42 
 44.18 
 46.33 
 48. 93 
 52.42 
 57.32 
 64.76 
 77.33 
 
 36.77 
 38.67 
 40.64 
 42. 58 
 44.92 
 47.63 
 51.25 
 56.39 
 64.03 
 76.89 
 
 42.31 
 43.88 
 45.66 
 47.78 
 50. 43 
 53. 93 
 58.85 
 66.28 
 78.39 
 
 KEASONS FOB USING COMBINED OB ACTUAEIES' TABLE OF MORTALITY IN LAST STEP 
 OF DETERMINING COST OF ANNUITIES FOB BACK SERVICES. 
 
 The second step in calculating the cost of adopting Part II of the 
 plan is to determine the amount of annuities that will actually be 
 paid those who rendered service prior to the adoption of the plan 
 from the time they reach the age of retirement until the last of them 
 is dead. This will depend upon the rate of mortality among the 
 survivors. From about the age of 75 the American table shows a 
 severe rate of mortality, and it was thought best, therefore, in dis- 
 counting the annuities from the retirement age down to the death 
 of the last survivor by the probability of living each year, to make 
 use of a table which shows generally a greater expectation of life 
 after the retirement ages than does the American table. The Com- 
 bined or Actuaries' Table, therefore, which shows at the age of 80 
 about six months greater expectation of life than does the American 
 table (4.78 years as against 4.89) and at older ages still greater dif- 
 ferences of expectation, was selected for this purpose. It shows the 
 death of the last person at the age of 99 as against the age of 95 in 
 the American table, and probably more nearly represents the true 
 span of life than does the American table. For a comparison of the 
 expectation of life imder the various mortality tables, see Table VI. 
 
 The eflf'ort has been throughout to use such tables as would give 
 the highest rate for annuities, so that the estimate of cost under 
 Part II of the plan would be a maximum. 
 
100 RETIREMENT OF SUPERANNUATED OIVIL-SERVICE EMPLOYEES. 
 
 INTEREST. 
 
 The computation of annuities depends upon tables of mortality 
 and tables of compound interest. Having considered briefly the 
 history and uses of mortality tables with special reference to those 
 employed in the construction of the proposed savings and annuity 
 plan, it becomes necessary to give some attention to the tables of 
 compound interest used in the computation of the annuities granted 
 under the plan. 
 
 SIMPLE INTEREST AND COMPOUND INTEREST, 
 
 Interest is defined by Carroll as "the charge made by the lender 
 to the borrower for the use or opportunity to use capital, money, or 
 credit, and is stated in terms of money." ^ 
 
 Two kinds of interest are taken account of in financial transac- 
 tions — simple and compound. Simple interest, which is interest 
 charged on the principal only, has no part in the calculation of 
 annuities, or in any other form of life assurance contracts. Com- 
 pound interest, on the other hand, which is interest charged on the 
 accrued interest as well as on the original principal, is the basis of 
 all life assurance computations, including the calculation of annui- 
 ties. All life assurance institutions invest their funds at compound 
 interest ; that is, they reinvest the interest received from their invest- 
 ments so as to receive more interest, gaining thus not merely profit 
 on the original investment, but profit on the profit as well. 
 
 CUMULATIVE POWER OF COMPOUND INTEREST. 
 
 To the mind not accustomed to the consideration of the cumulative 
 power of compound interest the results that can be obtained by steady 
 and systematic saving, when the accumulations are improved by 
 the operation of compound interest, appear little short of marvelous. 
 The young employee, entering the service at 20 years of age, has 
 only to put aside out of a salary of $1,200 a year the small sum of 
 $4.27 each month to accumulate, with the help of compound interest 
 at 3^ per cent, by the time he is 70 years of age the sum of $6,835.50, 
 which is sufficient to retire him on an annuity of $900 a year for 
 the rest of his life. Of this sum of $6,835.50, which he will have to 
 his credit at the age of 70, only $2,560.20 will actually have been 
 contributed by himself. All the remainder, which is no less than 
 $4,275.30, or nearly two-thirds of the whole sum, will be interest. 
 Illustrations of the working of this principle through different 
 periods of service are given in the following tables. Table VIII 
 
 » See Principles and practice of finance, by Edward Carroll, jr., p. 35. 
 
RETTEEMENT OP SUPEEANNUATED CIVIL-SEEVICE EMPLOYEES. 
 
 101 
 
 shows the percentage of annuity contributed by the employee and 
 the percentage gained through the increment of interest : 
 
 Table VIII. — Showing percentage of annuity contriMted hy employee and 
 percentage gained through increment of interest. 
 
 
 Entrance age. 
 
 Years 
 service. 
 
 
 
 Cost of annuity. 
 
 Retirement age. 
 
 Monthly 
 deduc- 
 tion from 
 salary 
 of 8100. 
 
 Amount 
 of annu- 
 ity. 
 
 Total. 
 
 Employee's 
 savings. 
 
 Interest on em- 
 ployee's savings. 
 
 
 Amount. 
 
 Per 
 cent. 
 
 Amount. 
 
 Per 
 cent. 
 
 70}years 
 
 7o years 
 
 70 years 
 
 70 years 
 
 70 years 
 
 70 years 
 
 70 years 
 
 70 years 
 
 70 years...-. 
 
 70 years 
 
 70 years 
 
 20 years 
 
 25 years 
 
 30 years 
 
 35 years 
 
 40 years 
 
 45 years 
 
 50 years 
 
 55 years 
 
 60 years 
 
 65 years 
 
 69 years 
 
 50 
 45 
 40 
 35 
 30 
 25 
 20 
 15 
 10 
 5 
 1 
 
 $4. 267 
 4.756 
 5. 289 
 5.869 
 6.497 
 7.176 
 7.907 
 8.691 
 9. 530 
 10. 425 
 11. 178 
 
 $900. 00 
 810. 00 
 720. 00 
 630. 00 
 540. 00 
 450. 00 
 360. 00 
 270. 00 
 180. 00 
 90.00 
 18.00 
 
 $6,835.50 
 6, 151. 95 
 5, 468. 40 
 4,784.85 
 4, 101. 30 
 3,417.75 
 2, 734. 20 
 2,050.65 
 1,367.10 
 683. 55 
 136. 71 
 
 $2,560.20 
 2,568.24 
 2, 538. 72 
 2, 464. 98 
 2,338.92 
 2, 152. 80 
 1,897.68 
 1,564.38 
 1, 143. 60 
 625. 50 
 134. 14 
 
 37.45 
 41.75 
 46.42 
 51.52 
 57.03 
 62.99 
 69.41 
 76.29 
 83.65 
 91.61 
 98.12 
 
 $4,275.30 
 
 3,583.71 
 
 2,929.68 
 
 2,319.87 
 
 1,762.38 
 
 1,264.95 
 
 836. 52 
 
 486. 27 
 
 223. 50 
 
 58.05 
 
 2.57 
 
 62.55 
 58.25 
 53.58 
 48.48 
 42.97 
 37.01 
 30.59 
 23.71 
 16.35 
 8.49 
 1.88 
 
 Table IX shows the amount returned to the employee in cash, 
 after various periods of service, for each dollar deposited. 
 
 Table IX, — Showing amount returned to the employee in cash, after various 
 periods of service, for each dollar deposited. 
 
 Retirement age. 
 
 70 years 
 70 years 
 70 years 
 70 years 
 70 years 
 70 years 
 70 years 
 70 years 
 70 years 
 70 years 
 70 years 
 
 Entrance age. 
 
 20 years 
 25 years 
 30 years 
 35 years 
 40 years 
 45 years 
 50 years 
 55 years 
 60 years 
 65 years 
 69 years 
 
 Years 
 of serv- 
 ice. 
 
 Monthly 
 deposit 
 from a 
 
 salary of 
 
 $4. 267 
 4. 756 
 5. 289 
 5.869 
 6.497 
 7.176 
 7.907 
 8.691 
 9.530 
 10. 425 
 11.178 
 
 Amount 
 of an- 
 nuity. 
 
 $900. 00 
 810. 00 
 720. 00 
 630. 00 
 540. 00 
 450. 00 
 360. 00 
 270. 00 
 180. 00 
 90.00 
 18.00 
 
 Amount 
 deposited 
 
 by em- 
 ployee dur- 
 ing entire 
 period of 
 service. 
 
 $2,560.20 
 2,568.24 
 2,538.72 
 2,464.98 
 2,338.92 
 2,152.80 
 1,897.68 
 1,564.38 
 1,143.60 
 625. 50 
 134. 14 
 
 Amount of 
 cash re- 
 turned on 
 retirement 
 in lieu of 
 an annuity. 
 
 $6,835.50 
 6,151.95 
 5,468.40 
 4,784.85 
 4,101.30 
 3,417.75 
 2,734.20 
 2,050.65 
 1,367.10 
 683. 55 
 136. 71 
 
 Amount 
 of cash 
 returned 
 for each 
 dollar 
 deposited. 
 
 $2.67 
 2.40 
 2.15 
 1.94 
 1.75 
 1.59 
 1.44 
 1.31 
 1.20 
 1.09 
 1.02 
 
 The rapidity with which a fund increases at compound interest 
 after the lapse of a few years is graphically illustrated in the accom- 
 panying chart by the curves representing the amount resulting from 
 a deposit of $1 a year compounded at various rates of interest from 
 1 to 50 years, and Table X, which follows, shows the same thing in 
 numbers. It will be noted that during the first years of accumula- 
 tion the amount of interest is insignificant, and the curves represent- 
 ing it are slight, but that after about 20 years' accumulation the 
 amount of interest increases very rapidly, approaching and passing 
 
102 BETIREMENT OF SUPERANNUATED CIVIL-SEEVICE EMPLOYEES. 
 
 Chart showing the amount of a deposit of$l per annum from one to fifty years at various 
 
 rates of interest. 
 
 *220 
 210 
 200 
 190 
 
 mo 
 
 170 
 
 160 
 
 ISO 
 
 liO 
 
 130 
 
 120 
 
 110 
 
 100 
 
 90 
 
 80 
 
 70 
 
 60 
 
 50 
 
 30 
 20 
 lO 
 
 o 
 
 ,5 10 25 SO 25 30 as ieO 4t5 SO \ 
 
 
 
 
 
 
 
 
 
 
 
 ^219.81 
 
 (.158.77 
 
 a3558 
 ■.116.18 
 
 (.5000 
 
 
 
 
 
 
 
 
 
 
 1 
 
 
 
 
 
 
 
 
 
 
 / 
 
 
 
 
 
 
 
 
 
 
 / 
 
 
 
 
 
 
 
 
 
 
 / 1 
 
 
 
 
 
 
 
 
 
 ^, 
 
 
 
 
 
 
 
 
 
 
 ^j 
 
 
 
 
 
 
 
 
 
 
 /■ 
 
 1 
 
 
 
 
 
 
 
 
 
 /^ 
 
 1 1 
 
 
 
 
 
 
 
 
 
 // 
 
 J J 
 
 
 
 
 
 
 
 
 / 
 
 1 
 
 \ 
 
 
 
 
 
 
 
 
 / 
 
 1 i 
 
 // 
 
 
 
 
 
 
 
 
 // 
 
 K 
 
 
 
 
 
 
 
 1 
 
 / 
 
 /) 
 
 y 
 
 
 
 
 
 
 
 // 
 
 // 
 
 V 
 
 
 
 
 
 
 
 
 // 
 
 // 
 
 f 
 
 
 
 
 
 
 
 /; 
 
 V/y 
 
 / 
 
 
 
 
 
 
 
 
 /A 
 
 V 
 
 
 
 
 
 
 
 
 
 ^ 
 
 
 
 ^ 
 
 ^^ 
 
 
 
 
 
 ¥^\ 
 
 
 rjii^''' 
 
 ^r^^ 
 
 
 
 
 
 A 
 
 
 
 
 
 
 
 
 
 ^ 
 
 ^ 
 
 
 
 
 
 
 
 
 
 ^ 
 
 
 
 
 
 
 
 
 
RETIKEMBNT OF SUPEEANNUATED CIVIL-SEEVICE EMPLOYEES. 103 
 
 the amount of the principal itself. In other words, the interest 
 accumulation on shorter periods is vastly less than on the longer 
 periods of service. To illustrate : The interest on $1 per annum com- 
 pounded for 40 years, at 4 per cent, amounts to $58.83, while for 50 
 years, an accumulation period of only 10 years more, or but one-fifth 
 of the whole period, it amounts to $108.77, or nearly twice the inter- 
 est of the shorter period. 
 
 Table X. 
 
 -Showing the amount of a deposit of $1 per annum from 1 to 50 years 
 at various rates of interest. 
 
 Year. 
 
 AmouDt of a deposit of SI per annum with interest at- 
 
 2 per cent. 
 
 2i per cent. 
 
 3 per cent. 
 
 3J per cent. 
 
 4 per cent. 
 
 Sj.02no 
 
 $1.02,50 
 
 $1.0300 
 
 $1.0350 
 
 $1.0400 
 
 2. 0604 
 
 2. 0756 
 
 2. 0909 
 
 2. 1062 
 
 2. 1216 
 
 3. 1216 
 
 3. 1525 
 
 3. 1836 
 
 3.2149 
 
 3. 2465 
 
 4. 2040 
 
 4. 2563 
 
 4. 3091 
 
 4. 3625 
 
 4. 4163 
 
 5. 3081 
 
 6. 3877 
 
 5. 4684 
 
 5. 5502 
 
 5. 6330 
 
 6. 4343 
 
 6. 5474 
 
 6. 6625 
 
 6. 7794 
 
 6. 8983 
 
 7. 5830 
 
 7. 7361 
 
 7.8923 
 
 8. 0517 
 
 8. 2142 
 
 8. 7546 
 
 8. 9545 
 
 9. 1591 
 
 9. 3685 
 
 9. 5828 
 
 9. 9497 
 
 10. 2034 
 
 10. 4639 
 
 10. 7314 
 
 11.0061 
 
 li.UVS7 
 
 11. 4835 
 
 11. 8078 
 
 12. 1420 
 
 12. 4864 
 
 12.4121 
 
 12. 7956 
 
 13. 1920 
 
 13. 6020 
 
 14. 0258 
 
 13.6803 
 
 14. 1404 
 
 14. 6178 
 
 15. 1130 
 
 15. 6268 
 
 14. 9739 
 
 15. 5190 
 
 16. 0863 
 
 16. 6770 
 
 17. 2919 
 
 16. 2934 
 
 16. 9319 
 
 17. 5989 
 
 18. 2957 
 
 19. 0236 
 
 17. 6393 
 
 18. 3802 
 
 19. 1569 
 
 19. 9710 
 
 20. 8245 
 
 19.0121 
 
 19. 8647 
 
 20. 7616 
 
 21. 7050 
 
 22. 6975 
 
 20. 4123 
 
 21. 3863 
 
 22. 4144 
 
 23. 4997 
 
 24. 6454 
 
 21. 8406 
 
 22. 9460 
 
 24.1169 
 
 25. 3572 
 
 26. 6712 
 
 23. 2974 
 
 24. 5447 
 
 25. 8704 
 
 27. 2797 
 
 28. 7781 
 
 24. 7833 
 
 26. 1833 
 
 27. 6765 
 
 29. 2695 
 
 30. 9692 
 
 26. 2990 
 
 27. 8629 
 
 29. 5368 
 
 31. 3289 
 
 33. 2480 
 
 27. 8450 
 
 29. 5844 
 
 31. 4529 
 
 33. 4604 
 
 35. 6179 
 
 29. 4219 
 
 31. 3490 
 
 33. 4265 
 
 35. 6665 
 
 38. 0826 
 
 31.0303 
 
 33. 1578 
 
 35. 4593 
 
 37. 9499 
 
 40. 6459 
 
 32. 6709 
 
 35. 0117 
 
 37. 5550 
 
 40. 3131 
 
 43.3117 
 
 34. 3443 
 
 36. 9120 
 
 39. 7096 
 
 42. 7591 
 
 46. 0842 
 
 36.0512 
 
 38. 8598 
 
 41. 9309 
 
 45. 2906 
 
 48. 9676 
 
 37. 7922 
 
 40. 8563 
 
 44. 2189 
 
 47. 9108 
 
 51. 9663 
 
 39. 5681 
 
 42. 9027 
 
 46. 5754 
 
 50. 6227 
 
 55. 0849 
 
 41. 3794 
 
 45. 0003 
 
 49. 0027 
 
 53. 4295 
 
 58. 3283 
 
 43. 2270 
 
 47. 1503 
 
 51. 5028 
 
 56. 3345 
 
 61. 7015 
 
 45. 1116 
 
 49. 3540 
 
 54. 0778 
 
 59. 3412 
 
 65. 2095 
 
 47. 0338 
 
 51. 6129 
 
 56. 7302 
 
 62. 4532 
 
 68. 8579 
 
 48. 9945 
 
 53. 9282 
 
 59. 4621 
 
 65. 6740 
 
 72. 6522 
 
 50. 9944 
 
 56. 3014 
 
 62. 2759 
 
 69. 0076 
 
 76. 5983 
 
 53. 0343 
 
 58. 7339 
 
 65. 1742 
 
 72. 4579 
 
 80. 7022 
 
 55.1149 
 
 61. 2273 
 
 68. 1594 
 
 76.0289 
 
 84. 9703 
 
 57. 2372 
 
 63. 7830 
 
 71. 2342 
 
 79. 7249 
 
 89. 4091 
 
 59. 4020 
 
 66. 4026 
 
 74. 4013 
 
 83. 5503 
 
 94. 0255 
 
 61.6100 
 
 69. 0876 
 
 77. 6633 
 
 87. 5095 
 
 98. 8265 
 
 63. 8622 
 
 71. 8398 
 
 81. 0232 
 
 91. 6074 
 
 103. 8196 
 
 66. 1595 
 
 74. 6608 
 
 84. 4839 
 
 95. 8486 
 
 109. 0124 
 
 68. 5027 
 
 77. 5523 
 
 88. 0484 
 
 100. 2383 
 
 114. 4129 
 
 70. 8927 
 
 80. 5161 
 
 91. 7199 
 
 104. 7817 
 
 120. 0294 
 
 73. 3306 
 
 83. 5540 
 
 95. 5015 
 
 109. 4840 
 
 125. 8706 
 
 75. 8172 
 
 86. 6679 
 
 99. 3965 
 
 114. 3510 
 
 131. 9454 
 
 78. 3535 
 
 89. 8596 
 
 103. 4084 
 
 119. 3883 
 
 138. 2632 
 
 80. 9406 
 
 93. 1311 
 
 107. 5406 
 
 124. 6018 
 
 144. 8337 
 
 83. 5794 
 
 96. 4843 
 
 111. 7969 
 
 129. 9979 
 
 151. 6671 
 
 86. 2710 
 
 99. 9215 
 
 116. 1808 
 
 135. 5828 
 
 158. 7738 
 
 1 year... 
 
 2 years.. 
 
 3 years.. 
 
 4 years. . 
 
 5 years.. 
 
 6 years.. 
 
 7 years.. 
 
 8 years.. 
 
 9 years.. 
 
 10 years. 
 
 11 years. 
 
 12 years. 
 
 13 years. 
 
 14 years. 
 
 15 years. 
 
 16 years. 
 
 17 years. 
 
 18 years. 
 
 19 years. 
 
 20 years. 
 
 21 years. 
 
 22 years. 
 
 23 years. 
 
 24 years. 
 
 25 years. 
 
 26 years. 
 
 27 years. 
 
 28 years. 
 
 29 years. 
 
 30 years. 
 
 31 years. 
 
 32 years. 
 
 33 years. 
 
 34 years. 
 
 35 years. 
 
 36 years. 
 
 37 years., 
 
 38 years., 
 
 39 years., 
 
 40 years., 
 
 41 years. 
 
 42 years. 
 
 43 years., 
 
 44 years.. 
 
 45 years. , 
 
 46 years. . 
 
 47 years.. 
 
 48 years.. 
 
 49 years. . 
 
 50 years. . 
 
 KATE OF INTEREST. 
 
 The cumulative power of compound interest being so great, the 
 rate at which the interest is compounded is important, since even 
 slight variations in the rate cause considerable differences in results. 
 (See chart, p. 102.) 
 
104 RETIREMENT OP SUPERANNUATED CIVIL- SERVICE EMPLOYEES. 
 
 The rate of interest that money will earn is important in connec- 
 tion with this plan in two respects. It has to be considered with 
 reference to the payment of interest on the accumulated savings of 
 the employees, and also in connection with the computation of the 
 annuity that these savings will buy. The bill provides, in the first 
 sentence of the first section, that interest at 3^ per cent compounded 
 annually shall be added to the savings of the employees. It likewise 
 provides in the last sentence of the same section that the deductions 
 from the employees' salaries shall be based on the proper mortality 
 table, with interest at 3^ per cent compounded annually. In other 
 words, no specific amount or uniform percentage of salary is stated 
 as the proper rate of deduction from salaries, but a sum which, on 
 two assumptions, will at the retirement age yield the amount neces- 
 sary to buy the desired annuity. The two assumptions are the rate 
 of mortality and the rate of interest. The latter is fixed by the 
 proposed law at 3^ per cent, but the right to change the mortality 
 basis is left to the Secretary of the Treasury, so that, in case the 
 experience among the Government annuitants should make it de- 
 sirable to use a table showing a higher or a lower* rate of mortality, 
 the change can be made. The table recommended for the present is 
 the British Offices' Select Annuitants' Table. For both purposes, the 
 accumulation of interest on the employees' savings and the computa- 
 tion of annuities to be bought with them, the rate of interest pro- 
 posed is 3^ per cent. 
 
 BATE OF 3i PEE CENT PROPOSED IN BILL. 
 
 The rate of 3^ per cent was adopted in drafting the proposed bill 
 as the desirable rate to be allowed the employees on their money 
 held by the Government, since, in the opinion of some who have con- 
 sidered the subject, it is the maximum rate that can be safely guaran- 
 teed by the Government ; while, on the other hand, a lower rate than 
 3^ per cent would require the deductions from salaries to be unduly 
 high in order to create the fund from which to pay the annuities 
 provided in the bill. It was also thought to be about as low a rat€ 
 as the Government could consistently ask its employees to accept on 
 enforced savings, since that rate or a higher one is offered them by 
 the majority of outside savings institutions. 
 
 OBJECTION TO LOW INTEREST RATE. 
 
 The most practical objection to too low a rate of interest is the 
 fact that it necessitates too high a deduction from the employee's 
 salary, a factor in the problem that is not very flexible. The higher 
 interest rate would undoubtedly create a better feeling among the 
 
EETIEEMENT OP SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 105 
 
 employees also, some of the more thrifty of whom object to a com- 
 pulsory savings plan solely on the ground that they can find more 
 remunerative investments for their savings than the Government 
 would guarantee under this bill. 
 
 The improvident, too, who never have any money to invest would 
 be less likely to complain about a compulsory savings plan charac- 
 terized by low rather than high deductions from salary. In the 
 opinion of the author, therefore, 3^ per cent is altogether too low 
 an interest rate on enforced savings, and the Government should 
 be willing to guarantee at least 4 per cent. It is very improbable 
 that a guarantee of that rate would put a burden on the Govern- 
 ment, for it would undoubtedly often be able to earn more than 4 
 per cent, which would offset the times when it would earn less. As 
 explained on page 77 also, the safest and wisest way for the Gov- 
 ernment to lend its aid to the retirement project, far better than by ' 
 any direct contribution, is through grant of a liberal rate of interest, 
 since encouragement of that kind from the Government would offer 
 no temptation to the introduction of abuses which invariably creep 
 in under a system supported wholly or in part by contributions from 
 the Government. The payment of a liberal rate of interest would 
 operate chiefly as a reward of merit for the benefit of the long- 
 service employee, for it is not until after a long period of years that 
 the difference of a point or two in the rate of compound interest 
 begins to show to any considerable extent, so that, while it would 
 not make much difference to the employee who left the service after 
 10 years whether the interest rate allowed on his savings was 3^ 
 or 4 per cent, it would make a very great difference to the employee 
 who had been in the service 40 or 50 years. Reference to the interest 
 chart on page 102 will show how much more interest at 4 and 5 per 
 cent will amount to on a long period of years than on a short term. 
 
 "ADVANTAGE OF LOW INTEREST RATE. 
 
 On the other hand, the assumption of a low interest rate is not 
 without its advantages. The lower the rate of interest the less 
 probable, of course, that the Government would ever fail to realize 
 the rate guaranteed. The bill provides that whatever is carried 
 above the guaranteed interest rate should be returned to the em- 
 ployees, and it is proposed (see p. 110) that this surplus earning 
 should be divided among the annuitants in order to make the an- 
 nuity settlement as attractive as possible and to discourage employees 
 from taking their money in cash. Naturally, the lower the rate of 
 interest guaranteed, the more there will be to divide among annuitants 
 and the greater the advantage given them over those who take a 
 cash settlement on retirement. 
 
106 RETIEEMENT OF SUPERANNUATED CIVIL-SEEVICE EMPLOYEES. 
 
 The effect of various rates of interest on the value of an annuity of 
 $1, based on the annuity experience of the British offices, is shown in 
 Table XL 
 
 Table XI. — Shotving the value of an annuity of $1, at variows ages, 'based on the 
 British offices' select annuitatnts' experience, with different rates of interest. 
 Annuity payable quarterly. 
 
 20 years 
 
 21 years 
 
 22 years 
 
 23 years 
 
 24 years 
 
 25 years 
 
 26 years 
 
 27 years 
 
 28 years 
 
 29 years 
 
 ■ 30 years 
 
 31 years 
 
 32 years 
 
 33 years 
 
 34 years 
 
 35 years 
 
 36 years 
 
 37 years 
 
 38 years 
 
 39 years 
 
 40 years 
 
 41 years 
 
 42 years 
 
 43 years 
 
 44 years 
 
 45 years 
 
 46 years 
 
 47 years 
 
 48 years 
 
 49 years 
 
 50 years 
 
 51 years 
 
 52 years 
 
 53 years 
 
 54 years 
 
 55 years 
 
 56 years 
 
 57 years 
 
 58 years 
 
 59 years 
 
 2Jper 
 cent. 
 
 3 per 
 cent. 
 
 22. 733 
 22. 548 
 22. 359 
 22. 164 
 21.965 
 21.758 
 21. 547 
 21.330 
 21. 107 
 20. 879 
 20. 645 
 20.404 
 20. 158 
 19. 906 
 19. 648 
 19. 384 
 19. 115 
 18. 840 
 18.558 
 18. 271 
 17. 979 
 
 17. 680 
 17. 377 
 17.069 
 16. 755 
 16. 436 
 16.113 
 15.785 
 15. 453 
 15.117 
 14. 778 
 14. 435 
 14.089 
 13. 740 
 13. 389 
 13.035 
 
 12. 681 
 12. 326 
 11. 969 
 11.613 
 
 3Jper 
 cent. 
 
 20. 874 
 20. 724 
 20.578 
 20. 410 
 20. 246 
 20. 076 
 19. 900 
 19. 720 
 19. 534 
 19.343 
 19. 147 
 18. 944 
 18. 735 
 18. 521 
 18. 301 
 18. 076 
 17. 844 
 17. 607 
 17.364 
 17.115 
 16. 860 
 16. 601 
 16. 335 
 16. 064 
 15. 788 
 15.506 
 15. 220 
 14. 928 
 14. 631 
 14.3.31 
 14. 026 
 13. 717 
 13. 405 
 13. 089 
 12. 770 
 12. 448 
 12. 124 
 11. 799 
 11. 471 
 11. 143 
 
 4 per 
 
 cent. 
 
 19. 259 
 19.137 
 19.010 
 18. 879 
 18. 743 
 18. 602 
 18. 456 
 18. 305 
 18. 150 
 17. 989 
 17. 823 
 17.650 
 17. 474 
 17. 291 
 17. 103 
 16.909 
 16.710 
 16. 505 
 16. 294 
 16.078 
 15. 855 
 15. 627 
 15. 394 
 15.156 
 14.911 
 14. 661 
 14. 406 
 14. 146 
 13. 881 
 13. 611 
 13.337 
 13. 058 
 12. 775 
 12. 488 
 12. 198 
 11.904 
 11.608 
 11.310 
 11. 008 
 10. 706 
 
 60 years . 
 
 61 years. 
 
 62 years . 
 
 63 years. 
 
 64 years . 
 
 65 years. 
 
 66 years . 
 
 67 years . 
 
 68 years. 
 
 69 years . 
 
 70 years . 
 
 71 years. 
 
 72 years . 
 
 73 years . 
 
 74 years . 
 
 75 years . 
 
 76 years . 
 
 77 years. 
 
 78 years . 
 
 79 years. 
 
 80 years . 
 
 81 years . 
 
 82 years . 
 
 83 years. 
 
 84 years . 
 
 85 years. 
 
 86 years . 
 /,7 years . 
 
 88 years . 
 
 89 years . 
 
 90 years . 
 
 91 years. 
 
 92 years . 
 
 93 years . 
 
 94 years . 
 
 95 years . 
 
 96 years . 
 
 97 years . 
 
 98 years . 
 
 99 years . 
 
 24 per 
 cent. 
 
 3 per 
 
 3iper 
 
 cent. 
 
 cent. 
 
 11.257 
 
 10.815 
 
 10.901 
 
 10. 485 
 
 10.547 
 
 10.157 
 
 10.194 
 
 9.828 
 
 9.844 
 
 9.502 
 
 9.496 
 
 9.177 
 
 9.152 
 
 8.854 
 
 8.811 
 
 8.534 
 
 8.474 
 
 8.218 
 
 8.143 
 
 7.904 
 
 7.816 
 
 7.595 
 
 7.494 
 
 7.291 
 
 7.179 
 
 6.992 
 
 6.870 
 
 6.698 
 
 6. 568 
 
 6.410 
 
 6.273 
 
 6.128 
 
 5.985 
 
 5.852 
 
 5.705 
 
 5.584 
 
 5.432 
 
 5.322 
 
 5.168 
 
 5.068 
 
 4.912 
 
 4. 821 
 
 4.664 
 
 4.582 
 
 4.425 
 
 4.350 
 
 4.194 
 
 4.127 
 
 3.972 
 
 3.912 
 
 3.759 
 
 3.704 
 
 3.553 
 
 3.504 
 
 3.357 
 
 3.313 
 
 3.168 
 
 3.129 
 
 2.988 
 
 2.953 
 
 2.816 
 
 2.784 
 
 2.652 
 
 2.623 
 
 2.495 
 
 2.470 
 
 2.346 
 
 2.323 
 
 2.204 
 
 2.184 
 
 2.068 
 
 2.051 
 
 1.940 
 
 1.924 
 
 1.817 
 
 1.804 
 
 1.700 
 
 1.688 
 
 1.586 
 
 1.575 
 
 4 per 
 cent. 
 
 10.402 
 10. 096 
 9.791 
 9.486 
 9.180 
 8.877 
 8.574 
 8.273 
 7.974 
 7.679 
 7.386 
 7.098 
 6.813 
 6.533 
 6.258 
 5.989 
 5.725 
 5.467 
 5.216 
 4.971 
 4.733 
 4.502 
 4.278 
 4.062 
 3.852 
 3.651 
 3.456 
 3.269 
 3:090 
 2.918 
 2.753 
 2.596 
 2.445 
 2.301 
 2.164 
 2.034 
 1.909 
 1.790 
 1.675 
 1.656 
 
 The probable future course of the rate of interest is discussed in 
 Chapter V, page 204. 
 
 ANNUITIES. 
 
 The plan of retirement under discussion proposes that the civil 
 employee shall be able to withdraw his savings, on retiring from the 
 service, in the form of an annuity or a cash sum. 
 
 ANNUITY ALWAYS 1^^ PER CENT OF AGGREGATE SALARY. 
 
 Starting with the amount of the annuity as a fixed quantity, as 
 explained at the beginning of this chapter — ^that is, 1^ per cent of 
 salary (a known sum) for every year of service from the age of en- 
 trance to the age of retirement (a definite number of years) — it is 
 easy to compute what deduction from salary will be enough, with 
 
flETIREMENT OF SUPERANNUATED CIVIL-SEKVICE EMPLOYEES. 107 
 
 interest at 3^ per cent, compounded annually, to create a fund suf- 
 ficient to buy that annuity. The amount of the annuity being thus 
 fixed by the amount of salary, the amount of the deduction from 
 salary remains unchanged as long as the salary remains unchanged. 
 Only when the salary is increased or decreased is the deduction from 
 salary changed. (See Table XXIII.) The point is that. in the pro- 
 posed plan of retirement the annuity is the fixed quantity (fixed 
 according to salary and length of service), and the deduction from 
 salary is the factor to be determined. In all flat-rate assessment 
 plans the reverse holds true, a fixed percentage of salary being 
 agreed upon as the proper deduction from salary for employees of 
 all salaries and all entrance ages. The logical problem, then, should 
 be to compute the annuities that the fund thus created will buy, but 
 seldom do these plans follow logic in this respect. The Canadian 
 plan, with its savings-bank idea based on a flat-rate deduction of 5 
 per cent from salaries, is the only known instance of a uniform as- 
 sessment plan in which the several annuities are restricted to the 
 sums which the individual contributions will purchase. To the extent 
 to which it is logical the Canadian plan is satisfactory, its failure 
 arising not from its adherence to the savings-bank idea but from its 
 adoption of the idea of a uniform percentage of salary as the proper 
 deduction from salary for all ages of entrance. With most flat-rate 
 assessment plans the amount of the annuity is determined arbitrarily 
 in advance, as well as the percentage of salary required from the 
 employee. There being no direct relation between the two factors, 
 the usual result is that the fund created by the deductions from 
 salary is insufficient to provide the benefits that are agreed upon or 
 that are ultimately granted, and the Government is accordingly 
 called on to make up the deficit. The practical result in the Canadian 
 instance is the same — a deficiency — with this difference, that the 
 annuitants rather than the State are made to feel the hardship of 
 an arrangement which retires the aged on inadequate allowances. 
 In such a case the State will, of course, ultimately be made to carry 
 the burden, if the friends of those thus inadequately retired are 
 sufficiently numerous and influential. 
 
 ANNUITY OF 1 OR 2 PER CENT OF AGGREGATE SAIW^RY POSSIBI^ BUT NOT 
 
 ADVISABLE. 
 
 Some other per cent than 1^ per cent of the salary for each year of 
 service might have been used as a basis for the annuities. Half pay 
 after 50 years of service would be 1 per cent for each year of service, 
 but as the majority of people serve the Government much less than 60 
 years annuities computed on the basis of 1 per cent would be inade- 
 quate, and the evils oi inadequate annuities have just been pointed 
 
108 EETIEEMENT OF SUPERANNUATED CIVIL-SEEVICE EMPLOYEES. 
 
 out in the case of Canada. On the other hand, annuities equal to full 
 pay after 60 years, that is, 2 per cent for each year of service, would 
 only be possible through excessive deductions from salary. The dif- 
 ference in the practicability of these several bases of computation — 
 1, 1^, and 2 per cent for each year of service — is shown in Table XII. 
 
 Table XII. — Showing ditferences in practicability of several bases of computa- 
 tion for annuities, 1, 11, and 2 per cent of annual salary for each year of 
 service. 
 
 Age. 
 
 Deductions required from a monthly 
 salary of $ 1 00 to provide an annuity 
 on retirement at age 70 equal to — 
 
 1 per cent 
 of annual 
 salary for 
 each year 
 of service. 
 
 IJ per cent 
 of annual 
 salary for 
 each "year 
 of service. 
 
 2 per cent 
 of annual 
 salary for 
 each year 
 of service. 
 
 20 years 
 25 years 
 30 years 
 35 years 
 40 years 
 45 years 
 50 years 
 55 years 
 60 years 
 65 years 
 69 years 
 
 2.844 
 3.171 
 3.526 
 3.913 
 4.331 
 4.784 
 5.271 
 5.794 
 6.353 
 6. 950 
 7.452 
 
 4.267 
 4.756 
 5.289 
 5. 869 
 6.497 
 7.176 
 7.907 
 8.691 
 9. 530 
 10. 425 
 11. 178 
 
 5.689 
 6.341 
 7.052 
 7.825 
 8.663 
 9.568 
 10. 543 
 11.588 
 12. 707 
 13. 900 
 14. 904 
 
 TWO FORMS or ANNUITIES. 
 
 Provision is made in the bill for three optional settlements on 
 retirement from the service. These three provisions are set forth in 
 section 6 of the bill, which reads as follows : 
 
 That upon retiring at the age of retirement or thereafter the employee may 
 withdraw his savings, with the increment of interest as herein provided, under 
 one of the following options ; * * * 
 
 Option I. In an annuity payable quarterly throughout life. 
 
 Option II. In an annuity payable quarterly throughout life, with the provi- 
 sion that in case of the death of the annuitant before he has received in annui- 
 ties the amount of his savings, plus the interest credited thereon, the balance 
 shall be paid to his legal heirs. In determining at his death the amount due 
 to his heirs no account shall be taken of the annuities paid to him by the 
 United States under section 11 of this act. 
 
 Option III. In one sum. 
 
 Which is the best option for the employee depends entirely on his 
 personal circumstances. The first option is the most desirable for an 
 employee who has no one but himself to consider and is willing to 
 sink his capital in order to secure the largest possible income while 
 he lives to enjoy it. It ceases, however, with his death. If others are 
 dependent on him and his health is poor on reaching the retirement 
 age, he might more properly take Option II, which will give him a 
 smaller annuity, but will assure to his heirs, in case he dies before the 
 amount of his savings, plus interest, has been returned to him, the sum 
 
EETIKEMENT OF SUPERANNUATED CIVIL-SEEVICE EMPLOYEES. 109 
 
 still to his credit. The third option is a necessary and logical alterna- 
 tive in a savings-bank scheme. The amount of the annuity that may 
 be received under the two options is shown in Table XIII. 
 
 Table XIII. — Showing amount of annuity granted for a given sum of money 
 under Option I and Option II of the bill. 
 
 Option I. — Amount of deposit necessary at age stated to purchase a life an- 
 nuity of $1 payable in quarterly installments, first payment three months 
 after reaching given age: 
 
 Age 60 $10,815 
 
 Age 65 9.177 
 
 Age 70 7.595 
 
 Amount of yearly annuity payable quarterly that following deposit will provide 
 
 under above : 
 
 Deposit. Annuity. 
 
 Age 60 $6,835.50 $632.03 
 
 Age 65 6,835.50 744.85 
 
 Age 70 6,835.50 900.00 
 
 Option II. — Amount of deposit necessary at age stated to provide a life annuity 
 of $1 payable in quarterly installments, first payment three months after 
 reaching given age, with provision granting retui'u, in case of death, of balance 
 of deposit not received in annuities: 
 
 Age 60 $12,675 
 
 Age 65 11.125 
 
 Age 70 9.625 
 
 Amount of yearly annuity payable quarterly that following deposit will pro- 
 vide under above : 
 
 Deposit. Annuity. 
 
 Age 60 $6,835.50 $539.28 
 
 Age 65 6,835.50 614.43 
 
 Age 70 6,835.50 710.18 
 
 ADVISABILITY OF CASH SETTLEMENT AS WELL AS ANNUITY SETTI^EMENT. 
 
 The desirability of allowing the employee to withdraw his savings 
 on retirement in the form of a cash sum instead of an annuity has 
 been questioned by some persons. It is asserted that the super- 
 annuated employee who retired from the service with a cash sum 
 might be tempted to invest it unwisely and in a short time be in no 
 better condition than if his savings had not been accumulated for 
 him. It has been suggested, therefore, by some persons that the 
 options on withdrawal from the service at the age of retirement 
 should be limited to the annuity settlements. The objection to this is 
 that there would be no age at which an employee leaving the service 
 could withdraw his savings plus interest in a cash sum and it cer- 
 tainly would not be desirable, in all cases, either for the employee 
 or the Government, that the employee should take the money to his 
 credit in the form of an annuity. If the employee retiring at age 70 
 is forced to take an annuity, then why should not the employee re- 
 tiring at age 69, at age 65, at age 60, at age 50, at age 40, and so 
 
110 EETTKEMENT OF SUPEEANNUATED OIVIL-SERVIC'E EMPLOYEES. 
 
 on down be required to take an annuity instead of a cash sum on 
 leaving the service? There would seem to be no age at which the 
 cash settlement might logically be allowed in preference to the an- 
 nuity settlement, and yet an annuity settlement would not be desir- 
 able in the case of an employee who left the service after only two or 
 three years with only enough money to his credit to buy an annuity 
 of a few dollars. Where the employee has only a small amount to 
 his credit it is much simpler to allow him to take his money in cash, 
 and section 7 of the bill accordingly provides that whenever he leaves 
 the service before reaching the age of retirement he shall withdraw 
 his savings plus interest in that form unless the amount to his credit 
 is at least $1,000, in which case he may, if he so desires, take an an- 
 nuity such as his money will buy at his attained age. 
 
 Since it is impossible to determine with justice to every individual 
 at what age or after what period of service the employee should be 
 restrained from taking his savings in the form of cash, the only prac- 
 tical thing to do is to make the annuity settlements as attractive as 
 possible, so that aged employees may be influenced, on retiring from 
 the service, to take one of them in preference to the cash settlement. 
 Toward that end it is provided that the surplus earnings above the 
 guaranteed interest rate may be divided among annuitants who re- 
 main in the service until the age of retirement. Those who withdraw 
 the money to their credit in a lump sum will not be allowed to par- 
 ticipate in the division of any surplus. If, in spite of the greater 
 attractions of the annuity settlements, the employee insists on having 
 his money in cash and then squanders it, the Government can cer- 
 tainly not be held responsible for his folly. It would seem to have 
 done its part when it has provided a way whereby he may be retired 
 at a proper age on a competence. 
 
 It will be some time, however, before this problem will be at all 
 pressing, since the Government's payments, under Part II of the 
 plan, on services rendered prior to its adoption will only be in the 
 form of annuities. It will be many years before those retiring would 
 have to their credit any considerable sum of their own saving, which, 
 under the terms of the bill as it now stands, could be drawn out in 
 cash, and in the interval, if it is found advisable, the bill might be 
 modified in accordance with any pronounced gpneral sentiment or 
 with any experience that had developed in regard to the wisdom of 
 limiting the division of surplus earnings to annuitants or restricting 
 settlements to annuity settlements. 
 
 Apart from any theoretical consideration there is one very real 
 practical objection to the idea of limiting the options on retirement 
 to annuity settlements. An employee might be in very poor health 
 on reaching the age of retirement, and, certain of living only a few 
 years longer, might prefer to take his savings in the form of a cash 
 sum and buy all the comfort possible during the short time left him, 
 
RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. Ill 
 
 rather than to take an annuity which would cease with his death or 
 run on after his death for the benefit of some one else. 
 
 It seems certain at least that any average human being woidd 
 object, and be justified in objecting, if his employer, whether the 
 same were the Government, a corporation, or an individual, should 
 withhold part of his earnings and reserve the right to return them 
 at some remote date in the form of an annuity only, regardless of 
 the employee's circumstances at that time or his wishes in the matter. 
 In the opinion of most people that would be carrying the element 
 of compulsion farther than necessary. It is unfortunate that it 
 should ever be necessary to force people to take any step for their 
 own good, and, theoretically, there is only one thing to be said in 
 favor of compelling a person, whether a Government employee or 
 not, to save his money, and that is that, since he is a member of 
 society, the possibility is recognized of his making a claim on society, 
 and society is right in protecting itself by prescribing what his con- 
 duct shall be. Undoubtedly^, the ideal plan of retirement would be 
 no retirement plan at all, but a government willing to pay salaries 
 large enough to support its employees in dignity and comfort and 
 a body of employees so thrifty as voluntarily to lay aside a com- 
 petence for the rainy days of old age. There would be no problem 
 then of superannuation in the public service, but such a condition 
 can not be expected before the millennium, and in the meantime 
 the Government must deal with the situation, in justice to itself and 
 the employees, in such a practical way as to get beneficial results, re- 
 gardless of any theory that it is tyranny for a government to require 
 an individual to include thrift among the virtues he must cultivate 
 in order to be held law-abiding. The Government is commonly held 
 to be justified in protecting itself against the possibility of dishonesty 
 on the part of its employees by requiring those holding offices of trust 
 to give bond for the faithful performance of duty, and it is difficult 
 to see Avhy the Government is not equally justified in protecting itself 
 against the evil consequences of improvidence on the part of its 
 employees by requiring them to make such regular deposits of money 
 as may guarantee their ability to retire when the interests of the 
 Government so demand. A compulsory retirement law, such as that 
 here proposed, is indeed much less paternalistic than a law requiring 
 employees to give bond, because under this retirement system every 
 contributor recovers his contributions with interest, whereas under 
 the bonding system of the Government nine hundred and ninety-nine 
 honest officials contribute to reimburse the Government against loss at 
 the hands of one dishonest employee. At the same time there is 
 surely a limit to the extent the Government is justified in interfering 
 with the individual's liberty or assuming responsibility for his wel- 
 fare, and that point would seem to be reached in a retirement plan 
 
112 RETIREMENT OF SUPERANNUATED OIViri-SERVICE EMPLOYEES. 
 
 when the Government has arranged the employee's affairs so that it 
 can without injustice dismiss him from the service, leaving him 
 thereafter to his own devices. 
 
 ANNUITY RATES USED IN PROPOSED PLAN. 
 
 The next thing to consider is what price the Government should 
 cliargi for these annuities. In determining what the rate should 
 be for an annuity of $1, beginning at various ages, the first step is 
 to select a mortality table that most accurately represents the par- 
 ticular body of lives on which the annuities are to be granted. The 
 table recommended, for reasons given on page 95, is the British 
 Offices' Select Annuitants' Table. The next step is to decide upon a 
 rate of interest which the funds received in payment for the annuity 
 contracts may reasonably be expected to earn. The rate of interest 
 proposed, for reasons given on page 104, is 3^ per cent. With these 
 two fundamentals established. Table XIV has been prepared, which 
 shows the present value of a life annuity of $1 for a male at age 
 70, first payment in one year to be $7.2205. Briefly stated, the price 
 of an annuity is the present worth of a series of payments to be made 
 to a person for a stated period or until the happening of some event, 
 such as death. 
 
 Table XIV. — Shcnorng Jiow the value of an annuity is determined. 
 
 Age. 
 
 Niunlier 
 living. 
 
 Prohal .ility 
 of living. 
 
 Present 
 
 value of SI 
 
 (3i per cent) 
 
 Present 
 
 worth of each 
 
 payment. 
 
 70 years 
 
 71 years 
 
 72 years 
 
 73 years 
 
 74 years 
 
 75 years 
 
 76 years 
 
 77 years 
 
 78 years 
 
 79 years 
 
 80 years 
 
 81 years 
 
 82 years 
 
 83 years 
 
 84 years 
 
 85 years 
 
 86 years 
 
 87 years 
 
 88 years 
 
 89 years 
 
 90 years 
 
 91 years 
 
 92 years 
 
 93 years 
 
 94 years 
 
 95 years 
 
 96 years 
 
 97 years 
 
 98 years 
 
 99 years 
 
 100 years 
 
 101 years 
 
 102 years 
 
 103 years 
 
 Present value of a life annuity of $1 at age 70 (first pay- 
 nent in one year) 
 
 38,991 
 
 37,573 
 
 35,790 
 
 33. 675 
 
 3i;312 
 
 2S, 820 
 
 26, 305 
 
 23,823 
 
 21,392 
 
 19, 031 
 
 16,760 
 
 14,598 
 
 12,561 
 
 10,668 
 
 8,930 
 
 7,359 
 
 5, 961 
 
 4,739 
 
 3,691 
 
 2,812 
 
 2,091 
 
 1,513 
 
 1,064 
 
 725 
 
 477 
 
 303 
 
 184 
 
 107 
 
 59 
 
 31 
 
 15 
 
 7 
 
 3 
 
 1 
 
 . 96363263 
 . 91790413 
 . 86366084 
 . 80305711 
 .73914493 
 . 67464287 
 . 61098715 
 . 54863943 
 . 4880S699 
 . 42984278 
 . 37439409 
 . 32215126 
 . 27360160 
 . 22902721 
 . 18873586 
 . 152S8143 
 . 1215-1087 
 . 09466287 
 .07211921 
 . 05362776 
 . 038SS3S2 
 . 0272SS35 
 . 01859403 
 . 01223359 
 . 00777102 
 . 00471904 
 . 00274422 
 . 00151288 
 . 00079506 
 . 00038470 
 .000179.53 
 . 0CX107694 
 . 00002565 
 
 $0. 96618357 
 . 93351070 
 . 90194270 
 .87144223 
 . 84197317 
 . 81350064 
 . 78599096 
 .75941155 
 . 73373097 
 . 70S91SS1 
 . 68494571 
 . 66178330 
 .63940415 
 .61778179 
 . 59689062 
 . 57670591 
 . 55720378 
 .53836114 
 . 52015569 
 . 50256588 
 . 4S557O90 
 . 46915063 
 . 45328563 
 . 43795713 
 . 42314699 
 . 40883767 
 . 39501224 
 . 38165434 
 . 36874816 
 . 35627841 
 . 34423035 
 . 33258971 
 . 32134271 
 
 $0. 93104601 
 . 856S7333 
 . 77897259 
 . 69981788 
 . 62234020 
 . 54882241 
 . 48023038 
 . 41664312 
 . 35812454 
 . 30472363 
 . 25643963 
 . 21319432 
 . 17494200 
 . 14148884 
 . 11265466 
 . 08816762 
 . 06772303 
 . 05096281 
 . 03751322 
 . 02695148 
 . 01888085 
 . 01280235 
 . 00842841 
 . 00535778 
 . 00328828 
 . 00192932 
 . 00108400 
 . 00057740 
 . 00029318 
 . 00013706 
 . 00006180 
 . 00002559 
 . 00000824 
 
 $7.22050596 
 
RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 113 
 PEESENT VALUE OF AN ANNUITY OF $1 FOR A MALE, BEGINNING AT AGE 70. 
 
 It will be observed that, according to the above table (Table XIV), 
 the number living at the beginning of age 70 is 38,991. At the 
 beginning of the second year there will be, according to the same 
 table, only 37,673 living, and consequently as the first annuity pay- 
 ment under our calculation is to be made at the beginning of the 
 second year the payment will amount to only $37,573. If an adjust- 
 ment were made at the beginning of the first year, the Government 
 would have to pay such a sum as would with compound interest 
 amount to $37,573 at the end of the year. Since each one of the 
 annuitants has an equal claim upon this sum, it must be divided by 
 38,991, the number living at the beginning of the first year. The 
 share of each annuitant, 3^ per cent interest being assumed, is there- 
 fore the present value of U^Pf of $1, or |^^|ff X0.96618357, or 
 $0.93104601. The present value of all payments commuted in this 
 manner constitutes the value of a life annuity at the age given. The 
 present value of a life annuity of $1 for a male at age 70 (first pay- 
 ment in one year) is therefore the sum of the present values of all 
 commuted payments from the age of 70 to 103, the oldest age con- 
 templated under the British Offices' Select Annuitants' Table. This 
 sum equals $7.22. To buy an annuity of $1, therefore, payable at 
 the end of age 70 and every year thereafter until the end of life, the 
 annuitant must pay a sum (or numerous sums at stated intervals) 
 which, with interest compounded annually at 3^ per cent, will 
 amount, when he reaches the age of 70, to $7.22 for every dollar of 
 the life annuity that he desires to buy. 
 
 rLLUSTBATION. 
 
 As a concrete illustration, take the case of an employee entering 
 the Government service at the age of 20, expecting to retire under 
 the plan at the age of 70 on an annuity equal to 1| per cent of his 
 salary for each year of service. For the sake of simplicity, let us 
 assume that his salary is $100 a month, and continues at that rate 
 throughout the entire period of his service. An annuity at age 70 
 equal to 1^ per cent of $1,200 a year for 50 years would amount to 
 $900. To ascertain the price of that annuity it is necessary then 
 to multiply $7.22, the present value of a life annuity of $1 beginning 
 at age 70, by 900. This amounts to $6,498, and is the sum which he 
 will have to accumulate by means of his savings and with the help of 
 compound interest. 
 
 As a matter of fact, however, the present value of a life annuity 
 
 of $1 beginning at age 70 will be $7,595, rather than $7.22, because 
 
 the bill provides for the payment of the annuities quarterly rather 
 
 than at the end of the year. Since all persons of a given group who 
 
 74196°— S. Doc. 745, 61-3 8 
 
114 EETIEEMENT OF SUPEEANNUATED CIVIL-SEEVICE EMPLOYEES. 
 
 are expected, under a given table, to die during a year will not be 
 dead at the end of three months when the first payment is due, it is 
 manifest that annuities payable quarterly require somewhat larger 
 premiums than do those payable annually, when the first payment 
 is due at the end of the first year. 
 
 The sum, therefore, which he will have to accumulate will be 
 $7.595X900=$6,835.50. 
 
 PRESENT VALUE OF AN ANNUITY OF $1 FOR A FEMALE BEGINNING AT AGE 70. 
 
 It is the practice of life-insurance companies to charge women 
 higher rates for annuities than men. This is because of their greater 
 longevity. According to the British Offices' Select Annuitants' Mor- 
 tality Table, the complete expectation of life for a female at age 70 
 is 10.884 years, as against 9.537 years for a male at the same age. 
 The greater longevity among female annuitants may be attributed 
 in some degree to the greater " self -selection " exercised by them.^ 
 
 If the practice of the insurance companies is followed in the mat- 
 ter of rates charged women annuitants, and if the rate charged a 
 male for an annuity of $1, payable quarterly, beginning at age 70, 
 is $7,595, the corresponding rate charged a female for a similar an- 
 nuity of $1, beginning at the same age, must be, according to Table 
 XV, $8,512. 
 
 There are several reasons, however, for suggesting that the annuity 
 rates charged by the Government might properly be made the same 
 for women as for men. In the first place, outside of the District of 
 Columbia, there are comparatively few women in the service. Table 
 2 in Census Bulletin 94 (p. 10) shows that only 7.4 per cent of the 
 employees in the entire civil service are women. In the District of 
 Columbia women constitute 29 per cent of the employees. In the 
 civil service elsewhere than in the District of Columbia women form 
 only 4 per cent of the total number. 
 
 In the second place, the " self-selection " exercised by women an- 
 nuitants would probably be less severe against the Government than 
 that exercised against the insurance companies. Annuities issued 
 by the Government would probably be more attractive because they 
 are issued by the Government without loading for expense, and be- 
 cause a surplus derived either from interest earned or from excessive 
 mortality among annuitants would be distributed among the sur- 
 vivors, whereas annuities issued by insurance companies are generally 
 on the nonparticipating plan. 
 
 In the third place, the Government might properly follow the 
 example of other nations in this respect and make some concession 
 to women in the matter of conditions under which they are retired. 
 
 »See Journal of the Institute of Actuaries, vol. 39, pp. 2, 3. 
 
KETIEEMENT OF SUPERANNUATED OIVIL-SEIIVICE EMPLOYEES. 115 
 
 It is customary in other countries which have a system of retiring 
 civil employees to retire women at a younger age than men. In New 
 Zealand, for instance, the retirement age for women is 55, as against 
 65 for men. The proposed plan makes no similar provision, but in 
 view of the fact that the annuity rates, even for woriien, have been 
 constructed on the most conservative basis, it seems fair to charge 
 them no more than men for their annuities. 
 
 A fourth consideration lies in the fact that a uniform rate for both 
 sexes would avoid the complexity incident to the use of two sets of 
 deductions and would simplify the matter of accounting. 
 
 Table XV. — Showing the present value of a life annuity of $1, for males and 
 females, heginning at various ages, first payment in three months {British 
 Offices' Select Annuitants' Mortality Experience; interest Si per cent, com- 
 pounded annually). 
 
 Age. 
 
 20 years 
 
 21 years 
 
 22 years 
 
 23 years 
 
 24 years 
 
 25 years 
 
 26 years 
 
 27 years 
 
 28 years 
 
 29 years 
 
 30 years 
 
 31 years 
 
 32 years 
 
 33 years 
 
 34 years 
 
 35 years, 
 
 36 years 
 
 37 years. 
 
 38 years 
 
 39 years 
 
 40 years 
 
 41 years 
 
 42 years 
 
 43 years 
 
 44 years 
 
 45 years 
 
 46 years 
 
 47 years 
 
 48 years , 
 
 49 years 
 
 50 years 
 
 51 years, 
 
 52 years 
 
 53 years, 
 
 54 years 
 
 55 years 
 
 56 years. 
 
 57 years, 
 
 58 years. 
 
 59 years. 
 
 Male. 
 
 S20. 874 
 20. 724 
 20. .570 
 20. 410 
 20. 246 
 20. 076 
 19. 900 
 19. 720 
 19. 534 
 19. 343 
 19. 147 
 18. 944 
 18. 735 
 18. 521 
 18. 301 
 18. 076 
 17. 844 
 17. 607 
 17. 364 
 17. 115 
 16. 860 
 16. 601 
 16. 335 
 16. 064 
 15.788 
 15. 506 
 15. 220 
 14. 928 
 14. 631 
 14. 331 
 14. 026 
 13. 717 
 13. 405 
 13. 089 
 12. 770 
 12.448 
 12. 124 
 11. 799 
 11.471 
 11.143 
 
 Female. 
 
 $21. 093 
 
 20. 951 
 20. 806 
 20. 655 
 20. 499 
 20. 339 
 20. 173 
 20. 003 
 19. 828 
 19. 048 
 19. 465 
 19. 277 
 19. 084 
 18. 888 
 18. 688 
 18. 485 
 18. 277 
 18. 067 
 17. 853 
 17. 635 
 17. 415 
 17. 191 
 16. 965 
 16. 735 
 16. 502 
 16. 265 
 16. 025 
 15. 781 
 15. 533 
 15.280 
 15. 022 
 14. 759 
 14. 488 
 14.213 
 13. 930 
 13. 639 
 13. 341 
 13. 035 
 12. 720 
 12. 397 
 
 Age. 
 
 60 years 
 
 61 years 
 
 62 years 
 
 63 years 
 
 64 years 
 
 65 years 
 
 66 years 
 
 67 years 
 
 68 years 
 
 69 years 
 
 70 years 
 
 71 years 
 
 72 years 
 
 73 years 
 
 74 years 
 
 75 years 
 
 76 years 
 
 77 years 
 
 78 years 
 
 79 years 
 
 80 years 
 
 81 years 
 
 82 years 
 
 83 years 
 
 84 years 
 
 85 years 
 
 86 years 
 
 87 years 
 
 88 years 
 
 89 years 
 
 90 years 
 
 91 years 
 
 92 years 
 
 93 years 
 
 94 years 
 
 95 years 
 
 96 years, 
 
 97 years 
 
 98 years, 
 
 99 years. 
 
 Male. 
 
 $10. 
 10. 
 10. 
 9. 
 
 Female. 
 
 J12. 066 
 11. 728 
 11. 383 
 11. 032 
 10. 675 
 10. 316 
 9.954 
 9.591 
 9.229 
 8.808 
 8.512 
 8.159 
 7.813 
 7.473 
 7.139 
 6.814 
 6.498 
 6.189 
 5.890 
 5.600 
 5.320 
 5.049 
 4.788 
 4.536 
 4.294 
 4.061 
 3.838 
 3.625 
 3.420 
 3.225 
 3.037 
 2. 860 
 2. 690 
 2.528 
 2.376 
 2.228 
 2.094 
 1.959 
 1.8.37 
 1.702 
 
 THESE RATES CONSERVATIVE, AS SHOWN BY COMPARISON WITH CANADIAN 
 
 GOVERNMENT RATES. 
 
 The fact that these rates are conservative is brought out by com- 
 parison with the rates offered to the public generally by the Canadian 
 Government. A system of Government annuities was recently estab- 
 lished by Canada, which enables any citizen to purchase from the 
 Government an annuity, which may be either immediate or deferred, 
 but can not be payable before the age of 55. The rates at which 
 
116 EETIEEMENT OF SUPEEANNUATED CIVIL-SEEVICE EMPLOYEES. 
 
 these annuities are thus sold are less, as will be seen from Table XVI, 
 than the rates here recommended. 
 
 Table XVI. — Showing immediate annuity rates of Canadian, Government, an- 
 nuities payaile quarterly, first installment three months after purchase. 
 
 Age last birtbday 
 
 65 years 
 
 56 years 
 
 57 years 
 
 58 years 
 
 59 years 
 
 60 years 
 
 61 years 
 
 62 years 
 
 63 years 
 
 64 years 
 
 65 years 
 
 66 years 
 
 67 years 
 
 Amount 
 required 
 for a life an- 
 nuity of $1. 
 
 $n.90 
 11.60 
 11.31 
 11.00 
 10. 70 
 10.40 
 10.09 
 9.79 
 9.48 
 9.18 
 8.87 
 8.57 
 8.27 
 
 Age last birtbday. 
 
 68 years 
 
 69 years 
 
 70 years 
 
 71 years 
 
 72 years 
 
 73 years 
 
 74 years 
 7.5 years 
 
 76 years 
 
 77 years 
 
 78 years 
 
 79 years 
 
 80 years 
 
 Amount 
 required 
 for a life an- 
 nuity of $1. 
 
 $7.97 
 7.67 
 7.38 
 7.09 
 6.81 
 6.53 
 6.25 
 5.98 
 5.72 
 5.46 
 5.21 
 4.96 
 4.72 
 
 Furthermore, dej)0sits made in payment of deferred annuities are 
 credited with interest at 4^ per cent, whereas the rate of interest 
 proposed here is 3^ per cent. It should be added, however, that 
 under the Canadian plan the depositor is paid but 3 per cent if he 
 elects to receive cash instead of an annuity or dies before his annuity 
 begins.^ 
 
 INFLUENCE OF INCREASED LONGEVITY ON ANNUITY RATES. 
 
 It is important that there be no confusion in the minds of those 
 considering the basis of this plan in regard to the relation between 
 the average length of life and the total span of life. The statement 
 is frequently made that, owing to general improvements in the con- 
 ditions under which life is maintained, the span of human life is 
 lengthening. If this is so, then objection might be made to using 
 mortality tables as the basis for annuity rates which were made on 
 the assumption that out of 100,000 individuals living at a given age, 
 all will be dead at the age of 104, as is the case with the British 
 Offices' Select Annuitants' Mortality Table, or that they will be dead 
 at the age of 96, as shown in the American Experience Table of Mor- 
 tality, or at some other age as shown in some other table. It might 
 be argued that, since the duration of life seems to be longer than in 
 former years, it is not safe to use a table made on any of the present 
 assumptions as to length of life. 
 
 Even though this contention were true, it does not follow that the 
 mortality table that runs to the greatest age is the safest. Several 
 tables run to 104 or more, but they are not as safe as the tables used, 
 because they do not contemplate so many payments in the aggregate 
 from the ages of 60, 65, and TO — the retirement ages under this plan. 
 That the span of life is lengthening is, however, doubted by many 
 
 »See Canadian Government Annuities, Ottawa (1908), p. 24. 
 
EETIREMEISTT OF SUPERANNUATED CIVIL-SEEVICE EMPLOYEES. 11? 
 
 actuaries. Mr. Henry Coclrbiirn, president of the British Institute 
 of Actuaries, discussing the British Offices' Tables, in his opening 
 address on November 28, 1904, said : 
 
 The new tables exhibit also a continued improvement in the value of annui- 
 tant life, especially among females, which must be attributed in some degree 
 to the " self-selection " exercised by the purchasers. * * * As regards the 
 larger question of a general improvement in the value of human life in this 
 country, and apart from the experience in any special class, there is no doubt 
 that advances in matters relating to sanitary science, the care of disease, more 
 healthful ways of living, have diminished at most ages the chances of death, 
 and, indeed, the remark is not unusual that " people live longer than formerly." 
 This improvement in vitality takes the form of, at each age, a greater average 
 number of years lived by those born into the world, constituting, in actuarial 
 l)arlance, a greater "expectation of life." A larger number than formerly 
 reach adult age and usefulness, though without materially increasing the small 
 proportion who will as heretofore attain to the highest ages; and one dis- 
 tinguishes between this position and longevity in its usual meaning the pro- 
 longation of life to advanced ages. In that matter it is difficult to say or to 
 determine that among the population as a whole there is any appreciable 
 increase.* 
 
 The subject was very thoroughly discussed at the Fourth Interna- 
 tional Congress of Actuaries held in New York in September, 1903. 
 Papers on the improvement in longevity during the nineteenth cen- 
 tury were presented by Mr. Samuel George Warner, of Great Britain, 
 and Mr. John K. Gore, of the United States, and numerous members 
 of the congress took part in the discussion. The general consensus 
 of opinion seems to have been that the average length of life may be 
 increasing but that the total span of life is not, or, if at all, at an 
 imperceptible rate. 
 
 To quote Mr. Warner : 
 
 We have the growth of our great hospitals, the various organizations which 
 care for the poor and the suffering, and especially for the children. Contem- 
 porarily with this we have also the great advance of science, its increased 
 ability to cope with disease, its triumphs in surgery, its development of sani- 
 tation. If we carefully consider these various " streams of tendency," I think 
 we shall not find it difficult to understand how the added length of years which 
 they have combined to bring have come as a gift to childhood and youth rather 
 than to old or middle age.^ 
 
 The conclusions of Mr. Gore were to the same effect. Said he: 
 
 In the absence of more complete data, we may conclude from the evidence 
 available that during the last 30 years our urban population has experienced 
 a rapidly decreasing death rate from phthisis, but that at the same time there 
 has been a decided increase in the rate from diseases of the heart, kidneys, 
 and lungs, from cancer and from violence. Among children, on the other 
 hand, the mortality from all the diseases named, except measles, has greatly 
 diminished. 
 
 On the assumption that the general tendency of the rate of mortality of our 
 urban population has been the same as that of the whole country, it may be 
 concluded from the data presented in these pages that the gross death rate was 
 
 1 See Journal of the Institute of Actuaries, vol. 39, p. 4. 
 
 * Documents Fourth International Congress of Actuaries, p. 62. 
 
118 RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 lower at tile end than at the beginning of the nineteenth century ; that there 
 was a decided decline in the rate during the last 50 years ; that the greatest 
 decline was at the youngest ages ; that there was a considerable decline in the 
 rate at the so-called producing ages of life, and that there was an increase in 
 the death rate at the older ages, the increase being greatest at the most ad- 
 vanced period of life.^ 
 
 In the discussion which followed the presentation of these papers. 
 Dr. Alfred Manes, of Germany, said : 
 
 It may with certainty be surmised only that a much larger percentage of new- 
 born children live longer to-day than a hundred years ago ; that, therefore, the 
 mortality among children has diminished, and this circumstance is undoubtedly 
 due to progress in medicine and social politics. On the other hand, there is 
 nothing to prove that to-day a larger percentage than, for instance, a hundred 
 years ago, reaches the highest stages of life — that is, over 60 to 70 years. 
 On the contrary, these cases seem to occur less frequently to-day, and that is 
 not to be wondered at in view of the change that has taken place in our cir- 
 cumstances of life. If we are indebted to the progress in medicine for the 
 fact that nowadays more children are alive, it seems to me doubtful whether 
 this is an advantage from the standpoint of political economy ; for it means 
 that to-day many more delicate children, whom nature had condemned to death 
 at the outset, are kept alive artificially; but this progress is scarcely con- 
 ducive to the improvement of our race.^ 
 
 Corroborative of this general view is Table XVII, taken from 
 the report of the Twelfth Census, which shows that in 1900, in 
 comparison with 1890, there was a very regular decrease in the 
 death rate at all ages up to 60 years, and an increase in the rates at 
 each age above 60 years. 
 
 Table XVII. — Showing for the registration area the death rates at each age 
 per 1,000 of population in 1890 and 1900 and the decreases and increases in 
 the rates. 
 
 Age. 
 
 1890 
 
 De- 
 crease. 
 
 In- 
 crease. 
 
 Under 1 year 
 
 1 year 
 
 2 years 
 
 3 years 
 
 4 years 
 
 Under 5 years — 
 
 5 to 9 years 
 
 10 to 14 years 
 
 15 to 19 years 
 
 20 to 24 years 
 
 25 to 29 years 
 
 30 to 34 years 
 
 35 to 39 years 
 
 40 to 44 years 
 
 45 to 49 years 
 
 50 to 54 years 
 
 55 to 59 years 
 
 60 to 64 years 
 
 65 to 69 years 
 
 70 to 74 years 
 
 75 to 79 years 
 
 80 to 84 years 
 
 85 to 89 years 
 
 90 to 94 years 
 
 95 years and over. 
 
 165.4 
 
 46.6 
 
 20.5 
 
 13.2 
 
 9.4 
 
 52.1 
 
 5.2 
 
 3.3 
 
 5.2 
 
 7.5 
 
 8.6 
 
 9.4 
 
 11.0 
 
 12.2 
 
 15.2 
 
 19.1 
 
 26.3 
 
 35.1 
 
 52.2 
 
 75.2 
 
 110.5 
 
 165.8 
 
 241.3 
 
 339.2 
 
 418.9 
 
 205.8 
 
 84.9 
 
 23.8 
 
 16.8 
 
 13.0 
 
 66.8 
 
 7.3 
 
 3.8 
 
 6.0 
 
 8.4 
 
 9.9 
 
 10.6 
 
 12.5 
 
 13.5 
 
 16.5 
 
 19.2 
 
 26.5 
 
 32.8 
 
 49.0 
 
 64.5 
 
 103.2 
 
 144.6 
 
 215.5 
 
 260.0 
 
 347.1 
 
 40.0 
 38.3 
 3.3 
 3.6 
 3.6 
 14.7 
 2.1 
 0.5 
 0.8 
 0.9 
 1.3 
 1.2 
 1.5 
 1.3 
 1.3 
 0.1 
 0.2 
 
 2.3 
 3.2 
 
 10.7 
 7.3 
 21.2 
 25.8 
 79.2 
 71.8 
 
 1 Documents Fourth International Congress of Actuaries, p. 615. 
 
 2 See Proceedings Fourtli International Congress of Actuaries, vol. 2, pp. Ill, 
 
 112. 
 
KETIEEMENT OP SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 119 
 
 Investigation of the cases of centenarians seems to bear out the 
 statement that the limit of human life is about 100 years. Mr. T. E. 
 Young, late president of the Institute of Actuaries, and author of a 
 work On Centenarians and the Duration of the Human Race, finds 
 that the majority of reputed cases of centenarians in modem times 
 are not authentic, and he proves that evidence of extreme longevity 
 in the past is deficient. Bulletin 13 of the Bureau of the Census 
 contains the statement that the number of centenarians in 100,000 
 population of known ages at the last six censuses has been as follows: 
 1850, 11; 18G0, 10; 1870, 9; 1880, 8; 1890, 6; 1900, 5. This regular 
 diminution indicates, not that the longevity of the population has 
 been decreasing, but that in this, as in other particulars the accuracy 
 of the age statistics of the censuses has been improving.^ 
 
 The same bulletin contains a quoted statement to the effect that " in 
 Prussia the number of persons (in a total population of 30,000,000) 
 declared to be more than 100 years old in 1890 was 149, of whom 
 more than one-half were discovered upon investigation to be of less 
 age; and of these 8.8 per cent were found to be from 95 to 100, 14.3 
 per cent were between 90 and 95, and the rest not yet 90 years old." ^ 
 
 It does not, therefore, seem likely that increased longevity of the 
 race will ever make the annuity rates suggested here inadequate. 
 Provision for that contingency has, however, been made in the bill, 
 and another table can, if necessary, be adopted by order of the Sec- 
 retary of the Treasury.* 
 
 A LIFE ANNUITY CONTRACT IS THE CONVERSE OF A LIFE INSURANCE CON- 
 TRACT. 
 
 Since the purchase of annuities is not very common in the United 
 States and the question under discussion is how to determine the value 
 of annuities on the lives of Government employees, it may be well to 
 point out the principles underlying the computation. They are pre- 
 cisely the opposite of those employed in the computation of life insur- 
 ance "premiums, with which the American public is more familiar. 
 This is so admirably explained by William Alexander* that his state- 
 ment is given in full : 
 
 In calculating annuities a mortality table must be employed and a rate of 
 interest assumed, as in calculating the premiums on life-insurance policies. In 
 fact, investigation will show that a life annuity is simply the opposite of a policy 
 of life insurance. In the case of the policy, a man pays the company a small 
 suin annually as long as he lives, in consideration of which the company agrees 
 
 1 See Census Bulletin 13, entitled "A Discussion of Age Statistics," by Allya A. Young, 
 p. 20. 
 
 2 See Mayo-Smith, Statistics and Sociology, p. 61. 
 ' See last sentence of sec. 1 of the proposed bill. 
 
 * See Life Insurance Company, by William Alexander, p. 47. 
 
120 EETIEEMENT OP SUPEEANNUATED CIVIL-SEEVICE EMPLOYEES. 
 
 to pay a large sum at his death. In the case of the annuity, a man sinks in the 
 beginning a large sum, in consideration of which the company agrees to pay 
 him a small sum annually as long as he lives. 
 
 In view of the fact that the conditions are reversed, and for other reasons, it 
 is usual in calculating annuities to adopt, on the one hand, a mortality table 
 framed on a somewhat more rigid basis than that employed in calculating in- 
 surance premiums ; and, on the other hand, to assume a somewhat more liberal 
 rate of interest, such, for example, as 3i per cent. 
 
 The younger a man is the less it costs to obtain a policy of life insurance. 
 In the case of an annuity the reverse is true. If a man is old, a given sum 
 will yield a large annuity ; if he is young, the same sum will yield but a small 
 annuity. 
 
 In the case of life insurance the longer the policy holder lives the greater 
 :he advantage to the company ; hence the comf)any insists upon medical ex- 
 iminations in order that it shall not assume risks on impaired lives. In the 
 ease of the annuity, on the other hand, no examination is required, because the 
 sooner the annuitant dies the less the company will have to pay. Hence there 
 is no need for the company to protect itself by an examination. As the annui- 
 tant is well aware of this fact, there is no danger that he will sink his capital 
 unless he believes himself to be in good health. 
 
 The man who has the greatest need of life insurance is the one who has a 
 family dependent upon him; the man who invests in an annuity is usually one 
 who has no dependents. 
 
 DEDUCTIONS FROM SALARIES. 
 
 After deciding on the mortality table and the rate of interest 
 proper for the purpose, and by means of them constructing the 
 rates which the Government should charge for the annuities granted 
 its employees, the fourth step in working out the proposed plan is to 
 determine what amount will have to be deducted from the employees' 
 salaries to create the sums necessary for the purchase of the annuities. 
 
 It has been pointed out that this plan differs essentially from all 
 the plans previously laid before Congress, in that it discards as un- 
 fair to the employees of different ages the idea of deducting from all 
 salaries a uniform percentage of salary, large or small. 
 
 The problem then under this plan is to determine what percentage 
 of salary must be deducted at each age of entrance into the service for 
 each grade of salary. Each class of cases must be treated indi- 
 vidually. Each employee must set aside that percentage of his 
 salary necessary, with the help of compound interest, to accumulate 
 a sum sufficient to buy him at the age of retirement an annuity equal 
 to 1^ per cent of his salary for each year he has served. If he should 
 set aside too small a percentage of his salary, then the sum to his 
 credit on reaching the retirement age would be insufficient for the 
 purchase of the annuity desired. On the other hand, there is no 
 need to set aside a larger percentage of his salary than that actually 
 required for the purchase of his annuity, for all his fellow employees 
 
RETIREMENT OP SUPERANNUATED CIVTL-SERVICE EMPLOYEES. 121 
 
 are accumulating in the same way the sums necessary to purchase 
 their own annuities, and have no need of his help. 
 
 HOW TO DETERMINE THE AMOUNT OF DEDUCTIONS FROM SALARIES. 
 
 To determine the amounts that must be deducted from any salary 
 at any entrance age, all that is necessary, in addition to the data 
 already secured, in computing the cost of the employee's annuity is 
 Table XVIII, which shows the amount to which a deposit of $1 a 
 month, first payment immediate, will accumulate at 3^ per cent per 
 annum, compound interest, at the end of the number of years which 
 the employee will haVe to serve before reaching the age of retirement. 
 
 Table XVIII. — Shotving the amount to which a deposit of $1 per month {first 
 payment immediate) will accumulate at 3i per cent per annum compound 
 interest at the end of a given term of years. 
 
 Term of years. 
 
 Amount 
 of accu- 
 mulation. 
 
 Terra of years. 
 
 Amount 
 of accu- 
 mulation. 
 
 Tenu of years. 
 
 Amount 
 of accu- 
 mulation. 
 
 Term of years. 
 
 Amount 
 of accu- 
 mulation. 
 
 1 
 
 $12.23 
 
 24.88 
 
 37.98 
 
 51.54 
 
 65.57 
 
 80.09 
 
 95.12 
 
 110.68 
 
 126. 78 
 
 143.45 
 
 160. 69 
 
 178.55 
 
 197.02 
 
 14 
 
 $216. 16 
 235. 94 
 256. 42 
 277. 03 
 299.57 
 322. 28 
 345. 79 
 370. 12 
 395.30 
 421.36 
 448. 34 
 476. 26 
 505. 16 
 
 27 
 
 $535. 06 
 566. 02 
 598. 06 
 631.22 
 665.54 
 701.06 
 737.82 
 775.87 
 815.26 
 856.02 
 898.21 
 941.87 
 987.06 
 
 40 
 
 $1,033.84 
 
 2 
 
 15 
 
 28 
 
 41 
 
 1,082.25 
 
 3 
 
 16 
 
 29 
 
 42 
 
 1,132.36 
 
 4 
 
 17 
 
 30 
 
 43 
 
 1,184.22 
 
 5 
 
 18 
 
 31 
 
 44 
 
 45 
 
 1,237.89 
 
 6 
 
 19 
 
 32 
 
 1,293.45 
 
 7 
 
 20 
 
 33 
 
 46 
 
 1,3-50.94 
 
 8 
 
 21 
 
 34 
 
 47 
 
 48 
 
 1,410.45 
 
 9 
 
 22 . . . 
 
 35 
 
 1, 472. 05 
 
 10 
 
 23 
 
 36 
 
 49 
 
 1,535.80 
 
 11 
 
 24 
 
 37 
 
 50 
 
 1,601.78 
 
 12 
 
 25 
 
 38 
 
 
 
 13 
 
 26 
 
 39 
 
 
 
 
 
 
 By dividing the sum which has been previously ascertained as the 
 cost of the annuity by the amount shown in the above table (Table 
 XVIII) which a deposit of $1 per month will accumulate in the given 
 number of years, the amount of the monthly deduction required from 
 the monthly salary during all the years of service to accumulate the 
 price of the annuity is obtained. Table XIX, which follows, shows 
 the per cent required to be deducted monthly from any salary at 
 different entrance ages to provide an annuity for a male at age 70 
 equal to 1| per cent of the annual salary for each year of service. 
 
122 KETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 Table XIX.- — Shoiving amount required to he deducted from a monthly salary 
 of $100 (per cent of other salaries) to provide an annuity at age 70 equal to 
 
 li per cent of annual salary for each year of service. 
 
 A. 
 
 Age of retire- 
 ment. 
 
 B. 
 
 A ge of en- 
 trance into 
 service. 
 
 Years of 
 service 
 (A-B). 
 
 D. 
 
 Amount 
 of an- 
 nuity. 
 
 Cost of an- 
 nuity 
 (DXS7.595). 
 
 Amount of 
 
 $1 a month 
 
 at end of 
 
 years shown 
 
 in column C. 
 
 G. 
 
 Monthly 
 
 deduction 
 
 from 
 
 (E^F). 
 
 Monthly 
 deduction 
 from salary 
 adjusted to 
 "nearest 
 tenth of a 
 dollar." 
 
 70 years 
 70 years 
 70 years 
 70 years, 
 70 years 
 70 years, 
 70 years, 
 70 years 
 70 years. 
 70 years, 
 70 years. 
 70 years. 
 70 years. 
 70 years, 
 70 years, 
 70 years. 
 70 years, 
 70 years, 
 70 years. 
 70 years. 
 70 years. 
 70 years. 
 70 years. 
 70 years, 
 70 years, 
 70 years, 
 70 years, 
 70 years, 
 70 years, 
 70 years, 
 70 years, 
 70 years, 
 70 years, 
 70 years, 
 70 years, 
 70 years, 
 70 years. 
 70 years. 
 70 years, 
 70 years 
 70 years, 
 70 years, 
 70 years, 
 70 years, 
 70 years 
 70 years 
 70 years, 
 70 years 
 70 years 
 70 years. 
 
 20 years . 
 
 21 years. 
 
 22 years . 
 
 23 years . 
 
 24 years . 
 
 25 years . 
 
 26 years . 
 
 27 years . 
 
 28 years . 
 
 29 years . 
 
 30 years . 
 
 31 years . 
 
 32 years . 
 
 33 years . 
 
 34 years . 
 
 35 years . 
 
 36 years . 
 
 37 years . 
 
 38 years . 
 
 39 years . 
 
 40 years . 
 
 41 years . 
 
 42 years . 
 
 43 years . 
 
 44 years . 
 
 45 years . 
 
 46 years . 
 
 47 years . 
 
 48 years . 
 
 49 years . 
 
 50 years . 
 
 51 years . 
 
 52 years . 
 
 53 years . 
 
 54 years . 
 
 55 years . 
 
 56 years . 
 
 57 years . 
 
 58 years . 
 
 59 years . 
 
 60 years . 
 
 61 years . 
 
 62 years . 
 
 63 years . 
 
 64 years . 
 
 65 years . 
 
 66 years . 
 
 67 years . 
 
 68 years . 
 
 69 years . 
 
 $900. 00 
 882. 00 
 864. 00 
 846. 00 
 828. 00 
 810. 00 
 792. 00 
 774. 00 
 756. 00 
 738. 00 
 720. 00 
 702. 00 
 684. 00 
 666. 00 
 648. 00 
 630. 00 
 612. 00 
 594. 00 
 576. 00 
 558. 00 
 540. 00 
 522. 00 
 504. 00 
 486.00 
 468. 00 
 450. 00 
 432. 00 
 414, 00 
 396. 00 
 378. 00 
 360. 00 
 342. 00 
 324. 00 
 306. 00 
 288. 00 
 270. 00 
 252. 00 
 234. 00 
 216. 00 
 198. 00 
 180. 00 
 162. 00 
 144. 00 
 126. 00 
 108. 00 
 90.00 
 72.00 
 54.00 
 36.00 
 18.00 
 
 56, 835. 50 
 6, 698, 79 
 6, 562, 08 
 6, 425, 37 
 6, 288, 66 
 6,151,95 
 6,015.24 
 5, 878. 53 
 5,741,82 
 5, 605. 11 
 5. 468. 40 
 5; 331. 69 
 5.194.98 
 5; 058. 27 
 4,921.56 
 4, 784. 85 
 4,648.14 
 4,511.43 
 4, 374. 72 
 4,238.01 
 4,101.30 
 3, 964, 59 
 3, 827, 88 
 3,691.17 
 3, 554. 46 
 3, 417. 75 
 3,281.04 
 3, 144. 33 
 3, 007. 62 
 2,870.91 
 2,734.20 
 2, 597. 19 
 2,460.78 
 2, 324. 07 
 2, 187. 36 
 2, 050. 65 
 1,913.94 
 1, 777. 23 
 1, 640. 52 
 1, 503. 81 
 1, 367. 10 
 1,230.39 
 1, 093. 68 
 956. 97 
 820. 26 
 683. 55 
 546. 84 
 410. 13 
 273.42 
 136. 71 
 
 SI, 601. 78 
 1, ,535. 80 
 1, 472. 05 
 1,410.45 
 1,350.94 
 1,293.45 
 1,2.37.' 89 
 1, 184. 22 
 1, 132, 36 
 1, 082, 25 
 1, 033. 84 
 987. 06 
 941.87 
 
 898. 21 
 856. 02 
 815. 26 
 775. 87 
 737. 82 
 701. 06 
 665. 54 
 
 631. 22 
 598. 06 
 566. 02 
 535. 06 
 505. 16 
 476. 26 
 448.34 
 421,36 
 395, 30 
 370, 12 
 345, 79 
 322, 28 
 299. 57 
 277. 63 
 256.42 
 235. 94 
 216. 16 
 197. 02 
 178. 55 
 160. 69 
 143. 45 
 126. 78 
 110. 68 
 
 95.12 
 80.09 
 65.57 
 51.54 
 37. 98 
 24.88 
 12.23 
 
 84. 267 
 4,362 
 4,458 
 4.555 
 4.655 
 4.756 
 4.859 
 4.964 
 5.071 
 5.179 
 5.289 
 5.402 
 5.516 
 5.631 
 5.749 
 5.869 
 5.991 
 6.114 
 6.240 
 6.368 
 6.497 
 6.629 
 6.763 
 6.899 
 7.036 
 7.176 
 7.318 
 7.462 
 7.608 
 7.757 
 7.907 
 8.060 
 8.214 
 8.371 
 8.530 
 8.691 
 8.854 
 9.020 
 9.188 
 9.358 
 9.530 
 9.705 
 9.881 
 10, 061 
 10,242 
 10,425 
 10, 610 
 10. 799 
 10. 989 
 11. 178 
 
 «4.30 
 4.40 
 4.50 
 4.60 
 4.70 
 4.80 
 4.90 
 5.00 
 5.10 
 5.20 
 5.30 
 5.40 
 S.50 
 5.60 
 5.70 
 5.90 
 6.00 
 6.10 
 6.20 
 6.40 
 6.50 
 6.60 
 6.80 
 6.90 
 7.00 
 7.20 
 7.30 
 7.50 
 7.60 
 7.80 
 7.90 
 8.10 
 8.20 
 8.40 
 8.50 
 8.70 
 8.80 
 9.00 
 9.20 
 9.40 
 9.50 
 9.70 
 9.90 
 10.10 
 10.20 
 10.40 
 10.60 
 10.80 
 11.00 
 11.20 
 
 To determine the amount of deduction required from any salary 
 at any age, multiply the amount shown as required from a salary of 
 $100 at the age desired by the ratio of the salary for which the deduc- 
 tion is desired to 100. In other words, the deduction required from a 
 salary of $100 for an employee entering the service at age 30 is shown 
 in the table as $5,289. For a salary of $150 for an employee entering 
 the service at age 30 the deduction required is determined as follows : 
 
 150 
 
 $5,289 X = $7,933. 
 
 100 
 
BETIEEMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 123 
 
 As a concrete illustration of the amount of salary to be deducted 
 for the creation of an annuity payable quarterly from age 70, of 
 1| per cent of salarj?' for each year of service, take the case of the 
 employee mentioned in the illustration on pages 113, 114. It was 
 ascertained that he would have to accumulate the sum of $7,595 
 times 900, or $6,835.50, in order to obtain a life annuity of $900, 
 which would be an annuity of 1^ per cent of his salary of $1,200 for 
 50 years, he having entered the service at age 20. To ascertain what 
 his monthly deductions from salary would be, divide $6,835.60 by 
 the amount which a deposit of $1 per month will accumulate at 3^ 
 per cent per annum, compounded annually, at the end of 50 years. 
 According to the interest table that is $1,001.78. The amount of his 
 monthly deduction from salary is therefore $6,835.50 divided by 
 $1,601.78, equaling 4.267, and that it remains until he receives a pro- 
 motion in salary. 
 
 PERCENTAGE OF SALARY DEDUCTED VARIES WITH RETIREMENT AGE. 
 
 The percentage of salary to be deducted must necessarily be larger 
 when retirement is contemplated at the ages of 65 and 60 than it is 
 when retirement takes place at the age of 70, since the time during 
 which contributions for the purchase of annuities are accumulated at 
 compound interest is 5 years shorter in one case and 10 years shorter 
 in the other. In addition to this, the time during which the annui- 
 ties will be payable is 5 years longer in one case and 10 years longer 
 in the other. The deductions from salaries for retirement at age 65 
 are shown in Table XX ; for retirement at age 60 in Table XXI. 
 
124 KETTREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 Table XX. — Showing amount required to be deducted from a monthly salary 
 of $100 (per cent of other salaries) to provide an annuity at age 65 equal to 
 1^ per cent of annual salary for each year of service. 
 
 A. 
 
 Age of retire- 
 ment. 
 
 65 years. 
 65 years. 
 65 years. 
 65 years. 
 65 years. 
 65 years. 
 65 years. 
 65 years. 
 65 years. 
 65 years. 
 65 years. 
 65 years. 
 65 years. 
 65 years. 
 65 years. 
 65 years. 
 65 years. 
 65 years. 
 65 years. 
 65 years. 
 65 years. 
 65 years, 
 65 years. 
 65 years. 
 65 years. 
 65 years. 
 65 years. 
 65 years, 
 65 years, 
 65 years 
 65 years 
 65 years, 
 65 years 
 65 years 
 65 years 
 65 years 
 65 years 
 65 years 
 65 years 
 65 years 
 65 years 
 65 years 
 65 years 
 65 years 
 65 years 
 
 B. 
 
 Age of en- 
 trance into 
 service. 
 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 years 
 
 Years of 
 service 
 (A-B). 
 
 Amount 
 
 of 
 annuity. 
 
 $810 
 792 
 774 
 756 
 738 
 720 
 702 
 684 
 666 
 648 
 630 
 612 
 594 
 576 
 558 
 540 
 522 
 504 
 486 
 468 
 450 
 432 
 414 
 396 
 378 
 360 
 342 
 324 
 306 
 288 
 270 
 252 
 234 
 216 
 198 
 180 
 162 
 144 
 126 
 108 
 90 
 72 
 54 
 36 
 18 
 
 E. 
 
 Cost of 
 
 annuity 
 
 (DX$9.177). 
 
 87,433.37 
 7,268.18 
 7, 103. 00 
 6,937.81 
 6,772.63 
 6,607.44 
 6, 442. 25 
 6,277.07 
 6,111.88 
 5,946.70 
 5, 781.. 51 
 5, 616. 32 
 5,451.14 
 5, 285. 95 
 5, 120. 77 
 4, 955. 58 
 4,790.39 
 4, 625. 21 
 4,460.02 
 4, 294. 84 
 4, 129. 65 
 3.964.46 
 3, 799. 28 
 3.634.09 
 3,468.91 
 3,303.72 
 3, 138. .53 
 2, 973. 35 
 2, 808. 16 
 2,642.98 
 2,477.79 
 2,312.60 
 2, 147. 42 
 1,982.23 
 1,817.05 
 1.651.86 
 1,486.67 
 1,-321.49 
 1, 156. 30 
 991.12 
 825. 93 
 660. 74 
 495. 56 
 330. 37 
 165. 19 
 
 F. 
 
 Amount of 
 $1 a month 
 at end of 
 years shovs^n 
 in column C. 
 
 «1,293.45 
 
 1,237.89 
 
 1,184.22 
 
 1,132.36 
 
 1,082.25 
 
 1,033.84 
 
 987.06 
 
 941. 87 
 
 898. 21 
 
 856. 02 
 
 815. 26 
 
 775. 87 
 
 737. 82 
 
 701.06 
 
 665. 54 
 631. 22 
 598. 06 
 566. 02 
 635. 06 
 505. 16 
 476. 26 
 448. 34 
 421. 36 
 395. .30 
 370. 12 
 345. 79 
 322. 28 
 29H. .■)7 
 277. 63 
 256. 42 
 23.1. 94 
 216. 16 
 197. 02 
 
 178. 55 
 160. 69 
 143. 45 
 126. 78 
 110. 68 
 
 95.12 
 80. 09 
 65.57 
 51.54 
 37.98 
 24.88 
 12.23 
 
 O. 
 
 Monthly 
 deduction 
 from salary 
 
 (E-5-F). 
 
 $5. 747 
 5.871 
 5.998 
 6.127 
 6.258 
 6.391 
 6.527 
 6.664 
 6.805 
 6.947 
 7.092 
 7. 239 
 7.388 
 7.540 
 7.694 
 7.851 
 8.010 
 8.171 
 8. 336 
 8.502 
 8.671 
 8. 842 
 9.017 
 9.193 
 9.372 
 9. 554 
 9.738 
 9. 925 
 10. 115 
 10. 307 
 10. .502 
 10. 699 
 10. 899 
 11. 102 
 11. 308 
 11.515 
 11. 726 
 11.940 
 12. 156 
 12. 375 
 12. 596 
 12.820 
 13. 048 
 13. 278 
 13. 607 
 
 H. 
 
 Monthly 
 deduction 
 from salary 
 adjusted to 
 "nearest 
 tenth of a 
 dollar." 
 
 J5.70 
 5.90 
 6.00 
 6.10 
 6.30 
 6.40 
 6.50 
 6.70 
 6.80 
 6.90 
 7.10 
 7.20 
 7.40 
 7.60 
 7.70 
 7.90 
 8.00 
 8.20 
 8.30 
 8.60 
 8.70 
 8.80 
 9.00 
 9.20 
 9.40 
 9.60 
 9.70 
 9.90 
 10.10 
 10.30 
 10. 50 
 10. 70 
 10.90 
 11.10 
 11.30 
 11.50 
 11.70 
 11.90 
 12.20 
 12.40 
 12.60 
 12.80 
 13.00 
 13.30 
 13.50 
 
KETIEEMENT OF SUPERANNUATED OIVILi-SERVICE EMPLOYEES. 125 
 
 Table XXI. — Shoicing amount required to he deducted from a monthly salary 
 of $100 (per cent of other salaries) to provide an annuity at age 60 equal to 
 li per cent of annual salary for each year of service 
 
 A. 
 
 Age of retire- 
 ment. 
 
 B. 
 
 Age of en- 
 trance into 
 service. 
 
 C. 
 
 Years of 
 service. 
 (A-B). 
 
 D. 
 
 Amount 
 of annu- 
 ity. 
 
 E. 
 
 Cost of 
 
 annuity. 
 
 (DX$10.815.) 
 
 F. 
 
 Amount of 
 $1 a month 
 
 at end of 
 years 
 
 shown in 
 column C. 
 
 G. 
 
 Monthly 
 
 deduction 
 
 from 
 
 salary. 
 
 (E^F.) 
 
 H. 
 
 Monthly 
 deduction 
 from salary 
 adjusted to 
 "nearest 
 tenth of a 
 dollar." 
 
 60 years 
 
 20 years 
 
 21 years 
 
 22 years 
 
 23 years 
 
 24 years 
 
 25 years 
 
 26 years 
 
 30 years 
 
 35 years 
 
 40 years 
 
 45 years 
 
 50 years 
 
 55 years 
 
 59 years 
 
 40 
 39 
 38 
 37 
 36 
 35 
 34 
 30 
 25 
 20 
 15 
 10 
 5 
 1 
 
 $720 
 702 
 684 
 666 
 648 
 630 
 612 
 540 
 450 
 360 
 270 
 180 
 90 
 18 
 
 87,786.80 
 7,592.13 
 7,397.46 
 7, 202. 79 
 7,008.12 
 6,813.45 
 6,618.78 
 5,840.10 
 4, 866. 75 
 3, 893. 40 
 2,920.05 
 1, 946. 70 
 973.35 
 194.67 
 
 11,033.84 
 987. 06 
 941.87 
 898. 21 
 856. 02 
 815. 26 
 775. 87 
 631. 22 
 476. 26 
 345. 79 
 235. 94 
 143. 45 
 65.57 
 12.23 
 
 $7. 532 
 7.692 
 7.854 
 8.019 
 8.187 
 8.357 
 8.531 
 9.252 
 10.219 
 11. 259 
 12. 376 
 13. 570 
 14.844 
 15.917 
 
 87.50 
 
 60 years 
 
 7.70 
 
 60 years 
 
 7.90 
 
 60 years 
 
 8.00 
 
 60 years 
 
 8.20 
 
 60 years 
 
 8.40 
 
 60 years 
 
 «.50 
 
 60 years 
 
 9.30 
 
 60 years 
 
 10.20 
 
 60 years 
 
 11.30 
 
 60 years 
 
 12.40 
 
 60 years 
 
 13.60 
 
 60 years 
 
 14.90 
 
 60 years 
 
 15.90 
 
 
 
 PERCENTAGE OF SALARY DEDUCTED VARIES WITH ENTRANCE AGE, BUT NOT 
 
 WITH SALARY. 
 
 It will be seen that for the younger ages, when retirement at age 
 70 is contemplated, less than 5 per cent of salary — ^the percentage 
 most often suggested in the schemes proposing a uniform rate of 
 deduction from salaries — will be suflScient, but for the older ages 
 more than 5 per cent will be necessary. Those entering the service 
 late in life and having but a short period of accumulation must set 
 aside a larger sum each month in proportion to their salaries than 
 those entering early, who have a longer period of accumulation. 
 This puts a premium on the early entrance ages, which is as it should 
 be. On the other hand, it is wholly fair to the elderly person who 
 enters the service, the deductions from his salary being in no case 
 excessive, his savings being accumulated for him at compound in- 
 terest and some provision thus assured him for his old age. It is 
 important to remember, too, that after the age of 70 the accumula- 
 tions increase very rapidly, and that the price of the annuity, on 
 the other hand, decreases very fast, so that an employee who entered 
 the service late in life and would have a very small annuity to his 
 credit at 70, by remaining a few years after reaching that age, under 
 the provisions of the bill (see sec. 4, p. 211), would retire on a 
 very comfortable annuity. For instance, as is shown by Table XXII, 
 an employee entering the service at age 50, on a salary of $100 a 
 month would, on reaching the age of 70, have to his credit $2,734, 
 which would then buy him an annuity of but $360 a year. By re- 
 maining in the service until he reached the age of 75 his accumula- 
 tions would have increased to $3,903, which would then purchase an 
 
126 RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 annuity of $637 a year. The number of those entering so late in life 
 is naturally not great and is confined largely to those whose work — 
 that of watchman or messenger — is light enough to permit its con- 
 tinuance late in life. 
 
 Table XXII. — Slioiving amount of cash accumulation at the end of various years 
 of service payable to employee on resignation or to Ms legal heirs in case of 
 death; and life annuity that may he granted an resignation in lieu of cash. 
 
 
 Age on entrance into service and montlily deduction required from a salary of 
 $100 (retirement age, 70). 
 
 Reliretnent at end 
 of years. 
 
 20-.$4 
 
 .267. 
 
 25—34.756. 
 
 30— $5,289. 
 
 35— $5,869. 
 
 
 Cash. 
 
 Annuity. 
 
 Casli. 
 
 Annuity. 
 
 Cash. 
 
 Annuity. 
 
 Cash. 
 
 Annuity. 
 
 6 
 
 $342 
 
 406 
 
 472 
 
 541 
 
 612 
 
 686 
 
 7(i2 
 
 841 
 
 922 
 
 1 , (107 
 
 1,094 
 
 1JS5 
 
 1,278 
 
 1 , 375 
 
 1,475 
 
 1,579 
 
 1,087 
 
 1,798 
 
 1,913 
 
 2,032 
 
 2, 156 
 
 2,283 
 
 2,415 
 
 2,5.52 
 
 2, 693 
 
 2, 840 
 
 2,991 
 
 3,148 
 
 3,311 
 
 3,479 
 
 3,653 
 3,8.33 
 4,019 
 4,212 
 4,411 
 
 4,618 
 4,832 
 5,053 
 5,282 
 5,519 
 
 5,764 
 6,018 
 6, 281 
 6, .553 
 6,835 
 
 0) 
 
 (•) 
 (') 
 (') 
 (') 
 (' 
 (' 
 
 (') 
 
 (0 
 
 (') 
 
 0) 
 $87 
 95 
 103 
 112 
 121 
 131 
 142 
 153 
 165 
 178 
 192 
 207 
 223 
 240 
 259 
 279 
 
 301 
 325 
 350 
 378 
 408 
 
 440 
 
 476 
 514 
 556 
 601 
 
 651 
 
 705 
 706 
 829 
 900 
 
 J381 
 
 452 
 
 526 
 
 603 
 
 682 
 
 764 
 
 849 
 
 937 
 
 1,028 
 
 1,122 
 
 1,220 
 
 1,320 
 
 1,425 
 
 1,533 
 
 1,645 
 
 1,760 
 
 1,880 
 
 2,004 
 
 2,132 
 
 2,205 
 
 2,403 
 
 2,545 
 
 2, 692 
 
 2,844 
 
 3,002 
 
 3,165 
 
 3,334 
 
 3,509 
 
 3,690 
 
 3,877 
 
 4,071 
 
 4,272 
 4, 480 
 4, 694 
 4,917 
 
 5,147 
 5,3S5 
 5,632 
 5,887 
 6,152 
 
 0) 
 
 (') 
 
 S 
 lii 
 
 a 
 
 (') 
 (') 
 
 S106 
 116 
 126 
 137 
 149 
 161 
 175 
 190 
 200 
 223 
 241 
 261 
 283 
 306 
 331 
 358 
 
 388 
 421 
 456 
 494 
 536 
 
 581 
 631 
 685 
 745 
 810 
 
 ,■5424 
 503 
 585 
 671 
 759 
 850 
 944 
 1,042 
 1,143 
 1,248 
 1,356 
 1,408 
 1,584 
 1,705 
 1,829 
 1,958 
 2,091 
 2,229 
 2,371 
 2,519 
 2, 672 
 2,830 
 2,994 
 3,163 
 3,339 
 3,520 
 3,708 
 3,902 
 4,104 
 4,312 
 
 4,527 
 4,751 
 4, 982 
 5,221 
 5,468 
 
 ?! 
 
 (') 
 (') 
 (') 
 (') 
 
 ?! 
 
 $130 
 143 
 156 
 170 
 186 
 202 
 220 
 240 
 261 
 284 
 309 
 336 
 365 
 397 
 432 
 470 
 
 511 
 
 557 
 606 
 661 
 720 
 
 $470 
 558 
 650 
 744 
 842 
 943 
 1,048 
 1,156 
 1,269 
 1,385 
 1,505 
 1,629 
 1,758 
 1,891 
 2,029 
 2,172 
 2,320 
 2,473 
 2,631 
 2,795 
 2,965 
 3,140 
 3,322 
 3,510 
 3,705 
 3,906 
 4,115 
 4,330 
 4,554 
 4,785 
 
 ?! 
 
 7 
 
 8 
 
 
 9 
 
 (M 
 
 10 
 
 (') 
 
 11 
 
 (') 
 
 12 
 
 (') 
 
 13 
 
 (1) 
 
 14 
 
 (1) 
 
 15 
 
 (n 
 
 16 
 
 (ii 
 
 17 
 
 (1) 
 
 18 
 
 (') 
 
 19 
 
 (') 
 
 20 
 
 $163 
 
 21 
 
 179 
 
 22 
 
 197 
 
 23 
 
 216 
 
 24 
 
 236 
 
 25 
 
 258 
 
 26 
 
 27 
 
 283 
 309 
 
 28 
 
 338 
 
 29 
 
 369 
 
 30 . 
 
 404 
 
 31 
 
 441 
 
 32 
 
 482 
 
 33 
 
 527 
 
 34 
 
 576 
 
 35 
 
 630 
 
 
 
 36 
 
 6,075 
 
 5,374 
 6,6S5 
 6.006 
 6,339 
 
 696 
 
 37 
 
 769 
 
 38 
 
 849 
 
 39 
 
 937 
 
 
 1,034 
 
 
 
 
 5,782 
 6,106 
 6,442 
 6, 790 
 7,150 
 
 793 
 873 
 
 9f;2 
 
 1,059 
 1,107 
 
 
 
 
 
 
 
 
 44 
 
 
 
 
 
 
 
 
 
 
 6,490 
 6,844 
 7,201 
 7,575 
 7,962 
 
 890 
 
 979 
 
 1,075 
 
 1,182 
 
 1,299 
 
 
 
 :::::::::. 
 
 
 
 
 
 
 
 
 49 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 7,197 
 7,570 
 7, 958 
 8,359 
 
 987 
 1,083 
 1,]S8 
 1,304 
 
 
 52 
 
 
 
 
 
 
 
 
 
 
 
 
 
 64 
 
 
 
 
 . 
 
 
 
 
 
 
 
 
 1 Section 7 of Ilrrnso bill No. 2201 :? provides tliat on IcnvinK the service prior to tlie age 
 of retiroiiK'nt an annuity will not be granted unless the cash to the employee's credit 
 amounts to at Uuist $1,000. 
 
EETIEEMENT OF SUPERANNUATED CIVIL-SEEVICE EMPLOYEES. 127 
 
 Table XXII. — Showing amount of ca.^h accumulation at the end of various years 
 of service payable to employee on resignation, etc. — Continued. 
 
 
 Age on 
 
 entrance Into service and monthly deduction required from a salary of 
 SlOO (retirement age, 70). 
 
 Retirement at ead 
 of years. 
 
 40— S 
 
 i.497. 
 
 45— ?7.176. 
 
 50— $7,907. 
 
 55-$8.691. 
 
 60-89.530. 
 
 
 Cash. 
 
 Annu- 
 ity. 
 
 Cash. 
 
 Annu- 
 ity. 
 
 Cash. 
 
 Annu- 
 ity. 
 
 Cash. 
 
 Aeau- 
 ity. 
 
 Cash. 
 
 Annu- 
 ity. 
 
 6 
 
 So20 
 filS 
 719 
 824 
 932 
 
 1,014 
 1,100 
 1,2S0 
 1,404 
 1,533 
 
 1,666 
 1,804 
 1,946 
 2,094 
 2,247 
 
 2,405 
 2,568 
 2,738 
 2,913 
 3,094 
 
 3,282 
 3,476 
 3,677 
 3,886 
 4,101 
 
 0) 
 
 (') 
 
 (' 
 
 (' 
 
 (') 
 
 (') 
 (') 
 ') 
 
 8 
 ?! 
 
 $208 
 
 229 
 253 
 279 
 307 
 337 
 
 371 
 
 407 
 447 
 492 
 540 
 
 $575 
 
 683 
 
 794 
 
 910 
 
 1,029 
 
 1,153 
 1,281 
 1,414 
 1,551 
 1,693 
 
 1,840 
 1,992 
 2,150 
 2,313 
 2,481 
 
 2,656 
 2,837 
 3,024 
 3,217 
 3,418 
 
 (') 
 (') 
 
 ('^ 
 0) 
 (') 
 
 ('^ 
 (') 
 
 ^) 
 ^') 
 
 v) 
 (1) 
 
 (') 
 
 S270 
 
 300 
 332 
 
 3GS 
 407 
 450 
 
 $033 
 
 752 
 
 875 
 
 1,002 
 
 1,134 
 
 1,271 
 1,412 
 1,558 
 1,709 
 1,806 
 
 2,028 
 2,195 
 2,309 
 2,548 
 2,734 
 
 0) 
 
 0) 
 
 !!! 
 
 (') 
 
 ii| 
 
 (') 
 (') 
 
 (') 
 (') 
 
 (' 
 (0 
 
 $360 
 
 $696 
 
 827 
 
 962 
 
 1,102 
 
 1,247 
 
 1,397 
 1,552 
 1,712 
 1,879 
 2,051 
 
 0) 
 
 0) 
 (') 
 
 s 
 
 (') 
 (') 
 (') 
 (') 
 
 $270 
 
 $763 
 906 
 1,055 
 1,212 
 1,367 
 
 (') 
 (') 
 (') 
 (') 
 $180 
 
 7 
 
 8 
 
 9 
 
 10 
 
 
 
 11 
 
 1,537 
 1,713 
 1.895 
 2,084 
 2,279 
 
 211 
 
 12 
 
 245 
 
 13 
 
 283 
 
 14 
 
 325 
 
 15 
 
 372 
 
 
 
 16 
 
 2,245 
 2,446 
 2,654 
 2,869 
 3,092 
 
 308 
 350 
 396 
 448 
 505 
 
 
 17 
 
 
 
 18 
 
 
 
 19 
 
 
 
 20 
 
 
 
 
 
 
 21 
 
 2,952 
 3,177 
 3,411 
 3, 653 
 3,903 
 
 405 
 454 
 509 
 570 
 637 
 
 
 22 
 
 
 
 
 
 23 
 
 
 
 
 
 24 
 
 
 
 
 
 25 
 
 
 
 
 
 
 
 
 
 
 
 3,660 
 3,910 
 
 4, 169 
 4,438 
 4,715 
 
 502 
 559 
 622 
 692 
 769 
 
 
 27 
 
 
 
 
 
 
 
 28 
 
 
 
 
 
 
 
 29 
 
 
 
 
 
 
 
 30 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 31 
 
 4,307 
 4,642 
 4,927 
 5,221 
 5,526 
 
 599 
 664 
 736 
 815 
 902 
 
 
 32 
 
 
 
 
 
 
 
 
 
 33 
 
 
 
 
 
 
 
 
 
 34 
 
 
 
 
 
 
 
 
 35 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 •Section 7 of House bill No. 22013 provides that on leaving the service prior to the age of retirement an 
 annuity will not be granted unless the cash to the employee's credit amounts to at least $1,000. 
 
 AMOUNT OF DEDUCTION FROM SALARY VARIES ONLY WITH CHANGE IN 
 
 SALARY. 
 
 The bill provides that deductions shall be varied to correspond to 
 any change in the salary of the employee. It is apparent, of course, 
 that if this were not done the annuities would not amount to 1^ per 
 cent of salary for each year of service in cases where there had been 
 changes in salary during the years of service. The deduction from 
 salary in cases of promotion is computed on the salary increase at 
 the attained age — that is, the age of the employee when the promo- 
 tion takes place. In other words, the promoted employee is regarded 
 as a new entrant to the extent of his increase in salary. Table 
 XXIII shows how deductions from salaries may be adjusted to 
 correspond to promotions. 
 
128 RETTEEMENT OF SUPEKANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 Table XXIII. — Shoifing how deductions from salaries may he adjusted to cor- 
 respond to promotions. 
 
 Monthly 
 deduc- 
 
 tior, from 
 salary. 
 
 Deductions 
 plus inter- 
 est at age of 
 retirement. 
 
 A entered service at age 20 at salary of $900 a year, or $75 a month. Deduction re- 
 quired at age 20 is 4.267 per cent of salary . 4.267 X $75 
 
 At age 22 his salary was increased to $1,000 a year, or $83.33 a month. Increase in 
 salary, $100 a year, or $8.33 a month. Deduction required at age 22 is 4.45S per 
 cent of salary increase. 4.458X$8.33 
 
 Deduction thereafter 
 
 At age 25 his salary was increased to $1,200 a year, or $100 a month. Increase in 
 salary, $200 a year, or $16.66 a month. Deduction required at age 25 is 4.756 per 
 cent of salary increase. 4.756X$16.66 
 
 Deduction thereafter 
 
 At age 32 his salary was increased to $1,400 a year, or $116.66 a month. Increase in 
 salary. $200 a year, or $16.66 a month. Deduction required at age 32 is 5.516 per 
 cent of salary increase. 5.516X$16. 66. ■ 
 
 Deduction thereafter 
 
 At age 35 his salary was increased to $1,600 a year, or $133.33 a month. Increase in 
 salary, $200 a year, or $16.66 a month. Deduction required at age 35 is 5.869 per 
 cent 01 salary increase. 5.809X$16.66 
 
 Deduction thereafter 
 
 At age 38 his salary was increased to $1,800 a year, or $150 a month. Increase in 
 salary, $200 a year, or $16.66 a month. Deduction required at age 38 is 6.240 per 
 cent of salary increase. 6.240X$16.66 
 
 Deduction thereafter. 
 
 1'otal . 
 
 $3.20 
 .37 
 
 3.57 
 .79 
 
 4.36 
 
 .92 
 
 5.28 
 
 6.26 
 1.04 
 
 7.30 
 
 $5, 125. 70 
 544.66 
 
 1,021.83 
 
 866.62 
 
 798.95 
 
 729. 10 
 
 9,086.76 
 
 Summary, 
 
 2 years at 
 
 3 years at 
 7 years at 
 3 years at 
 3 years at 
 
 32 years at 
 
 $900 = $1, 800 
 1,000= 3,000 
 1,200= 8,400 
 1,400= 4,200 
 1,600= 4,800 
 1, 800 = 57, 600 
 
 50 years' service = 79, 800 X 11 per cent = $1,197 = annuity required. 
 
 $1,197X$7.595 (value of an annuity of $1 at age 70) =$9,091.21. 
 Amount to credit of employee on retirement at age 70=$9,086.76. 
 
 Note. — The difference of $4.45 between the value of the annuity ($9,091.21) and the 
 amount to the credit of the employee at retirement ($9,086.76) is due to the omission of 
 decimals from the monthly deductions at the various ages. 
 
 Those already in the service at the time the plan goes into effect 
 must be regarded as new entrants and the amount of their deduc- 
 tions from salary computed on the basis of their age at that time. 
 
 As an illustration of how the plan will work in the case of an em- 
 ployee who has been in the service some time when the law goes into 
 effect, take the case of an employee 40 years of age, who has been in 
 the service 15 years at the time of the enactment of this plan into 
 law. He would on retirement 30 years hence be entitled to receive 
 an annuity from the Government of 1| per cent of his total compen- 
 sation for service up to the passage of such a law, or 22.5 per cent of 
 his average annual salary during that time, plus the amount of his 
 own savings from the time the law went into effect until his retire- 
 
RETIEEMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 129 
 
 ment, after 30 years, at the age of 70. Suppose that this employee 
 receives a salary of $1,200 per annum throughout the whole term of 
 his service. On retiring at the age of 70 he would be entitled to an 
 annuity of $810 for the remainder of his life, $270 from the Gov- 
 ernment, as 1^ per cent of his total compensation during the 15 years 
 he served prior to the passage of the retirement law, and $540 as an 
 annuity from his own savings — that is, 1^ per cent of his salary for 
 every year of service after the passage of the law. The annuity from 
 the Government (the $270) would have no cash-surrender value. It 
 could be taken only as an annuity, never in a lump sum, and could 
 only be obtained in case the employee remained in the service until 
 he reached the retirement age. The $540, on the other hand, which 
 represents his own savings, plus interest, could be converted into the 
 cash sum necessary to buy that annuity, $4,101.30. The employee 
 could always, on leaving the service, withdraw his own money, but 
 the contribution by the Government for services rendered prior to 
 the passage of this act must always be taken in the form of an an- 
 nuity. 
 
 AVERAGE RATE OF DEDUCTION FROM SALARY ONLY 5 PER CENT. 
 
 Some criticism has been brought against this plan by employees 
 now old in the service, who will have to be regarded as new entrants, 
 on the ground that the rates of deduction for them are excessive. 
 This criticism seems to be liased on incomplete understanding of the 
 situation. 
 
 The percentage of salary deducted, to provide for retirement at 
 age 70, it will be seen by reference to Table XIX, ranges from 4.3 
 in the case of those 20 years old at the time of entrance into the 
 service or at the time of the passage of the bill to 11.2 in the case of 
 those 69 years old at such time. While a deduction of 11.2 per cent 
 from salary seems, at first glance, to be high, the return made by the 
 Government for such contribution is so generous that the employee 
 has no just cause for complaint. The deduction would only be made 
 for one year. On a salary of $1,200 that would be $11.20 a month, 
 or $134.40 for the year. At the end of that time the employee would 
 be retired, under Senate bill 1944, on an annuity of $540 a year if 
 he had been in the service 30 years, an annuity of $720 if he had been 
 in the service 40 years, of $900 if he had been in the service 50 years, 
 and so on. In other words, in consideration of his saving $134.40 for 
 one year, the Government would pay him 401.8 per cent a year on 
 that saving for the rest of his life, provided he had been 30 years 
 in the service; 635.7 per cent a year if he had been employed 40 years; 
 or 669.6 per cent if 50 years. It would be hard to find, at age 69, 
 a better investment for twelve monthly installments of $11.20 each. 
 If the employee should happen to die during the year before reaching 
 74196°— S. Doc. 745, 61-3 9 
 
130 RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 the age of retirement, the full amount he had contributed, plus in- 
 terest, would be returned to his family. If he lived to the age of 
 retirement he could, if he preferred, draw his contribution for the 
 one year ($134.40) in cash, but the Government's payment to him for 
 the other 29, 39, or 49 years would be paid, under Part II of the pro- 
 posed plan, only in the form of an annuity. In any possible event, 
 he would be well repaid for being compelled to save $11.20 a month 
 for 12 months. 
 
 Comparatively few of the employees are 69 years of age. The 
 great majority are under 40 years of age. Between the ages of 20 
 and 40 the rate of deduction from salary ranges from 4.3 to 6.5 per 
 cent, or on a salary of $1,200 from $4.30 to $6.50 a month. As the 
 average age of entrance into the service is about 27 years and the 
 rate of deduction at that age is an even 5 per cent, the average amount 
 deducted from salaries, once the plan were in full operation, would 
 be 5 per cent. 
 
 ADVANTAGE TO THE SERVICE OF INCREASING DEDUCTION WITH INCREASE 
 
 or ENTRANCE AGE. 
 
 The fact that the percentage of deductions from salary increases 
 with the age of entrance into the service works out greatly to the 
 good of the service, since it offers more encouragement to the young 
 than it does to the old to enter the service. Two individuals enter- 
 ing the employ of the Government, one at the age of 20 and the other 
 at the age of 60, on salaries of $100 a month, would be required to set 
 aside, respectively, 4.3 per cent of salary and 9.5 per cent. It 
 amounts, therefore, to this: That the younger employee would re- 
 ceive $95.70 a month, while the older one would receive $90.50, a fact 
 that would have a tendency to discourage the elderly from entering 
 the service. The advantage of this is seen when contrasted with the 
 effect on the service of any form of civil pension which would retire 
 all employees after 10 years or some other period of service. Good 
 places in the business world are likely to become increasingly difficult 
 to secure at advanced ages. The promise of a pension would, there- 
 fore, make the Government service look very attractive to those 
 superannuated unfortunates who had not been able to place them- 
 selves well in life, and the average age of applicants for civil-service 
 positions would without doubt be much higher than it is now. 
 
CHAPTER in. 
 
 MINOR PEOVISIONS OF THE PROPOSED BILL. 
 
 Having considered the mathematical basis of the proposed plan 
 of retiring civil employees of the Government, it is next in order 
 to take up some of the minor provisions of the bill. While these 
 do not vitally affect the essential features of the plan, they are im- 
 portant as adding to its equitableness and attractiveness. 
 
 PROVISIONS FOR SEPARATION FROM SERVICE. 
 
 It is right that a measure intended primarily for the improvement 
 of the public service should contain some provision for the removal, 
 not only of those who are superannuated, but also of those who have 
 become disabled through illness or accident. It is also right, from 
 the standpoint of humanity, that some cognizance should be taken 
 of the condition in which death or dismissal from the service may 
 find the employee. Not the least merit of a savings plan of retire- 
 ment, as opposed to any form of civil pension, is the fact that it 
 permits of an extension of its benefits automatically and with justice, 
 to both the individual and the Government, to all cases in which 
 separation from the service occurs. 
 
 There are five ways in which an individual may be separated from 
 the civil service. These may be listed as follows: 
 
 (1) By retirement because of old age. 
 
 (2) By resignation. 
 
 (3) By dismissal. 
 
 (4) By death. 
 
 (5) By retirement because of disability. 
 
 Retirement Because of Old Age. 
 
 How the retirement of the superannuated is to be effected has been 
 explained in the first part of this discussion under the head of 
 "Mathematical basis of the proposed plan." Besides section 1 of 
 the bill, which contains the statement of the foundation of the pro- 
 posed measure, sections 3, 4, 5, and 6 contain provisions regarding 
 the retirement of the superannuated which will now be considered. 
 
 131 
 
132 EETIEEMENT OF SUPERANNUATED CIVIL.-SEE.VICE EMPLOYEES. 
 
 AGKS OF RETIREMENT ACCORDING TO SEVERITY OF OCCUPATION. 
 
 Section 3 reads as follows: 
 
 " Sec. 3. That the retirement age herein referred to shall be sixty -five years 
 for group one, sixty-five years for group tvpo, and seventy years for group three. 
 And the I'resident of the United States shall designate the branches of the 
 service to be included in each group." 
 
 While it is felt that the age of retirement for clerks generally 
 shoul(i be 70 years, it was not thought just to consider all of them 
 in one class together, since those engaged in the more arduous kinds 
 of employment might naturally be expected to become superannuated 
 earlier than others employed at lighter tasks. The powers of the 
 mind ordinarily outlast those of the body, and an aged person 
 engaged in mental work, whether as a judge of the Supreme Court, 
 a Senator in Congress, oi a petty clerk in the executive depart- 
 ments remains a useful member of society much longer than do those 
 whose labors depend upon their physical activities. 
 
 The employees coming within the scope of the bill whose duties 
 make most severe demands upon their physical endurance are the 
 railway postal clerks, A large part of their work is performed 
 during the night in light railway cars on swiftly moving trains under 
 considerable physical and mental strain. The employees whose phys- 
 ical powers are taxed most heavily after the railway postal clerks are 
 the letter carriers. Abroad in all kinds of weather and burdened 
 with a heavy pack, their work is certainly more exhausting physically 
 than that of the majority of Government clerks. With these facts 
 in mind, the civil-service employees have been divided into three 
 groups. In Group I are the railway postal clerks, for whom retire- 
 ment is proposed at the age of 65. A clause in section 11 of the bill 
 also provides that employees of Group I may receive the annuity at 
 the age of 60 if they so desire. In Group II are letter carriers, for 
 whom retirement is proposed at the age of 65. In Group III are all 
 the other departmental clerks, and retirement is proposed for them at 
 the age of 70. 
 
 In view of the difference in the value of annuities for employees 
 retiring at different ages, it was necessary to compute the cost of 
 annuities for these three groups of employees separately. Their 
 records should also be kept in three separate groups, so that the 
 mortality and disability statistics based on them in years to come 
 will tell a more accurate story than if the history of the three groups 
 is consolidated. 
 
 MODES OF PROCEDURE FOE RETIREMENT. 
 
 The action to be taken on the arrival of each employee at the age 
 of retirement, whatever that age may be, in order to put into effect 
 
RETIREMENT OP SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 133 
 
 the provisions of the plan, is stated in section 4 of the bill, which 
 reads as follows: 
 
 Sec. 4. That if within thirty days before the arrival of an employee at the 
 age of retirement, the head of the department or independent office in which 
 he is employed certifies to the Secretary of the Treasury that by reason of his 
 efficiency and his willingness to remain in the service the continuance of such 
 employee therein would be advantageous to the public service, such employee 
 may be retained for a term not exceeding two years; and at the end of the 
 two years he may by similar certification be continued for an additional term of 
 two years, and so on. Upon the failure of the head of the department or 
 independent office to make the above-described certificate it shall be the duty 
 of the Secretary of the Treasury to place such employee upon the retired list 
 in accordance with the provisions of this act. 
 
 This provision shows that the plan does not contemplate the arbi- 
 trary retirement of all who reach the age of 70. It would, in many 
 cases, be a real loss to the nation to force into retirement men engaged 
 in work which they are still able to perform efficiently and which is 
 of benefit to the public. This would be particularly true of scien- 
 tists and economists engaged in research work. This provision 
 allows them to continue their work beyond the age of 70 if they de- 
 sire to do so and their services are recognized as valuable. The pro- 
 vision is also of benefit to the efficient clerk entering the service late 
 in life who would prefer to remain at work a few years beyond the 
 age of 70, because he would then be able to retire on a much larger 
 annuity than if he retired at the age of 70, since the annuity not 
 only costs less at the older age, but each year that he remains gives 
 him a larger retirement fund from his savings, plus interest. With 
 the exception of persons who come into the departments by prefer- 
 ment on account of military service, it is generally true, of course, 
 that clerks who enter late in life are admitted by reason of their 
 special qualifications in some particular work, and their continuance 
 in the service past the ordinary age of retirement is not open to the 
 usual objections on the score of advanced age. 
 
 It is highly desirable, however, that there be a fixed age of retire- 
 ment at which the routine clerk can, without injustice, be forced out 
 of the service. The history of superannuation measures in England 
 shows how important the officials of the civil service in that country 
 have considered a compulsory age of retirement. The Ridley Com- 
 mission, in England, in 1888, recommended 65 as the proper age, and 
 then said : 
 
 There should be no exception to this rule, except in the case of certain 
 scheduled offices, in which the officer, if asked by the Government to do so, might 
 be allowed to extend his services for a further period, never exceeding five 
 years.^ 
 
 1 See Second Report of Commission on Civil Establisliments. 1888. p. XXIII. 
 
134 EETTREMENT OF SUPERANNUATED CIVIL-SEEVICE EMPLOYEES. 
 
 A Treasury official who was most vigorous in urging the necessity 
 for compulsory retirement at a given age was Mr. Frank Mowatt. 
 It was about the only reform that he had advocated before the Ridley 
 Commission, being adverse in general to making changes in the exist- 
 ing system. So convinced, however, was he of the wisdom of a 
 compulsory retirement age that he would not even admit that the re- 
 tention in office of exceptional men after they had reached that age 
 was advisable. An interesting sequel to this statement is the fact that 
 when the Boer War broke out and he, as Sir Francis Mowatt, was 
 serving as Secretary to the Treasury, it was not considered wise at 
 that critical time to make a change in Treasury officials, and he was 
 accordingly retained for a year beyond the compulsory retirement 
 age by special order in council. 
 
 It was not until November 29, 1898, that the recommendation of 
 the Ridley Commission and other commissions as to the compulsory 
 retirement age was put into effect by an order in council. The power 
 of retention, in special circumstances, for a period not exceeding 
 five years, is lodged with the treasury, but when the superannuation 
 act of 1909 was passed as a measure intended to modify and reform 
 the civil pension system a clause was included in the act providing for 
 reduction of the pension in case of such retention, which was evidently 
 intended as a discouragement to the exercise of such power. The case 
 of Sir Francis Mowatt shows, however, that the law should make the 
 retention of exceptional employees at least possible, though difficult 
 and unusual. 
 
 It has been the policy of the Government to show preference for 
 war veterans in the matter of appointment to office. A similar 
 preference in the matter of their retirement from office would un- 
 doubtedly be urged were a retirement plan to be adopted. In the 
 last annual report (1910) of the Hon. M. O. Chance, former Auditor 
 for the Post Office Department, occurs the following paragraph, 
 which is well worthy of consideration in connection with this bill : 
 
 For these reasons cliiefly I most heartily indorse the plan embodied in 
 Senate bill 1944. It should be modified, however, in my judgment, so as to 
 show war veterans a similar preference in the matter of retirement to that 
 shown in appointment. Of the 711 employees of this office, 48 — 6.75 per cent — are 
 veterans of the Civil War. Some have been in the civil service many years, 
 while others have been appointed quite recently. It would seem desirable in 
 cases where they have been in the civil service too short a period of time to 
 be entitled under the terms of the bill to receive an adequate annuity from 
 the Government, that the bill should be amended so as to give them a retiring 
 allowance of not less than half pay. I recommend, therefore, that the Treasury 
 Department urge the passage of the bill referred to, with the following amend- 
 ment: 
 
 On page 11, line 21, after the word " act," insert the following : 
 Provided, however, That such annuity to any employee who served ninety 
 days or more in the military or naval service of the United States during the 
 
RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 135 
 
 late Civil War, or sixty days in the war with Mexico, and who has been honor- 
 ably discharged therefrom, shall, including the annuity herein provided for 
 by his own contributions from his salary, be not less than fifty per centum of 
 his average annual compensation during his entire period of employment in 
 the civil service. 
 
 CONTINUANCE IN SERVICE AFTER EETIEEMENT AGE. 
 
 For the benefit of those employees retained in the service after the 
 age of retirement section 5 was introduced into the bill. It reads as 
 follows : 
 
 Sec 5. That if an employee is retained in the service after reaching the re- 
 tirement age a deduction of ten per centum of his monthly salary, pay, or com- 
 pensation shall thereafter be made while he remains in the service, and the same 
 shall be treated as other deductions under section two of this act. 
 
 The purpose of deducting 10 per cent from the salaries of persons 
 who remain in the service after reaching the age of retirement is to 
 increase as rapidly as possible the amount to their credit. Those 
 who desire to remain after the age of retirement will, in most cases, 
 be persons who entered the service late in life, and who, therefore, 
 have not had time to accumulate a sum sufficient to buy them a de- 
 sirable annuity. Five years longer in the service, with a 10 per cent 
 deduction from salary during that period, would almost double the 
 annuity the employee's money would buy (see p. 127). 
 
 VARIOUS OPTIONS ON EETIEEMENT. 
 
 Section 6 details the various options which the employee has of 
 withdrawing his savings on retirement and reads as follows : 
 
 Sec 6. That upon retiring at the age of retirement or thereafter the employee 
 may withdraw his savings, with the increment of interest as herein provided, 
 under one of the following options ; and, if Option I or Option II is selected, re- 
 ceive in addition thereto such annuity, if any, as may be apportioned by the 
 Secretary of the Treasury out of accumulations in excess of three and one-half 
 per centum guaranteed by the provisions of this act, and such apportionment 
 by the Secretary of the Treasury shall be conclusive: 
 
 Option I. In an annuity payable quarterly throughout life. 
 
 Option II. In an annuity payable quarterly throughout life, with the pro- 
 vision that in case of the death of the annuitant before he has received in an- 
 nuities the amount of his savings, plus the interest credited thereon, the balance 
 shaU be paid to his legal heirs. In determining at his death the amount due to 
 his heirs no account shall be taken of the annuities paid to him by the United 
 States under section eleven of this act. 
 
 Option III. In one sum. 
 
 If after retirement the employee does not avail himself of one of the foregoing 
 options, but leaves the amount due him on deposit, interest at the rate of two 
 per centum per annum on the original sum so left on deposit on retirement shall 
 be credited thereto for a period not exceeding twenty years, and if not then 
 withdrawn the money so left on deposit, without interest, shall be covered into 
 the Treasury as a miscellaneous receipt. 
 
136 RETIREMENT OP SUPEBAlirNUATED CIVIL-SERVICE EMPLOYEES. 
 
 The advantages of these various options have been discussed on 
 page 108, under the caption of " Two forms of annuities." The 
 second part of the section makes provision for the disposal of savings 
 not withdrawn by the employee on retirement. 
 
 Retirement Because of Resignation, Dismissal, or Death. 
 
 Section 7 of the bill contains the provisions, under the plan, for 
 the return of an employee's savings, in case of his separation from 
 the service before reaching the age of retirement, by reason of his 
 resignation, dismissal, or death. It reads as follows : 
 
 P^c. 7. That upon absolute separation from the civil service prior to the re- 
 tirement age, and only upon such separation, the employee may withdraw his 
 savings in one sum, and in case he has been in such service not less than six 
 years he may also receive in addition thereto interest on his savings at the 
 rate of three and one-half per centum per annum, compounded annually ; or, in 
 case his savings amount to at least one thousand dollars he may withdraw the 
 same under any one of the foregoing options, computed on the basis of his 
 attained age. In case of the death of an employee while in the service the 
 amount of his savings, together with the interest credited thereon, shall be 
 paid to his legal heirs. 
 
 In Case of Resignation. 
 
 Under the proposed savings plan the employee who leaves the serv- 
 ice to engage in some other occupation will not go penniless to his 
 new work. If nothing else, he will have at least the amount of his 
 enforced savings while in the Government service. This will be 
 returned to him, since the Government claims no right to compel him 
 to lay it aside except with the understanding that it shall be paid 
 back to him on his absolute separation from the service, whether at 
 the age of retirement or earlier. 
 
 interest allowed on savings after six years' service. 
 
 The question whether interest should be paid on these savings in 
 case the employee leaves the service before reaching the age of retire- 
 ment is one that has received considerable attention. Some are in- 
 clined to believe that no interest should be paid on the savings of 
 those employees who remain only a short time in the service, since 
 those who do so usually regard the service as merely a means to an 
 end. With this class of employees in mind, section 7 was made to 
 provide that interest on savings should only be allowed an employee 
 who leaves the service through resignation or dismissal after he has 
 been in the service at least six years. The loss of interest to the indi- 
 vidual who has been in the service less than six years is small in every 
 case — not sufficient to affect the rate of resignations one way or the 
 other. A $1,200 employee aged 25 on entrance into the service would 
 have $314.74 to his credit after being in the service five years, of 
 
RETIREMENT OP SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 137 
 
 which $288 would represent his own contributions. If he resigned 
 after five years, he would forfeit the difference between $314.74 and 
 $288, or $26.74, the amount of interest contributed by the Govern- 
 ment. The sum of $26.74 is certainly not sufficient to hold in the 
 service an employee who has reasons for wishing to resign. 
 
 On the other hand, the forfeiture of that small amount of interest 
 would amount in the aggregate to a considerable sum returned to the 
 Government, which would ultimately be divided among the clerks 
 that remained in the service and took annuities on retirement, and 
 thus be an additional safeguard in guaranteeing the interest rate. 
 
 It has been suggested that interest might be withheld in all cases 
 except where the employee has been in the service for an extended 
 period, such as 20 years or more. It is said that such a forfeiture of 
 interest might have a tendency to hold employees in office longer than 
 if there were no penalty attached to resigning. The practical objec- 
 tion to such a proposal is that the interest after 19 years amounts to 
 a very considerable sum. The employee mentioned above as forfeit- 
 ing $26.74, if he left after five years, would forfeit $449 of the $1,533 
 to his credit if he left at the end of 19 years. The result would be 
 a mild form of peonage, at best a kind of coercion difficult to defend 
 in the case of enforced savings. 
 
 ANNUITY ON SEPARATION FROM SERVICE BEFORE AGE OF RETIREMENT IN CASE 
 SAVINGS AMOUNT TO $1,000. 
 
 The clause providing that an employee, on retiring from the service 
 before reaching the age of retirement, may, if he so desires, withdraw 
 his savings in the form of an annuity, computed on the basis of his 
 attained age for such an amount as his savings will buy, seems to call 
 for no particular comment. Table XXII, on page 126, shows the 
 amount of cash accumulations to an employee's credit at the end of 
 various years of service and the life annuity that may be granted him 
 on resignation in lieu of cash. 
 
 In Case of Dismissal. 
 
 The employee who is dismissed from service under this plan would 
 have to his credit the amount of his savings, and in case he has been 
 in the service six years he would also have the interest on his savings. 
 To dismiss him under those circumstances would be less difficult than 
 if he were known to be without funds. The efficiency of the service 
 is thus protected. 
 
 superiority of this plan over civil PENSION illustrated in case of dismissal. 
 
 The general wisdom of a savings plan, from the viewpoint of the 
 service, in contrast to a civil pension of any description, appears in 
 the provisions of section 7 as applied to those whose separation from 
 
138 KETIKEMENT OF SUPEBANNtJATED CIVIL-SERVICE EMPLOYEES. 
 
 the service comes through dismissal. Everyone familiar with the 
 executive departments of the Government knows that not all the 
 inefficient clerks are found among the superannuated. While the rules 
 enforced by the Civil Service Commission are effective in preventing 
 the entrance of incompetents into the service, they are not so success- 
 ful in maintaining efficiency among those who secure entrance, a 
 fact set forth in their reports: 
 
 The conditions which have forced large business institutions to adopt pension 
 systems exist to an inteuser degree in the public service, partly due to the re- 
 luctance of appointing officers in making removals and partly to the lack of a 
 wise system for making promotions upon efficiency. Under the enforcement of 
 sound promotion regulations reductions and dismissals would tend to reduce to 
 a minimum the number of inefficient and incapacitated employees, because 
 under such regulations there would be a constant weeding out and reduction to 
 lower grades of this class of employees/ 
 
 This reluctance of officers to make removals and the difficulty of 
 doing so, even after they have definitely concluded to make the par- 
 ticular removals, was strikinglj'^ brought out by Hon. E. F. Ware, 
 Commissioner of Pensions, in testimony before the House Committee 
 on Reform in the Civil Service on February 9, 1904. A leaf from 
 the hearing of the committee on that occasion reads as follows : 
 
 Mr. Smith. Have you any plan or theory as to the proper and humane way of 
 disposing of the old people? 
 
 Mr. Wake. No, sir. The reason I have not any plan is this : There was an old 
 man in the bureau who was so thoroughly inefficient that I concluded to dismiss 
 him. He was over 80 years of age, and I had the paper on my desk ready to 
 issue when the next morning before the dismissal could take place he dropped 
 dead, and it scared me. If I had issued the order for his dismissal, it might have 
 been charged that I inhumanely murdered him. I have not been able to bring 
 my courage up to the point of dismissing any of those very old people. I 
 therefore say this : I think that the Government should fix an age at which they 
 should leave the service. That is one way of handling this whole question. 
 However, I do not believe that my views on this particular branch of the subject 
 would be worthy of present consideration, for there are better ways. 
 
 Mr. Lacey. Have you had occasion to think of this idea : Suppose that every 
 man in your office had to be reappointed at a fixed period, five, seven, or eight 
 years, or some other fixed period, and it was optional to appoint or not, do you 
 not tliink it would enable you to weed out the least efficient in that way from time 
 to time when the periodical time of appointment arrived, requiring also that 
 every man who is appointed shall undergo an examination, not a civil-service 
 examination, but a departmental examination, along the line of work at which 
 he has been employed? Did you ever investigate or think out the question 
 whether that would give you relief, so as to be constantly getting new blood 
 into the office? 
 
 Mr. Wake. I have never had that point presented to me, but there is in my 
 bureau a class of appointees called " special examiners," 150 in number, whose 
 services expire every year, on the 1st of July, and unless they are reappointed 
 by the Pension Commissioner they are no longer connected with the service. 
 
 * See Twentieth Report of Civil Service Commission, p. 155. 
 
RETTEEMENT OP SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 139 
 
 It has been my experience that all of the poor members of that class (called 
 special examiners) knowing their inferiority, begin during June to work any 
 political influence on me which they have, and the poorer the clerk the greater 
 the influence, so that by the 1st of July I am completely overwhelmed with 
 demands to keep such persons in the service. 
 
 Last year I got rid of three men, and I had more trouble in getting rid of 
 those three men than I had from other sources in the entire bureau during 
 a month's work, and the job was so great that I have decided not to under- 
 take it a second time, because the influence that was brought to bear upon me 
 only began with me. Some of it was carried to the department. I was haled up 
 to the department to answer some of the demands of the persons interested in 
 the reappointments and the President himself was even applied to. I would 
 not feel that it was any protection to a bureau to have the right you suggest, 
 because it is as easy to dismiss as it is to stand the pressure that comes from 
 keeping bad clerks in. I believe that answers the question. 
 
 The same points were brought out a few days later, February 12, 
 1904, by Adjt. Gen. F. C. Ainsworth, then Chief of the Record and 
 Pension Office, War Department, in his testimony before the same 
 committee. Among other things, he said : 
 
 It goes without saying that whenever an employee of the civil establishment, 
 by reason of age or any other cause, becomes unable to render a reasonable 
 return in service for the salary paid him it is the plain duty of his bureau 
 chief and the head of his department to cause his reduction in grade or his 
 discharge from service. But it is difficult to bring one's self to recommend or 
 order the reduction or dismissal, in his old age, of an employee who has ren- 
 dered many years of faithful and efficient service, who probably has no means 
 of support other than his salary, and with whom no fault can be found other 
 than that he has become worn out in the public service. In such a case senti- 
 mental consideration usually prevails, the call of duty is neglected, and the old 
 employee retains his position, virtually as a pensioner, while the duties which 
 he should perform are neglected or are discharged by another, often at an 
 inadequate compensation. 
 
 In addition to all this, whenever an attempt is made to reduce or discharge 
 an employee who has become useless or unfit for service by reason of age 
 or any other cause, it is almost invariably the case that more or less political 
 and social pressure is brought to bear in his behalf upon the chief of his 
 bureau and the head of the department. The exercise of such influence is 
 espe*ially to be looked for in the cases of those, young or old, whose record of 
 service is indifferent or bad. As a rule, to which there are but few excep- 
 tions, the value of an employee bears an inverse ratio to the political and 
 social support which he brings to bear in his own interest. It is at best difficult 
 to bring about the discharge of a worthless, inefficient, unfaithful, or insub- 
 ordinate employee, and it is equally difficult after his discharge to resist the 
 importunities of his friends and supporters for his reinstatement. 
 
 Under the proposed plan, the retention of inefficient clerks out of 
 humane considerations or because of their political prestige would be 
 far less imperative than it now is. On the other hand, the tendency 
 of a civil pension would be just the reverse, since the chief who dis- 
 missed an incompetent clerk would know that he not only deprived 
 him of the salary of which he probably had most pressing need, but 
 
140 RETIREMENT OP SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 that he also deprived him of a kind of intangible right to the pension 
 that would ultimately be his if he were allowed to remain in the 
 service until reacliing the age at which it Avould be granted, and 
 which he had already partly earned. (See Chap. I, p. 54, discussion 
 under head, Civil pension is demoralizing to the service.) 
 
 In Case of Death. 
 
 The savings plan would certainly not be condemned in the home of 
 any employee removed by death from the service. The last sentence 
 in section 7 provides that interest on the employee's savings shall be 
 paid in case of his removal from the service by death, regardless of 
 the length of time he has been in office. 
 
 In Case of Disability. 
 
 The last retirement bill introduced in the first session of the 
 Sixtieth Congress (H. R. 21261), known as the first " Gillett bill," 
 contained no provision for separation from the service in case of 
 disability. This omission seemed at that time to be disapproved by 
 the employees of the Post Office Department. At the annual conven- 
 tion of the United States Association of Post-Office Clerks, held in 
 Birmingham, Ala., September 7 to 11, 1908, the president of the 
 association strongly opposed this bill because of the elimination of 
 the disability provision contained in the so-called Keep bill, the first 
 of the series introduced covering this plan of retirement and known 
 officially as PI. R. 179G9. Since then, the association seems to have 
 changed its attitude toward the disability question, for it is under- 
 stood to oppose the second "Gillett bill" (II. R. 22013), the one last 
 favorably reported, on the ground that the disability provision is 
 unsatisfactory. This attitude seems to be decidedly inconsistent in 
 view of the fact that the disability provision in this last bill is the 
 most liberal of any yet proposed. Opposition is understood to be 
 based on the theory that the cost of disability should be paid for 
 entirely by the Government instead of out of any fund created by 
 the employees. In taking this position the members of the postal 
 service have not seemed to realize that the passage of this last bill 
 would enable them to get accident insurance at net cost, and that they 
 would be benefited out of all proportion in comparison with the 
 members of the other departments by participating in any mutual 
 fund, since the number of accidents among members of the postal 
 service is naturally much greater than among members of other 
 branches of the service. If the criticism of inequity is raised it 
 should be directed toward cutting down benefits to the members of 
 the postal service. 
 
EETIEEMENT OP SUPERANNUATED CIVTL-SERVICE EMPLOYEES. 141 
 DISABILITY PROVISION IN SO-CAT.LKD KEEP BILL. 
 
 The disability provision found in section 6 of H. E. 179G9 provides 
 that an employee who has served the Government for not less than 
 20 years may retire on an annuity equal to 1^ per cent of the aggre- 
 gate salary he has received, in case of disability "not duo to vicious 
 habits or by reason of exigencies of service, but without fault or 
 delinquency on his part, or on his own application after 40 years' 
 service." 
 
 NECESSITY OF DETEEMINING COST OF DISABILITY BENEFIT. 
 
 While a disability clause is recognized as a desirable feature of any 
 retirement bill, the aforesaid provision does not wholly meet the require- 
 ments. The clause providing for retirement on the employee's own ap- 
 plication after 40 years' service virtually means general retirement at 
 the ages of 60 to 65 instead of 65 and 70, and would therefore ma- 
 terially increase the cost to the Government for annuities for back 
 services. Neither could any provision for retirement in case of dis- 
 ability, however satisfactory in theory, be regarded as desirable in 
 the absence of figures to show what such a provision would cost. 
 
 DIFFICULTy OF DETERMINING COST OF DISABILITY BENICFIT. 
 
 The first step necessary then in determining the feasibility of in- 
 cluding in the retirement measure a provision for disability is to 
 ascertain what such a provision would be likely to cost. The great 
 difficulty in the way of estimating this cost is the fact that there is 
 no satisfactory basis for such computation. No reliable tables of dis- 
 ability based upon the experience of American lives have as yet been 
 compiled. Several German tables have been prepared based on the 
 experience of various industries, including the different branches of 
 the German railways and including the employees in German coal 
 mines, but none of these tables can suitably be used as the basis for 
 the required estimate. While they have been compiled in a most 
 scientific manner, it is generally recognized that they show too high 
 a rate of invalidity to serve as a satisfactory basis for computing the 
 cost of disability among ordinary American lives, such as civil-service 
 employees. This is because, in the first place, they are all based on 
 extra-hazardous occupations, and, in the second place, because dis- 
 ability is made to include superannuation. The most superficial 
 study of these tables — including even the most reliable ones — shows 
 that disability has been generally confused with superannuation in 
 the older ages, and the rates based on them are in consequence in- 
 ordinately high. 
 
142 KETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPL»OYEES. 
 GERMAN DISABILITY EXPERIENCE BEST AVAILABLE. 
 
 That the German tables show too high a rate of invalidity is recog- 
 nized apparently by German actuaries, for J. Karup in a chapter on 
 disability in his well-known work " Eef orm des Rechnungswesens der 
 Gothaer Lebensversicherungsbank " calls attention to the fact that 
 the disability experience of German railroad employees is not reliable, 
 and recommends that observations made from 1868 to 1876 be disre- 
 garded because " pensioning and invalidity were treated then as of 
 equal significance." 
 
 Overconservative, however, as we know they are, rates based on the 
 German tables of disability are the most reliable that are available 
 for computing the cost of a disability provision. The tables of 
 Zimmermann, based on the experience of the various branches of the 
 employees of German railways, have accordingly been used to esti- 
 mate the cost of the disability benefit proposed in the Keep bill 
 (H. R. 17969). These tables cover an experience extending over the 
 years 1873 to 1887, and although they include three years, 1873 to 
 1876, of the period, 1868 to 1876, quoted above by Karup as one when 
 the superannuated were erroneously classed with the disabled, they 
 are, nevertheless, generally recommended by Karup, Hamza, and 
 other leading actuaries of Germany as the safest of available ex- 
 periences, their fault being, indeed, an excess of safety rather than 
 a lack of it.^ 
 
 1 Recently, since the above text was written, tables which could be used for the calcu- 
 lation of the cost of a disability feature for that class of the civil service retiring at age 
 70 have been published, based upon the experience of the Knights of Maccabees. The 
 experience upon the members of this fraternal order should approach more nearly upon 
 that of the above-mentioned class of the civil service. From a cursory examination of 
 the rates derived from this experience it is evident that the cost of disability benefits 
 would show a considerable decrease from the cost obtained on the German experience 
 which has been made the basis of these calculations. 
 
RETIREMENT OP SUPERANNUATED CIVIIr-SERVICE EMPLOYEES. 143 
 
 Table XXIV. — Showing rates based on German disability experience to pro- 
 vide an annuity of $100 {first payment immediate) to age indicated upon 
 occurrence of total and permanent disability} 
 
 Present age. 
 
 Retirement age. 
 
 65 
 
 60 
 
 20 years.. 
 
 21 years.. 
 
 22 years.. 
 
 23 years. . 
 
 24 years.. 
 
 25 years.. 
 
 26 years.. 
 
 27 years.. 
 
 28 years.. 
 
 29 years. . 
 
 30 years.. 
 
 31 years.. 
 
 32 years.. 
 
 33 years.. 
 
 34 years.. 
 
 35 years. 
 
 36 years.. 
 
 37 years.. 
 
 38 years.. 
 
 39 years.. 
 
 40 years.. 
 
 41 years.. 
 
 42 years.. 
 
 43 years.. 
 
 44 years.. 
 
 45 years. . 
 
 46 years. . 
 
 47 years.. 
 
 48 years.. 
 
 49 years- 
 
 50 years. . 
 
 51 years.. 
 
 52 years.. 
 
 53 years.. 
 
 54 years.. 
 
 55 years.. 
 
 56 years.. 
 
 57 years.. 
 
 58 years.. 
 
 59 years.. 
 
 60 years.. 
 
 61 years.. 
 
 62 years.. 
 
 63 years.. 
 
 64 years.. 
 
 65 years.. 
 
 66 years.. 
 
 67 years.. 
 
 68 years.. 
 
 69 years. . 
 
 $0.41 
 
 SO. 41 
 
 .58 
 .76 
 .95 
 1.15 
 1.36 
 1. 50 
 1.84 
 2.11 
 2.40 
 2.71 
 3.05 
 3.42 
 3.81 
 4.22 
 4.64 
 5. 08 
 5. .53 
 6.00 
 6.48 
 6. 98 
 7. .52 
 8.12 
 8.70 
 9. .54 
 10. Zl 
 H..30 
 
 12. io 
 
 13. .53 
 14.84 
 16. 29 
 17. 70 
 19. 19 
 20.46 
 2] . 60 
 22. 00 
 23. 44 
 24.09 
 24. 55 
 24.81 
 24.88 
 22.99 
 19. 92 
 15. .33 
 
 8.94 
 
 $0.59 
 .84 
 1.12 
 1.42 
 1.76 
 2.12 
 2.54 
 3.04 
 3. GO 
 4.16 
 4.68 
 5.11 
 5.52 
 5.88 
 6.28 
 6.72 
 7.21 
 7.77 
 8. .36 
 9.00 
 9.69 
 10. 22 
 10.70 
 11.13 
 11.60 
 12.14 
 12. 91 
 13.72 
 14. 62 
 16. 55 
 17.07 
 17. 42 
 17. 71 
 17.96 
 18.18 
 18.40 
 16.89 
 14.65 
 11.36 
 6.62 
 
 1 These rates were computed by Mr. Benedict D. Flynn, assistant actuary, Tlie Trav- 
 elers Insurance Company, Hartford, Conn., in January, 1909. 
 
 ESTIMATED COST OF DISABILITY PROVISION IN SO-CALLED KEEP BILL. 
 
 The disability benefit proposed in the Keep bill is arranged on a 
 basis similar to that used in calculating retirements; that is, retire- 
 ment by reason of total disability and after not less than 20 years' 
 service on 1^ per cent of the employee's total compensation during 
 the service prior to the taking effect of this act. That would mean 
 a disability benefit of 30 per cent of pay in the case of the employee 
 who had been in the service 20 years, 45 per cent of pay in the case 
 of the employee who had been in the service 30 years, and so on. 
 While this arrangement might, in many cases, be inadequate, it could 
 be recommended for the Government as a safe and conservative 
 beginning. 
 
144 RETIEEMElSrT OF SUPERANNUATED CIVIL- SBEVICE EMPLOYEES. 
 
 The erst the first year of such a provision based on the foregoing 
 rates, to run from the date of disability to the respective ages of 
 retirement, is shown in the following table to be $1,157,298. 
 
 Table XXV, — Shotving cost of MsaMUty provision in Keep Mil, J)Ut limited to 
 run from date of disaMlity to age of retirement. 
 
 Age, 
 years. 
 
 1 per cent of 
 salary of all 
 general em- 
 ployees (who 
 have been in 
 service at least 
 20 years) mul- 
 tiplied by 
 number of 
 years of service. 
 (See note.) 
 
 Rate 
 per 
 
 $100 
 of an- 
 nuity. 
 
 Total 
 pre- 
 mium, 
 first 
 
 year. 
 
 1 per cent of 
 
 salary of all 
 letter carriers 
 (who have been 
 
 in service at 
 least 20 years) 
 multiplied by 
 
 number of 
 years of service. 
 
 (See note.) 
 
 Rate 
 per 
 $100 
 of an- 
 nuity. 
 
 Total 
 pre- 
 mium, 
 first 
 
 year. 
 
 1 per cent of 
 salary of all 
 
 railway postal 
 clerks (who 
 have been int 
 
 service at leas 
 
 20 years) mul- 
 tiplied by 
 number of 
 
 years of service. 
 (See note.) 
 
 Rate 
 per 
 
 $100 
 of an- 
 nuity. 
 
 Total 
 pre- 
 mium, 
 first 
 year. 
 
 Total 
 
 (a) 
 
 (b) 
 
 (c) 
 $625, 762 
 
 (d) 
 
 (e) 
 
 (f) 
 $92, 279 
 
 (g) 
 
 (h) 
 
 (i) 
 853, 491 
 
 33 
 
 $1,304.00 
 2, 684. 00 
 5, 425. 00 
 9, 144. 40 
 16, 924. 60 
 28, 165. 40 
 34,351.60 
 43,788.80 
 61, 082. 60 
 63,738.80 
 72, 709. 20 
 76,344.60 
 90, 483. 80 
 104,656.40 
 115,537.40 
 124, 138. 20 
 125.606.80 
 135,243. 60 
 101,806.40 
 . 115, 563. 00 
 108, 961. 00 
 106, 520. 00 
 102, 238. 20 
 125, 021. 20 
 111,507.80 
 107,263.60 
 114, 996. 80 
 129, 945. 60 
 121,782.00 
 155, 409. 60 
 151,782.40 
 159, 050. 60 
 152, 981. 80 
 132, 034. 20 
 136,893.20 
 98, 689. 40 
 96, 363. 80 
 
 $2.39 
 
 2.76 
 
 3.12 
 
 3.51 
 
 3.89 
 
 4.25 
 
 4.62 
 
 4.98 
 
 5.33 
 
 5.66 
 
 5.98 
 
 6.27 
 
 6.57 
 
 7.94 
 
 8.82 
 
 10.17 
 
 11.01 
 
 12.39 
 
 13.01 
 
 13.80 
 
 14.55 
 
 15.21 
 
 15.42 
 
 15.93 
 
 17.29 
 
 18.61 
 
 21.39 
 
 24.72 
 
 28.65 
 
 31.17 
 
 33.02 
 
 33.56 
 
 32.21 
 
 29.15 
 
 25.94 
 
 20.95 
 
 12.68 
 
 31 
 
 74 
 
 169 
 
 321 
 
 658 
 1,197 
 1,587 
 2,181 
 3,256 
 3,608 
 4,348 
 4,787 
 5,945 
 8,310 
 10, 190 
 12,625 
 13,829 
 16,757 
 13,245 
 15,948 
 15,854 
 16,202 
 15, 765 
 19, 916 
 19,280 
 19, 962 
 24,598 
 32, 123 
 34,891 
 48, 441 
 50,118 
 53,378 
 49, 276 
 38, 488 
 35, 510 
 20, 675 
 12, 219 
 
 
 
 
 
 
 
 34 
 
 $762. 60 
 912. 00 
 839. 00 
 
 $4.22 
 
 4.64 
 
 5.08 
 
 6.53 
 
 6.00 
 
 6.48 
 
 6.98 
 
 7.52 
 
 8.12 
 
 8.79 
 
 9.54 
 
 10.37 
 
 11.30 
 
 12.35 
 
 13.53 
 
 14.84 
 
 16.29 
 
 17.79 
 
 19.19 
 
 20.46 
 
 21.60 
 
 22.60 
 
 23.44 
 
 24.09 
 
 24.55 
 
 24.81 
 
 24.88 
 
 22.99 
 
 19.92 
 
 15.33 
 
 8.94 
 
 32 
 42 
 43 
 
 '"'iss' 
 
 238 
 472 
 817 
 1,214 
 1,863 
 2,432 
 2,672 
 3,466 
 4,830 
 4,319 
 4,704 
 5,427 
 4,719 
 5,366 
 5,029 
 5,243 
 4,972 
 5,154 
 4,324 
 4,006 
 4,273 
 4,468 
 4,666 
 3,334 
 2,566 
 1,430 
 
 
 
 
 35 
 
 
 
 
 30 
 
 37 
 
 $400. 00 
 
 894. 00 
 
 840. 00 
 
 4, 132. 00 
 
 6, 454. 00 
 
 6,708.00 
 
 11, 494. 00 
 
 14, 080. 00 
 
 11,248.00 
 
 22,836.00 
 
 23, 041. 00 
 
 22,326.20 
 
 21,802.00 
 
 22, 798. 00 
 
 25,542.00 
 
 21,311.00 
 
 23, 105. 20 
 
 23, 928. 40 
 
 20, 802. 20 
 
 17, 148. 00 
 
 21,330.00 
 
 15, 034. 00 
 
 14,597.60 
 
 15, 180. 00 
 
 $7.21 
 7.77 
 8.36 
 9.00 
 9.69 
 10.22 
 10.70 
 11.13 
 11.60 
 12.14 
 12.91 
 13.72 
 14.62 
 16.55 
 17.07 
 17.42 
 17.71 
 17.96 
 18.18 
 18.40 
 16.89 
 14.65 
 11.36 
 6.62 
 
 29 
 09 
 
 38 
 
 39 
 
 40 
 
 41 
 
 42 
 
 43 
 
 44 
 
 45 
 
 46 
 
 47 
 
 48 
 
 49 
 
 50 
 
 51 
 
 52 
 
 53 
 
 54 
 
 55 
 
 56 
 
 57 
 
 58 
 
 59 
 
 60 
 
 61 
 
 62 
 
 63 
 
 64 
 
 65 
 
 2,636.00 
 3, 666. 00 
 6, 761. 80 
 10,864.80 
 14,951.00 
 21, 193. 20 
 25, 491. 00 
 25,762.80 
 30, 670. 00 
 39, 113. 00 
 31, 925. CO 
 31, 699. 00 
 33,315.60 
 26, 529. 20 
 27,964.40 
 24, 579. 00 
 24,275.40 
 21,999.40 
 21, 990. 20 
 17,949.00 
 16,317.00 
 17, 222. 00 
 17, 958. 40 
 20,295.80 
 16, 737. 00 
 16,737.40 
 15,992.00 
 
 70 
 371 
 628 
 686 
 1,230 
 1,667 
 1,305 
 2,772 
 2,975 
 3,063 
 3,187 
 3,773 
 4,360 
 3,712 
 4,092 
 4.297 
 3.7i2 
 3, 1.'5 
 3, 603 
 2,202 
 1,658 
 1,0C5 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 66 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 68 
 
 69 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 92, 279 
 
 Amount required to provide all general employees who have been in the service 
 not less than 20 years a disability allowance equal to 1 per cent of salary 
 for each year of service, to run from date of disability to age 70 5625, 762 
 
 Amount required to provide all letter carriers who have been In the service 
 not less than 20 years a disability allowance equal to 1 per cent of salary 
 for each year of service, to run from date of disability to age 65 
 
 Amount required to provide all railway postal clerks who have been in the 
 service not less than 20 years a disability allowance equal to 1 per cent of 
 salary for each year of service, to run from date of disability to age 60 53, 491 
 
 771, 532 
 Amount required to provide all employees who have been in the service not 
 less than 20 years disability allowances equal to 1.5 per cent of salary for 
 each year of service, to run from date of disability to ages stated above, 
 according to occupation ($771,5.32X1.5) 1,157,298 
 
 Note. — The amount $152,981.80, opposite 65 years, in column (a) of the above table, 
 is the sum of all annuities of persons who have been in the service 20 years or more, 
 aa shown in the last column of illustrative Table XXIX beginning with tbe item of 
 $5,448 (p. 16.3). Other amounts in columns (a), (d), and (g) are the sums of annuities 
 of employees of various ages and classes who have been in the service 20 years or more. 
 
EETIEEMENT OP SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 145 
 ONE-TEAR TERM RATES USED IN CALCULATION. 
 
 The rates that were used in calculating these premiums are one-year 
 term rates based on the German disability experience to provide an 
 annuity of $100, first payment immediate, upon the occurrence of 
 total and permanent disability and continuing to the age of retire- 
 ment. The life annuity table used in the calculation was based upon 
 the American Experience Table of Mortality. As the expectation of 
 life shown by that table is greater than the fact in the case of perma- 
 nently disabled persons, and as it is well known that the life of a 
 person totally disabled — particularly in the younger ages — is not so 
 good as that of the normal person, it follows that annuities based on 
 the American Experience Table of Mortality will give higher values 
 than necessary. It will be seen, therefore, that in every way the dis- 
 ability rates applied to the various groups of civil-service employees 
 at present ages for present salaries for estimating the total cost of a 
 disability provision in connection with the retirement plan were more 
 than adequate and conservative. The one-year term rates used in the 
 calculations are open to objection on one score. The cost of the dis- 
 ability provision on the one-year term basis would undoubtedly 
 increase for a few years. To use level premium rates, however, for 
 the calculation of the disability cost, especially with the very inade- 
 quate data as to the rate of disability among the civil employees, 
 would be complicated and unsatisfactory. The better plan would be 
 to employ one-year term rates based on the German disability experi- 
 ence for the first few years until the experience of the enormous civil- 
 service organization could furnish data for determining the cost of its 
 own disability benefits. 
 
 HOW COST OF DISABILITY PROVISION CAN BE MET. 
 
 The cost of such a disability provision being thus approximately 
 ascertained, the important question of how this cost can be met re- 
 mains for consideration. At the hearings held in 1908, the suggestion 
 was made that annuities for services rendered prior to the adoption 
 of the plan might be paid out of deductions from the salaries of new 
 entrants and deductions from salary increases of those promoted, 
 after the plan followed by the French Government.^ The suggestion 
 was embodied in sections 6, 7, and 9 of H. R. 21261, as a substitute 
 for the provision in the two preceding bills that the annuities for 
 these services be paid out of appropriations made by the Govern- 
 ment. Since then, the House committee, by reporting favorably 
 H. R. 22013, has receded from this position, and returned to the 
 original plan of providing that annuities for back services be paid 
 
 1 See Hearings before the Committee on Reform in the Civil Service, House of Repre- 
 sentatives, Retirement Fund for Superannuated Employees in the Civil Service, p. 81. 
 
 74196°— S. Doc. 745, 61-3 10 
 
146 RETIEEMENT OF SUPEEANNUATED CIVIL-SEEVICE EMPLOYEES. 
 
 by the Government, with the limitation, however, that they be re- 
 stricted to $600 in each case. Since the other suggestion meant a 
 tax on efficiency and was unfair to the younger employees, it was 
 wisely abandoned, but it is proper to state here that, if the Govern- 
 ment assumes the payment of annuities for back services, the fund 
 created by deductions from salaries of new entrants and the salaries 
 of employees receiving promotions might justly and consistently be 
 applied to pay the cost of disability benefits, since all employees, 
 both old and young, would have a chance to participate in the benefits. 
 It would mean simply that Government employees would be required 
 to carry accident insurance, which would be furnished them at cost, 
 without the loading for expense necessary in the case of insurance 
 companies. 
 
 The sum that will be available through deductions from entrance 
 and promotion salaries has been estimated by Maj. Fred Brackett of 
 the Treasury Department as approximately $1,412,329 a year. In 
 deciding, therefore, how the cost of putting the plan into operation 
 shall be met Congress will be settling not one question but two, since 
 the fate of a disability clause would seem to depend largely on this 
 decision. Maj. Brackett's computation is as follows : 
 
 There is an average of 8,082 deaths, resignations, and removals per year, and 
 I have allowed an equal number of new appointments at $720 each, from which 
 we receive $60 each, or one-twelfth of the whole amount. This produces 
 $484,920 per annum, but as probably 5 per cent of the original appointments 
 would be of $900 grade, we must add $6,060, or 404 by 15, which would give us 
 $490,981, from appointments. From promotions we should receive an average 
 of $120, less 5 per cent for appointments to vacated grades, which might not 
 involve promotions. Each promotion ought to average $114, as follows : 
 
 $720 to $840 $120 
 
 $840 to $900 60 
 
 $900 to $1,000 100 
 
 $1,000 to $1,200 200 
 
 Total 480 
 
 25 per cent (assessment) on $480 is $120. $120 less 5 per cent = ($6) $114, 
 $114X8,082=$921,348. $490,981+$921,34S=$1,412,329, the amount of annual 
 proceeds from new entrants' and promotion salaries.* 
 
 DESIEABILITY OF MORE LIBERAL DISABILITY BENEFITS, 
 
 It would be very desirable, both for the employee and for the 
 service, if such a course were practicable, to provide for a more 
 liberal disability benefit than that proposed in the Keep bill. The 
 ideal arrangement would undoubtedly be to have the disability bene- 
 fits accrue to the employee regardless of his term of service, since 
 disablement may occur at any period and the need be much greater 
 
 1 See Hearings before the Committee on Reform in the Civil Service, House of Repre- 
 eentatives (1908) Retirement Fund for Superannuated Employees In the Civil Service, 
 p. 130, 
 
RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 147 
 
 in the case of the employee who has been in the service only one year 
 than in the case of the employee who has been in the service 20 years 
 or more. Disability benefits limited, as in the above-mentioned bill, 
 to those who have served at least 20 years would be of little value to 
 the letter carriers, and of practically no value to the railway mail 
 service. A provision to be really adequate would have to provide 
 about 50 per cent of the pay received at the time disability was 
 incurred. It would include the payment of benefits for permanent 
 disability due to either accidents or illness, accident benefits to be 
 payable after any length of service, illness benefits to be payable only 
 when the employee has been in the service a stated number of years, 
 probably ten. While such a provision has much to recommend it, 
 however, it can not, of course, be wisely adopted in ignorance of the 
 cost. In view of the absence of reliable disability statistics, it is 
 impossible to state the cost accurately. 
 
 ESTIMATED COST OF LIBERAL DISABILITY BENEFIT. 
 
 A computation based on the disability tables compiled by Zim- 
 mermann gives $6,737,263 the first year as the cost of a disability pro- 
 vision, such as outlined above. While this figure is so high as to be 
 ridiculous — and emphasizes again the very great safety of the esti- 
 mate of $1,157,298 (based on the same tables) as the cost of the 
 disability provision in the so-called Keep bill — still, in the absence of 
 all other data, this figure makes the price of a liberal benefit prohib- 
 itive at the present time. Had the estimate been about $2,000,000 a 
 year instead of $5,737,263, then the above-mentioned disability clause 
 might safely have been included in the bill, and the provisions under 
 it so graduated as to bring the cost below the amount of $1,412,329 
 a; year, the amount of the fund available through deductions from 
 entrance and promotion salaries, but with the estimate of cost, even 
 though that estimate is known to be grossly exaggerated, over three 
 times as great as the available fund, the only safe conclusion is that 
 such a clause is unwise until such time as reliable statistics of disa- 
 bility on lives of civil-service employees are available as a basis for 
 computation. If a limited disability provision such as that proposed 
 in the Keep bill be granted, and then the disability experience of 
 United States civil-service employees in the various groups be care- 
 fully kept for a few years following the adoption of the proposed 
 plan, valuable data may be obtained from which American tables 
 of disability can be compiled and the cost of a liberal disability 
 feature in connection with the retirement plan accurately computed. 
 An increase of disability benefits could then be authorized by 
 Congress, 
 
148 KETIREMENT OP SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 Table XXVI. — Showing cost the first year of disaMlity provision equal to one- 
 half pay, to run from date of disaMlity to age of retirement. 
 
 Total 
 salaries of 
 
 general 
 employees. 
 
 Total 
 
 premium 
 
 first 
 
 year. 
 
 Total 
 salaries of 
 
 letter 
 carriers 
 and rural 
 carriers. 
 
 Rate. 
 
 Total 
 
 premium, 
 
 first 
 
 year. 
 
 Total 
 salaries 
 
 of 
 railway 
 
 postal 
 clerks. 
 
 Rate. 
 
 Total. 
 
 14 years 
 
 15 years 
 
 16 years 
 
 17 years 
 
 18 years 
 
 19 years 
 
 20 years 
 
 21 years 
 
 22 years 
 
 23 years 
 
 24 years 
 
 25 j'ears 
 
 26 years 
 
 27 years 
 
 28 years 
 
 29 years 
 
 30 years 
 
 31 years 
 
 32 years 
 
 33 years 
 
 34 years 
 
 35 years 
 
 36 years 
 
 37 years 
 
 38 years 
 
 39 years 
 
 40 years 
 
 41 years 
 
 42 years 
 
 43 years 
 
 44 years 
 
 45 years 
 
 46 years 
 
 47 years 
 
 48 years 
 
 49 years 
 
 50 years 
 
 51 years 
 
 52 years 
 
 53 years 
 
 54 years 
 
 55 years 
 
 66 years 
 
 57 years 
 
 58 years 
 
 59 years 
 
 60 years 
 
 61 years 
 
 62 years 
 
 63 years 
 
 64 years 
 
 65 years 
 
 66 years 
 
 67 years 
 
 68 years 
 
 69 years 
 
 86,570,497 
 
 53,824,944 
 
 88,400 
 33, 000 
 97, 440 
 153,220 
 346,860 
 676, 200 
 948, 760 
 293,680 
 557, 860 
 890, 060 
 146, 760 
 ,309,500 
 610,480 
 788, 580 
 807, 560 
 944, 160 
 143, 980 
 023,260 
 060. 160 
 039, 080 
 070, 600 
 863,200 
 956,680 
 925, 900 
 916, 260 
 667, 440 
 515, 260 
 256, 820 
 218, 400 
 017, 100 
 987, 880 
 951,000 
 011,480 
 975. 200 
 844, 920 
 710, 540 
 642, 360 
 276, 080 
 275, 740 
 161,000 
 050, 240 
 998, 140 
 020, 280 
 979, 520 
 931,220 
 894, 160 
 951.600 
 878, 460 
 078, 500 
 007, 220 
 935, 620 
 926, 840 
 730, 580 
 710,120 
 532, 180 
 489, 369 
 
 80.41 
 
 .41 
 
 .41 
 
 .41 
 
 .41 
 
 .41 
 
 .41 
 
 .46 
 
 .52 
 
 .59 
 
 .66 
 
 .74 
 
 .83 
 
 .94 
 
 1.08 
 
 1.25 
 
 1.46 
 
 1.72 
 
 2.04 
 
 2.39 
 
 2.76 
 
 3.12 
 
 3.51 
 
 3.89 
 
 4.25 
 
 4.62 
 
 4.98 
 
 5.33 
 
 5.66 
 
 5.98 
 
 6.27 
 
 6.57 
 
 7.94 
 
 8.82 
 
 10.17 
 
 11.01 
 
 12.39 
 
 13.01 
 
 13.80 
 
 14. 55 
 
 15.21 
 
 15.42 
 
 15.93 
 
 17.29 
 
 18.61 
 
 21.39 
 
 24.72 
 
 28.65 
 
 31.17 
 
 33.02 
 
 33.56 
 
 32.21 
 
 29.15 
 
 25.94 
 
 20.95 
 
 12.68 
 
 34 
 
 135 
 
 399 
 
 628 
 
 1,422 
 
 2,772 
 
 3,890 
 
 5,951 
 
 8,101 
 
 11,151 
 
 14, 169 
 
 17,090 
 
 21,667 
 
 26, 213 
 
 30, 322 
 
 36,802 
 
 45,902 
 
 52,000 
 
 62,427 
 
 72, 634 
 
 84,749 
 
 89, 332 
 
 103, 779 
 
 113,818 
 
 123, 941 
 
 123, 236 
 
 125,260 
 
 120,289 
 
 125, 561 
 
 120, 623 
 
 124. 640 
 
 128, 181 
 
 159,712 
 
 174, 213 
 
 187, 628 
 
 188, 330 
 
 203, 488 
 
 166, 018 
 
 176, 052 
 
 168, 925 
 
 159,741 
 
 153,913 
 
 162, 531 
 
 169, 359 
 
 173,300 
 
 191 ; 261 
 
 235, 236 
 
 251,679 
 
 336, 168 
 
 332, 584 
 
 313, 994 
 
 298, 535 
 
 212, 964 
 
 184, 205 
 
 111,492 
 
 62, 051 
 
 $162, 180 
 
 343, 080 
 
 522, 360 
 
 723, 740 
 
 9.59, 900 
 
 1,175,800 
 
 1,257,640 
 
 1,353,260 
 
 1.508,860 
 
 i; 664, 780 
 
 1,837,260 
 
 1,856,440 
 
 1,955,360 
 
 1,956,080 
 
 1,950,240 
 
 2,028,500 
 
 2, 002, 580 
 
 1,932,320 
 
 1, 908, 540 
 
 2,032,100 
 
 1,913.. 300 
 
 1,800,280 
 
 1,805,040 
 
 1, 462, 900 
 
 1, 602, 660 
 
 1, 352, 460 
 
 1,262,980 
 
 1, 299, 300 
 
 1, 312, 580 
 
 1,267,680 
 
 1,095,440 
 
 953, 400 
 
 941,320 
 
 764, 420 
 
 791,540 
 
 680, 500 
 
 574, 340 
 
 514,740 
 
 453, 220 
 
 388, 420 
 
 308, 440 
 
 295,760 
 
 267, 300 
 
 298, 680 
 
 306, 080 
 
 259,840 
 
 273,860 
 
 198, 340 
 
 194, 6S0 
 
 152, 340 
 
 108, 460 
 
 87, 100 
 
 80.41 
 
 .41 
 
 .41 
 
 .58 
 
 .76 
 
 .95 
 
 1.15 
 
 1.36 
 
 1.59 
 
 1.84 
 
 2.11 
 
 2.40 
 
 2.71 
 
 3.05 
 
 3.42 
 
 3.81 
 
 4.22 
 
 4.64 
 
 5.08 
 
 5.63 
 
 6,00 
 
 6.48 
 
 6.98 
 
 7.52 
 
 8.12 
 
 8.79 
 
 9.54 
 
 10.37 
 
 11.30 
 
 12.35 
 
 13. 53 
 
 14.84 
 
 16.29 
 
 17.79 
 
 19.19 
 
 20.46 
 
 21.60 
 
 22,60 
 
 23,44 
 
 24.09 
 
 24,55 
 
 24,81 
 
 24.88 
 
 22.99 
 
 19.92 
 
 15.33 
 
 8.94 
 
 665 
 
 1,407 
 
 2,142 
 
 4, 198 
 
 7,295 
 
 11,170 
 
 14, 463 
 
 18,404 
 
 23, 991 
 
 30, 632 
 
 38,766 
 
 44,555 
 
 62, 990 
 
 59, 660 
 
 66, 698 
 
 77,286 
 
 84, 509 
 
 89, 660 
 
 96, 964 
 
 112,375 
 
 114, 798 
 
 116, 6.58 
 
 125, 992 
 
 110,010 
 
 122, 008 
 
 118,881 
 
 120, 488 
 
 134, 737 
 
 148. 322 
 
 155. 323 
 148, 213 
 141,485 
 153, 341 
 135, 990 
 161,897 
 139,230 
 124,057 
 116,331 
 106, 235 
 
 93, 570 
 75, 722 
 73,378 
 66, 604 
 68, 667 
 60,971 
 39,833 
 24, 483 
 
 81,200 
 26,240 
 98, 920 
 220, 760 
 297,860 
 409,880 
 421,200 
 464, 340 
 .520,340 
 588,800 
 563,640 
 664, 980 
 622, 920 
 674, 960 
 651, 280 
 663,280 
 637, 580 
 619, 440 
 617,920 
 600, 740 
 644,800 
 511,820 
 449, 600 
 400,840 
 353, 540 
 337, 200 
 303, 140 
 300, 100 
 284, 200 
 289,640 
 247,400 
 217, 640 
 196, 720 
 161, 000 
 148, 920 
 139, 380 
 107,340 
 89,640 
 101,020 
 72, 600 
 71,860 
 67,600 
 60, 940 
 71,800 
 84, 660 
 84, 440 
 49, 500 
 62, 100 
 61,920 
 41,640 
 37,800 
 32,840 
 
 $0.69 
 
 .69 
 
 .59 
 
 .84 
 
 1.12 
 
 1,42 
 
 1.75 
 
 2,12 
 
 2,54 
 
 3.04 
 
 3.60 
 
 4.16 
 
 4.68 
 
 5.11 
 
 6,52 
 
 5,88 
 
 6,28 
 
 6,72 
 
 7.21 
 
 7.77 
 
 8.36 
 
 9.00 
 
 9.69 
 
 10,22 
 
 10,70 
 
 11,13 
 
 11,60 
 
 12,14 
 
 12.91 
 
 13.72 
 
 14. 62 
 
 16,56 
 
 17,07 
 
 17.42 
 
 17,71 
 
 17,96 
 
 18.18 
 
 18.40 
 
 16. 89 
 
 14,65 
 
 11,36 
 
 6.62 
 
 Amount required to provide 94,403 general employees a disability allowance 
 
 equal to full pay, to run from date of disability to age 70 $6, 570, 496 
 
 Amount required to pi'ovide 61,931 letter carriers and rural carriers a dis- 
 ability allowance equal to full pay, to run from date of disability to age 65- 3, 824, 944 
 
 Amount required to provide 13,894 railway postal clerks a disability allow- 
 ance equal to full pay, to run from date of disability to age 60 1,^79, 087 
 
 Total 11, 474, 527 
 
 Amount required to provide 170,228 employees disability allowances equal to 
 half pay, to run from date of disability to ages stated above, according to 
 occupation 5, 737, 263 
 
 Note. — Since the above table was worked out and the accompanying text 
 written, the second " Gillett bill" (H. R. 22013), with its notable disability 
 provision — a compromise between the limited disability clause of the Keep bill 
 
EETIEEMENT OP SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 149 
 
 and the liberal disability provision discussed above — has been favorably re- 
 pprted. This provides that any employee, regardless of his length of service, 
 " who, by reason of accident or illness not due to vicious habits or by reason of 
 exigencies of the service, but without fault or delinquency on his part, has 
 become totally and permanently disabled," may retire on an annuity equal to 
 1^ per cent of his total compensation during service prior to retirement, the 
 allowance for disability due to accident being never less than 20 per cent of 
 his average annual compensation, and the allowance for disability on account of 
 illness being granted only after 20 years of service. It will be observed that this 
 is much more liberal than the provision in the Keep bill, since a disability allow- 
 ance is granted after any period of service. It is much more conservative, how- 
 ever, than the provision suggested above as " really adequate," on which the 
 computation was made, since it provides only 20 per cent of pay as a disability 
 allowance instead of 50 per cent. No estimate of the cost of this disability pro- 
 vision in H, R. 22013 has been made. It lies, of course, somewhere between 
 $1,157,298 a year, the estimated cost of the provision in the Keep bill, and 
 $5,737,263 a year, the estimated cost of the provision suggested as " really 
 adequate." 
 
 SEPARATE EECOEDS SHOULD BE KEPT OF SUPERANNUATION AND DISABILITT. 
 
 Whether a limited, a liberal, or a compromise disability provision 
 be adopted, the confusion which the German experience shows in the 
 older ages between superannuation and disability may be avoided by 
 making the benefits run from date of disability to the age of retire- 
 ment only and by paying them only on condition that the employee 
 continue his contributions to his retirement fund, so that when he 
 reaches the retirement age the disability fund will be relieved of 
 further payments. If the disability benefits were to run for life, 
 the cost, of course, would be very high because of the rapid increase 
 in the probability of disability after about the sixtieth year of age. 
 If the disability benefits are continued only to the retirement age, 
 the heavy expense of disability in the advanced ages may be avoided, 
 and the increase in the charges for advancing ages of entrance held 
 down by the constantly diminishing period during which disability 
 payments would be made. 
 
 If the fund out of which to pay these disability benefits were 
 created by uniform deductions from the salaries of new entrants and 
 from promotion salaries of all groups of employees, regardless of 
 the hazard of occupation, and the ages of retirement for all groups 
 were the same, such a plan might be open to criticism on the ground 
 that one group would be receiving a benefit at the expense of another. 
 By making the disability benefits run only to the ages of retirement 
 this inequality in benefits is overcome, in a measure at least, by the 
 provision of the bill which groups the employees according to sever- 
 ity of occupation, and gives the youngest retiring age to the most 
 hazardous occupation, and the oldest retiring age to the least hazard- 
 ous occupation. Under such an arrangement, employees would be 
 subject to substantially the same tax in proportion to their initial 
 salaries and increases, but railway postal clerks would be limited to 
 disability incurred prior to age 60 and to benefits up to age 60, 
 
150 EETIREMENO: OE SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 letter carriers to disability incurred prior to age 65 and to benefits 
 up to age 65, and departmental clerks to disability prior to age TO 
 and to benefits up to age 70. 
 
 If the cost of a liberal disability benefit were not kept entirely 
 within the limit of the available fund by confining it between the date 
 of disability and the age of retirement, the benefits for permanent 
 disability might be reduced to 40 per cent of pay, or the benefit for 
 disability due to illness might be given only after 15 years of service. 
 But until reliable disability rates founded on actual American ex- 
 perience are available, the disability benefit proposed in the so-called 
 Keep bill — retirement on 1^ per cent of salary for each year of serv- 
 ice in case of disability after 20 years of service — would seem to be 
 the limit of financial safety. 
 
 DISABILITY CLAUSE IN PEOPOSED BILL. 
 
 Sections 6 and 7 of H. K. 21261 and sections 8 and 9 of H. K. 
 28286 make provision for the creation of a fund by uniform deduc- 
 tions from the salaries of new entrants and from the salaries of those 
 promoted. In the bill proposed in this report (S. 1944) a fund is 
 similarly created under section 8, but it is applied under section 9 to 
 the payment of disability benefits instead of to the payment of annui- 
 ties for back services. 
 
 Section 8 provides for the creation of a disability fund and reads 
 as follows: 
 
 Sec. 8. That beginning with the first day of July nest following the passage 
 of this act, there shall be deducted and withheld from the monthly salary, pay, 
 or compensation of every employee newly entering the service to whom this act 
 applies an amount equal to one-fifth of his monthly salary, pay, or compensa- 
 tion during the first six months of his employment; and in every case of pro- 
 motion of any person to whom this act applies, there shall be deducted and 
 withheld from the monthly salary, pay, or compensation of such person an 
 amount equal to the increase made by such promotion during the first three 
 months from the taking effect thereof ; and the amounts so deducted and with- 
 held shall be deposited in the Treasury of the United States to the credit of a 
 special fund to carry out the provisions of section nine of this act. 
 
 It will be noted that for the sake of simplicity in the matter of 
 accounting, one-fifth of the monthly salary is deducted from the sal- 
 ary of the new entrant during the probationary period instead of 
 one-sixth, as provided for in former bills following the French 
 system. 
 
 Section 9, which makes provision for retirement in case of dis- 
 ability, reads as follows: 
 
 Sec. 9. That beginning one year after the first day of July next following the 
 passage of this act, any employee to whom this act applies, who has served the 
 United States for not less than twenty years, and who, by reason of accident 
 or illness not due to vicious habits or by reason of exigencies of the service, 
 
EETIEEMENT OP SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 151 
 
 but without fault or delinquency on his part, has become totally and perma- 
 nently disabled, may retire from active service prior to the age of retirement, 
 and, on certificate from the head of the department or independent office in 
 which he is employed to the Secretary of the Treasury setting forth such disa- 
 bility and the approval of such certificate by the Secretary of the Treasury, may 
 receive, out of the fund created by section eight of this act, an annual disability 
 allowance, payable quarterly, equal to one and one-half per centum of his total 
 compensation during service prior to such retirement. Allowances under this 
 section shall be discontinued on arrival of the employee at the age of retire- 
 ment unless sooner terminated by the Secretary of the Treasury. 
 
 If, upon the retirement of an employee on a disability allowance, the money 
 then to his credit under section two of this act, together with interest thereon 
 at three and one-half per centum per annum, compounded annually, will not be 
 sufficient to purchase an annuity, payable quarterly throughout life, for such 
 employee on arrival at the age of retirement equal to his annual disability 
 allowance, the Secretary of the Treasury shall deduct and withhold from 
 his quarterly disability allowance an amount, computed to the nearest tenth 
 of a dollar, that together with the money then to his credit, with interest, 
 will be sufficient to purchase such annuity. Amounts deducted and withheld 
 from disability allowances shall be treated as deductions under section two of 
 this act. If the money to his credit as aforesaid is in excess of the amount 
 that will be required to purchase such annuity he may withdraw such excess In 
 one cash sum, or in an annuity certain limited to the age of retirement. 
 
 The Secretary of the Treasury shall reduce or terminate the disability allow- 
 ance granted to any employee whenever in his judgment it is proper to do so, 
 and such action on his part shall be final and conclusive. 
 
 In case of the death of an employee while in the receipt of a disability allow- 
 ance, the amount to his credit under section two of this act shall be paid to his 
 legal heirs, and the disability allowance shall cease and determine. 
 
 The disability allowances hereby provided for shall at all times be limited 
 to the fund created by section eight of this act, and if the total allowances shall 
 at any time be in excess of such fund, the allowances shall be reduced pro rata 
 to a sum within such fund. 
 
 It is thought that this provision safeguards the interests of the 
 Government in every way, and yet it is so worded that when the 
 disability experience of the employees warrants so doing, more liberal 
 benefits may be allowed by change of a few words in the bill. The 
 ultimate ideal, of course, is the allowance, as soon as it is proved 
 practicable, of disability benefits for total and permanent disability 
 resulting from accident incurred in line of duty after any period of 
 service. Provision is made for the reduction or termination of the 
 allowance within the discretion of the Secretary of the Treasury, 
 since it is always possible that a person thought to be permanently 
 disabled may recover in part or entirely. As a precautionary meas- 
 ure in the interests of the Government it is specifically provided also 
 that the allowances shall be reduced pro rata, if they at any time 
 exceed the amount of the disability fund. While the disability bene- 
 fit provided is so limited as to make that probability very remote it 
 was thought wise to put a phrase in the disability clause that would 
 
152 KETIREMBNT OF SUPERANNUATED CIVIL-SEEVICJE EMPLOYEE^. 
 
 make impossible a deficit and a call on the Government for appro- 
 priations. 
 
 In pursuance of the principle laid down in the foregoing pages 
 that there should be a sharp distinction drawn between disability and 
 superannuation, this section provides that disability allowances shall 
 be discontinued on arrival of the employee at the age of retirement, 
 and that from that time on, while he shall continue to draw the cus- 
 tomary amount as an annuity, it shall be paid out of the retirement 
 fund created by himself instead of the disability fund. (This is 
 necessary for the reason that at thie older ages it is impossible to 
 differentiate between disability and superannuation.) 
 
 In case the sum to his credit at the time of retirement from active 
 service on a disability allowance is not sufficient to purchase an an- 
 nuity for him when he shall reach the age of retirement equal to the 
 amount of his disability allowance (which will then be discontinued), 
 it will be necessary to deduct from his quarterly disability allowance 
 such an amount as will be sufficient, together with the money then 
 to his credit, to purchase such an annuity. As the bill stands at 
 present, disability allowances being granted only after 20 years' 
 service, there is no probability of the amount to an employee's credit 
 at the time of retirement on account of disability being insufficient 
 to purchase an annuity at the ago of retirement equal to his disability 
 allowance. If the bill should be amended so as to allow of accident 
 benefits after any period of service, it might happen that the amount 
 to an employee's credit at the time of disablement, say, one or two 
 years after entering the service, would be insufficient for the pur- 
 chase of an annuity at the age of retirement equal to the disability 
 allowance, and deductions would therefore have to be made as 
 provided for. At present, however, with disability benefits granted 
 only after 20 years' service, the sum to the credit of the employee is 
 likely to be in excess of the amount required for the purchase of an 
 annuity at the age of retirement equal to the disability allowance 
 granted in the interval. As an injured employee is likely to be in 
 need of money at the time of his disablement, the bill provides that 
 this excess may be drawn at once in a cash sum, if so desired. 
 
 PROVISION FOR REINSTATEMENT IN SERVICE. 
 
 As persons who leave the service frequently return to it, section 
 10 was introduced into the bill to provide for the reinstatement of 
 such persons. It reads as follows: 
 
 Sec. 10. That in case of reinslatomeut in the classified civil service of any 
 person who at the time of his separation therefrom received a refund under 
 section seven of this act, his period of service for the purpose of retirement 
 and of maklufj; the monthly deduction from his salary shall be computed from 
 the date of such reinstatement unless he shall, within ninety days after rein- 
 
BETIEEMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 153 
 
 statement, pay to the Secretary of the Treasury the amount refunded to him, 
 with interest at three and one-half per centum per annum, in which case the 
 sama shall be replaced to the credit of his account, and the former period of 
 service shall be counted. 
 
 PKOVISION FOR PAYMENT OP ANNUITIES FOR PAST SERVICES. 
 
 The proposed bill thus far down to section 11, has had to do only 
 with Part I of the plan, the payment of annuities for services ren- 
 dered after its adoption. Sections 11 and 12, which have to do with 
 Part II of the plan, the payment of annuities for services rendered 
 prior to the adoption of the plan proper, are discussed by themselves 
 in the chapter entitled " Cost of plan," since it is the payment of 
 annuities for past services which constitutes, aside from the cost of 
 administration, the sole expense connected with the plan. 
 
 MISCELLANEOUS PROVISIONS OF THE PROPOSED BILL. 
 
 The remaining sections of the bill make provision mainly for the 
 condition and legality of its enactment. Section 13 is self-explana- 
 tory, and reads as follows : 
 
 Sec. 13. That every i)erson to whom this act applies who shall continue in 
 the classified civil service after the passage of this act, as well as every person 
 to whom this act applies who may hereafter be appointed to a position or p];ice, 
 shall be deemed to consent and agree to the deductions made and provided for 
 herein, and shall receipt in full for the salary, pay, or compensation which may 
 be paid monthly or at any other time, and such payment shall be full and 
 complete discharge and acquittance of all claims or demands whatsoever for 
 services rendered by such ))erson during the period covered by such payment, 
 notwithstanding the provisions of sections one hundred and sixty-seven, one 
 hundred and sixty-eight, and one hundred and sixty-nine of the Revised Statutes 
 of the United States, or of any other law, rule, or regulation affecting the salary, 
 pay, or compensation of any person or persons employed in the classified civil 
 service to whom this act applies. 
 
 PROVISION FOB KEEPING STATISTICAL RECORDS. 
 
 Section 14 of the bill should have special emphasis. It reads as 
 follows : 
 
 Sec. 14. That the Secretary of the Treasury shall prepare and keep all need- 
 ful tables, records, and accounts required for carrying out the provisions of 
 this act. The records to be kept shall include data showing the mortality ex- 
 perience of the employees in the various branches of the service, and the rate 
 of withdrawal from the classified service, and any other information that may 
 be of value and may serve as a guide for future valuations and adjustments of 
 the plan for the retirement of employees. The Secretary of the Treasury shall 
 make a detailed comparative report annually to Congress showing all receipts 
 and disbursements under the provisions of this act, together with the total 
 number of persons receiving annuities and disability allowances, and the 
 amounts paid them. 
 
154 RETIREMENT OP SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 As pointed out in the first report made by the subcommittee on 
 personnel of the Keep Commission, one of the valuable features of 
 the plan is the array of reliable statistics concerning a large body 
 of representative people that will gradually be collected if this 
 retirement plan is adopted. In handling the accounts of the em- 
 ployees under this plan records will necessarily be kept showing 
 the mortality experience of the employees in the various branches 
 of the service and in different localities throughout the country, the 
 rate of withdrawal from the classified civil service, and much similar 
 information that may be of value and service as a guide in future 
 valuations and adjustments of any plan, and in reducing the cost, 
 not only to the employees, but to the Government as well. 
 
 The records should eventually prove of great interest to the in- 
 surance companies in this country as well as to the public, for on them 
 mortality tables of exceptional reliability might be constructed. 
 
 PROVISION LIMITING OPERATION OF PLAN TO DISTRICT OF COLUMBIA. 
 
 The operation of the plan is limited in the proposed bill, for rea- 
 sons explained in the chapter entitled " Cost of plan," to the classi- 
 fied civil service in the District of Columbia. Section 15 will be 
 found on page 214. 
 
 PROVISION MAKING MONEYS OF BILL NONASSIGNABLE AND NONATTACHABLE. 
 
 A necessary provision in the bill is section 16, which reads as 
 follows : 
 
 Sec. 16. That none of the moneys mentioned in this act shall be assignable, 
 either in law or equity, or be subject to execution or levy by attachment, gar- 
 nishment, or other legal process. 
 
 PROVISION FOR ADMINISTRATION OF PLAN. 
 
 Section 17 of the proposed bill, which makes provision for the 
 cost of administering the plan, is discussed in the chapter entitled 
 " Cost of plan," on page 185. 
 
 ENACTING CLAUSE. 
 
 The final provision of the proposed bill is the enacting clause, 
 which reads as follows : 
 
 Sec. 18. That the Secretary of the Treasury is hereby authorized to perform, 
 or cause to be performed, any and all acts and to make such rules and regula- 
 tions as may be necessary and proper for the purpose of carrying the provi- 
 sions of this act into full force and effect. 
 
CHAPTER IV. 
 COST OF PLAN. 
 
 COST OF PUTTING PLAN INTO OPERATION UNDER PERKINS BILL. 
 
 Assuming that the proposed retirement plan is acceptable to Con- 
 gress, the most important thing to be considered is the cost of putting 
 it into operation. 
 
 The plan itself is self-sustaining and asks nothing of the Govern- 
 ment except the care and investment of the employees' savings. If 
 the present civil service could be wiped out entirely and a fresh list 
 of appointments made to-morrow, this savings and annuity plan 
 might go into full operation without any appropriation from the 
 Treasury except that necessary to cover the cost of keeping the ac- 
 counts. Part I of the plan might indeed be put into immediate op- 
 eration without Part II and the Government's help not be asked, but 
 that would mean postponing the solution of the superannuation 
 problem for a full generation. In that case benefits resulting to the 
 service from the plan would only begin to be apparent in about 30 
 years, when the old and middle-aged persons now in the service would 
 have passed away. The ideal solution of the problem, however, is to 
 require employees to begin at once to save for their own annuities, 
 and at the same time to retire, under the provisions of the bill, all 
 those who are now at the retirement age. 
 
 The one difficulty in the way of doing this is the necessity of pro- 
 viding money for the retirement of those already grown old in the 
 service. If the plan were put into effect immediately there is a con- 
 siderable body of old people, of 70 years of age and over, who should 
 be retired at once, there are others 69 years of age who would have 
 only one year of monthly deductions from salary to contribute toward 
 the purchase of an annuity, there are others 68 years of age who 
 would have only two years' time for accumulating the necessary sum, 
 and so on down to those employees whose term of service begins with 
 the enactment of the plan, each lacking something, according to the 
 length of time he had served before the passage of the bill, toward 
 the sum required to buy the desired annuity. The only way in which 
 these persons could be retired would be through the appropriation 
 
 155 
 
156 RETIREMENT OP SUPERANNUATED CIVIL-SEKVICE EMPLOYEES. 
 
 from some source of a sum sufficient to make up the difference be- 
 tween their own savings and the amount required to purchase their 
 annuities. The annual sum necessary would gradually increase for 
 a few years, reaching its maximum about 30 years after the passage 
 of the bill, but a few years after that the amount each year would 
 fall off very rapidly until in about 50 years, when practically all now 
 in the service would be dead, there would be no more need of appro- 
 priations. The plan would then be self-sustaining, and the condition 
 of the civil service, so far as superannuation is concerned, nearly 
 what it would be if a clean sweep of the service could be made and 
 the plan inaugurated to-morrow with a complete list of new ap- 
 pointees. 
 
 Experience of New Zealand. 
 
 This difficulty was clearly perceived by the framers of the public 
 superannuation act recently passed in New Zealand, as shown by the 
 following press comment: 
 
 Hitherto, no comprehensive scheme for the humane and equitable treatment 
 during infirmity and old age of the servants of the State has been in operation 
 in New Zealand, and critics of public affairs have complained of what they 
 considered a glaring defect in the national life of the Dominion. But these 
 critics had not fully realized the difficulties which presented themselves in the 
 way of an application of the pension idea which would be at once financially 
 sound and fair in its operation. As the Premier (the Rt. Hon. Sir Joseph G. 
 Ward) pointed out in the course of a debate on the bill, the civil service in 
 New Zealand is old compared with the age of the country, and it was because 
 of that fact that there was a supreme difficulty on the part of the Government 
 in putting on the statute looks a superannuation act J/O years after some of 
 the men had joined the service, the incidence of which was light in its burden 
 upon members of the service.* 
 
 It is exactly the difficulty that confronts those who would devise 
 a plan of retirement for the civil employees of the United States 
 which shall be " at once financially sound and fair in its operation." 
 
 The difficulty was met in New Zealand in the only way that can 
 be devised without injustice to the whole body of employees, that is, 
 by appropriation from the Government. While the New Zealand 
 plan goes much farther than anything suggested in the plan under 
 discussion in this report in the way of benefits (including benefits to 
 widows and orphans), and has departed widely, in certain respects, 
 from the savings bank idea, the necessity of keeping entirely separate 
 the annuities paid on services rendered after the adoption of the plan 
 and the annuities paid on services rendered prior to the adoption of 
 the plan was clearly perceived, as shown by the following comments 
 on their superannuation act: 
 
 The pensions are liberal, and a scheme of this description, applying to present 
 officers, many of whom can retire immediately on very fair pensions, must of 
 
 » See The Insurance Record, London, Feb. 21, 1908. 
 
RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 157 
 
 necessity entail a heavy liability on the part of any Government. The favorite 
 method, however (vide New South Wales and Cape Colony civil-service 
 schemes), has been to ignore this liability and to go on paying the pensions of 
 the old men who retire, out of the contributions of the young men who join the 
 scheme, until the funds are exhausted, and the outlay for pensions exceeds the 
 income from contributions. The actuary, Mr. Morris Fox, has made the reck- 
 lessness of this method quite apparent in his comprehensive reports, and the 
 Government has agreed to start the scheme with an annual payment of £20,000, 
 the subsidy to be increased by such further amounts as will be sufficient to pay 
 the difference between the pensions falling due and the amount of pension the 
 contributions would have actually purchased. (For example, if an old servant 
 retires on £400 n year while his contributions would only have purchased £10, 
 the fund pays the £10, and the Government finds the balance, £390 per annum.) 
 The contributions of the younger members will therefore be accumulated at 
 compound interest to help provide their pensions when they become payable, 
 and will not be absorbed by meeting more immediate liabilities; the cost of 
 providing current pensions being borne by the present taxpayers and not by 
 posterity. If the scheme were commenced without contributions, the pensions 
 falling due would be the measure of the Government's annual liability, and by 
 meeting this liability (or rather the portion not paid for by the contributor) at 
 once. Sir Joseph Ward has made a fair division of the annual outlay between 
 present and future taxpayers. It is this simple, but ingenious, financial 
 arrangement which differentiates the scheme from all others with which we 
 are familiar, and the result is threefold ; the solvency of the fund is secured, 
 the present strain on the exchequer is the minimum compatible with soundness, 
 and only a fair share of the liability is transferred to posterity. The Govern- 
 ment is to be congratulated accordingly on having adopted this important 
 actuarial recommendation.^ 
 
 The necessity for keeping separate accrued and future liabilities 
 was indeed well brought out in Mr. Fox's reports. There seems to 
 have been no thought in his mind but that the whole of the liability 
 for back services should be borne by the Government, a point which 
 does not appear to have been questioned by the Government. As for 
 future liabilities, it was impracticable, in view of the generous bene- 
 fits provided under the scheme, for the employees to carry them alone 
 and the help of the Government was expected with them also, but 
 Mr. Fox insisted on the importance of reserving and accumulating 
 the contributions to meet the contributors' portion of liability and 
 not using them, in earlier years, to pay other claims which had not 
 been provided for by contributions, namely, pensions to persons 
 already in the service at the time of the establishment of the plan.^ 
 
 Cost Dependent on Number of Employees Included. 
 
 The cost of putting the proposed plan into operation depends, of 
 course, entirely on the number of employees to whom the benefits of 
 the plan are extended. If it were confined to the employees of the 
 
 iSee The Review (Sydney), Feb. 29, 1908. 
 
 2 See Civil Service Retirement in Great Britain and New Zealand (Senate Doc. 200, pp. 
 234-235). 
 
158 EETIEEMENT OF SUPEEANNUATED CIVIL-SEEVICE EMPLOYEES. 
 
 District of Columbia only it would cost very much less than if ex- 
 tended to the entire classified service, since the number of classified 
 employees in the District is only 23,254 as compared with that of 
 170,228 included in the entire service. At the same time, as super- 
 annuation is very much greater in the District than it is outside the 
 District, the need of a retirement plan is much more urgent in the 
 District than it is outside. Census Bulletin 94 not only emphasizes 
 the fact that superannuation among civil servants in the District is 
 greatly in excess of superannuation among civil servants outside the 
 District, but it also brings out in a general way that it is much 
 greater among the civil servants in the District than it is among 
 breadwinners throughout the country. 
 
 The number of Government employees at least 65 years of age is 6,523. Of 
 this number 1,852 are employed in the District of Columbia, and 4,671 elsewhere. 
 Although less numerous in the District than elsewhere, employees of advanced 
 age form a much larger proportion of the force in the District than they do of 
 the force elsewhere. In the District practically one Government employee in 
 14 is at least 65 years of age, while elsewhere the corresponding figures are but 
 about one in 34. 
 
 Whether these figures represent any special tendency for Government em- 
 ployees to remain in service after persons in other walks of life would have 
 retired, is, of course, the Interesting question. Perhaps some light may be 
 thrown upon it by comparing the age distribution of the Government employees 
 in the District * * * 25 years of age and over with that of the breadwin- 
 ners 25 years of age and over reported at the census of 1900. 
 
 In the District of Columbia ***!() pej. ^ent of the male employees 25 
 years of age and over are at least 65. For the breadwinners in general the 
 corresponding percentage is 6.3.i 
 
 The advisability of confining the proposed plan, in the beginning, 
 to the District of Columbia can be urged not only on the grounds of 
 less cost and greater gain where the need is greatest, but on the 
 general principle that it is desirable to proceed slowly in the inaugu- 
 ration of new measures. The plan could gradually be extended by 
 Congress to various classes of employees, as the wisdom of doing so 
 was proved. In the proposed bill, section 15 reads as follows : 
 
 Sec. 15. That the provisions of this act shall apply only to the classified civil 
 service of the District of Columbia, which is hereby defined to include all officers 
 and employees in the executive civil service of the United States in the District 
 of Columbia, except persons appointed by the President and confirmed by the 
 Senate, and unskilled laborers. No person serving in a position excepted from 
 examination or registration as defined in the civil-service rules shall be included 
 within the provisions of this act unless he has served in a competitive position 
 for at least one year. Whenever any person becomes separated from the classi- 
 fied service by reason of appointment into the unclassified service, such sepa- 
 ration shall not operate to take him out of the provisions of this act. The 
 President shall have power, in his discretion, to exclude from the operation of 
 this act any group of employees whose tenure of office is intermittent or of un- 
 certain duration. 
 
 iSee Census Bulletin 04, pp. 12, 13. 
 
EETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 159 
 Two Calcttlations of Maximum C5ost for Entire Classified Service Agree. 
 
 Two calculations have been made of the cost of putting the plan 
 into operation throughout the service. They virtually agree. The 
 amounts of the two sums are different, but proportionately they are 
 the \-ame. 
 
 THE first calculation. 
 
 The first calculation was made under the direction of Mr. Benedict 
 D. Flynn, assistant actuary of the Travelers Insurance Co., Hartford, 
 Conn., for the Committee on Department Methods and was based 
 on Table 67 of Census Bulletin 12, entitled " The Executive Civil 
 Service of the United States," covering the classified employees as of 
 June 30, 1903. The total number of employees included in that cal- 
 culation was 103,030, and the maximum cost of paying them annuities 
 for past services was found to amount to $66,985,778 in the course of 
 67 years, as shown by the following table : 
 
 Table XXVII. — Showing maximum cost of annuities for hack services for 
 
 103,030 employees. 
 
 [Based on census of employees as of June 30, 1903.] 
 
 Year. 
 
 Amount of 
 appropria- 
 tion. 
 
 Year. 
 
 Amount of 
 appropria- 
 tion. 
 
 Year. 
 
 Amount of 
 appropria- 
 tion. 
 
 1907 
 
 $725, 110 
 811,840 
 908,188 
 1,025,293 
 1,157,181 
 1,258,725 
 1,370,710 
 1,466,424 
 1,526,551 
 1,570,768 
 1,579,132 
 1,564,974 
 1,550,742 
 1,534,636 
 1,531,851 
 1,612,159 
 1,554,679 
 1,546,866 
 1,550,718 
 1,555,588 
 1,571,682 
 1,589,167 
 1,617,302 
 1,663,981 
 
 1931 
 
 $1,699,374 
 
 1,713,035 
 
 1,724,385 
 
 1,734,603 
 
 1,736,047 
 
 1,744,512 
 
 1,746,561 
 
 1,736,974 
 
 1,718,542 
 
 1,684,723 
 
 1,635,423 
 
 1,568,188 
 
 1,492,830 
 
 1,406,199 
 
 1,314,000 
 
 1,211,837 
 
 1,103,182 
 
 990,583 
 
 889,324 
 
 772,735 
 
 669, 126 
 
 572,770 
 
 484,069 
 
 403,305 
 
 1955 
 
 $331,667 
 269,380 
 216,046 
 170,947 
 133,347 
 102, 450 
 77,434 
 57 499 
 
 1908 
 
 1932 
 
 1956 
 
 1909 
 
 1933 
 
 1957. 
 
 1910 
 
 1934 
 
 1958 
 
 1911 
 
 1935 
 
 1959 
 
 1912 
 
 1936 
 
 1960 
 
 1913 
 
 1937 
 
 1961 
 
 1914 
 
 1938 
 
 1962 
 
 1915 
 
 1939 
 
 1963 
 
 41 884 
 
 1916 
 
 1940 
 
 1964 
 
 29,877 
 
 1917 
 
 1941 
 
 1965 
 
 20, 829 
 14 152 
 
 1918 
 
 1942 
 
 1966 
 
 1919 
 
 1943 
 
 1967 
 
 9,354 
 5 971 
 
 1920 
 
 1944 
 
 1968 
 
 1921...'. 
 
 1945 
 
 1969 
 
 3,697 
 
 1922 
 
 1946 
 
 1970 
 
 2,199 
 
 1923 
 
 1947 
 
 1971 
 
 1 251 
 
 1924 
 
 1948 
 
 1972 
 
 679 
 
 1925 
 
 1949 
 
 1973 
 
 34C 
 
 1926 
 
 1950 
 
 1974 
 
 163 
 
 1927 
 
 1951 
 
 Total 
 
 
 1928 
 
 1952 
 
 1953 
 
 66, 985, 778 
 
 1929 
 
 
 
 1930 
 
 1954 
 
 
 
 
 
 THE SECOND CALCULATION. 
 
 The second calculation, which was made under the direction of 
 the author by the Bureau of the Census, was based on cards used in 
 the compilation of Census Bulletin 94, entitled " Statistics of Em- 
 ployees of the Executive Civil Service of the United States," covering 
 the classified employees as of June 30, 1907. The total number of 
 employees included in this most recent inquiry was 170,228, and the 
 
160 EETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 maximum cost of paying them annuities for past services was found 
 to amount to $130,581,273, in the course of the next 78 years, as 
 shown by the following table : 
 
 Table XXVIII. — Showing maximum cost of annuities for hack services for 
 
 170,228 employees. 
 
 [Based on census of employees as of June 30, 1907.] 
 
 Aggregate annuities payable quarterly. 
 
 Years after the introduction of the plan. 
 
 Less than 1 year. 
 1 year. 
 
 2 years... 
 
 3 years . . . 
 
 4 years . . . 
 
 5 years... 
 
 6 years... 
 
 7 years . . . 
 
 8 years . . . 
 
 9 years . . . 
 
 10 years . . 
 
 11 years.. 
 
 12 years.. 
 
 13 years.. 
 
 14 years.. 
 
 15 years . . 
 
 16 years.. 
 
 17 years . . 
 
 18 years . . 
 
 19 years . . 
 
 20 years.. 
 
 21 years.. 
 
 22 years . . 
 
 23 years . . 
 
 24 years.. 
 
 25 years . . 
 
 26 years.. 
 
 27 years . . 
 
 28 years . . 
 
 29 years.. 
 
 30 years . . 
 
 31 years., 
 
 32 years. 
 
 33 years . 
 
 34 years. 
 
 35 years. 
 
 36 years . 
 
 37 years . 
 
 38 years . 
 
 39 years . 
 
 40 years . 
 
 41 years . 
 
 42 years . 
 
 43 years . 
 
 44 years . 
 
 45 years . 
 
 46 years . 
 
 47 years . 
 
 48 years . 
 
 49 years . 
 
 50 years . 
 
 51 years . 
 
 52 years . 
 
 53 years . 
 
 54 years . 
 
 55 years . 
 
 56 years . 
 
 57 years . 
 
 58 years . 
 69 years . 
 60 years . 
 
 121, 795 
 261,819 
 390,485 
 556, 632 
 705,135 
 861,499 
 003,086 
 129, 118 
 252, 506 
 317,860 
 392,028 
 441,271 
 491,484 
 559, 337 
 621,035 
 679, 979 
 726, 937 
 791,401 
 871,945 
 940,921 
 047, 310 
 138, 272 
 235, 543 
 323, 097 
 390, 712 
 
 442. 268 
 469, 245 
 481, 754 
 495, 463 
 483, 861 
 454,704 
 419, 266 
 373,275 
 314,099 
 232, 814 
 135,067 
 021,176 
 901,416 
 767,554 
 618, 430 
 
 , 466, 544 
 
 302,036 
 
 !, 132, 720 
 
 964, 236 
 
 792, 997 
 
 618, 516 
 
 ', 449, 172 
 
 .283,841 
 
 , 125, 133 
 
 977, 446 
 
 840, 125 
 
 714,958 
 
 602, 139 
 
 502, 310 
 
 415,013 
 
 339, 457 
 
 274,814 
 
 220,096 
 
 174. 269 
 136,301 
 105, 195 
 
 To general 
 employees 
 retiring at 
 age of 70. 
 
 To letter 
 carriers and 
 rural car- 
 riers retir- 
 ing at age 
 of 65. 
 
 $706, 290 
 
 803, 6C0 
 
 892,056 
 
 1,020,092 
 
 1, 123, 599 
 
 1,249,851 
 
 1, 358, 948 
 
 1,449,713 
 
 1,532,090 
 
 1,553,682 
 
 1,577,259 
 
 1, 570, 667 
 
 1, 556, 937 
 
 1,545,965 
 
 1, 537, 544 
 
 1,511,480 
 
 1,485,348 
 
 1, 465, 143 
 
 1,456,133 
 
 1,438,410 
 
 1,465,515 
 
 1,482,258 
 
 1,508,111 
 
 1,530,210 
 
 1,549,001 
 
 1, 548, 476 
 
 1, 544, 175 
 
 1,538,943 
 
 1,543,358 
 
 1, 546, 149 
 
 1,547,352 
 
 1,552,364 
 
 1,561,293 
 
 1,564,071 
 
 1,551,927 
 
 1,529,148 
 
 1,498,314 
 
 1, 463, 090 
 
 1,421,790 
 
 1,367,819 
 
 1,313,333 
 
 1,245,255 
 
 1, 169, 589 
 
 1,094,285 
 
 1,014,722 
 
 927, 968 
 
 842, 132 
 
 754,800 
 
 667, 842 
 
 584, 828 
 
 505, 410 
 
 431,711 
 
 364, 316 
 
 304, 260 
 
 251,508 
 
 205, 707 
 
 166, 464 
 
 133, 232 
 
 105, 399 
 
 82, 353 
 
 63, 495 
 
 $156, 449 
 
 187,943 
 
 217, 500 
 
 246, 545 
 
 273, 947 
 
 294, Oil 
 
 312,044 
 
 326, 639 
 
 347,075 
 
 371,103 
 
 394, 799 
 
 424, 154 
 
 459,273 
 
 503, 673 
 
 542,928 
 
 597,995 
 
 648, 186 
 
 708,207 
 
 776, 330 
 
 839, 736 
 
 892, 680 
 
 940, 521 
 
 989,799 
 
 1,036,572 
 
 1, 072, 848 
 
 1,122,372 
 
 1,154,148 
 
 1, 178, 888 
 
 1, 197, 461 
 
 1,197,318 
 
 1, 188, 837 
 
 1, 172, 208 
 
 1, 146, 978 
 
 1, 114, 770 
 
 1,079,298 
 
 1,040,360 
 
 994,292 
 
 946, 731 
 
 892,842 
 
 836, 651 
 
 778,416 
 
 720, 110 
 
 662, 490 
 
 602, 976 
 
 542. 571 
 
 483, 713 
 
 426, 686 
 
 372,822 
 
 322,910 
 
 277, 860 
 
 237, 479 
 
 201,518 
 
 169, 715 
 
 141,797 
 
 117,483 
 
 96, 476 
 
 78, 473 
 
 63, 182 
 
 50, 321 
 
 39, 605 
 
 30,765 
 
BETIKEMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 161 
 
 Table XXVIII. — Showing maximum cost of annuities for back services for 
 170,228 employees — Continued, 
 
 Years after the introduction of the plan. 
 
 Aggregate annuities payable quarterly. 
 
 Total. 
 
 To general 
 employees 
 retiring at 
 age of 70. 
 
 To letter 
 carriers and 
 rural car- 
 riers retir- 
 ing at age 
 of 65. 
 
 To railway 
 
 postal 
 clerks retir- 
 ing at age 
 
 of 60. 
 
 61 years 
 
 62 years 
 
 63 years 
 
 64 years 
 
 65 years 
 
 66 years 
 
 67 years 
 
 68 years 
 
 69 years 
 
 70 years 
 
 71 years 
 
 72 years 
 
 73 years 
 
 74 years 
 
 75 years 
 
 76 years 
 
 77 years 
 
 78 years 
 
 Total 
 
 80, 036 
 
 59, 950 
 
 44, 149 
 
 31,914 
 
 22, 601 
 
 15, 645 
 
 10, 562 
 
 6,937 
 
 4,413 
 
 2,709 
 
 1,600 
 
 902 
 
 483 
 
 248 
 
 124 
 
 54 
 
 23 
 
 6 
 
 48,258 
 
 36,114 
 
 26, 576 
 
 19,206 
 
 13, 608 
 
 9,432 
 
 6,386 
 
 4,212 
 
 2,700 
 
 1,677 
 
 1,007 
 
 581 
 
 320 
 
 171 
 
 89 
 
 42 
 
 18 
 
 6 
 
 23, 568 
 
 17, 777 
 
 13, 181 
 
 9,588 
 
 6,830 
 
 4,752 
 
 3,219 
 
 2,117 
 
 1,344 
 
 819 
 
 477 
 
 264 
 
 137 
 
 66 
 
 30 
 
 12 
 
 5 
 
 8,210 
 
 6,059 
 
 4,392 
 
 3,120 
 
 2,163 
 
 1,461 
 
 957 
 
 608 
 
 369 
 
 213 
 
 116 
 
 67 
 
 26 
 
 11 
 
 5 
 
 130,581,273 
 
 69,547,243 36,325,671 24,708,359 
 
 METHOD FOLLOWED IN PEEPARING TABLES OF COST. 
 
 The method followed in calculating the maximum cost after the 
 number of employees to be included in the calculations was de- 
 termined is illustrated by Tables XXIX and XXX, which were 
 prepared in the course of making the last calculation. These tables 
 show how the data were drawn off and the percentages of salaries 
 determined for all employees included in the estimate. The total 
 amount of salaries for each age to be used in determining the annui- 
 ties for this age was thus obtained. These totals were then dis- 
 counted to age 70 according to the probability of living based upon 
 the American Experience Table of Mortality. The total annuity 
 payments for each year for the remaining years of life after age 70 
 were then obtained by discounting the above-discounted totals accord- 
 ing to the probability of living based upon the Combined or Actu- 
 aries' Experience Table of Mortality. 
 74196°— S. Doc. 745, 61-3 11 
 
162 RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 Table XXIX. — Shoicing the number of general employees 65 years of age, 
 each group, and the annuities to which those employees would be entitled if 
 service. 
 
 
 $600 
 
 $720 
 
 $840 
 
 $900 
 
 $1,000 
 
 $1200 
 
 $1,400 
 
 Years of service. 
 
 (U 
 
 s 
 
 1 
 
 < 
 
 2; 
 
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 o 
 
 "5 
 3 
 
 a 
 
 3 
 o 
 
 a 
 
 'A 
 
 o 
 
 
 o 
 
 S 
 < 
 
 (-4 
 
 § 
 
 % 
 6 
 
 3 
 
 2; 
 
 1 
 o 
 
 a 
 <5 
 
 Total 
 
 113 
 
 $67,800 
 
 69 
 
 $49, C80 
 
 29 
 
 $24,360 
 
 66 
 
 S59, 400 
 
 109 
 
 $109,000 
 
 175 
 
 5210,000 
 
 76 
 
 $106,400 
 
 Less than 1 year. . 
 
 4 
 4 
 7 
 5 
 1 
 3 
 2 
 3 
 5 
 4 
 3 
 1 
 5 
 11 
 3 
 3 
 1 
 4 
 2 
 2 
 1 
 3 
 2 
 
 2,400 
 2,400 
 4,200 
 3,000 
 
 600 
 1,800 
 1,200 
 1,800 
 3,000 
 2,400 
 1,800 
 
 600 
 3,000 
 6,600 
 1,800 
 1,800 
 
 600 
 2,400 
 1,200 
 1,200 
 
 600 
 1,800 
 1,200 
 
 
 
 1 
 
 840 
 
 
 
 
 
 
 
 
 
 2 
 2 
 3 
 3 
 2 
 1 
 3 
 1 
 4 
 2 
 1 
 
 1,440 
 1,440 
 2, ICO 
 2, ICO 
 1,440 
 
 720 
 2, ICO 
 
 720 
 2,880 
 1,440 
 
 720 
 
 4 
 
 900 
 1,800 
 
 900 
 3,600 
 
 900 
 
 900 
 
 1 
 
 1 
 1 
 2 
 1 
 3 
 1 
 S 
 6 
 7 
 3 
 3 
 7 
 6 
 5 
 6 
 3 
 3 
 3 
 3 
 1 
 5 
 4 
 1 
 8 
 2 
 1 
 
 1,000 
 1,000 
 1,000 
 2,000 
 1,000 
 3,000 
 1,000 
 5,000 
 6,000 
 7,000 
 3,000 
 3,000 
 7,000 
 6,000 
 5,000 
 6, 000 
 3,000 
 3,000 
 3,000 
 3,000 
 1,000 
 5,000 
 4,000 
 1,000 
 8,000 
 2,000 
 1,000 
 
 2 
 3 
 2 
 3 
 
 7 
 
 2,400 
 3,600 
 2,400 
 3,600 
 8,400 
 
 
 
 
 3 
 2 
 
 1 
 
 2,520 
 
 1,680 
 
 840 
 
 
 
 
 1 
 1 
 
 1 
 1 
 1 
 3 
 3 
 1 
 
 1,400 
 1,400 
 1,400 
 1,400 
 1,400 
 4,200 
 4,200 
 1,400 
 
 4 years 
 
 
 
 
 
 
 
 
 4 
 5 
 9 
 6 
 4 
 9 
 9 
 6 
 3 
 6 
 6 
 2 
 6 
 7 
 7 
 4 
 2 
 9 
 8 
 4 
 2 
 2 
 
 4,800 
 6,000 
 
 10,800 
 7,200 
 4,800 
 
 10,800 
 
 10,800 
 7,200 
 3,600 
 7,200 
 7,200 
 2,400 
 7,200 
 8,400 
 8,400 
 4,800 
 2,400 
 
 10,800 
 9, 600 
 4,800 
 2,400 
 2,400 
 
 
 
 
 
 900 
 6,300 
 
 900 
 2,700 
 6,300 
 3,600 
 2,700 
 
 9 years 
 
 3 
 2 
 1 
 2 
 2 
 1 
 
 2,520 
 
 1,680 
 
 840 
 
 i,eso 
 
 1,C80 
 840 
 
 
 
 
 1 
 2 
 2 
 1 
 2 
 4 
 4 
 
 1,400 
 2,800 
 2,800 
 1,400 
 2,800 
 5,600 
 5,600 
 
 13 years 
 
 4 
 6 
 6 
 
 2,880 
 4,320 
 4,320 
 
 
 
 
 2 
 
 1 
 1 
 
 1 
 
 1,680 
 840 
 840 
 840 
 
 
 3,600 
 
 3,600 
 
 900 
 
 
 2 
 1 
 1 
 2 
 
 4 
 
 1,440 
 
 720 
 
 720 
 
 1,440 
 
 2,880 
 
 18 years 
 
 
 
 
 1,800 
 
 3 
 
 1 
 3 
 
 4,200 
 1,400 
 4,200 
 
 
 
 
 
 2 
 
 1,680 
 
 
 
 
 3 
 2 
 
 1 
 2 
 
 2, ICO 
 
 1,440 
 
 720 
 
 1,440 
 
 
 
 
 4 
 5 
 2 
 1 
 1 
 1 
 4 
 2 
 3 
 4 
 1 
 
 2,400 
 
 3,000 
 
 1,200 
 
 600 
 
 600 
 
 COO 
 
 2,400 
 
 1,200 
 
 1,800 
 
 2,400 
 
 600 
 
 
 
 2 
 2 
 3 
 1 
 
 2 
 3 
 
 1 
 
 1,800 
 1,800 
 2,700 
 
 900 
 1,800 
 2,700 
 
 900 
 
 1 
 4 
 3 
 2 
 4 
 
 1,400 
 5,600 
 4,200 
 2,800 
 5,600 
 
 25 vears 
 
 1 
 
 840 
 
 2G years 
 
 
 
 
 
 
 
 
 
 
 1 
 2 
 
 720 
 1,440 
 
 
 
 
 
 30 years 
 
 2 
 
 1,680 
 
 4 
 
 4,000 
 
 2 
 2 
 3 
 2 
 5 
 2 
 3 
 1 
 2 
 2 
 2 
 5 
 2 
 1 
 2 
 
 2,400 
 2,400 
 3,600 
 2,400 
 6,000 
 2,400 
 3,600 
 1,200 
 2,400 
 2,400 
 2,400 
 6,000 
 2,400 
 1,200 
 2,400 
 
 2 
 2 
 2 
 1 
 2 
 2 
 
 2,800 
 2,800 
 2,800 
 1,400 
 2,800 
 2,800 
 
 
 
 I 
 
 720 
 1,440 
 
 
 
 
 
 2 
 2 
 
 2,000 
 2,000 
 
 33 years 
 
 
 
 2 
 
 1,800 
 
 
 
 
 
 
 
 
 1 
 1 
 
 900 
 900 
 
 2 
 
 1 
 
 2,000 
 1,000 
 
 
 1 
 
 600 
 
 
 
 
 
 
 
 
 
 
 1 
 1 
 2 
 3 
 1 
 1 
 2 
 1 
 3 
 
 1,400 
 1,400 
 2,800 
 4,200 
 1,400 
 1,400 
 2,800 
 1,400 
 4,200 
 
 
 
 
 1 
 
 720 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 1 
 2 
 1 
 
 600 
 
 1,200 
 
 60D 
 
 2 
 
 1,440 
 
 1 
 
 840 
 
 
 
 2 
 1 
 2 
 
 2,000 
 1,000 
 2,000 
 
 
 
 
 
 
 
 
 
 1 
 
 900 
 
 
 1 
 
 720 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 2 
 
 2,400 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 1,000 
 
 
 
 1 
 
 1,400 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 1 
 
 720 
 
 
 
 
 
 
 
 
 
 
 
 Not reported 
 
 1 
 
 COO 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 163 
 
 classified according to salary and years of service, the aggregate salaries of 
 retired immediately on 1 per cent of their present salaries for each year of 
 
 $1,600 
 
 11,800 
 
 $2,000 
 
 $2,500 
 
 Piecework. 
 
 Not re- 
 ported. 
 
 i3 
 "3 
 
 o 
 
 3 
 s> 
 o 
 
 i 
 
 12; 
 
 a 
 
 o 
 
 n 
 < 
 
 a) 
 
 .a 
 
 a 
 
 3 
 "A 
 
 "S 
 
 o 
 
 a 
 < 
 
 <a 
 
 .a 
 
 a 
 
 3 
 
 12; 
 
 ■4-3 
 CI 
 3 
 
 o 
 
 a 
 
 a 
 
 3 
 
 3 
 
 a 
 < 
 
 iz; 
 
 3 
 § 
 
 a 
 < 
 
 iz; 
 
 3 
 § 
 
 a 
 < 
 
 
 40 
 
 $64,000 
 
 49 
 
 $88,200 
 
 40 
 
 $80, 000 
 
 23 
 
 $57,500 
 
 5 
 
 $6,000 
 
 4 
 
 $4, 500 
 
 $926,840 
 
 
 $203,319.15 
 
 
 
 
 
 
 
 
 
 
 3,240 
 
 8,140 
 14, 560 
 14, 540 
 17,600 
 16, 940 
 
 7,220 
 12,960 
 28,920 
 37, 100 
 26, 420 
 14,260 
 33,380 
 38,960 
 31, 560 
 20, 420 
 34, 280 
 35,780 
 23,960 
 22, 660 
 27,240 
 18,880 
 22,080 
 14, 560 
 25,440 
 38, 360 
 19,940 
 14,000 
 20, 100 
 12,620 
 26,920 
 
 8,400 
 17,520 
 17,740 
 21,500 
 19,900 
 13, 300 
 
 9,200 
 
 11,720 
 
 11,300 
 
 . 20,280 
 
 0.50 
 1.25 
 2.00 
 3.00 
 4.00 
 5.00 
 6.00 
 7.00 
 8.00 
 9.00 
 10.00 
 11.00 
 12.00 
 13.00 
 14.00 
 15.00 
 16.00 
 17.00 
 18.00 
 19.00 
 20.00 
 21.00 
 22.00 
 23.00 
 24.00 
 25.00 
 26.00 
 27.00 
 28.00 
 29.00 
 30.00 
 31.00 
 32.00 
 33.00 
 34.00 
 35.00 
 36.00 
 37.00 
 38.00 
 39.00 
 40.00 
 41.00 
 42.00 
 43.00 
 44.00 
 45.00 
 46.00 
 
 10.20 
 
 101. 75 
 
 291. 20 
 
 436. 20 
 
 704. 00 
 
 847. 00 
 
 433. 20 
 
 907. 20 
 
 2,313.60 
 
 3,339.00 
 
 2, 642. 00 
 
 1,568.60 
 
 4, 005. 60 
 
 5,064.80 
 
 4, 418. 40 
 
 3,063.00 
 
 5,484 80 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 1 
 
 2,000 
 
 
 
 
 
 
 
 
 
 
 
 1 
 
 2,500 
 
 
 
 
 900 
 
 
 
 
 
 1 
 
 2,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 1 
 
 1 
 
 1,800 
 1,800 
 
 
 
 
 
 
 
 
 
 3 
 
 4,800 
 
 
 
 1 
 
 2,500 
 
 
 
 
 
 1 
 
 2,000 
 
 
 
 
 
 2 
 1 
 
 1 
 1 
 
 1 
 
 3,200 
 1,000 
 1,600 
 1,600 
 1,C00 
 
 1 
 
 1,800 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 2 
 
 3,600 
 
 1 
 
 1 
 
 2,000 
 2,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 1 
 1 
 2 
 2 
 1 
 2 
 1 
 1 
 
 1,800 
 1,800 
 3,600 
 3, 600 
 1,800 
 3,600 
 1,800 
 1,800 
 
 1 
 1 
 
 2,500 
 2,500 
 
 
 
 
 
 
 
 
 
 
 
 3 
 
 1 
 1 
 1 
 1 
 1 
 
 4,800 
 1,600 
 1,600 
 1,600 
 1,600 
 1,600 
 
 2 
 2 
 1 
 1 
 1 
 
 4,000 
 4,000 
 2,000 
 2,000 
 2,000 
 
 
 
 
 
 1 
 1 
 
 1 
 
 2,500 
 2,500 
 2,500 
 
 
 
 
 
 6,082.60 
 4,312.80 
 4,305.40 
 5, 448. 00 
 3,964.80 
 4,857.60 
 3 348 80 
 
 
 
 
 1,400 
 
 
 
 
 1,200 
 
 
 1,200 
 
 
 
 2 
 
 4,000 
 
 
 
 
 1,200 
 
 
 
 2 
 
 1 
 
 3,200 
 1,600 
 
 1 
 1 
 
 1 
 
 1,800 
 1,800 
 1,800 
 
 
 
 
 1,000 
 
 1 
 1 
 1 
 1 
 1 
 1 
 1 
 1 
 
 2,000 
 2,000 
 2,000 
 2,000 
 2,000 
 2,000 
 2,000 
 2,000 
 
 
 
 
 1,200 
 
 6,105.60 
 9, 590. 00 
 5,184.40 
 3,780 00 
 
 2 
 
 5,000 
 
 
 
 1 
 
 1,600 
 
 
 
 
 
 1 
 2 
 
 1 
 2 
 
 1,800 
 3,600 
 1,800 
 3,600 
 
 1 
 
 1 
 
 2,500 
 2,500 
 
 
 
 
 
 1 
 3 
 2 
 
 1,600 
 4,800 
 3,200 
 
 
 
 
 
 5,628 00 
 
 
 
 
 
 3,659.80 
 8,076.00 
 2,604.00 
 6,606 40 
 
 1 
 
 2,500 
 
 
 
 
 
 
 
 
 
 3 
 
 4, 800 1 
 
 1,800 
 1,800 
 3,600 
 5,400 
 3,600 
 
 
 
 
 
 
 
 
 1 
 2 
 3 
 2 
 
 1 
 3 
 
 1 
 1 
 
 2,000 
 6,000 
 2,000 
 2,000 
 
 1 
 1 
 
 2,500 
 2,500 
 
 
 
 
 
 5, 854. 20 
 
 
 
 
 
 
 
 7,310 00 
 
 
 3,200 
 1,000 
 1,600 
 
 1 
 
 1,200 
 
 
 
 6,965.00 
 4, 788. 00 
 
 
 
 
 
 2 
 
 5,000 
 
 
 
 
 
 3,404.00 
 4, 453. 60 
 4,407.00 
 8,112.00 
 
 1,600 
 1,600 
 1.600 
 
 2 
 
 3,600 
 
 1 
 1 
 
 2,000 
 2,000 
 
 
 
 
 
 1 
 
 2,500 
 
 
 
 
 
 4 
 
 7,200 
 1,800 
 5,400 
 3,600 
 1,800 
 1,800 
 1,800 
 
 
 
 
 
 1,600 
 3,200 
 
 1 
 3 
 2 
 
 1 
 5 
 3 
 
 1 
 
 2,000 
 10,000 
 6,000 
 2,000 
 
 
 
 
 
 
 
 15, 000 
 29, 600 
 21,820 
 10, 100 
 6,000 
 6,700 
 
 6, 150. 00 
 12, 432. 00 
 9,382.60 
 4, 444. 00 
 
 1 
 3 
 
 1 
 
 2,500 
 7,500 
 2,500 
 
 1 
 
 1,200 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 2, 700. 00 
 
 
 
 
 
 1 
 
 2,500 
 
 
 
 
 
 3,082.00 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 2,400 
 
 48.00 
 
 1, 152. 00 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 720 
 600 
 
 50.00 
 22.00 
 
 360. 00 
 
 
 
 
 
 
 
 
 
 
 
 
 
 132. 00 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
164 RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 Tarle XXX. — SJtotving the annuities that ivould he due all general employees 
 for each year of service, and the annuities due each age group the first year 
 the same annuities. 
 
 Present age of 
 annuitant. 
 
 Total . 
 
 years . . 
 years., 
 years . . 
 years . . 
 years., 
 years.. 
 years., 
 years., 
 years . . 
 years., 
 years., 
 years . . 
 years., 
 years . . 
 years., 
 years . . 
 years., 
 years . . 
 years., 
 years . . 
 years . . 
 years., 
 years . . 
 years., 
 years., 
 years . . 
 years . . 
 years., 
 years . . 
 years . . 
 years., 
 "years., 
 years . . 
 years'. 
 
 Annuity 
 if retired 
 imme- 
 diately. 
 
 $150 
 
 380 
 
 911 
 
 308 
 
 1,572 
 
 1,290 
 
 3, 223 
 
 4,491 
 
 2,000 
 
 8,277 
 
 7,340 
 
 8, 230 
 
 15,702 
 
 12,359 
 
 23, 750 
 
 28, 258 
 
 31,428 
 
 45,983 
 
 58, 208 
 
 05, 400 
 
 81,580 
 
 98,835 
 
 118,590 
 
 125, 220 
 
 170, 098 
 
 107,302 
 
 203, 319 
 
 •200, 837 
 
 207,790 
 
 210,039 
 
 172,373 
 
 185, 291 
 
 104, 207 
 
 104, 133 
 
 Annuity 
 at retire- 
 ment age. 
 
 SI 15, 130 
 114,958 
 148,388 
 139, 288 
 102, 185 
 158,042 
 153, 73() 
 155,057 
 119,005 
 125,001 
 108,022 
 105,363 
 
 Aggregate annuities payable quarterly. 
 
 Imme- 
 diately. 
 
 1 yiear. 
 
 2 years. 
 
 3 years. 
 
 4 years. 
 
 After the introduction of the plan when the youngest 
 annuitant will be one whose present age is— 
 
 70 
 
 $470, 860 
 
 97 
 
 290 
 
 718 
 
 255 
 
 1,324 
 
 1,111 
 
 2,794 
 
 3,939 
 
 1,825 
 
 7,403 
 
 6, 020 
 
 7,481 
 
 14, 433 
 
 11,394 
 
 22,032 
 
 20,307 
 
 29, 480 
 
 43,343 
 
 55,171 
 
 02,246 
 
 77,809 
 
 94, 068 
 
 69 
 
 $535,773 
 
 37 
 
 174 
 
 400 
 
 180 
 
 972 
 
 841 
 
 2,170 
 
 3,128 
 
 1,477 
 
 6,095 
 
 6, 535 
 
 6,343 
 
 12,396 
 
 9,903 
 
 19,362 
 
 23, 407 
 
 20,416 
 
 39, 171 
 
 50,252 
 
 57, 108 
 
 71,919 
 
 87, 909 
 
 110,458 
 
 68 
 
 $594,704 
 
 13 
 
 96 
 
 275 
 
 122 
 
 688 
 
 617 
 
 1,643 
 
 2,430 
 
 1,173 
 
 4,934 
 
 4,557 
 
 5,303 
 
 10,510 
 
 8,505 
 
 16, 829 
 
 20,570 
 
 23, 451 
 
 35, 100 
 
 45,415 
 
 52, 016 
 
 65,983 
 
 81,247 
 
 102, 934 
 
 110, 293 
 
 $680,061 
 
 4 
 
 47 
 
 151 
 
 78 
 
 465 
 
 437 
 
 1,206 
 
 1,840 
 
 911 
 
 3,918 
 
 3,689 
 
 4,306 
 
 8,787 
 
 7,211 
 
 14, 453 
 
 17,879 
 
 20, 009 
 
 31,160 
 
 40, 695 
 
 47,009 
 
 60, 100 
 
 74,541 
 
 95, 359 
 
 102, 780 
 
 142, 306 
 
 $749,066 
 
 20 
 75 
 
 47 
 
 298 
 
 296 
 
 853 
 
 1,351 
 
 690 
 
 3,044 
 
 2,930 
 
 3,534 
 
 7,235 
 
 6,029 
 
 12, 254 
 
 15, 355 
 
 17,912 
 
 27, 384 
 
 36, 127 
 
 42, 123 
 
 54,315 
 
 67, 895 
 
 87,779 
 
 95, 216 
 
 132, 009 
 
 133, 635 
 
 1 The original tables, of which this is an illustration, continue down to the age of the 
 youngest person now in the servica. 
 
RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 165 
 
 between the ages of 95 and 58^ if retired immediately on 1 per eent of salary 
 and each year thereafter during the first 12 years ^ if retired at the age of 10 on 
 
 Aggregate annuities payable quarterly. 
 
 5 years. 
 
 6 years. 
 
 7 years. 
 
 8 years. 
 
 9 years. 
 
 10 years. 11 years. 
 
 12 years. 
 
 After the introduction of the plan when the youngest annuitant will be one whose present age is— 
 
 65 
 
 64 
 
 63 
 
 62 
 
 61 
 
 60 
 
 59 
 
 58 
 
 $833,234 
 
 S905, 965 
 
 $966, 475 
 
 $1,021,393 
 
 $1,035,788 
 
 $1,051,506 
 
 $1,047,111 
 
 $1,037,958 
 
 
 
 
 
 
 
 
 
 8 
 32 
 26 
 
 178 
 
 190 
 
 577 
 
 956 
 
 507 
 
 2,305 
 
 2,276 
 
 2,806 
 
 5,857 
 
 4,964 
 
 10,246 
 
 13,019 
 
 15, 383 
 
 23,801 
 
 31,749 
 
 37,395 
 
 48, 670 
 
 61, 359 
 
 80,242 
 
 87,647 
 
 122,906 
 
 124, 532 
 
 155, 603 
 
 3 
 12 
 13 
 
 98 
 
 114 
 
 370 
 
 647 
 
 359 
 
 1,692 
 
 1,723 
 
 2,180 
 
 4,651 
 
 4,019 
 
 8,436 
 
 10, 885 
 
 13,042 
 
 20,441 
 
 27,595 
 
 32,863 
 
 43, 207 
 
 54, 982 
 
 72,800 
 
 80, 121 
 
 113,136 
 
 115,368 
 
 145,004 
 
 152,204 
 
 1 
 
 4 
 
 6 
 
 48 
 
 63 
 
 222 
 
 415 
 
 243 
 
 1,197 
 
 1,265 
 
 1,651 
 
 3,613 
 
 3,192 
 
 6,829 
 
 8,962 
 
 10, 904 
 
 17,331 
 
 23, 700 
 
 28,563 
 
 37, 970 
 
 48, 810 
 
 65,510 
 
 72, 690 
 
 103,422 
 
 106, 197 
 
 134,333 
 
 141,837 
 
 147,497 
 
 
 
 
 
 
 1 
 
 2 
 21 
 31 
 122 
 
 248 
 
 156 
 
 810 
 
 895 
 
 1,212 
 
 2,736 
 
 2,480 
 
 5,423 
 
 7, 255 
 
 8,978 
 
 14,490 
 
 20,094 
 
 24,531 
 
 33, 002 
 
 42,894 
 
 58,425 
 
 65,411 
 
 93,830 
 
 97,078 
 
 123, 655 
 
 131,399 
 
 137.450 
 
 148,764 
 
 
 
 
 
 1 
 8 
 13 
 
 60 
 
 136 
 
 93 
 
 519 
 
 605 
 
 858 
 
 2,009 
 
 1,878 
 
 4,213 
 
 5,761 
 
 7,268 
 
 11,931 
 
 16, 801 
 
 20,798 
 
 28, 343 
 
 37,282 
 
 51,599 
 
 58, 337 
 
 84, 434 
 
 88,075 
 
 113,037 
 
 120,954 
 
 127,, 335 
 
 1.38,631 
 
 114,809 
 
 
 
 
 3 
 
 5 
 
 26 
 
 67 
 
 51 
 
 311 
 
 388 
 
 580 
 
 1,422 
 
 1,379 
 
 3, ItiO 
 
 4,475 
 
 5,772 
 
 9,059 
 
 13,8.33 
 
 17,389 
 
 24, 030 
 
 32,019 
 
 45,089 
 
 51,522 
 
 75,. 303 
 
 79,255 
 
 102,553 
 
 110,5ti8 
 
 117,213 
 
 128,429 
 
 106, 989 
 
 119,986 
 
 1 
 
 2 
 
 10 
 
 29 
 
 25 
 
 171 
 
 232 
 
 372 
 
 962 
 
 976 
 
 2,342 
 
 3,388 
 
 4,484 
 
 7,670 
 
 11,199 
 
 14,318 
 
 20,091 
 
 27, 147 
 
 38,949 
 
 45, 022 
 
 66,506 
 
 70,684 
 
 92, 283 
 
 100,313 
 
 107,148 
 
 118,220 
 
 99,116 
 
 111,813 
 
 103,638 
 
 
 1 
 
 4 
 
 11 
 
 11 
 
 84 
 
 128 
 
 223 
 
 616 
 
 660 
 
 1,6.57 
 
 2,488 
 
 3,395 
 
 5,9.58 
 
 8,893 
 
 11,591 
 
 16,542 
 
 22, 698 
 
 33,227 
 
 38,891 
 
 58,115 
 
 62,426 
 
 82, 303 
 
 90, 268 
 
 
 97,211 
 
 
 
 108, 069 
 
 
 
 
 91,2.37 
 
 
 
 
 
 103, 585 
 
 
 
 
 
 
 96, 579 
 
 
 
 
 
 
 
 101,087 
 
 
 
 
 
 
 
 
 
 *The original tables are carried through 78 years, when, according to the mortality 
 table, the youngest person now in the service will be dead. Only 12 years are given as 
 an li lustration. 
 
166 KETIREMENT OF SUPEEANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 Comparison of Two Calculations. 
 
 At first glance the second calculation seems remarkably large when 
 compared with the earlier one, but the difference in the amounts is 
 readily accounted for, and the results are, in fact, when analyzed, 
 astonishingly similar, considering the differences in the data employed 
 in making the calculations. There are three reasons why the last 
 result should be larger than the first : 
 
 (1) The last calculation includes 67,198 more employees than does 
 the first. 
 
 (2) The last calculation is based on earlier ages of retirement, 60 
 and 65 having been adopted for two groups of employees, with 70 
 years for the third group, which naturally increases the cost above 
 the first calculation, based on only one age of retirement, that of 70 
 years. 
 
 (3) The last calculation is based on two mortality tables, the Com- 
 bined or Actuaries' Table and the American Experience Table. The 
 former, which was used in making the last part of the last calcu- 
 lation, shows a slightly longer expectation of life from age 70 than 
 the latter, which was employed as the basis for the whole of the first 
 calculation, and the use of the Combined or Actuaries' Table in con- 
 nection with the American Experience Table has therefore raised 
 the cost somewhat in the second calculation. 
 
 GEEATEK NUMBER OF EMPLOYEES INCLUDED IN LAST CALCULATION. 
 
 The greater number of people included in the last calculation is 
 explained by two facts, first, the increase in the size of the service, 
 owing both to the Government's enlarged activities and the growing 
 tendency to bring into the classified service new groups of employees; 
 and, second, the inclusion in the inquiry of persons not classified but 
 reported as classified, and also of persons reported as unclassified but 
 included as classified because investigation showed them to belong to 
 the classified service. 
 
 Not all the employees of the civil government of the United States 
 were included in these computations. On July 1, 1907, according to 
 the Official Kegister, the executive civil service, exclusive of the con- 
 sular and diplomatic service, furnished employment to 286,902 per- 
 sons. Of this number 101,028 were omitted from the statistics of 
 Census Bulletin 94. In a few instances this was because the returns 
 were received too late for tabulation, but more often it was because 
 certain classes of employees- are peculiar in some technical respect, 
 such as the character of their appointment or the method of their 
 compensation, and thus the inclusion of data concerning them would 
 have tended to destroy the comparability of the figures for classes 
 which are in technical respects alike. The most important of the 
 
EETIREMElsrT OF StrPERANlsrUATED CIVlL-SERVlCE EMPLOYEES. 167 
 
 classes omitted for the latter reason include 62,663 postmasters, 
 18,376 mechanics and laborers at navy yards and naval stations, 
 12,850 clerks in post offices not having free delivery, and 1,031 occa- 
 sional employees of the Weather Bureau. Data for 4,584 employees 
 of the Isthmian Canal Commission at work on the Isthmus were too 
 incomplete to be included. From this statement of the most im- 
 portant classes omitted from Bulletin 94 it will be seen that these 
 omissions did not prevent the use of the data collected for the bulle- 
 tin in computing the cost of annuities for back services under the pro- 
 posed plan, for the reason that it is not proposed to extend the plan 
 to those classes. 
 
 The first estimate was based on Table 67 of Census Bulletin 12, 
 covering the executive civil service as of June 30, 1903, and embraced 
 103,030 employees. In preparing the present estimate the cards used 
 in the preparation of Census Bulletin 94 showing the executive civil 
 service as of June 30, 1907, were used, and covered 170,228 employees. 
 
 Each of the 185,874 employees included in Bulletin 94 was repre- 
 sented in the Bureau of the Census by a tabulation card showing, 
 in addition to other matter, the age, years of service, rate of compen- 
 sation, and occupation of the employee. All the information was 
 thus available for calculating the maximum cost of annuities for 
 back services. In examining these cards to ascertain how many of 
 these employees in the executive civil service were also included in the 
 classified civil service, it was found that a considerable number of 
 employees did not understand their technical status in the civil 
 service and did not answer accurately the question as to whether they 
 were classified or unclassified. Charwomen, for instance, frequently 
 made the mistake of reporting themselves as classified. On the other 
 hand, a considerable number of railway postal clerks reported them- 
 selves, erroneously, as unclassified. This seems, in the latter case, in- 
 credible, because the railway postal clerks were one of the first large 
 groups of Government employees to be placed under civil service rules 
 and their status has never been changed. The error did, however, occur, 
 for the reason possibly that old clerks who came into the civil service 
 under blanket rule realized only that they had never taken an exami- 
 nation, and supposed, therefore, that they had not been classified. 
 From the cards it was impossible to tell the names of the individual 
 represented by the card except on tracing the number of the card 
 back to the original schedule made by the individual, but as it would 
 have required months of time to do this, it was decided to include the 
 cards of all employees who reported themselves as classified, and to 
 make an individual separation of the cards of those who reported 
 themselves as unclassified. 
 
 These decisions were regarded as being in harmony with the gen- 
 eral rule, pursued throughout the computations, that all doubtful 
 
168 RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 cases of whatsoever sort were to be decided in favor of the alternative 
 which would make the calculation of the cost of annuities for back 
 services a maximum figure. In accordance with this rule, 170,228 
 employees w ere included in the computation, 67,198 more individuals 
 than were taken account of in the earlier calculation. 
 
 The classes excluded from the two calculations are as follows : 
 
 Classes excluded from the first calculation. 
 
 Classified employees in the District of Columbia (retirement age, 70)— 22,273 
 Classified employees elsewhere than in the District of Columbia (retire- 
 ment age, 70) 102,464 
 
 124, 737 
 
 Less employees in the District of Columbia who had been in 
 the service less than one year 1, 781 
 
 Less employees elsewhere than in the District of Columbia who 
 
 had been in the service less than one year 19, 712 
 
 Less employees whose years of service were not reported 163 
 
 Less employees without salary 51 
 
 21,707 
 
 Number of persons included in the first estimate of cost of an- 
 nuities for back services 103, 030 
 
 Not all of the employees of the civil government were included in 
 the last calculation. Of the 286,902 persons shown in the Official 
 Register, 170,228 were included, as follows : 
 
 Classes excluded from the second calculation. 
 
 According to the Official Register of July 1, 1907, the executive civil 
 service, exclusive of the consular and diplomatic service, furnished 
 
 employment to 286, 902 
 
 In preparing the estimate of cost of annuities for back services, the 
 following groups of persons were omitted : 
 
 Groups included in Official Register, but omitted from 
 Bulletin 94 and present computation — 
 
 Postmasters 62, 663 
 
 Mechanics and laborers at navy yards and na- 
 val stations 18,376 
 
 ClM"ks in post offices not having free delivery 12, 850 
 
 Occasional employees of Weather Bureau 1, 031 
 
 Isthmian Canal employees on the Isthmus 4, 584 
 
 Other miscellaneous classes 1, 524 
 
 101, 028 
 
 Groups included in Official Register, and in Bulletin 
 94, but omitted from present computation — 
 
 Laborers, unskilled 7, 255 
 
 Janitors, scrubbers, cleaners, and charwomen 1, 532 
 
 Special agents, experts, appraisers, and commis- 
 sioners 850 
 
 Laborers, skilled 817 
 
 Guards 695 
 
EETIREMENT OF SUPEEANNUATED CIVIL-SERVICE EMPLOYEES. 169 
 
 In preparing tlie estimate of cost of annuities for bacii services, the following 
 groups of persons were omitted — Continued. 
 
 Groups included in OfBcial Register, and in Bulletin 
 94, but omitted from present computation — Cont'd. 
 
 Heads of local offices 502 
 
 Firemen 441 
 
 Cooks and baliers 371 
 
 Physicians and surgeons 254 
 
 Farmers 236 
 
 Domestics and waiters 201 
 
 Stewards and quartermasters 159 
 
 Heads of departments, bureaus, and independ- 
 ent offices 115 
 
 Other miscellaneous classes 2, 218 
 
 15,646 
 
 116, 674 
 
 Number of persons Included in the last estimate of cost of annui- 
 ties for back services 170, 228 
 
 EARLIER RETIREMENT AGES IN LAST CALCULATION. 
 
 The number of employees included in the calculation to be retired 
 at the various ages of retirement follows : 
 
 Railway postal clerks (retirement age 60) 13,894 
 
 Letter carriers and rural carriers (retirement age 65) 61,931 
 
 All other employees (retirement age 70) 94,403 
 
 Total 170,228 
 
 TEST OF ACCURACY OF TWO CALCULATIONS. 
 
 Having the total number of employees shown in the first calculation 
 (103,030) , the total number of emploj'ees shown in the second calcula- 
 tion (170,228), and the aggregate annuities payable to the first group 
 ($66,985,778) as a basis for the calculation, the aggregate annuities 
 that should be shown by the last calculation may be determined, 
 assuming, of course, that the first calculation is correct, that the age 
 distribution has remained the same, and that salaries on the average 
 have remained the same. 
 
 Since no interest factor was used in calculating the cost of the 
 annuities for back services, the expectation of life under the Ameri- 
 can Experience Table at the various retirement ages may be used 
 as the value of an annuity of $1, and by multiplying the number 
 of employees to be retired at the various ages by this value of an 
 annuity of $1 at the corresponding retirement age, and then dividing 
 the sum of these by the result of a similar computation covering the 
 employees included in the first calculation, a result will be obtained 
 which shows the ratio of the amount of total annuities payable for 
 past services under the first calculation to the amount the last cal- 
 culation should show. 
 
170 RETIEEMENT OP SUPERA]SrN"TJATED CIVIL-SEEVICE EMPLOYEES. 
 
 As the annuity payments under the last calculation are to be made 
 quarterly, first payment in three months after the emploj^ee reaches 
 the age of retirement, the annuity values (13.645, 10.845, and 8.415) 
 used in the first part of the following calculation, covering the last 
 estimate, are the curtate expectation of life for the respective retire- 
 ment ages of 60, 65, and 70, according to the Combined or Actuaries' 
 Table of Mortality, and correspond to annual payments when the first 
 payment is to be made in one year, with 0.375 added to cover the addi- 
 tional cost of annuity payments made quarterly, first payment in 
 three months, instead of at the end of the year. The first calculation 
 was based throughout on the American Experience Table of Mor- 
 tality, lx+§. first payment immediate, on the assumption that, on 
 the average, the employees would retire at the age of 70^ years. The 
 complete expectation of life under this table at the age of 70| is 
 approximately 8.25 years. The calculation may therefore be stated as 
 follows : 
 
 13, 894 X 13.645= 189,584 
 
 61, 931 X 10.845= 671,642 • 
 
 94, 403 X 8.415= 794,401 
 
 170, 228 1, 655, 627 
 
 103, 030 X 8.25 = 849,997 
 
 1, 655, 627H-849, 997= 1.948 
 
 1.948 X $66,985,778 $130, 488, 295 
 
 The last calculation shows a cost of 130, 581, 273 
 
 Difference $92, 978 
 
 This difference might be reduced by carrying the decimals out 
 farther, but since the difference is but slightly over seven one-hun- 
 dredths of 1 per cent, furth(;r refinement would seem to be a waste of 
 time. 
 
 Probable Cost Much Less than Maximum. 
 
 This total maximum sum of $130,581,273 is, however, only the pos- 
 sible total cost of putting the proposed plan into operation and ap- 
 plying it to the whole number of employees included in this inquiry; 
 that is, to 170,228 persons. It is not the probable cost, which is greatly 
 less. There are three reasons why the actual cost will be much kss 
 than the sum of $130,581,273 during the course of the next 78 years. 
 
 (1) This sum allows for mortality, but not for resignations. 
 
 (2) This sum allows for annuities based on present salaries, whereas 
 the bill provides for annuities for back services based on the average 
 salary received in the past (1| per cent of total compensation during 
 entire period of service), which in the majority of cases is consider- 
 ably less than the present salary. 
 
RETIREMENT OP SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 171 
 
 (3) This sum alloAvs for annuities to persons of retiring age who 
 might remain in the service after reaching that age in accordance 
 with the provision contained in section 4 of the proposed bill. 
 
 BECAUSE CALCULATION MAKES NO ALLOWANCE FOR RESIGNATION. 
 
 The cost of annuities for past services could be discounted by the 
 probability of living, since tables of mortality, which show this, are 
 available, but it could not be discounted by the probability of resign- 
 ing, since there are no available data on which a table of resignations 
 could be constructed. A very great margin of safety is, therefore, 
 undoubtedly secured by ignoring resignations in making the estimates 
 of possible cost. 
 
 Generally speaking, the rate of resignation is usually held to be, 
 roughly, equal to the mortality. Mr. Miles M. Dawson, the well- 
 known actuary, states, indeed that it is much greater. In an article 
 on the value and cost of service pensions, he says : 
 
 There is another view of the cost which in practice has, perhaps, more sig- 
 nificance to the employer than even the foregoing, and that is : To what per- 
 centage addition to the entire pay roll is it equivalent? This involves calcula- 
 tions based upon rates of withdrawal and dismissal from the service, and these 
 rates would differ so widely in different employments that it would be useless 
 to undertake to estimate this cost. It is, however, a matter of common observa- 
 tion that in most employments withdrawals and dismissals greatly outnumber 
 the deaths.* 
 
 While it can not be shown with any definiteness how much this 
 maximum cost must be discounted to allow for the resignations, it 
 can be shown that they will probably be numerous enough to prevent 
 the amount of the annual appropriation ever reaching anything like 
 the maximum sums shown in Table XXVIII. This table shows that 
 the possible appropriation increases gradually from $1,121,795, becom- 
 ing a little over $2,000,000 six years after the adoption of the plan, a 
 little over $3,000,000 in 20 years, and reaching its maximum of 
 $3,495,463 in 28 years, after which it falls off, gradually at first and 
 very rapidly at the last, until in 78 years it has entirely disappeared. 
 But these figures are based on 170,228 individuals, and assume that 
 not one of the employees now in the service entitled to an annuity for 
 back services will resign before reaching the age of retirement, and 
 that all employees included in the calculation have received their 
 present salaries from the date of their original appointments. It is 
 certain, of course, that many will resign, and that many employees 
 have received lower salaries in the past than they are receiving at 
 present. It is therefore equally certain that the sum required must 
 be considerably less than the maximum given. 
 
 ^ See " Value and cost of service pensions," by Miles M. Dawson, Tlie Railway Age, 
 Sept. 2, 1904. 
 
172 RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 The important question, then, with reference to the cost of putting 
 the plan into operation throughout the classified service, is this: 
 What effect will the establishment of the plan have on the rate of 
 resignations fn the service? It will undoubtedly have a tendency to 
 discourage resignations. This effect will be most marked among the 
 employees who have reached advanced ages, but it will be less and less 
 pronounced the farther away the employee is from the age of retire- 
 ment. It will be least noticeable, owing to the remoteness of the 
 benefit offered, on those who have been in the service the shortest 
 time, and that really means almost half the service, since census 
 reports show that 48.2 per cent of those now in the executive civil 
 service have worked for the Government less than five years.^ It fol- 
 lows, therefore, that if allowance is to be made for resignations only, 
 the sum of $1,121,795, estimated as the maximum cost the first year, 
 if 170,228 employees are included in the plan, would be about the true 
 sum required for that year, because few employees 70 years of age 
 and over would be likely to resign just before they became entitled to 
 retirement allowances, but with each additional year the increasing 
 excessiveness of the estimated annual appropriation becomes more 
 apparent, the number of resignations for which no allowance has been 
 made increasing with remoteness from the age of retirement. 
 
 BECAUSE CALCULATION IS BASED ON PRESENT SALARIES INSTEAD OF AVERAGE 
 
 SALARIES. 
 
 Census Bulletin No. 94 shows that the average compensation of em- 
 ployees in the executive civil service is lowest in the younger ages 
 and highest in the older ages. The average compensation of em- 
 ployees from 20 to 24 years of age is $785, while for those from 70 
 to 74 years of age the average compensation is $1,125. In the Dis- 
 trict of Columbia the average compensation ranges from $781 for 
 employees from 20 to 24 years of age, to $1,2G3 for employees 70 
 to 74 years of age. The calculations of cost for annuities for back 
 services have been made on the basis of present salaries, and as the 
 salaries for employees increase, in the great majority of cases, with 
 age, the present salaries of those under consideration are higher 
 than their average salaries and therefore the estimate of cost is 
 greater by reason of that fact than the actual cost would be. 
 
 BECAUSE CALCULATION MAKES NO ALLOWANCE FOR RETENTION OF PERSONS IN THE 
 SERVICE AFTER THE AGE OF RETIREMENT. 
 
 There would undoubtedly be numerous employees whose interest 
 in their work and whose efficiency would make desirable their con- 
 tinuance in office after reaching the age of retirement in accordance 
 
 » See Census Bulletin 94, p. 27. 
 
EETIKEMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 173 
 
 with the provision contained in section 4 of the proposed bill. Others 
 who had entered the service late in life would remain a few years 
 beyond the age of retirement in order to increase the amount of 
 their annuities. The retention of every such individual would 
 reduce the total payment of annuities for back services. 
 
 From the foregoing it will be seen that the calculated cost of 
 annuities for back services is in excess of reality by the amount of 
 annuities saved through resignation of persons before reaching the 
 age of retirement, phis the difference between the amount of annui- 
 ties based on final salaries and the amount of annuities provided 
 for the bill based on aggregate salary, plus the amount of annuities 
 saved through retention of persons in the service after the age of 
 retirement. 
 
 CALCULATION INCLUDES PAYMENT ON BACK SERVICES TO ALL PRESENT EMPLOYEES. 
 
 It is true, of course, that those in the service who are now at the 
 age of retirement represent the residue of a service that was much 
 smaller at the time of their entrance into it than is the case now on 
 their leaving it. It may be suggested that, since the service is 
 larger n6w than it was when those now at the age of 70 entered it, 
 the number who will be eligible for retirement in 28 years — the year 
 of estimated maximum cost — will be correspondingly large and the 
 annuities payable for back services accordingly greater. It should 
 be remembered, however, that to offset this is the fact that those 
 who reach the retirement age 28 years hence will have been providing 
 for their own annuities by 28 years of savings and the Government, 
 instead of having to pay annuities for the full period of service, as 
 will be necessary the first year of the plan, will only provide for 
 annuities on the difference between the full period and 28 years. 
 
 COST or PUTTING PLAN INTO OPERATION UNDER GILLETT BILL. 
 
 Calculations as to the cost of putting into operation the Gillett bill 
 (H. R. 22013), favorably reported by the Committee on Reform in 
 the Civil Service, House of Representatives, have also been made by 
 the author. Like the calculations on the cost of the Perkins bill, 
 they were carried through 78 years, or to the year when, according 
 to the mortality table used, all in the service at the time of the 
 passage of the bill, would be dead. They show that the cost of put- 
 ting into effect throughout the service the Gillett bill (which is sim- 
 ilar in all essential respects to the Perkins bill but limits the amount 
 which the Government will contribute for any one individual for 
 services rendered prior to the adoption of the bill to a sum which, 
 with the annuity provided by the individual's own contributions, will 
 not exceed $600 a year), would be $87,055,280. 
 
174 HETIKEMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 Comparison of Cost of Peekins and Gillett Bills. 
 
 The cost of putting into effect the Perkins bill (S. 1944) through- 
 out the classified service being $130,581,273, and the cost of putting 
 into effect the Gillett bill (H. R. 22013) throughout the service being 
 $87,055,280, in the course of the next 78 years, it follows that the dif- 
 ference in cost between the two bills would be $43,525,993, as shown 
 by the following table : ^ 
 
 Table XXXI. — Showing total and comparative cost to the Government of estab- 
 lishing plan for retiring employees under terms of Pa-kins bill {8. 1944) O'^d 
 Gillett Mil {H. R. 22013). 
 
 All employees. 
 
 Excess cost 
 of establish- 
 ing Perldns 
 bill (S. 1944) 
 for all em- 
 ployees over 
 cost of es- 
 tablishing 
 Gillett bill 
 (H. R. 22013) 
 for all em- 
 ployees. 
 
 Cost of es- 
 tablishing 
 Gillett bill 
 (H. R. 22013) 
 for all em- 
 
 Cost of es- 
 tablishing 
 Perkins bill 
 (S. 1944) 
 for all em- 
 ployees. 
 
 General employees. 
 
 Excess cost 
 of establish- 
 ing Perkins 
 bill (S. 1944) 
 for general 
 employees 
 over cost of 
 establishing 
 Gillett bill 
 (H.R. 22013) 
 for general 
 employees. 
 
 Cost of es- 
 tablishing 
 Gillett bill 
 (H.R. 22013) 
 for general 
 employees. 
 
 Cost of es- 
 tablishing 
 
 Perkins bill 
 
 (S. 1944) 
 
 for general 
 
 employees. 
 
 Immediately. 
 
 1 year 
 
 2 years 
 
 3 years 
 
 4 years 
 
 5 years 
 
 6 years 
 
 7 years 
 
 8 years 
 
 9 years 
 
 10 years 
 
 11 years 
 
 12 years 
 
 13 years 
 
 14 years 
 
 15 years 
 
 16 years 
 
 17 years 
 
 18 years 
 
 19 years 
 
 20 years 
 
 21 years 
 
 22 years 
 
 23 years 
 
 24 years 
 
 25 years 
 
 26 years 
 
 27 years 
 
 28 years 
 
 29 years 
 
 30 years 
 
 31 years 
 
 32 years 
 
 33 years 
 
 34 years 
 
 35 years 
 
 36 years 
 
 37 years 
 
 38 years 
 
 39 years 
 
 40 years 
 
 41 years 
 
 42 years 
 
 43 years 
 
 44 years 
 
 45 years 
 
 843,525,993 
 
 .?87,055,280 
 
 $130,581,273 
 
 $37,366,001 
 
 832,181,242 
 
 143,251 
 169,714 
 188,507 
 220,200 
 249,315 
 287,703 
 327,280 
 355,677 
 389, 989 
 407,830 
 429,763 
 437,813 
 445,. 360 
 460,260 
 485,707 
 500, 456 
 517,114 
 533,993 
 564,221 
 588,925 
 640,838 
 686,504 
 742,475 
 804, 487 
 864,296 
 908,608 
 956,207 
 005,355 
 000,186 
 125,442 
 180,277 
 .227,543 
 ,304,964 
 ,365,805 
 , 408, 406 
 ,431,587 
 ,440,830 
 ,440,176 
 ,425,883 
 ,394,017 
 ,356,629 
 ,295,772 
 ,230,176 
 ,161,036 
 ,087,321 
 ,004,177 
 
 978,544 
 1,092,105 
 1,201,978 
 1,336,432 
 1,455,820 
 1,573,796 
 1,675,806 
 1,773,441 
 1,862,517 
 1,910,030 
 1,962,265 
 2,003,458 
 2,046,124 
 2,099,077 
 2,135,328 
 2,179,523 
 2,209,823 
 2,257,408 
 2,307,724 
 2,351,996 
 2,406,472 
 2,451,768 
 2,493,068 
 2,518,610 
 2,526,216 
 2,5.33,760 
 2,513,038 
 2,470,399 
 2,435,277 
 2,358,419 
 2,274,427 
 2,191,723 
 2,068,311 
 1,948,294 
 1,824,408 
 1,703,480 
 1,580,346 
 1,461,240 
 1,341,671 
 1,224,413 
 1,109,915 
 1,006,264 
 902,544 
 803,200 
 705,676 
 614,339 
 
 1,121,795 
 1,261,819 
 1,390,485 
 1,556,632 
 1,705,1.35 
 1,861,499 
 2,003,086 
 2,129,118 
 2,252,-506 
 2,317,860 
 2,392,028 
 2,441,271 
 2,491,484 
 2,559,337 
 2,621,035 
 2,679,979 
 2,726,937 
 2,791,401 
 2,871,945 
 2,940,921 
 3,047,310 
 3,138,272 
 3,235,543 
 3,323,097 
 3,390,712 
 3,442,268 
 3,469,245 
 3,481,754 
 3,495,463 
 3,483,861 
 3,454,704 
 3,419,266 
 3,373,275 
 3,314,099 
 3,232,814 
 3,135,067 
 3,021,176 
 2,901,416 
 2,767,554 
 2,618,430 
 2,466,544 
 2,302,036 
 2,132,720 
 1,964,236 
 1,792,997 
 1,618,516 
 
 125,977 
 
 152, 962 
 
 171,346 
 
 202,051 
 
 228,645 
 
 266,036 
 
 303,523 
 
 329,671 
 
 360,856 
 
 375,951 
 
 392, 179 
 
 395,125 
 
 397, 661 
 
 405,974 
 
 421,344 
 
 426, 420 
 
 434, 885 
 
 442,684 
 
 461,991 
 
 476,140 
 
 514,059 
 
 547,619 
 
 589,807 
 
 638,5.33 
 
 683,759 
 
 717, 688 
 
 756, 450 
 
 799, 975 
 
 849,367 
 
 907,003 
 
 961,377 
 
 1,019,701 
 
 1,091,157 
 
 1,156,078 
 
 1,203,244 
 
 1,233,396 
 
 1,2,50,015 
 
 1,256,497 
 
 1,251,669 
 
 1,229,301 
 
 1,201,914 
 
 1,156,808 
 
 1,100,377 
 
 1,039,998 
 
 974,326 
 
 897,925 
 
 580, 
 650: 
 720: 
 818 
 
 1,055 
 
 1,120 
 
 1,171 
 
 1,177 
 
 1,185 
 
 1,175 
 
 1,159 
 
 1,139 
 
 1,116 
 
 1,085: 
 
 1,050 
 
 1,022 
 
 994: 
 
 962: 
 
 951 
 
 934 
 
 918 
 
 891 
 
 865 
 
 830 
 
 787, 
 
 738 
 
 693 
 
 639 
 
 585. 
 
 532 
 
 470 
 
 407 
 
 348 
 
 295 
 
 248 
 
 206 
 
 170 
 
 138 
 
 111 
 
 88 
 
 69 
 
 54 
 
 40 
 
 30 
 
 $69,547,243 
 
 706,290 
 803, 600 
 892,056 
 1,020,092 
 1,123,599 
 1,249,851 
 1,358,948 
 1,449,713 
 1,532,090 
 1,553,682 
 1,577,259 
 1,570,667 
 1,556,937 
 1,545,965 
 1,537,544 
 1,511,480 
 1,485,348 
 1,465,143 
 1,456,133 
 1,438,410 
 1,465,515 
 1,482,258 
 1,508,111 
 1,530,210 
 1,549,001 
 1,548,476 
 1,544,175 
 1,. 538, 943 
 1,543,3,58 
 1,. 546, 149 
 1,547,3.52 
 1,552,364 
 1,-561,293 
 1,564,071 
 1,551,927 
 1,529,148 
 1,498,314 
 1,463,090 
 1,421,790 
 1,367,819 
 1,313,333 
 1,245,255 
 1,169,589 
 1,094,285 
 1,014,722 
 927, 968 
 
 1 For cost of pension paid wholly from the Public Treasury see pages 48-52. 
 
RETIREMENT OF SUPEEANNUATED CIVIL-SERVICE EMPLOYEES. 175 
 
 Table XXXI. — Showing total and comparative cost to the Government of estab- 
 lishing plan for retiring employees, etc. — Continued. 
 
 
 All employees. 
 
 General employees. 
 
 
 Excess cost 
 of establish- 
 ing Perkins 
 bill (S. 1944) 
 for all em- 
 ployees over 
 cost of es- 
 tablishing 
 Gillette bill 
 (H. R. 22013) 
 for all em- 
 ployees. 
 
 Cost of es- 
 tablishing 
 Gillett bill 
 (H. R. 22013) 
 for all em- 
 ployees. 
 
 Cost of es- 
 tablishing 
 Perkins bill 
 (S. 1944) 
 for all em- 
 ployees. 
 
 Excess cost 
 of establish- 
 ing Perkins 
 bill (S. 1944) 
 
 for general 
 
 employees 
 over cost of 
 establishing 
 
 Gillett bill 
 (H. R. 22013) 
 
 for general 
 employees. 
 
 Cost of es- 
 tablishing 
 Gillett bill 
 (H.R. 22013) 
 for general 
 employees. 
 
 Cost of es- 
 tablishing 
 
 Perkins bill 
 
 (S. 1944) 
 for general 
 
 employees. 
 
 46 years 
 
 $918,052 
 
 827,277 
 
 735,221 
 
 646,230 
 
 560,782 
 
 481,136 
 
 407,756 
 
 342,084 
 
 284,093 
 
 232, 472 
 
 189, 890 
 
 152,794 
 
 121,568 
 
 95,576 
 
 74, 186 
 
 56, 796 
 
 42,844 
 
 31,810 
 
 23,210 
 
 16,613 
 
 11,648 
 
 7,978 
 
 5,333 
 
 3,461 
 
 2,176 
 
 1,320 
 
 768 
 
 424 
 
 225 
 
 115 
 
 51 
 
 23 
 
 6 
 
 $531,120 
 
 456,564 
 
 390,112 
 
 331,216 
 
 279,343 
 
 233,822 
 
 194,383 
 
 160,226 
 
 130,920 
 
 106,9^5 
 
 84,924 
 
 67,302 
 
 52,701 
 
 40,725 
 
 31,009 
 
 23,240 
 
 17,106 
 
 12,339 
 
 8,704 
 
 5,988 
 
 3,997 
 
 2,584 
 
 1,604 
 
 952 
 
 533 
 
 280 
 
 134 
 
 59 
 
 23 
 
 9 
 
 3 
 
 $1,449,172 
 
 1,283,841 
 
 1,125,133 
 
 977,446 
 
 840, 125 
 
 714,958 
 
 602,139 
 
 502,310 
 
 415,013 
 
 339, 457 
 
 274,814 
 
 220,096 
 
 174,269 
 
 136,301 
 
 105,195 
 
 80,036 
 
 59,950 
 
 44,149 
 
 31,914 
 
 22,601 
 
 15,645 
 
 10,562 
 
 6,937 
 
 4,413 
 
 2,709 
 
 1,600 
 
 902 
 
 483 
 
 248 
 
 124 
 
 54 
 
 23 
 
 6 
 
 $820,240 
 
 739,200 
 
 657,001 
 
 577,508 
 
 500,626 
 
 428,702 
 
 362,504 
 
 303,226 
 
 250, 955 
 
 205,432 
 
 166,3.38 
 
 133, 181 
 
 105,. 381 
 
 82,348 
 
 63, 493 
 
 48,258 
 
 36,114 
 
 26,576 
 
 19,206 
 
 13, 60S 
 
 9, 4.32 
 
 6,386 
 
 4,212 
 
 2,700 
 
 1,677 
 
 1,007 
 
 581 
 
 320 
 
 171 
 
 89 
 
 42 
 
 18 
 
 6 
 
 $21,892 
 
 15,600 
 
 10,841 
 
 7,320 
 
 4,784 
 
 3,009 
 
 1,812 
 
 1,034 
 
 553 
 
 275 
 
 126 
 
 51 
 
 18 
 
 5 
 
 2 
 
 $842,132 
 
 47 years 
 
 754,800 
 
 48 years 
 
 667,842 
 
 49 years 
 
 584,828 
 
 50 years 
 
 505, 410 
 
 51 years 
 
 431,711 
 
 52 years 
 
 364,316 
 
 53 years 
 
 304,260 
 
 54 years 
 
 251,. 508 
 
 55 years 
 
 205, 707 
 
 56 years 
 
 166, 464 
 
 57 years 
 
 133,232 
 
 58 years 
 
 105,399 
 
 59 years 
 
 82,353 
 
 60 years 
 
 63,495 
 
 61 years. . . . 
 
 48,258 
 
 
 
 36,114 
 
 63 years 
 
 
 26,576 
 
 
 
 19,206 
 
 65 years 
 
 
 13,608 
 
 
 9,432 
 
 
 
 6,386 
 
 
 
 4,212 
 
 
 
 2,700 
 
 
 
 1,677 
 
 
 
 1,007 
 
 
 
 581 
 
 
 
 320 
 
 
 
 171 
 
 
 
 89 
 
 
 
 42 
 
 
 
 18 
 
 
 
 6 
 
 
 
 
 
 
 Mail carriers. 
 
 Railway postal clerks. 
 
 
 Excess cost 
 
 
 
 Excess cost 
 
 
 
 
 of establish- 
 
 
 
 of establish- 
 
 
 
 
 ing Perkins 
 
 
 
 ing Perkins 
 
 
 
 
 bill (S. 1944) 
 
 Cost of es- 
 
 Cost of es- 
 
 bill (S. 1944) 
 
 Cost of es- 
 
 Cost of es- 
 
 
 for mail 
 
 tablishing 
 
 tablishing 
 
 for railway 
 
 tablishing 
 
 tablishing 
 
 
 carriers over 
 
 Gillett bill 
 
 Perkins bill 
 
 postal clerks 
 
 Gillett bill 
 
 Perkins bill 
 
 
 cost of es- 
 
 (H.R. 22013) 
 
 (S. 1944) 
 
 over cost of 
 
 (H.R. 22013) 
 
 (S. 1944) 
 
 
 tablishing 
 
 for mail 
 
 for mail 
 
 establishing 
 
 for railway 
 
 for railway 
 
 
 Gillett bill 
 
 carriers. 
 
 earners. 
 
 Gillett bill 
 
 postal clerks. 
 
 postal clerks. 
 
 
 (H. R. 22013) 
 
 
 
 (H.R. 22013) 
 
 
 
 
 for mail 
 
 
 
 for railway 
 
 
 
 
 carriers. 
 
 
 
 postal clerks. 
 
 
 
 
 81,393,106 
 
 $34,932,565 
 
 $36,325,671 
 
 $4,766,886 
 
 $19,941,473 
 
 $24,708,359 
 
 Immediately 
 
 789 
 
 155,660 
 
 156,449 
 
 16,485 
 
 242,571 
 
 259,056 
 
 1 year 
 
 352 
 
 515 
 
 616 
 
 758 
 
 833 
 
 1,070 
 
 1,141 
 
 1,500 
 
 1,914 
 
 187,591 
 216,985 
 245, 929 
 273, 189 
 293, 178 
 310,974 
 325.498 
 345,575 
 369, 189 
 
 187,943 
 217,500 
 246,546 
 273,947 
 294, Oil 
 312, 044 
 326, 639 
 347,075 
 371,103 
 
 16, 400 
 16,647 
 17, .533 
 19,912 
 20,834 
 22,687 
 24,865 
 27,633 
 29,965 
 
 253,816 
 264,282 
 272,462 
 287, 677 
 296,803 
 309,407 
 327,901 
 345, 708 
 363,110 
 
 270,216 
 
 2 years 
 
 280,929 
 
 
 289,995 
 
 4 years 
 
 307,589 
 
 5 years 
 
 317,637 
 
 6 years 
 
 332,094 
 
 7 years 
 
 352,766 
 
 8 years 
 
 373,341 
 
 9 years 
 
 393,075 
 
 10 years 
 
 2,159 
 2,653 
 2,846 
 
 392,640 
 421,501 
 456,427 
 
 394,799 
 424, 154 
 459,273 
 
 35,425 
 40,035 
 44,853 
 
 384,545 
 406,415 
 430,421 
 
 419,970 
 
 11 years 
 
 446,450 
 
 12 years 
 
 475,274 
 
176 RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 TABI.E XXXI. — Showing total and ^■ompa'^ative cost to tlw Oovernmcat of estab- 
 lishing plan for retiring employees, etc. — Continued. 
 
 13 years . 
 
 14 years . 
 
 15 years . 
 
 16 years . 
 
 17 years. 
 
 18 years . 
 
 19 years . 
 
 20 years . 
 
 21 years . 
 
 22 years. 
 
 23 years . 
 
 24 years . 
 
 25 years . 
 
 26 years . 
 
 27 years . 
 
 28 years . 
 
 29 years . 
 
 30 years . 
 
 31 years. 
 
 32 years . 
 
 33 years . 
 
 34 years . 
 
 35 years . 
 
 36 years . 
 
 37 years . 
 
 38 years . 
 
 39 years . 
 
 40 years . 
 
 41 years. 
 
 42 years . 
 
 43 years . 
 
 44 years . 
 
 45 years. 
 
 46 years . 
 
 47 years . 
 
 48 years . 
 
 49 years . 
 
 50 years . 
 
 51 years. 
 
 52 years . 
 
 53 years . 
 
 54 years . 
 
 55 years. 
 
 56 years . 
 
 57 years . 
 
 58 years . 
 
 59 years . 
 
 60 years . 
 
 61 years. 
 
 62 years . 
 
 63 years . 
 
 64 years . 
 
 65 years . 
 
 66 years . 
 
 67 years . 
 
 68 years . 
 
 69 years . 
 
 70 years . 
 
 71 years . 
 
 72 years . 
 
 73 years. 
 
 74 years. 
 
 75 years . 
 
 76 years . 
 
 77 years. 
 
 78 years. 
 
 Mall carriers. 
 
 Excess cost 
 of establish- 
 ing Perkins 
 bill (S. 1944) 
 
 for mail 
 carriers over 
 cost of es- 
 tablishing 
 Gillett bill 
 (H.R. 22013) 
 for mail 
 carriers. 
 
 $3,157 
 
 3,361 
 
 3,991 
 
 4,744 
 
 4,550 
 
 6,028 
 
 7,013 
 
 8,213 
 
 10, 120 
 
 12,559 
 
 15,689 
 
 20, 100 
 
 25,237 
 
 29, 099 
 
 32,859 
 
 36,263 
 
 44,234 
 
 46,288 
 
 47,214 
 
 46,975 
 
 47, 062 
 
 47,721 
 
 48,613 
 
 48,674 
 
 50, 036 
 
 49, 472 
 
 48, 877 
 
 47,566 
 
 42,367 
 
 42,717 
 
 42,981 
 
 43, 441 
 
 44,656 
 
 43,612 
 
 40,704 
 
 36,894 
 
 33,277 
 
 29,840 
 
 26,622 
 
 23,612 
 
 20, 809 
 
 18,217 
 
 15,838 
 
 13,654 
 
 11,677 
 
 9,895 
 
 8,303 
 
 6,883 
 
 5,641 
 
 4,564 
 
 3,637 
 
 2,847 
 
 2,193 
 
 1,656 
 
 1,218 
 
 875 
 
 261 
 161 
 92 
 48 
 23 
 9 
 5 
 
 Cost of es- 
 tablishing 
 Gillett bill 
 (H.R. 22013) 
 for mail 
 
 539 
 
 594 
 
 643 
 
 703 
 
 770: 
 
 832 
 
 884 
 
 930; 
 
 977 
 
 1,020 
 
 1,052 
 
 1,097 
 
 1,125 
 
 1,146 
 
 1,161 
 
 1,153 
 
 1,142 
 
 1,124 
 
 1,100 
 
 1,067 
 
 1,031 
 
 991 
 
 945 
 
 896 
 
 843 
 
 787 
 
 730 
 
 677 
 
 -619 
 
 559 
 
 499 
 
 439 
 
 383 
 
 332 
 
 286 
 
 244 
 
 207 
 
 174 
 
 146 
 
 120 
 
 Cost of es- 
 tablishing 
 Perkins bill 
 (S. 1944) 
 for mail 
 carriers. 
 
 542 
 597 
 
 776 
 839 
 892 
 
 036 
 
 072 
 
 122 
 
 154 
 
 178 
 
 197 
 
 197 
 
 188 
 
 172 
 
 146 
 
 114 
 
 079 
 
 040 
 
 994 
 
 946 
 
 892 
 
 836 
 
 778 
 
 720 
 
 662: 
 
 602 
 
 542 
 
 483 
 
 426 
 
 372 
 
 322 
 
 277 
 
 237 
 
 201 
 
 169 
 
 141 
 
 117 
 
 96 
 
 78 
 
 63 
 
 50 
 
 39 
 
 30 
 
 23 
 
 17 
 
 13 
 
 9 
 
 6 
 
 4 
 
 3 
 
 2 
 
 Railway postal clerks. 
 
 Excess cost 
 5f establish- 
 ing Perkins 
 bill (S. 1944) 
 for railway 
 postal clerks 
 over cost of 
 establishing 
 Gillett bill 
 ; H.R. 22013) 
 for railway 
 postal clerks. 
 
 61 
 70 
 77 
 86 
 96: 
 105 
 118 
 128: 
 140 
 150 
 160 
 165 
 170 
 172 
 174 
 174 
 172 
 160 
 166 
 162 
 157 
 149 
 142 
 133 
 124 
 115 
 107 
 96: 
 
 8?: 
 
 78 
 69 
 61 
 54 
 47 
 41 
 35 
 30 
 25 
 21 
 18 
 14 
 11 
 
 Cost of es- 
 tablishing 
 Gillett bill 
 
 (H.R. 22013) 
 for railway 
 
 postal clerks 
 
 5458,570 
 
 479,561 
 
 500, 459 
 
 515,918 
 
 531,292 
 
 543,280 
 
 557,003 
 
 570,549 
 
 586, 728 
 
 597,524 
 
 606,050 
 
 608,220 
 
 605,737 
 
 600,264 
 
 691,402 
 
 580, 088 
 
 566, 189 
 
 545,903 
 
 534,066 
 
 498, 172 
 
 472,593 
 
 444,148 
 
 415,981 
 
 386, 429 
 
 357,952 
 
 328, 180 
 
 298,121 
 
 267, 646 
 
 240, 074 
 
 213,559 
 
 188, 918 
 
 166, 150 
 
 146,239 
 
 126,154 
 
 108,846 
 
 93,255 
 
 79, 307 
 
 66, 920 
 
 55,917 
 
 46, 468 
 
 38,204 
 
 31,101 
 
 26, 072 
 
 19,979 
 
 15,746 
 
 12,257 
 
 9,418 
 
 7, 125 
 
 5,313 
 
 3,893 
 
 2,795 
 
 1,963 
 
 1,351 
 
 901 
 
 583 
 
 362 
 
 216 
 
 122 
 
 64 
 
 31 
 
 14 
 
 5 
 
 2 
 
 Cost of es- 
 tablishing 
 Perkins bill 
 
 (S. 1944) 
 for railway 
 postal clerks. 
 
RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 177 
 
 The difference in cost to the Government between establishing the 
 Perkins and Gillett bills is graphically illustrated by the following 
 chart : 
 
 -< 
 O 
 is 
 
 ■< 
 
 O CO 
 
 as ** 
 
 E-i C^ 
 
 H S5 
 
 CO t^ 
 
 g 
 
 
 
 
 
 
 
 
 
 s 
 
 
 
 
 
 
 
 i 
 
 XJ 
 
 
 
 
 
 
 
 h 
 
 s 
 
 
 
 
 
 
 y 
 
 7 
 
 *o 
 
 
 
 
 
 X 
 
 y 
 J 
 
 / 
 
 s 
 
 
 
 
 ^ 
 
 y 
 
 / 
 
 
 ^f^ 
 
 y 
 
 / 
 
 
 ■<.f 
 
 f 
 
 
 
 ^ 
 
 / 
 
 
 o^ 
 
 ^ 
 
 
 
 
 "^ 
 
 \ 
 
 / 
 
 r 
 
 
 , 
 
 
 
 J^ 
 
 V 
 
 i 
 
 V 
 
 
 
 
 
 "N 
 
 ^ 
 
 ^ 
 
 k 
 
 \ 
 
 
 
 
 
 S^ 
 
 
 i 
 
 A 
 
 
 
 
 
 "> 
 
 
 
 \ 
 
 \ 
 
 
 
 
 
 
 
 
 ^s^ 
 
 ^ 
 
 
 
 i 
 
 4 
 
 1 
 
 
 1 
 
 *^1 
 
 
 1 
 
 
 
 74196°— S. Doc. 745, 61-3 12 
 
178 EETIEEMENT OF SUPERANNUATED CIVIL-SEEVICE EMPLOYEES. 
 
 The number and per cent of the total number of employees whose 
 annuities under the Perkins bill would be reduced by the $600 limit 
 provided under the Gillett bill are shown in the following table : 
 
 Table XXXII. — Showing, by classes, the per cent of employees whose annuities 
 would 6e reduced hy the $600 limit provided by the Gillett bill (H. R. 22013). 
 
 
 Total nura- 
 
 berof 
 employees. 
 
 Employees whose 
 annuities would 
 be reduced by 
 the $600 limit. 
 
 
 Number. 
 
 Per cent 
 of total. 
 
 All classes 
 
 170,228 
 
 50,619 
 
 29.7 
 
 
 
 General employees 
 
 94, 403 
 61,931 
 13,894 
 
 40, 197 
 6,173 
 4,249 
 
 42.6 
 
 Mail carriers 
 
 10.0 
 
 
 30.6 
 
 
 
 CALCULATION OF MAXIMUM COST FOR SERVICE IN THE DISTRICT OF 
 
 COLUMBIA. 
 
 The maximum cost, the first year, of putting the plan into opera- 
 tion in the District of Columbia alone would be much less than if 
 extended to the employees throughout the country, and at the same 
 time those branches of the service where superannuation is greatest 
 and the need of a retirement measure most keenly felt would be 
 benefited immediately. The cost of paying annuities for back serv- 
 ices to employees in the District of Columbia is shown in Table 
 XXXIII to be about $400,000 [$396,060] for the first year. 
 
 Table 'KKKlll. ^Showing estimate of the maximum cost the first year of annu- 
 ities equal to 1.5 per cent of salary for each year of service for employees in 
 the District of Columbia. 
 
 Period of service. 
 
 Years, 
 (a) 
 
 Average 
 years. 
 
 (b) 
 
 Number 
 of em- 
 ployees. 
 
 ffi) 
 
 Salary. 
 
 Total, 
 (d) 
 
 Average, 
 (e) 
 
 Annuity. 
 
 Total 
 (see note). 
 
 (0 
 
 Average. 
 (g) 
 
 Under 5 
 
 5 to 9 
 
 10 to 14 
 
 15 to 19 
 
 20 to 24 
 
 25 to 29 
 
 30 to 34 
 
 35 to 39 
 
 40 and over. 
 
 12 
 
 45 
 76 
 61 
 84 
 
 117 
 86 
 75 
 
 176 
 
 $14, 180 
 45,300 
 77, 920 
 63,000 
 101,000 
 144, 260 
 114,140 
 100. 740 
 233, 940 
 
 $1, 182 
 1,007 
 1,025 
 1,033 
 1,202 
 1,233 
 1,327 
 1,343 
 1,329 
 
 $851 
 4,756 
 14, 026 
 16,065 
 33, 330 
 58,425 
 54, 787 
 55,911 
 157,909 
 
 $71 
 106 
 185 
 263 
 397 
 499 
 637 
 745 
 897 
 
 All periods. 
 
 732 
 
 894,480 
 
 1,222 
 
 396,060 
 
 Note.— The annuities shown in column (f) are equal to 1.5 per cent of salary for each year of service; 
 bX1.5Xd 
 100 
 
RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 179 
 
 This table is less accurate than the other tables given in this 
 report, but its lesser accuracy is a point in favor of its conservatism. 
 It is based on Table 72 in Census Bulletin 94, which shows the em- 
 ployees in the executive civil service in the District of Columbia 
 classified by compensation, age, and period of service. The lesser 
 accuracy of Table XXXIII is due to the fact that Table 72 includes 
 unclassified as well as classified employees, the total number of 
 employees in the District being given as 25,351 as against 23,254 
 classified employees. The employees shown in Table 72 are given in 
 five-year age groups, which also makes the result somewhat less 
 accurate than if the number at each age had been stated. The sum 
 of $400,000 would, however, seem to be a safe maximum figure, 
 considering all the allowances that must be made for the inclusion 
 of unclassified members of the service, the overestimation due to 
 computations based on present rather than average salaries, and the 
 retention of numerous individuals in the service past the age of 
 retirement. 
 
 This approximate figure of $400,000 as the maximum annual cost 
 of inaugurating a retirement measure in the District of Columbia 
 is interesting, since it has been estimated that the loss to the Govern- 
 ment by reason of superannuation in the District is approximately 
 $400,000 a year. In a report on superannuation in the civil service, 
 made by a special committee of the National Civil Service Reform 
 League in 1906, the Civil Service Commission is quoted as authority 
 for the statement that those over 70 years of age do about three- 
 quarters of the maximum quantity of work performed by a thor- 
 oughly efficient employee, and that the loss to the Government 
 through superannuation in the departments at Washington amounts 
 therefore to about $400,000 a year.^ 
 
 HOW THE COST OF PUTTING PLAN INTO OPERATION MAY BE MET. 
 
 Two ways of paying annuities on services rendered prior to the 
 adoption of the plan have been suggested. The first two bills intro- 
 duced into Congress covering this plan provided that annuities pay- 
 able for services rendered prior to the passage of the bill should be 
 paid by the Secretary of the Treasury from any money in the Treas- 
 ury not otherwise appropriated. The third bill makes provision 
 for payment of annuities for back services out of a fund created by 
 deductions from the salaries of new entrants and the salaries of those 
 promoted, but this provision has been discarded by the House com- 
 mittee as unfair to the younger employees, and is no longer proposed. 
 The bill discussed in this report provides for the payment of annu- 
 
 » See Special Report of United States Civil Service Commission to the President, p. 3. 
 
180 RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 ities for back services by the Government. Section 11 reads as 
 follows: 
 
 Sec. 11. That beginning with the first day of July next following the pas- 
 sage of this act every employee to whom this act applies shall be entitled, on 
 reaching the retirement age, or having already passed that age, to retire from 
 the service under the provisions hereinbefore contained, and also, in addition 
 to the annuity herein provided for by his own contributions from his salai'y, 
 to receive from the United States during the remainder of his life an annuity 
 equal to one and one-half per centum of his total compensation during service 
 prior to the taking effect of this act ; and the Secretary of the Treasury is 
 hereby authorized and directed to pay such annuity quarterly, upon proper 
 certification of the retirement of such employee by the appointing ofiicer under 
 whom he last served. Annuities from the United States for the period of 
 service prior to the passage of this act shall be payable only on condition that 
 the employee remains in the service until he reaches the age of retirement : 
 Frovidecl, however. That employees of group one may receive the annuity 
 granted by this section on retirement at the age of sixty years or thereafter. 
 On the death of the employee the payment of annuities provided for by this 
 section shall cease and determine. Annuities payable by the United States 
 on salaries in excess of two thousand five hundred dollars per annum shall be 
 based upon an annual salary of two thousand five hundi-ed dollars. 
 
 This is followed by a section which makes provision for reckoning 
 the period of service prior to the passage of the bill. Section 12 
 reads as follows: 
 
 Sec. 12. That the period of service upon which the annuity to be paid by 
 the United States is based shall be computed from original employment, 
 whether as a classified or unclassified employee, and shall include periods of 
 service at different times and service in one or more departments, branches, or 
 independent offices of the Government, the Signal Corps prior to July first, 
 eighteen hundred and ninety-one, and the general service in or under the War 
 Department prior to May sixth, eighteen hundred and ninety-six. 
 
 Plan Can Be Put into Operation Without Additional Appropriation by 
 
 Government, 
 
 The study and discussion which have been given to the subject in 
 recent years seem to have convinced those interested that the only 
 way to put the plan into operation is by means of appropriations 
 from the Government. The following arguments have been used to 
 discredit the suggestion that the annuities for back services should 
 be paid by any form of taxation on the employees. 
 
 (1) That the plan is constructed primarily for the benefit of the 
 public service. The removal of superannuated employees is more to 
 the interest of the Government than to the interest of the clerks as 
 a bodj^ 
 
 (2) That the Government was the beneficiary of all services 
 rendered prior to the adoption of the plan, and if anyone is charged 
 for such services it should be the beneficiary. 
 
KETIKEMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 181 
 
 (3) That an appropriation for this purpose puts the Government 
 into position to act logically in the matter of readjusting salaries in 
 the Government service. It has long been contended that the average 
 salary of $948 a year paid by the Government ^ is inadequate in these 
 days of high prices. Salaries can not be consistently advanced, how- 
 ever, while there are a large number of worn-out employees in the 
 service already receiving more than they earn. Expulsion from the 
 service and readjustment of salaries through demotion are not satis- 
 factory solutions for those who are superannuated but needs must 
 continue at their desks, for those who are efficient but underpaid, 
 or for the Government who is overpaying some and underpaying 
 others. 
 
 (4) That the necessity for appropriations from any source is only 
 temporary. 
 
 (5) That the appropriation of a reasonable sum for only 50 years 
 is an economy and not an expense to the Government, since it removes 
 from the service the evil of superannuation, which under the present 
 system is fully as costly as the establishment of the proposed plan 
 and besides is a permanent and probably growing expense. 
 
 (6) That "practically nothing is asked of the Government toward 
 the support of a retirement plan except a chance to establish one at 
 the expense of the employees themselves. 
 
 (7) That it would be very unfair to force the younger employees 
 to pay for annuities on the past services of their elders and, at the 
 same time, contribute to their own retirement. 
 
 Opposition to the proposal that the plan shall be put into opera- 
 tion by means of appropriations from the Government is only heard 
 on the ground that the people of the country may look on such appro- 
 priations with disfavor. It is doubtful, however, if there would be 
 opposition from those who understood the need for the measure, and 
 the nature of the proposed plan. 
 
 As suggested on page 33, the proposal that the plan be put into 
 operation by means of appropriations from the Government does not 
 necessarily mean that these appropriations will be in addition to the 
 present appropriation for salaries. It is difficult to state with abso- 
 lute precision just what the saving to the Government would be if 
 the aged employees who do not fully earn their salaries were retired, 
 for the reason that efficiency records of work performed by these 
 aged people are not generally kept throughout the service. Such 
 statistics as are available would seem to indicate that the amount lost 
 the Government through the inefficiency of the aged about equals the 
 cost of superannuation. 
 
 As noted on page 13, an effort was made a few years ago by the 
 Civil Service Commission and the National Civil Service Reform 
 
 1 See Census Bulletin 94, p. 32. 
 
182 RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 League to determine what loss the Government was then sustaining 
 through superannuation. Schedules were prepared and sent out to 
 the various departments, and from the returns made on these schedules 
 it was found that the loss in the District of Columbia amounted to 
 approximately $400,000 a year. Assuming that employees at various 
 ages possessed the same degree of efficiency in the District of Colum- 
 bia and elsewhere, it was found, by applying the percentages obtained 
 for the District to the employees elsewhere, that the Government wa« 
 sustaining an annual loss in the District and elsewhere of $1,200,000. 
 This estimate was made in 1906, when the service was considerably 
 smaller than it is now, in 1911, and, of course, much smaller than it 
 will be in future years. It is obvious that unless a retirement system 
 is adopted the actual number of superannuated employees in the serv- 
 ice must increase with the growth of the service. It is obvious also 
 that unless the growth of the service continues at no less rate here- 
 after than it has in the past the proportion of superannuated to active 
 employees must also increase. That the service is likely to continue 
 to grow may be assumed without argument, but that it will continue 
 to grow at the rapid rate of the past 30 years is debatable. The 
 present superannuated employees represent the residue of the active 
 service of 30 or 40 years ago. The superannuated employees 30 or 40 
 years hence will represent the residue of the present active service. 
 Thirty or forty years ago the service was composed of not more than 
 30,000 employees. To-day the classified service is composed of about 
 200,000 individuals. If the residue of 30,000 employees of 30 or 40 
 years ago is now costing the Government $1,200,000 annually, then the 
 cost of superannuation 30 years hence may fairly be estimated to be 
 as 30,000 is to 200,000, or nearly seven times as great as at present. 
 This estimate is, of course, based on the assumption that the rate of 
 separation from the service by resignation and death will continue 
 the same, which would seem to be a fair assumption, and perhaps 
 more than fair, since commercial opportunities outside of the service 
 are likely to be no greater than they have been in the past, and, there- 
 fore, to attract away no greater proportion of the service, and the 
 rate of mortality at the ages up to about 70 years is known to be 
 steadily decreasing. On this basis the cost of superannuation 30 or 
 40 years hence would be approximately $8,000,000 annually, or more 
 than twice the maximum amount required to be appropriated in any 
 one year for back services under the Perkins bill. 
 
 This phase of the problem was of much interest to the Hon. Frank- 
 lin MacVeagh, Secretary of the Treasury, and in order to determine 
 whether the cost of superannuation in 1910 was not greater than the 
 amount that would have to be appropriated under a fair contributory 
 system, he undertook, in the spring of 1910, to ascertain how many 
 young clerks could be employed out of the residue of present appro- 
 priations for salaries if the old clerks were first paid annuities out 
 
HETrREMENl' O^P SIJPEfiAlSrlSrtJATEI) CtVIL-SEEVICE EMPLOYEES. 183 
 
 of those appropriations on the scale proposed under the Perkins 
 bill (S. 1944). Since the annuities for past services would be 
 paid wholly from public funds, it seemed to him entirely fair to 
 place a minimum and a maximum on the amount that would be given 
 to any one individual. He accordingly had prepared a statement 
 showing the amount of money that would be required the first year 
 to pay annuities under the Perkins bill, but with a minimum of $300 
 and a maximum of $600, with a minimum of $360 and a maximum of 
 $720, and a minimum of $360 and a maximum of $1,000. The 
 following table shows that the cost under the respective scales is 
 $146,116, $168,080, and $194,308. The number of younger clerks 
 under the respective scales that could be employed at $900 a year by 
 expending for that purpose the difference between those amounts and 
 the present salaries of these aged employees is as follows: 282, 258, 
 and 229. 
 
 Statistics relative to clerks in the Treasury Department 70 years of age and over. 
 
 Total number 
 
 Average age 
 
 Total of present annual salaries- 
 Average annual salary 
 
 Average years of service 
 
 300 
 
 73§ 
 
 $400, 559 
 
 $1, 335 
 
 32 
 
 Aggregate salaries paid $12, 727, 750 
 
 One and one-half per cent of aggregate salaries $190, 916 
 
 Present salaries 
 
 Annuities (minimum, 
 
 ; maximum, $600). 
 
 Balance available for clerk hire- 
 Number that can be employed at $900- 
 
 Present salaries 
 
 Annuities (minimum, $360; maximum, $720). 
 
 Balance available for clerk hire 
 
 Number that can be employed at 
 
 Present salaries 
 
 Annuities (minimum, $360; maximum, $1,000). 
 
 Balance available for clerk hire 
 
 Number that can be employed at $900 
 
 $400, 559 
 $146, 116 
 
 $254, 443 
 282 
 
 $400, 559 
 $168, 080 
 
 $232, 479 
 
 258 
 
 $400, 559 
 $194, 308 
 
 $206, 251 
 229 
 
 Ages of clerks in Treasury Department 70 years of age and over. 
 
 No. 
 
 Age. 
 
 No. 
 
 Age. 
 
 1 
 
 95 
 
 8 
 
 78 
 
 1 
 
 94 
 
 12 
 
 77 
 
 2 
 
 86 
 
 19 
 
 76 
 
 2 
 
 84 
 
 25 
 
 75 
 
 1 
 
 83 
 
 39 
 
 74 
 
 2 
 
 82 
 
 26 
 
 73 
 
 7 
 
 81 
 
 43 
 
 72 
 
 4 
 
 80 
 
 37 
 
 71 
 
 H 
 
 79 
 
 60 
 
 70 
 
184 RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 As between the three different scales of annuities, the one giving 
 a maximum of $720 a year would be the most expedient. Annui- 
 ties from $300 to $600 would be inadequate, and the number of clerks 
 that could be employed with the residue of the appropriations after 
 paying these annuities would be more than is really necessary. An- 
 nuities from $360 to $720 would be much more satisfactory, and the 
 258 young clerks that could be secured under this arrangement would 
 manifestly be of greater value to the department than the present 300 
 aged ones. Annuities with a maximum of $1,000 would greatly 
 relieve the difficulty of removing inefficient employees in the higher 
 grades, but the number of clerks (229) that could be employed with 
 the residue of the present salaries is so small as to raise the question 
 whether the departments would not be compelled to ask for addi- 
 tional appropriations to increase their forces if this scale were 
 adopted. 
 
 Similar investigations were made at the request of the Secretary of 
 the Treasury in representative bureaus of the Post Office Department 
 and the Department of Commerce and Labor, and indicate th^t aged 
 clerks can be retired on the basis suggested and younger clerks em- 
 ployed to take their places and do their work, and that not only can 
 these two things be done at the present cost of employing the older 
 clerks, but that an actual saving of money would be effected from the 
 beginning. 
 
 In three divisions of one of the departments there are 17 employees 
 receiving $24,940 a year in salaries, or an average of $1,467 each, who 
 are rated as performing services worth slightly less than 50 per cent of 
 their salaries. These 17 clerks could be retired under the plan outlined 
 above on 48 per cent of their average pay, or say $700 a year each, 
 and leave $767 a year each, or $13,040 for the employment of younger 
 clerks at the lower grades. As these people are only performing 50 
 per cent of what is considered a fair day's work, it may be stated with 
 accuracy that with these aged clerks retired on annuities aggregating 
 $11,900 it would be possible with the balance of $13,040 to obtain 
 better and more efficient service by the employment of, say, 13 young, 
 energetic clerks, than the Government now has with the 17 old ones. 
 
 It should be noted, in this connection, that the mortality among 
 these aged employees is very high, and as they died off the annuities 
 thus released could be used to increase salaries. 
 
 From the foregoing it is apparent that the establishment of this 
 plan along the lines of the Perkins bill, but with minimum and maxi- 
 mum limitations, as suggested by the Secretary of the Treasury, on 
 the amount of annuities on services rendered prior to the adoption 
 of the plan, would not only cost the Government nothing, but would 
 probably result in a small saving even the first year, and tlSiat this 
 saving would steadily increase from year to year as the employees' 
 
RETIREMENT OP SUPEEAlSrNUATED CIVIL-SERVICE EMPLOYEES. 185 
 
 savings accumulated for their ov/n retirement, until finally the cost 
 of superannuation to the Government would be nothing. 
 
 COST OF ADMINISTERING THE PLAN. 
 
 Besides the cost of putting the plan into operation, the cost of ad- 
 ministering it needs to be considered. It is believed that a small 
 annual appropriation will be sufficient for this purpose. Section 17 
 of the proposed bill, which makes provision for that need, reads as 
 follows. 
 
 Sec. 17. That for the clerical and other service and all other expenses neces- 
 sary in carrjang out the provisions of this Act during the fiscal year nineteen 
 hundred and ten, including salaries and rent in the city of Washington, there 
 is hereby appropriated the sum of twenty thousand dollars out of any money 
 in the Treasury not otherwise appropriated, to be available until expended. 
 
 It is estimated that the savings accounts of the 170,228 employees 
 included in the estimates of cost for the entire classified service could 
 easily be taken care of by 26 bookkeepers. This estimate takes into 
 account a most liberal number of Sundays, holidays, days of annual 
 leave and sick leave, and presupposes that the Government book- 
 keepers would not average more than 300 entries a day and keep their 
 accounts balanced. (If the plan is limited to 23,254 classified em- 
 ployees of the District only four bookkeepers would be required to 
 do the work.) The computation is as follows: 
 
 Bookkeepers for entire service. 
 
 Number of employees in service 170, 228 
 
 Number of entries per year for each employee (12 monthly deposits, 
 and the equivalent of 4 entries to cover crediting of interest, 
 balancing accounts, and statement work) 16 
 
 Total number of entries per year for entire service (170,228X16)— 2,723,648 
 
 Number of days in year 365 
 
 Less Sundays and holidays 60 
 
 Less days of sick and annual leave 40 
 
 100 
 
 Working days per year 265 
 
 Entries per day for each bookkeeper 400 
 
 Entries per year for each bookkeeper (265X400) 106,000 
 
 Number of bookkeepers for entire service (2,723,648-^106,000) 25.7 
 
 Bookkeepers for District of Columbia. 
 
 Number of employees in service 23, 254 
 
 Number of entries per year for each employee (12 monthly deposits, 
 and the equivalent of 4 entries to cover crediting of interest, 
 balancing accounts, and statement work) 16 
 
186 RETIREMENT OF SUPERAlsrISrUATED ClVlL-SERVICE EMPLOYEES. 
 
 Total number of entries per year for service in the District 
 
 (23,254X16) . $372,064 
 
 Number of days in year 365 
 
 Less Sundays and holidays 60 
 
 Less days of sick and annual leave 40 
 
 100 
 
 Working days per year 265 
 
 Entries per day for each bookkeeper 400 
 
 Entries per year for each bookkeeper (265X400) 106,000 
 
 Number of bookkeepers for service in District (372,064-^106,000) ___ 8. 5 
 
 The appropriation of $50,000 to cover the cost of administration 
 included in the first " Gillett bill " is about correct as an estimate 
 of that cost for the entire classified service. Twenty-six bookkeepers 
 at an average annual salary of $1,400 would cost $36,400, and the 
 other expenses of administration, including the salary of the head 
 of the office and his assistants, would probably consume the balance 
 of $13,600. 
 
 For conducting the plan in the District of Columbia alone the 
 sum of $20,000 a year would suffice. Four bookkeepers, at $1,400 
 each, would cost $5,600. The other expense would not be much less 
 for the District of Columbia than for the entire service, so that it 
 is not safe to estimate the cost at much less than $20,000 a year. 
 
 These estimates would seem to be all on the side of safety when 
 compared with statements made by various savings-bank officials who 
 were consulted on the subject. 
 
 Mr. Andrew Mills said that the Dry Dock Savings Institution of 
 New York, of which he is president, employs eight bookkeepers, with 
 salaries ranging from $1,200 to $2,500 a year, to keep its 70,000 
 accounts. They make in all approximately 197,000 entries, compute 
 the interest twice a year, enter the interest, and balance the ledger. 
 This means a daily everage of 400 items for each bookkeeper. Twice 
 a year about five extra men are employed for a week to assist in post- 
 ing the interest. Mr. Mills said that in his judgment the Govern- 
 ment should be able to handle the accounts of 150,000 employees, 
 each of whom requires one cash entry a month and an interest credit 
 twice a year, with the help of 12 bookkeepers of the class employed 
 by his bank. 
 
 Mr. William E. Knox said that the Bowery Savings Bank, New 
 York, of which he is comptroller, employs 12 bookkeepers to handle 
 their 151,000 accounts, which represented in 1907, 346,000 transactions. 
 This means a daily average of about 500 items for each bookkeeper. 
 
 Mr. Pierre Jay, formerly bank commissioner of Massachusetts, was 
 of the opinion that it would cost from $30,000 to $35,000 annually, so 
 
RETIREMENT OF SUPER AiSTNUATED CIVIL-SERVICE EMPLOYEES. 187 
 
 far as clerical and incidental expenses are concerned, to collect and 
 administer the Government retirement fund. He said that about 
 one-third of the salary expense shown in his report on savings banks 
 of Massachusetts is chargeable to salaries of officers and the other 
 two-thirds to salaries of clerks. 
 
 Emphasis should be laid on the fact that the labor involved in 
 keeping the accounts of a savings bank is much greater than the labor 
 that would be required to keep the accounts of the Government em- 
 ployees. In the savings bank the entries are made at irregular inter- 
 vals and are for varying amounts, whereas in the Government's case 
 the entries would be made at regular intervals and for uniform 
 amounts. The computation of interest credits would accordingly be 
 simplified also. 
 
CHAPTEE V. 
 
 PROVISIONS FOR INVESTMENT OF RETIREMENT FUND. 
 
 Provision for the investment of the fund created under this plan 
 by the savings of the civil service employees is made in section 2 of 
 the proposed bill which reads as follows : 
 
 Sec. 2. That the amounts so deducted and withheld from the salary, pay, or 
 compensation of each employee shall be deposited in the Treasury of the United 
 States and shall be credited, together with interest at three and one-half per 
 centum per annum, compounded annually, to an individual account of the 
 employee from whose salary, pay, or compensation the deduction is made. The 
 moneys so deducted and the income derived therefrom may from time to time 
 be deposited in savings banks designated by the Secretary of the Treasury for 
 that purpose: Provided, That the savings banks receiving such deposits shall 
 pay interest thereon at a rate of not less than three and one-half per centum 
 per annum, compounded annually. For the safe-keeping and prompt payment 
 of the money deposited with them the Secretary of the Treasury shall require 
 the savings banks to give satisfactory security, by the deposit of bonds of 
 the United States, bonds or other interest-bearing obligations of any State of 
 the United States, or any legally authorized bonds issued for municipal pur- 
 poses by any city or town in the United States which has been in existence as 
 a city or town for a period of twenty-five years, and which for a period of 
 ten years previous to such deposit has not defaulted in the payment of 
 any part of either principal or interest of any funded debt authorized to be 
 contracted by it, and which has at such date more than twenty-five thousand 
 inhabitants, as established by the last national census, and whose net indebted- 
 ness does not exceed five per centum of the valuation of the taxable property 
 therein, to be ascertained by the last preceding valuation of property for the 
 assessment of taxes; or any legally authorized bonds issued for municipal pur- 
 poses by any city or town in the United States which has been in existence as 
 a city or town for a period of twenty-five years, and which for a period of ten 
 years previous to such deposit has not defaulted in the payment of any part 
 of either principal or interest of any funded debt authorized to be contracted 
 by it, and which has at such date more than two hundred thousand inhabit- 
 ants, as established by the last national census, and whose net indebtedness 
 does not exceed seven per centum of the valuation of the taxable property 
 therein, to be ascertained by the last preceding valuation of property for the 
 assessment of taxes. In this clause the words " net indebtedness " means the 
 Indebtedness of any city or town, omitting debts created for supplying the 
 inhabitants with water, and debts created in anticipation of taxes to be paid 
 within one year, and deducting the amount of sinking funds available for the 
 payment of the indebtedness included. The Secretary of the Treasury shall 
 accept, for the purposes of this act, securities herein enumerated in such pro- 
 188 
 
RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 189 
 
 portions as he may from time to time determine, and he may at any time 
 require the deposit of additional securities, or require any banii to change the 
 character of the securities already on deposit. It shall be the duty of the 
 Secretary of the Treasury to obtain information with reference to the value 
 and character of the securities authorized to be accepted under the provisions 
 of this section, and he shall from time to time furnish Information to savings 
 banks as to such bonds as would be accepted as security. When consistent 
 with the best interests of the fund created by this act, the Secretary of the 
 Treasury shall distribute the deposits herein provided for, as far as practicable^ 
 equitably between the different States and sections. 
 
 If, for any reason, the Secretary of the Treasury shall not be able to make 
 satisfactory arrangements with savings banks for all of the funds, then he may 
 invest the balance in any of the aforementioned securities. 
 
 The moneys deducted from salaries and the income derived therefrom shall 
 be held and deposited or invested, as above described, by the Secretary of the 
 Treasury until paid out as hereinafter provided. Any deficiency in the fund 
 hereby created to carry out the provisions of this act shall be paid out of any 
 money in the Treasury not otherwise appropriated. 
 
 For the purpose of aiding the Secretary of the Treasury in depositing and 
 investing the funds created by this act a board of investment is hereby created, 
 composed of the Treasurer of the United States, the Comptroller of the Cur- 
 rency, the chief of the ofiice created by the provisions of this act, and two 
 persons to be designated by the President from among the employees of the 
 classified civil service. The members of the board of investment shall be 
 sworn, and shall hold ofiice until others are appointed and qualified in their 
 stead. 
 
 TWO PROVISIONS FOR INVESTMENT OF FUND. 
 
 It will be seen from this that the bill provides for the investment of 
 the retirement fund in two ways : 
 
 (1) Indirectly, by deposit in savings banks meeting certain require- 
 ments. 
 
 (2) Directly, by investment in a certain limited class of securities. 
 The bill provides that the banks receiving these funds must pay 
 
 not less than 3^ per cent interest on the deposits, and that they must 
 give Federal, State, or municipal bonds as security for these deposits. 
 Failing fo make satisfactory arrangements with savings banks for 
 all of the fund, the Secretary of the Treasury is authorized to invest 
 the balance directly in the aforementioned securities. 
 
 NOT FEASIBLE AT PRESENT TO DEPOSIT FUND IN SAVINGS BANKS. 
 
 Several men prominent in savings-bank circles have been asked for 
 their opinion of the investment clause in the proposed bill. The 
 consensus of opinion seems to be that the provisions in the bill for 
 handling the funds are theoretically sound, but that one of them is 
 not at present practicable. While there is no good reason for chang- 
 ing the two main provisions — that the funds be deposited first in 
 savings banks, and, secondly, invested in a limited class of securi- 
 ites — the fact should be brought out that the first provision is not 
 
190 RETIEEMENT OP SUPEEANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 likely to be of much service. Under present conditions it would not 
 be possible to deposit any large amount of the retirement fund in the 
 savings banks of the country. 
 
 Differences between eastern and tvestern savings banks. 
 
 In considering the subject it is necessary to bear in mind several 
 important differences between the savings banks of the East and 
 those of the West. Generally speaking, the savings banks of New 
 York and New England may be put in one class and those of the 
 rest of the country in another. Those of the former class operate 
 under the strictest laws governing such institutions. The rate of 
 interest which they pay is usually 3| or 4 per cent, whereas the savings 
 banks of the West seldom pay more than 3 per cent. The savings 
 banks of the East are generally mutual banks, and the profits of their 
 investments are distributed among the depositors, whereas the sav- 
 ings banks of the West are more often the property of stock com- 
 panies and are run mainly for the profit of the stockholders. 
 
 These differences in bank administration would prevent the wide- 
 spread acceptance of the Government's superannuation fund by the 
 savings banks of the country. The provision in the bill that 3^ per 
 cent interest must be paid on the clerks' savings would exclude the 
 fund from the majority of western banks, because they are unwilling 
 to guarantee that rate of interest. On the other hand, the eastern 
 banks paying 4 per cent interest on deposits could not accept the fund, 
 because the bill provides that savings banks receiving the employees' 
 savings must give satisfactory security in the shape of United States, 
 State, or municipal bonds, or other stipulated interest-bearing obliga- 
 tions. The New York and Massachusetts laws prohibit the prefer- 
 ring of depositors. 
 
 One practical objection to the provision in the bill that the em- 
 ployees' savings be deposited in savings banks is the fact that the 
 deposits would have to be received in the names of the individual 
 depositors. Under existing laws they could not be accepted as a 
 lump deposit from the Government. This requirement would neces- 
 sitate considerable accounting, and constitutes in the minds of some 
 bank officials, though not of all, an objection to the acceptance of the 
 employees' savings. Also the limited amount allowed individual 
 depositors would make it impossible for some banks to accept the 
 savings of the higher-salaried employees for the full period of ac- 
 cumulation. Altogether, it seems plain that the greater portion of 
 the Government employees' savings could not now be deposited under 
 existing laws in savings banks, but would have to be invested in the 
 securities named in the bill. 
 
m 
 
 UETIEEMENT OF SUPERANNUATED CIVIL-SEEVICE EMPLOYEES. 191 
 INVESTMENT OF FUND SHOULD BE RESTRICTED TO PUBLIC SECURITIES. 
 
 Although it does not appear feasible to deposit any large amount of 
 the retirement fund in savings banks, the officials consulted were 
 agreed in thinking that the securities in which it is invested should be 
 limited to those acceptable to the New York and New England sav- 
 ings banks, with the exception of railroad bonds, real estate, and 
 notes secured by personal indorsement. The liability of loss to the 
 employees, if the investment of the fund is limited to Federal, State, 
 and municipal bonds, they believe to be negligible. Mr. Andrew 
 Mills, president of the Dry Dock Savings Institution, of New York, 
 stated that during the past 30 years that institution had not lost a 
 dollar through securities of that class, although it had had an average 
 of $12,000,000 invested in that way. The nature of the retirement 
 fund, which would be made up of the savings of a large body of 
 people, makes the propriety of limiting its investments to the best of 
 savings-bank securities hardly debatable. 
 
 SAVINGS-BANK INVESTMENTS. 
 
 Savings banks are defined by Hamilton as " institutions established 
 by public authority, or by private persons, in order to encourage 
 habits of saving by affording special security to owners of deposits, 
 and by the payment of interest to the full extent of the net earnings, 
 less whatever reserve the management may deem expedient for a 
 safety fund; and in furtherance of this purpose bank offices are 
 located at places wdiere they are calculated to encourage savings 
 among those persons who most need such encouragement." ^ 
 
 According to the same authority, a savings bank is distinguished 
 from an ordinary commercial bank in several ways. Its object is to 
 promote thrifty habits among the laboring classes and to increase 
 their resources. Its first concern, therefore, is safety of the deposits, 
 its earnings being a secondary consideration. As its directors and 
 managers have no special financial interest in the returns, the methods 
 are therefore extremely conservative. A commercial bank, on the 
 contrary, is primarily a money-making institution, run in the interests 
 of stockholders, the managing officials being often heavily interested 
 in the stock. They want safe investments, but there is a constant 
 temptation to waive considerations of safety in the interest of larger 
 net returns to stockholders. Commercial banks discount paper and 
 are tempted to take risks in speculation. Savings banks do not, but 
 invest their deposits in public securities or in loans secured by real- 
 estate mortgages. 
 
 An earlier writer, J. Howard Van Amringe, says that banks of issue 
 and discount have only one point in common with savings banks, and 
 
 1 See Savings and Savings Institutions, by James H. Hamilton, p. 161. 
 
192 RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 that is the receipt of deposits. He emphasizes the difference still 
 more by declaring that the former exist for the convenience of the 
 rich, the latter for the benefit of the poor. The poor he defines as 
 those who have no invested capital. The charter for the first savings 
 bank in New York State was granted on the plea of the Ncav York 
 Society for the Prevention of Pauperism.^ 
 
 It seems proper, therefore, in discussing the investment of the fund • 
 that will be created from the employees' savings, to emphasize the 
 fact that the legal restrictions placed upon the investment of savings 
 bank funds vary greatly in different States of the Union. Some of 
 the States have enacted laws which are very strict and conservative, 
 properly safeguarding the interests of the depositors, while others 
 allow so-called " savings banks " to do business in a loose, unsafe way 
 that is directly contrary to the traditional spirit of savings institu- 
 tions. This abuse is well described in the following quotation: 
 
 The stock savings banks are numerous in Western and Southern States, and, 
 in addition to being institutions conducted for the benefit of shareholders, have, 
 with but few exceptions, little to distinguish them from ordinary commercial 
 banks, possessing all the powers and privileges of such institutions, and differ- 
 ing only in the added privilege of accepting savings deposits. Some of these 
 savings deposits, too, are held subject to check, thus practically nullifying any 
 added security that a savings institution is supposed to give. Again, in in- 
 stances, particularly in the Western States, the only apparent difference 
 between a savings bank and a State bank, other than the name and the statute 
 under which the organization may have been effected, rests solely in the now 
 obsolete privilege of issuing currency — the State bank still nominally possess- 
 ing that right which is denied to the savings bank.^ 
 
 At present the States which regulate most carefully the activities of 
 their savings banks are New York, Massachusetts, Connecticut, and 
 then, perhaps, Vermont, Maine, and New Hampshire. The result is 
 that savings bank failures are not often heard of in these States. 
 
 The number of savings banks that have failed under the Massachu- 
 setts law during the last 72 years is shown in the following tabular 
 statement, which is taken from the annual report for 1906 of the 
 Hon. Pierre Jay,^ bank commissioner of the Commonwealth of Massa- 
 chusetts. 
 
 1 See Life Assurance and Savings Banks, a lecture by J. Howard Van Amringe, New 
 York, 1872. 
 
 2 See Savings Banks and Safe Securities, by J. G. Dater (1898), p. 11. 
 * Now vice president, Bank of the Manhattan Company, of New York. 
 
RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 193 
 
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194 RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 It will be seen from the above that the principal causes of the 
 savings-bank failures in Massachusetts have been unwise investments 
 in real estate/ bad management, and the defalcation of bank officials. 
 It will be noted, however, that the terms of the proposed law do not 
 permit investment of the retirement fund in real estate, bu^ restrict 
 it to investment in public bonds alone. 
 
 PUBLIC BONDS SAFE INVESTMENTS. 
 
 A bond may be defined as follows: "An instrument by which a 
 government, municipality, or corporation contracts and agrees to 
 pay a specified sum of money on a given date (sometimes reserving 
 the right for earlier payment) , the bond itself being a coupon-bearing 
 (or registered) note under seal ; the coupons representing the quarterly, 
 semiannual, or annual interest, as the case may be, at a fixed rate." '• 
 
 The strength and security of Federal, State, and municipal bonds as 
 investments rest on the fact that they are based primarily on the 
 power of taxation, although they themselves are usually exempt from 
 taxation. 
 
 : FEDERAL BONDS. 
 
 The bonds of the United States Government have been issued at 
 various times to cover the national debt. As investments they are 
 secured by the national credit and the national honor. As the Ameri- 
 can people have shown themselves to be essentially a debt-paying 
 people, their promise to pay is regarded as among the most unimpeach- 
 able securities in the markets of the world. It has been said that " the 
 Government of the United States enjoys to-day the proud distinction 
 of having outstanding bonds bearing the lowest rate of interest at 
 which bonds have been issued by any nation, and, furthermore, its 
 bonds are selling in the market at a price which indicates that its 
 credit is not surpassed by that of any other nation." ^ 
 
 VARIOUS ISSUES OF FEDERAL BONDS. 
 
 The good credit of the Nation began with the foundation of the 
 Government and is largely due to the fine understanding and high 
 ideals of Alexander Hamilton, first Secretary of the Treasury, who 
 persuaded the new Government not to repudiate the colonial debts, 
 amounting to $72,775,895, but on the contrary to assume them. The 
 people of the country have ahvays shown themselves eager to pay 
 a public debt and willing to submit to heavy taxation to do so. By 
 1812 the national debt Avas down to $45,000,000. The w^ar of 1812 
 increased it, so that in 1816 it amounted to $127,334,933, but in 1835 
 
 1 See Money and Investments, by Montgomery Kollins, p. 44. 
 
 2 See Memorandum Concerning United States Bonds, revised to Oct. 1, 1902, prepared by 
 Fisk and Robinson, p. 18. 
 
RETIEEMENT OF SUPEEANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 195 
 
 it was all paid. The Mexican War piled it up again so that in 1851 
 it amounted to $68,304,796. By 1857 it was down to only $28,699,831. 
 Several Indian wars increased it to $98,580,873 by 1861. 
 
 At the opening of the Civil War the Treasury was empty and the 
 national credit reduced to a 12 per cent basis. All kinds of borrowing 
 followed. Over 20 different forms of obligations were issued, bearing 
 rates of interest varying from 7^^^ per cent down to nothing, and 
 with maturities of from 30 days to 40 years. The expedient most 
 criticized was the issue of legal-tender notes. There were several 
 great war loans, all of which the people of the country floated with 
 alacrity. One was the 6 per cent five-twenty year loan of 1862, issued 
 in denominations from $50 to $10,000. Another great war loan was 
 the seven-thirties of 1864 and 1865. The maximum of public debt was 
 reached August 31, 1865, and amounted to $2,844,649,626, against 
 which there was only $88,218,055 in the National Treasury. The war 
 being over, however, the Nation began at once to recover financially, 
 as well as in every other way, from the effects of the struggle. In 
 1879, specie payments were resumed, and by 1893 the debt had fallen 
 to $1,545,985,686.13, with a balance of $778,604,339.28 in the Treasury. 
 In 1894, however, on account of currency laws which made it neces- 
 sary to maintain the parity of various forms of currency with gold, 
 an increase in the gold reserve was secured through two sales of 5 
 per cent bonds, of $50,000,000 each. In 1895 the Government sold 
 $62,000,000 of 4 per cent bonds redeemable after 1925, and in 1896, 
 $100,000,000 more of 4 per cent bonds of 1925. In 1898, the Avar with 
 Spain made necessary an issue of 3 per cent ten-twenty year bonds 
 amounting to $198,792,660. After the war the Government had 
 large revenues, and the process of debt-paying began again. The 
 refunding act of 1900 provided for the refunding of the threes, the 
 fours of 1907, and the fives into new 2 per cent 30-year gold bonds. 
 Upward of $646,000,000 have thus been converted. It will be seen 
 from the following tabular statement that these consols of 1930, bear- 
 ing 2 per cent, constitute approximately 70 per cent of the interest- 
 bearing national debt. The Panama Canal loans, negotiated in 1906 
 and 1908, called for issues of 2 per cent 10-year bonds. The principal 
 Government issues now outstanding, all of which date since the year 
 1895, are therefore as follows : 
 
 Table XXXV. — Showing prmcipal outstanding bonds of the United States. 
 
 Title of loan. 
 
 Rate. 
 
 When 
 issued. 
 
 Redeemable 
 after- 
 
 Outstanding 
 May 1, 1911. 
 
 Consols, 1930 . 
 
 Per cent. 
 2 
 3 
 4 
 2 
 2 
 
 1900 
 
 1898 
 1895-96 
 1906 
 1908 
 
 Apr. 1,19.30 
 Aug. 1,1908 
 Feb. 1,1925 
 Aug. 1,1916 
 Nov. 1, 1918 
 
 $646,250,150 
 
 Loan of 1908-18. . . . 
 
 63, 94.'^, 460 
 
 Loan of 1925 
 
 118,489,900 
 54,631,980 
 
 
 Do 
 
 30, OOC, 000 
 
 
 
196 KETIKEMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 FEDERAL BONDS NOW ISSUED TO PAY FOR PUBLIC WOKKS. 1 
 
 In connection with the last loan made by this Government it is 
 interesting to note that formerly the debt of governments repre- 
 sented the cost of wars, but more recently an increasing portion of 
 government debts in other countries as well as our own represents the 
 cost of industrial undertakings. It follows, therefore, that bond- 
 holders have a further security for the payment of the interest in 
 the earning power of properties, such as the Panama Canal or the 
 Russian railway system, in addition to the regular source of public 
 revenue, that is, the taxing power of the nation. 
 
 FEDERAL BONDS SAFEST OF INVESTMENTS. 
 
 Of all possible investments, therefore, the United States Govern- 
 ment bond is probably the safest. 
 
 RATE OF INTEREST ON FEDERAL BONDS LOW. 
 
 By reason of this fact, however, the interest return is correspond- 
 ingly low. The splendid credit of the nation is such that our Govern- 
 ment bonds sell at a higher price than the bonds of any other nation, 
 over $730,000,000 of the $913,000,000 outstanding bearing only 2 per 
 cent interest, the lowest rate of any national issue. This is due, 
 however, not merely to the greatness of our resources and the small- 
 ness of our debt, but also to the fact that our national banking sys- 
 tem is largely based on the bonds of the Government, the national 
 banks being required to put Government bonds in the United States 
 Treasury as security for their issue of notes or bank bills. The 
 exact status of the Government bond as a form of investment is 
 summarized as follows by the editor of the Bankers' Magazine: 
 
 Government bonds are an ideal investment for trust funds, but the artificial 
 stimulus given to the price of these securities, owing to the uses made of them 
 by the national banks, has tended to place them beyond the reach of fiduciary 
 institutions. In fact, United States bonds are rapidly losing their investment 
 character and are becoming more or less speculative. The 2 per cent bonds 
 selling at 103 and upwards maintain their price not because of the interest 
 yield, but because of the special uses to which the bonds may be put by the 
 national banks. It is hardly necessary to say that if the special privileges 
 with reference to security for bank circulation and deposits were removed 
 from United States bonds, their price would fall to a level to make them 
 attractive investments for savings banks and trust companies.* 
 
 While yielding a very low rate of interest at present, it is well to 
 remember, however, that the purchasers of Government bonds dur- 
 ing the Civil War realized 6 and 7 per cent on their purchases when 
 the war issues were refunded, and that, in the long run, part at least 
 of a permanent fund might be invested profitably in Government 
 bonds. 
 
 1 See Bankers' Magazine, vol. 72, p. 371. 
 
BETIKEMEFT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 197 
 FEDEEAL BONDS ATTRACTIVE TO LIFE-INSURANCE COMPANIES DURING WAR. 
 
 The desirability of Federal bonds as an asset is also attested by the 
 history of life-insurance investments. Except the savings banks, life- 
 insurance companies were, until the recent days of corporation 
 growth, the only conspicuous and extensive repository of the people's 
 savings. Since the organization of the insurance department of the 
 State of New York in 1859, the annual statements of the insurance 
 companies have made the public familiar with the merits and earn- 
 ing power of the various classes of investments. These statements 
 seem to show that different kinds of investments have been profitable 
 at different periods in the history of the United States. Statistics 
 compiled from reports of the 29 largest life-insurance companies 
 in the country display an interesting variation in the life-insurance 
 companies' record of investments in public bonds. Beginning with 
 5.9 per cent of life-insurance assets in 1860, these investments in- 
 creased to 16.1 per cent in 1870, 23.4 per cent in 1880, and then fell 
 off to 9.2 per cent in 1890 and 8.6 per cent in 1900.^ 
 
 The general significance of these different variations in life-insurance 
 investments at different periods would seem to be this : That in times 
 of public peace and ordinary business activity Federal bonds yield 
 too low a return to be attractive investments, but that in times of 
 public peril and prolonged industrial depression they are in great 
 demand. In the begimiing of the history of the big life-insurance 
 companies in this country there was no large field of investment open 
 to them outside of mortgage loans, notes on policy premiums, and 
 public loans. The great transcontinental railroads were not yet built 
 or projected, the era of gas light, electric light, and water companies 
 had not yet dawned. The most remunerative investments of half a 
 century ago were mortgages and premium notes and the life-insurance 
 companies accordingly put 80 per cent of their money intp those 
 securities. Not until the Civil War broke out did public bonds rival 
 mortgages or premiums in favor. With the outbreak of hostilities, 
 however, and the cessation of industrial activity the life-insurance 
 companies hastened to transform their mortgage loans into public 
 securities. While gold was at a premium Government bonds could 
 be purchased at a price which yielded a rate of interest in paper as 
 high as 10 per cent. The maximum price of 285 per cent was reached 
 in July, 1864, at which point the purchasing price of greenbacks was 
 but 36 cents on the dollar. When at length the effects of the war 
 began to wear off and the premium on gold declined, while chances for 
 remunerative* investments began to multiply, the Government bonds 
 c^ne gradually to look less and less attractive to the insurance com- 
 panies, until at the present time they are only used as investments for 
 
 1 See " The Investments of Life-Insurance Companies," by Lester W. Zartman, instructor 
 In insurance, Yale University (1906). 
 
198 EETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 unemployed funds. It is important, however, when considering the 
 safety of investments to note that, during the financial depression of 
 the seventies, the insurance companies purchased a large amount of 
 Federal bonds and held them, even though the Government was re- 
 funding them at a lower rate of interest, until after 1880. About 
 that time railroad securities began to come into high favor, and since 
 then the insurance companies have become heavy purchasers of rail- 
 road bonds, nearly 29 per cent of their assets in 1900 being in that 
 form of securities. 
 
 STATE BONDS. 
 
 Only less secure than United States bonds, according to the testi- 
 mony of numerous writers on investments, are the obligations of 
 tho sovereign States of the Union. 
 
 State bonds usually sell [says one author] upon a basis which may be taken 
 as the equivalent of pure interest, with no element of risk or speculation 
 Involved. The obligations of different States sell at different prices, in ac- 
 cordance with market conditions and the relations of supply and demand, but 
 there can be no question of the equal ability of all States to pay their obliga- 
 tions. Repudiation of State debts has occurred in our history, but only in 
 cases where an overwhelming majority of the citizens were opposed to the 
 creation of the debt at the time of its issue, but lacked the means to control 
 the situation. Such instances are chiefly to be found in the case of the so- 
 called carpet-bag governments of the Southern States after the Civil War.^ 
 
 STATE BONDS NOW SAFE HOLDINGS. 
 
 The conditions under which the repudiated State bonds were issued 
 are so different from any that now obtain or are likely to occur again 
 that there is to-day no reason for believing that any of our State 
 issues of recent date are anything but safe holdings. The bonds of 
 those States which have maintained an unbroken record for payment 
 of their debts are in such high favor that, like Government bonds, 
 they are out of the reach of the majority of investors. During the 
 War of the Rebellion Massachusetts met all its obligations in gold, 
 even when gold was selling at a stupendous premium. Its credit 
 is consequently very sound. The issues of New York State are like- 
 wise in high favour and yield the investor approximately 3 per cent.- 
 Nearly all the States are now, however, on a sound financial basis, so 
 that their bonds are among the safest of securities. 
 
 Some State issues [says Montgomery Rollins] have valuable assets in the 
 shape of income-producing property, which contribute toward the payment of 
 the principal and interest of its obligations; such, for instance, are the large 
 Income-producing State-owned wharves and docks in San Francisco. 
 
 1 See How to Invest Money, by George Garr Henry, vice president Guaranty Trust Co., 
 New York (1908). 
 
 * See lnvf'«lmt>nt Probloms, by Fisk and Robinson MOOT). 
 
RETIREMENT OP StJPERANNUAlED CIVIL-SERVICE EMPLOYEES. 199 
 
 Again, an indebtedness of tliis nature may be incurred for some improvement 
 more or less local in its nature, the particular section benefited being primarily 
 responsible for the liquidation of the debt, for which, nevertheless, the State 
 has obligated itself for payment, an example being bonds issued by the Common- 
 wealth of Massachusetts for the benefit of the Metropolitan Water District. 
 
 EATE OF INTEREST ON STATE BONDS NOT HIGH. 
 
 The interest return from most of our State securities is not large, and con- 
 sequently their purchase is more or less limited to institutions such as insur- 
 ance companies and savings banks, or to trustees of estates, or to those seek- 
 ing a particularly conservative form of investment and who can afford the low 
 rate of interest.^ 
 
 MUNICIPAL BONDS. 
 
 Municipal bonds are declared by one writer to be " among the most 
 popular and safest forms of investments." ^ 
 
 Municipal bonds [says another author] have steadily grown in favor for 
 individual investment. They have always been in demand by institutions, and 
 the savings banks of the country at the very outset were permitted to purchase 
 and loan upon them, or to loan money to towns and cities, which is substantially 
 the same thing. Numerous favorable court decisions have further established 
 their position, and no one to-day hears the theory advanced, as was the case 
 40 years ago, that a municipal bond is a third mortgage, the Federal and State 
 debts taking precedence as first and second mortgages. One of the strongest 
 points in their favor has been the decision of the United States Supreme Court 
 in the celebrated income-tax case, in wiiich it was held that these bonds were 
 exempt from the operation of the income tax. As a result of this conclusive 
 opinion by the court of highest resort any shade of doubt that may have 
 remained as to the desirability of municipal bonds for the investment of indi- 
 vidual or trust funds has been swept away.^ 
 
 In this connection Judge Dillon has written : 
 
 The Supreme Court of the United States has upheld the rights of the holder 
 of municipal securities with a strong hand, and has set a face of flint against 
 repudiation, even when made on legal grounds deemed solid by the State courts, 
 by municipalities which had been deceived and defrauded. [Further:] The 
 value of such securities is largely due to the course of adjudication in respect 
 thereto by the Supreme Court and the reliance which is felt by the public that 
 it will stand firmly by the doctrine it has so fi-equently asserted.* 
 
 In his little book on Municipal Bonds, Eben H. Gay quotes the case 
 of Moultrie County v. Fairfield (see 105 U. S., 370 (1882), to prove 
 that should repudiation be attempted judgment may be secured 
 against the city for the amount of interest or principal in default, and 
 the officials who have hitherto refused to levy the necessary tax com- 
 pelled, by writ of mandamus, so to do.^ 
 
 1 See Money and Investments, by Montgomery Rollins, p. .S73. 
 
 2 See " Investment Securities," by George B Caldwell, manager bond department, Ameri- 
 can Trust and Savings Bank, Chicago, 111., in American Investment, February, 1906. 
 
 ^ See Savings Banks and Safe Securities, by .1. G. Dater, p. 58. 
 
 * See Dillon's Municipal Bonds, p. 7. 
 
 * See Municipal Bonds, by Eben H. Gay, published by N. W. Harris & Co., bankers, 
 Boston, 1890. 
 
200 RETIREMENT OF SUPERANNUATED ClVlL-SERVICE EMPLOYEES. 
 LARGE INVESTMENTS IN MUNICIPAL BONDS. 
 
 With the safety of municipal bonds assured, their increased popu- 
 larity as an attractive form of investment has caused a phenomenal 
 growth in the municipal indebtedness of the country. According to 
 the Federal census of 1902, the funded debt and special assessment 
 loans of minor civil divisions amounted to $1,561,433,680. The steady 
 increase in urban population, as shown in the following table, explains 
 this large indebtedness. 
 
 Table XXXVII. — Showing population living in cities at each decade.^ 
 
 
 
 
 Inhabit- 
 
 Census 
 year. 
 
 Population 
 
 of the 
 
 United States. 
 
 Population 
 living in 
 
 cities. 
 
 ants of 
 cities in 
 
 each 100 of 
 the total 
 
 population. 
 
 1790 
 
 3,929,214 
 
 131,472 
 
 3.3 
 
 1800 
 
 5,308,438 
 
 210,873 
 
 4.0 
 
 1810 
 
 7,239,881 
 
 356, 920 
 
 4.9 
 
 1820 
 
 9,633,822 
 
 475,135 
 
 4.9 
 
 1830 
 
 12,866,020 
 
 864, 509 
 
 6.7 
 
 1840 
 
 17,069,453 
 
 1,453,994 
 
 8.5 
 
 1850 
 
 23,191,876 
 
 2,897,586 
 
 12.5 
 
 1860 
 
 31,443,321 
 
 5,072,256 
 
 16.1 
 
 1870 
 
 38,558.371 
 
 8,071,875 
 
 20.9 
 
 1880 
 
 50,155,783 
 
 11,318,547 
 
 22.6 
 
 1890 
 
 62,947,714 
 
 18,317,783 
 
 29.1 
 
 1900 
 
 75,994,575 
 
 25,126,668 
 
 33.1 
 
 1910 
 
 91,972,266 
 
 35,726,720 
 
 38.8 
 
 ■ This table Includes cities of 8,000 and over. 
 
 The development of cities and tlie wonderful advance made in material com- 
 fort through waterworks, pavement, gas and electric plants, sewers, drains, 
 and sanitation within the last half century, while creating a new form of in- 
 debtedness, has greatly advanced the valuation of real property, which, despite 
 increased obligation, furnishes more than adequate security for the indebted- 
 ness. Wise legislation has afforded still further protection to these obligations 
 by limiting the bonding power of communities, so that to-day the net municipal 
 debt of the country bears an exceedingly low ratio to the assessed valuation 
 of the property upon which it is a lien. Another point in favor of municipal 
 bonds is that, while furnishing adequate security to investors, they possess also 
 a highly recognized standard of value in all money centers. Thus they are 
 readily accepted as collateral in bank loans and, while not fluctuating widely 
 in the market, or subject to the attacks of unprincipled speculators, they are 
 readily marketable. In nearly all the important cities of the country invest- 
 ment bankers are ready and anxious to buy, sell, or exchange such securities 
 in order to supply the enormous investment demand for them from individuals 
 and corporations.* 
 
 The purposes for which municipal bonds are issued is illustrated 
 by the following classification of the funded debt and special assess- 
 ment loans of minor civil divisions in 1902, compiled from census 
 returns. 
 
 1 See Savings Banks and Safe Securities, by J. G. Dater (1898), p. 64. 
 
RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 201 
 Table XXXVIII. — Showing purposes of municipal bond issues. 
 
 Purpose of issue. 
 
 Amount. 
 
 Total. 
 
 Waterworks 
 
 Electric light and gas works. 
 AU other industries 
 
 Total for municipal industries 
 
 Municipal buildings 
 
 Police and Are departments 
 
 School buildings and sites 
 
 Libraries, art galleries, and museums. . . 
 
 Parks and gardens 
 
 Sewers 
 
 General street improvements 
 
 Street paving 
 
 Bridges and abolition of grade crossings . 
 
 liOcal improvements 
 
 General improvements 
 
 Railroad subsidies 
 
 All other 
 
 Issued for funding 
 
 Issued for refunding 
 
 Total. 
 
 Total for all purposes . 
 
 5320,986,519 
 11,116,323 
 82,585,338 
 
 69. 
 7. 
 
 127, 
 19, 
 78, 
 93, 
 
 129, 
 14, 
 65, 
 60, 
 
 113, 
 47, 
 
 122, 
 95, 
 
 111, 
 
 271,842 
 507,753 
 
 805. 525 
 628,835 
 491,792 
 403,831 
 266, 201 
 229, 869 
 669, 942 
 849,728 
 883, 183 
 794,885 
 
 140. 526 
 760,808 
 040,780 
 
 8414,688,180 
 
 1,146,745,500 
 
 1,561, 433, ( 
 
 CHAKACTEE OF MUNICIPAL BONDS ACCEPTABLE. 
 
 Attention is directed to the fact that the proposed bill makes the 
 acceptability of municipal bonds determined by four factors: (1) The 
 population of the municipality; (2) its period of existence as a city 
 or town, which must be not less than 25 years; (3) its good record in 
 the payment of debts, the bonds of no city being acceptable if it has 
 defaulted within 10 years in the payment of any part of either princi- 
 pal or interest of any funded debt authorized to be contracted by it ; 
 and (4) its net indebtedness, which must not exceed 5 per cent of the 
 valuation of the city's taxable property in the case of cities or towns 
 of less than 200,000 inhabitants, and must not exceed 7 per cent of the 
 valuation of the taxable property in cases of cities of more than 
 200,000 inhabitants. 
 
 BONDS OF SMALL MUNICIPALITIES. 
 
 The last bill introduced during the first session of the Sixtieth 
 Congress (H. R. 21261) limited investments in municipal bonds to 
 cities of 100,000 population and over. A number of financiers con- 
 sulted advised that the investment provision be changed to include 
 cities of much smaller population, care being taken to preserve the 
 clause as to the time the municipality had been a city. Mr. Louis D. 
 Brandeis, of Boston, author of the savings-bank and annuity law 
 which was recently enacted in Massachusetts, said that, in his opinion, 
 many of the smaller cities are better security than the larger ones, and 
 that it is not in the interest of the people generally or of the employees 
 to discriminate against the smaller municipalities. The proposed bill 
 accordingly limits investments in bonds to bonds of cities having a 
 
202 RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 population of 25,000 and over. According to the census of 1900, there 
 are 156 cities in the United States which have a population of 25,000 
 or over.^ 
 
 In support of the contention that the smaller municipalities are 
 often better security than the larger ones, and that it is not in the 
 interest of the people generally to discriminate against the smaller 
 municipalities, the following quotation is of interest : 
 
 While differing only moderately from one another in point of safety and 
 income return, municipal bonds may be divided into two distinct classes in 
 accordance with the degree of convertibility which they possess. Some mu- 
 nicipal bonds possess great convertibility ; others almost none. The feature 
 which chiefly determines the activity or inactivity of a municipal issue is the 
 size and importance of the municipalty, together with the amount of bonds 
 which it has outstanding. The bonds of large and important cities, whose out- 
 standing debt reaches considerable proportions, usually possess great activity. 
 They are constantly traded in and command a broad market, because dealers 
 are willing to buy or sell in blocks at prices within a fraction of 1 per cent 
 apart. 
 
 On the other hand, the bonds of counties, townships, and small cities are 
 usually quite inactive. Transactions rarely occur in them, dealers do not make 
 market in them, and they can be sold only to genuine investors. It is often 
 impossible to have them even quoted. 
 
 At first sight it would appear that active municipal bonds would be much 
 more desirable, but inactive municipals possess a special advantage which the 
 active ones do not enjoy. They possess more stability of market price. It is 
 true that their stability of value is due to the fact that they are not traded in or 
 quoted and is therefore largely fictitious, but nevertheless it accomplishes a 
 useful purpose. It enables the investor to carry inactive municipals at cost 
 price upon his books through periods in which active market bonds would re- 
 quire to be marked down in conformity with prevailing market prices. No 
 other class of investment except real-estate mortgages possesses to the same 
 degree this quality of price stability. For many classes of buyers — savings 
 banks, for example — stability of price is a consideration of prime importance. 
 The preservation of the savings bank's surplus and, indeed, the continued 
 solvency of the institution depend upon maintaining the integrity of the prin- 
 cipal which it has invested. A savings bank requires, also, great safety of 
 principal and interest, i. e., the certainty that principal and interest installments 
 will be paid at maturity. It needs only a fair, but not high, yield, and it does 
 not need to place emphasis upon convertibility or prospect of appreciation in 
 value. Comparison of these requirements with the characteristics of inactive 
 municipal bonds discloses a strikmg adaptability on their part to the real needs 
 of the case. As a consequence, it is not surprising to discover that inactive 
 municipals are greatly sought by savings banks. 
 
 The desirability of inactive municipals for savings-bank investment was never 
 more forcibly illustrated than on the first of last January, when the savings 
 banks came to make up their annual statements. Broadly speaking, there can 
 be no doubt that they were saved by the large quantity of inactive municipals 
 and real-estate mortgages which they carried. Had any considerable portion 
 of their assets consisted of railroad bonds and active municipals, upon which 
 
 1 The number of cities of 25,000 inhabitants has probably increased since 1900. It does 
 not follow, however, that all will come within the provisions of the bill, for the reason 
 that their net indebtedness may be greater in some cases than allowed under the bill. 
 
EETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 203 
 
 they should have had to write off a loss of 10 to 15 points, their solvency would 
 almost certainly have been impaired.^ 
 
 " NET INDEBTEDNESS " DEFINED. 
 
 In accordance with the suggestion of Mr. Pierre Jay, former bank 
 commissioner of the Commonwealth of Massachusetts, and others, the 
 proposed bill contains a definition of the term " net indebtedness " 
 similar to that contained in the Massachusetts law relating to in- 
 vestments of savings banks. While it is generally conceded that 
 municipalities can not usually stand a greater " net indebtedness " 
 than 5 per cent of the assessed valuation, it is a rule that has some 
 striking exceptions. The assessed valuation is the value fixed upon 
 the property of the municipality by authorized officials for the pur- 
 pose of taxation, but the rules for fixing the assessments vary in dif- 
 ferent places. In New York, for instance, property is assessed at 
 about its true value, whereas in Chicago the assessment of real prop- 
 erty is based upon about 75 per cent of its real value. In munici- 
 palities where the assessed valuation is only a fraction of the real 
 value of the property, the net indebtedness of the city may safely be 
 more than 5 per cent of the valuation of the city's taxable property. 
 The Massachusetts law for savings banks has been followed in this 
 as in other respects, and the proposed bill therefore fixes the limit of 
 indebtedness allowed on the smaller municipalities — those having 
 less than 200,000 inhabitants — at 5 per cent of the assessed valuation, 
 and raises the limit of indebtedness allowed municipalities of more 
 than 200,000 inhabitants to 7 per cent of the valuation of their tax- 
 able property. By net indebtedness is meant " the indebtedness of 
 any city or town, omitting debts created for supplying the inhabit- 
 ants with water and debts created in anticipation of taxes to be paid 
 within one year, and deducting the amount of sinking funds avail- 
 able for the payment of the indebtedness included." 
 
 ESSENTIAL POINTS IN CONSIDERING SA-FETY OF MUNICIPAL BONDS. 
 
 Before dismissing the subject of the safety and desirability of the 
 municipal bond as a form of investment, it may be proper to empha- 
 size the fact that municipalities are not all governed by the same laws 
 nor possessed of the same degree of civilization and material wealth, 
 and that their credit therefore varies like that of different individuals. 
 The statement is made by the manager of a Chicago bond house that 
 '"the important elements of security in a municipal bond are the 
 legality of its issue, the moral hazard^ the assessed valuation of the 
 property that must be taxed to pay the bond, and the ratio of the 
 debt to real assessment valuation." ^ 
 
 1 See How to Invest Money, by George Garr Henry, vice president Guaranty Trust Co., 
 of New York (1908). 
 
 2 See "Investment Securities," by George B. Caldwell, manager bond department, Ameri- 
 can Trust and Savings Bank, Chicago, 111., in American Investments, February, 1906. 
 
204 RETIREMENT OP SUPERANNUATED CTVIL-SERVICE EMPLOYEES. 
 
 The points which should be considered in the investigation of a 
 municipal bond are similarly defined by another bank official as 
 follows : 
 
 (1) The proportion which the total debt of the municipality bears to the 
 assessed valuation of the property subject to taxation; (2) the purpose of 
 issue, which must be a proper and suitable one; (3) the proceedings under 
 which the bonds were issued, which must be in full compliance with the law. 
 
 " If these points are found to be satisfactory, the investor may rest content 
 that no other form of security is so greatly safeguarded and that his bonds 
 rank upon a substantial equality with Government and State obligations.^ 
 
 BATE OF INTEREST ON MUNICIPAL BONDS. 
 
 After the safety of the municipal bond, the most important thing 
 to be considered is the rate of interest which it will yield. Since 
 United States and State bonds are now so high in value, it follows that 
 the Government employees' retirement fund will have to depend 
 mainly on municipal bonds to lift the interest rate above an average 
 of 2 or 3 per cent. Can they be depended on to jdeld the 3^ per cent 
 provided for in the bill, or the 4 per cent recommended as more de- 
 sirable? In the opinion of savings-bank officials of New York and 
 New England who have been consulted it is safe to guarantee that 
 rate of interest on the employees' savings. According to the state- 
 ment of a prominent bond house, the yield on the investments in 
 municipal bonds may be said to range between 3| and 4^ per cent.^ 
 
 The vice president of the First National Bank of Chicago, 111., 
 states that " municipal bonds yield, according to their grade, from 3^ 
 to 5 per cent to the investor, and as a class they are one of the best 
 investments in the market." * 
 
 PROBABLE FUTURE COURSE OF RATE OF INTEREST. 
 
 The profitable investment of the retirement fund created under the 
 provisions of the proposed bill will depend on the rate of interest 
 which can be obtained on the securities to which it is restricted. 
 Many persons believe that the rate of interest is lower now than it 
 has been in the past and that it is likely to be still lower in the future. 
 The student finds, however, that the interest rate fluctuates constantly, 
 so that it is impossible to know whether the general tendency of the 
 rate is upward or downward unless a long period of years is taken 
 under observation. It may be stated, of course, as a general proposi- 
 tion that the interest rate is always low in an old and settled country 
 in comparison to what it is in a new and undeveloped one, and that 
 
 1 See How to Invest Money, by George Garr Henry, vice president Guaranty Trust Co., 
 New York (1908). 
 
 2 See Investment Problems, by Pisk & Robinson. 
 
 » See " Investments," by David R. Porgan, vice president First National Bank, Chicago, 
 in American Investments, February, 190(3. 
 
RETIKEMENT OF SUPEBANNUATED CIVIL-SERVICE EMPLOYEES. 205 
 
 money therefore is not likely to bring in future years the large return 
 it has brought here in the past when the Great West was first opened 
 up to industry. The fact, too, that these are days of swift and easy 
 communication between widely distant countries lowers the general 
 rate of interest by making our American securities well known the 
 world over and bringing to us from all points of the compass without 
 much effort the capital desired. Nevertheless, in spite of the fact that 
 these modern conditions might be expected to depress the interest 
 rate and keep it down, there are those who say, not only that the rate 
 of interest is now on the upward trend and has been so for some time, 
 but that it never will stay down for any great length of time. 
 
 It is illuminating in connection with this discussion to read what 
 Lester W. Zartman, instructor in insurance at Yale University, has 
 said on this subject 
 
 If we study the rate of interest in the United States from the period of the 
 Civil War, we shall find that there has been one tendency through the whole 
 period, the movement toward lower rates. Much discussion in insurance circles 
 has been based on the shovi^ing of this period. The conclusion has been that the 
 tendency of interest is to decline, and investments, especially during the past 15 
 years, have been made on the assumption that the rate of interest for a long 
 time was to continue to decline. It is a mistake to base conclusions on a study 
 of the period since the Civil War and on this period alone. Valid conclusions 
 must be based on a wider study. 
 
 There is a belief widely prevalent that the rate of interest has been high 
 throughout the history of the United States until recent years, and that there 
 has been a gradual decline to vi^hat is known as the present low rate. This is 
 not exactly true. It is a fact that in general the rate of interest in the United 
 States has been higher than in Europe, especially in England, but, relatively 
 speaking, the rate was not steadily high during the early history of the country, 
 nor has there been a gradual decline. The real situation is that the rate has 
 been a fluctuating one. During colonial times 6 per cent was altogether a 
 common rate of interest. Before the Revolutionary War loans could be secured 
 on desirable mortgages in New York State at 5 per cent, which can not be 
 considered as a high rate on mortgage loans, for many borrowers are paying 
 more even now.^ 
 
 Zartman goes on to describe the fluctuations in the rate of interest 
 in succeeding years. He finds that during the thirties the rate fluctu- 
 ated rapidly, being extremely high in 1836 and then, during the severe 
 depression following the crisis of 1837-1839, going as low as 4 per 
 cent on many loans, the ordinary rate fluctuating around 6 per cent. 
 Life-insurance statistics were not available before 1850, but savings- 
 bank statistics show that for such investments as the savings banks 
 were allowed to make the rate of interest for 50 years was probably 
 under 6 per cent. From 1850 to 1860 the statistics of the income and 
 assets of seven life-insurance companies are available, and show, in a 
 general way, that the rate of interest for the decade 1850-1860 was 
 somewhat below 6 per cent. 
 
 igee The Investmeiits of Life Insurance Companies, by Lester W. Zartman. 
 
206 RETIEEMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 After 1860 we have abundant data as to the rate of earnings 
 secured by the life companies on their investments. In the early 
 part of the sixties there was a decrease in earnings, but in 1863 the 
 interest rate began to rise, and in 1864 the rate was the highest 
 known in the experience of the insurance companies. This was due 
 to the fact that they had large investments in Government bonds, the 
 interest on which was paid in gold, and gold was at a premium. The 
 prevailing rate was more than 7 per cent and 8 to 12 per cent was 
 not uncommon. 
 
 Since the latter part of the sixties the interest rate has declined 
 more or less unsteadily, but none the less surely. The decade of the 
 seventies was a period of widespread financial depression. In the 
 early part of the decade the prevailing interest rate was 6^ per cent, 
 in the latter part 6 per cent. After 1880 the decline in the rate of 
 interest became more pronounced. Not a single company maintained 
 a level of 6 per cent unbroken. The general interest rate Avas 5^ per 
 cent. The rapid decline in the rate of interest continued in the decade 
 of the nineties, reaching its lowest point in 1893 and 1894. The aver- 
 age rate for the decade was about 5 per cent, but in the worst years 
 it sank as low in numerous cases as 2^ and 3 per cent. The latter part 
 of the decade was a turning point. Since 1900 the average rate 
 of interest earned by the life-insurance companies has been 4J per 
 cent, though there have been sharp fluctuations. It may be safely 
 stated that since 1896 the general tendency of interest rates has been 
 slowly but steadily upward. From this survey of the interest returns 
 obtained by the principal life-insurance companies on their invest- 
 ments, thus collected and classified by Zartman, the^ main conclusion 
 to be drawn would seem to be this, that the tendency of the interest 
 rate is not to decline but to fluctuate. Remembering that the future 
 is long, it is safe then to argue that while the rate of interest may be 
 low at some time in the future, it is sure, also, to be high at some other 
 time in the future. 
 
 It is true, however, that some writers hesitate to hazard a predic- 
 tion as to the rate of interest in the future. Among them is Prof. 
 Irving Fisher, of Yale University, whose conclusions are thus sum- 
 marized in his exhaustive work, " The Eate of Interest : " 
 
 In order to estimate the possible variation in the rate of interest we may, 
 broadly spealving, take account of the following three groups of causes: (1) The 
 thrift, foresight, self-control, and love of offspring which exist in a community ; 
 (2) the progress of inventions; (3) the changes in the purchasing power of 
 money. The first cause tends to lower the rate of interest ; the second to raise 
 it; and the third to affect only the nominal rate of interest, though practically 
 it usually produces also a dislocation in the real rate of interest. 
 
 Were it possible to estimate the strength of the various forces thus sum- 
 marized we could base upon them a prediction as to the rate of interest in the 
 future. Such a prediction, however, to be of much value would require more 
 
RETIKEMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 207 
 
 painstaking attention tlian has ever been given to existing historical conditions. 
 Without such a careful investigation any prediction is hazardous.^ 
 
 Numerous actuaries have declared that it is folly to say that the 
 rate of interest will continue to decline, since the time would come 
 if that were true when money would be loaned without interest, a 
 condition contrary to all probability. Carried to its logical con- 
 clusion, the idea of constantly declining interest would lead ulti- 
 mately to the theory that the rate of interest must eventually become 
 a minus quantity, and the time arrive when the money lender would 
 pay the borrower for taking the money off hie hands, a theory not 
 likely to gain much credence in the business world. 
 
 The probable future rate of interest was discussed with great 
 earnestness at the Fourth International Congress of Actuaries, held 
 in New York in August, 1903. Two papers were presented, one on 
 " The Probable Future Course of the Rate of Interest," by Mr. J. 
 Burn, of Great Britain, and one on " Der wahrscheinliche Lauf des 
 Zinssatzes in der Zukunft," by Dr. Ludwig Grossmann, of Austria. 
 Mr. Burn's conclusion was as follows : 
 
 The most probable future course of the rate of interest (providing no 
 exceptional disturbances occur) would therefore seem to be: 
 
 A fall, small but rapid, within the next year or two ; then a less rapid fall 
 lasting possibly for several years, and gradually settling down to a general 
 tendency to fall at a slower and slower rate.^ 
 
 It is interesting to note that since 1903, the year when this paper 
 was read, the rate of interest has steadily advanced, and that most 
 of the actuaries who participated in the discussion which followed 
 the reading of these papers indorsed rather the views of Dr. Gross- 
 mann, who held that the marked decrease in the returns from invest- 
 ments appeared to be mainly of a temporary nature.^ Dr. Alfred 
 Manes, of Germany, called attention to a recent work by Ernst Voye, 
 of Halle, entitled, " On the Extent of the Various Rates of Interest 
 and their Reciprocal Dependence on Each Other. The Course of 
 the Rate of Interest in Prussia from 1807 till 1900." In this the 
 author divides the century into four periods, discussing the rate of 
 interest in Prussia in each period. He finds that in the first period, 
 from 1807 to 1844, there was a general decline in the rate of interest, 
 which, owing to extremely unfavorable political relations (until 
 1814) was as high as 8 per cent and then dropped about 1844 to 3| 
 per cent. In the second period, from 1845 to 1870, it rose, inter- 
 rupted several times by a retrograde movement. The years from 
 1871 to 1895 comprise the third period, in which an almost uninter- 
 rupted decline is to be noticed and the rate of interest dropped to 
 3 per cent, the minimum of the entire century. Finally, in the fourth 
 
 1 See The Rate of Interest, by Irving Fisher, Ph. D., p. 334. 
 
 2 See Documents, Fourth International Congress of Actuaries, p. 574. 
 8 See Documents, Fourth International Congress of Actuaries, p. 922. 
 
208 RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 period, from 1896 to 1900, was observed a rather rapid upward move- 
 ment to over 3^ per cent. The author states the fact that in America, 
 Eussia, France, and Austria the rate of interest has also declined 
 since 1870, and comes to the following conclusion : 
 
 Constantly increasing commerce converts tlie national money markets int^ 
 an international money market, contracting more and more, so that the rates 
 of the separate countries tend to adjust themselves each to the other. Whether 
 the rate of interest in one of the civilized states will ever again deviate from 
 that in another by 4 per cent, as was the case in 1869 between the United States 
 and England, is highly questionable. * * * The development of an inter- 
 national rate of interest produces the natural result that by an extension of 
 the market, the rate of interest in the separate countries is secured against 
 too low a decline as well as against an immoderate rise. * * * The reac- 
 tion of the foreign upon the domestic rate of interest can, therefore, be generally 
 only favorable and by no means predominantly unfavorable.^ 
 
 Another strong speech, bringing out the same point, was made on 
 that occasion by Mr. Charlton T. Lewis, of the United States. 
 Said he: 
 
 It has been often asserted in the public press and sometimes in the writings 
 of economists, * * * ^]jat there is a progressive and secular tendency to 
 diminution in the rate of interest. This theory has been widely accepted among 
 financial men, yet on examination it proves to be without foundation. All 
 these diagrams, all these tables, the whole history of the rate of interest go to 
 disprove it. 
 
 He then went on to trace the history of the rate of interest in 
 Europe and the United States from the time of the Napoleonic wars 
 down to the present day, showing the same general fluctuations in the 
 rate that had been noted by Ernst Voye in his book. From 1815 to 
 1845 a general decline, from 1846 to 1871 a general rise, from 1872 
 to 1897 a general decline, and from 1897 to 1903, the year in which 
 he spoke, a general rise again, " so marked that it is astonishing to 
 me that the facts have not obtained more prominence in this debate." 
 
 He opposed next " another theory by which many economists have 
 been influenced," and that is " that the accumulation of capital in 
 itself has a tendency to lower the rate of interest, and that as the 
 world grows richer the rate of interest must progressively decline." 
 
 If there is any established fact in the financial history of the world, any 
 general truth which is demonstrated by experience on the largest scale, it is 
 that this theory is unfounded. Is there a man with any knowledge of economic 
 history who doubts that the world's wealth made enormous progress in the 
 century from 1760 to 1860? Is there any possible question that the growth of 
 capital in the period which some of us are able to remember, from 1845 to 1870, 
 was rapid and magnificent, far outstripping the growth of population? Yet 
 if we inquire into the market of each of these epochs we shall find that in 
 each case the rate of interest at the later date was materially and universally 
 much higher than it was at the early date. * * * 
 
 ^ See Proceedings of the Fourth International Congress of Actuaries, Vol. II, p. 150. 
 
RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 209 
 
 These facts, which can not be disputed, show that while the normal rate 
 of interest is a function of the average productiveness of capital, its fluctua- 
 tions depend not simply day by day and month by month, and even year by 
 year, but sometimes from generation to generation upon other influences. 
 These are mainly the forces which shape the imaginings and expectations of 
 men. The most potent of them is the spirit of enterprise, the degree in which 
 the tendency prevails among men to reach forward energetically for the future 
 and to shape it for themselves with confidence. 
 
 Keasoning thus, Mr. Lewis comes to the conclusion that the rate of 
 interest^ — 
 
 Will undergo fluctuations, but as long as capital in the hands of human indus- 
 try and of human ingenuity can reproduce its kind, the rate at which it prom- 
 ises to increase will be the only limit beyond which enterprise and sanguine 
 hope will be unwilling to pay for the use of it.^ 
 
 Bearing all these facts and arguments in mind, it would seem 
 reasonable to assume that a permanent fund invested in stable se- 
 curities will yield, on the average, a moderate rate of interest such 
 as it is here proposed shall be guaranteed the Government employees 
 on their savings. 
 
 1 See Proceedings of the Fourth International Congress of Actuaries, Vol. II, pp. 
 156-161. 
 
 74196 '—S. Doc. 745, 61-3 14 
 
Appendix A. 
 
 TEXT OF PERKINS BILL. 
 
 [S. 1944, Sixty-first Congress, first session.] 
 A BILL For tlie retirement of employees in the classified civil service. 
 
 Be it enacted hy the Senate and House of Representatives of the United States 
 of America in Congress assembled, That beginning with the first day of July 
 next following the passage of this act there shall be deducted and withheld from 
 the monthly salary, pay, or compensation of every officer or employee of the 
 United States to whom this act applies an amount, computed to the nearest 
 tenth of a dollar, that will be sufficient, with interest thereon at three and one- 
 half per centum per annum, compounded annually, to purchase from the United 
 States, under the provisions of this act, an annuity, payable quarterly through- 
 out life, for every such employee on arrival at the age of retirement as herein- 
 after provided, equal to one and one-half percentum of his annual salary, pay, 
 or compensation for every full year of service or major fraction thereof between 
 the date of the passage of this act and the arrival of the employee at the age 
 of retirement. The deductions hereby provided for shall be based on such 
 annuity table as the Secretary of the Treasury may direct, and interest at the 
 rate of three and one-half per centum per annum, compounded annually, and 
 shall be varied to correspond to any change in the salary of the employee. 
 
 Sec. 2. That the amounts so deducted and withheld from the salary, pay, 
 or compensation of each employee shall be deposited in the Treasury of the 
 United States and shall be credited, together with interest at three and one-half 
 per centum per annum, compounded annually, to an individual account of the 
 employee from whose salary, pay, or compensation the deduction is made. The 
 moneys so deducted and the income derived therefrom may from time to time 
 be deposited in savings banks designated by the Secretary of the Treasury for 
 that purpose : Provided, however, That the savings banks receiving such deposits 
 shall pay interest thereon at a rate of not less than three and one-half per 
 centum per annum, compounded annually. For the safe-keeping and prompt 
 payment of the money deposited with them the Secretary of the Treasury shall 
 require the savings banks to give satisfactory security, by the deposit of bonds 
 of the United States, bonds or other interest-bearing obligations of any State 
 of the United States, or any legally authorized bonds issued for municipal pur- 
 poses by any city or town in the United States which has been in existence as a 
 city or town for a period of twenty-five years, and which for a period of ten 
 years previous to such deposit has not defaulted in the payment of any part 
 of either principal or interest of any funded debt authorized to be contracted 
 by it, and which has at such date more than twenty-five thousand inhabitants, as 
 established by the last national census, and whose net indebtedness does not 
 exceed five per centum of the valuation of the taxable property therein, to be 
 ascertained by the last preceding valuation of property for the assessment of 
 taxes; or any legally authorized bonds issued for municipal purposes by any 
 210 
 
RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 211 
 
 city or town in the United States which has been in existence as a city or town 
 for a period of twenty-five years, and which for a period of ten years previous 
 to such deposit has not defaulted in the payment of any part of either principal 
 or interest of any funded debt authorized to be contracted by it, and which 
 has at such date more than two hundred thousand inhabitants, as established 
 by the last national census, and whose net indebtedness does not exceed seven 
 per centum of the valuation of the taxable property therein, to be ascertained 
 by the last preceding valuation of property for the assessment of taxes. In this 
 clause the words " net indebtedness " mean the indebtedness of any city or town, 
 omitting debts created for supplying the inhabitants with water, and debts created 
 in anticipation of taxes to be paid within one year, and deducting the amount of 
 sinking funds available for the payment of the indebtedness included. The 
 Secretary of the Treasury shall accept, for the purpose of this act, securities 
 herein enumerated in such proportions as he may from time to time determine, 
 and he may at any time require the deposit of additional securities, or require 
 any bank to change the character of the securities already on deposit. It shall- 
 be the duty of the Secretary of the Treasury to obtain information with refer- 
 ence to the value and character of the securities authorized to be accepted 
 under the provisions of this section, and he shall from time to time furnish 
 information to savings banks as to such bonds as would be accepted as security. 
 When consistent with the best interests of the fund created by this act, the Sec- 
 retary of the Treasury shall distribute the deposits herein provided for, as far 
 as practicable, equitably between the different States and sections. 
 
 If, for any reason, the Secretary of the Treasury shall not be able to make 
 satisfactory arrangements with savings banks for all of the funds, then he may 
 invest the balance in any of the aforementioned securities. 
 
 The moneys deducted from salaries and the income derived therefrom shall 
 be held and deposited or invested, as above described, by the Secretary of the 
 Treasury until paid out as hereinafter provided. Any deficiency in the fund 
 hereby created to carry out the provisions of this act shall be paid out of any 
 money in the Treasury not otherwise appropriated. 
 
 For the purpose of aiding the Secretary of the Treasury in depositing and 
 investing the funds created by this act a board of investment is hereby created, 
 composed of the Treasurer of the United States, the Comptroller of the Cur- 
 rency, the chief of the office created by the provisions of this act, and two 
 persons to be designated by the President from among the employees of the 
 classified civil service. The members of the board of investment shall be 
 sworn, and shall hold office until others are appointed and qualified in their 
 stead. 
 
 Sec. 3. That the retirement age herein referred to shall be sixty-five years 
 for group one, sixty-five years for group two, and seventy years for group three. 
 And the President of the United States shall designate the branches of the 
 service to be included in each group. 
 
 Sec. 4. That if within thirty days before the arrival of an employee at the 
 age of retirement the head of the department or independent oflice in which he 
 is employed certifies to the Secretary of the Treasury that by reason of his 
 efficiency and his willingness to remain in the service the continuance of such 
 employee therein would be advantageous to the public service, such employee 
 may be retained for a term not exceeding two years ; and at the end of the 
 two years he may by similar certification be continued for an additional term 
 of two years, and so on. Upon the failure of the head of the department or 
 independent office to make the above-described certificate it shall be the duty 
 of the Secretary of the Treasury to place such employee upon the retired list 
 in accordance with the provisions of this act. 
 
212 EETIEEMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 Sec. 5. That if an employee is retained in ttie service after reaching the 
 retirement age a deduction of ten per centum of his monthly salary, pay, or 
 compensation shall thereafter be made while he remains in the service, and 
 the same shall be treated as other deductions under section tv^^o of this act. 
 
 Sec. 6. That upon retiring at the age of retirement, or thereafter, the em- 
 ployee may withdraw his savings, with the increment of interest as herein 
 provided, under one of the following options, and if Option I or Option II is 
 selected, receive in addition thereto such annuity, if any, as may be apportioned 
 by the Secretary of the Treasury out of accumulations in excess of three and 
 one-half per centum guaranteed by the provisions of this act, and such appor- 
 tionment by the Secretary of the Treasury shall be conclusive : 
 
 Option I. In an annuity payable quarterly throughout life. 
 
 Option II. In an annuity payable quarterly throughout life, with the provi- 
 sion that in case of the death of the annuitant before he has received in 
 annuities the amount of his savings, plus the interest credited thereon, the 
 balance shall be paid to his legal heirs. In determining at his death the amount 
 due to his heirs no account shall be taken of the annuities paid to him by the 
 United States under section eleven of this act. 
 
 Option III. In one sum. 
 
 If after retirement the employee does not avail himself of one of the fore- 
 going options, but leaves the amount due him on deposit, interest at the rate 
 of two per centum per annum on the original sum so left on deposit on retire- 
 ment shall be credited thereto for a period not exceeding twenty years, and if 
 not then withdrawn the money so left on deposit, without interest, shall be 
 covered into the Treasury as a miscellaneous receipt. 
 
 Sec. 7. That upon absolute separation from the civil service prior to the 
 retirement age, and only upon such separation, the employee may withdraw his 
 savings in one sum, and in case he has been in such service not less than six 
 years he may also receive in addition thereto interest on his savings at the rate 
 of three and one-half per centum per annum, compounded annually; or, in 
 case his savings amount to at least one thousand dollars, he may withdraw 
 the same under any one of the foregoing options computed on the basis of his 
 attained age. In case of the death of an employee while in the service the 
 amount of his savings, together with the interest credited thereon, shall be paid 
 to his legal heirs. 
 
 Sec. 8. That beginning with the first day of July next following the passage 
 of this act there shall be deducted and withheld from the monthly salary, pay, 
 or compensation orf every employee newly entering the service to whom this act 
 applies an amount equal to one-fifth of his monthly salary, pay, or compensation 
 during the first six months of his employment ; and in every case of promotion 
 of any person to whom this act applies there shall be deducted and withheld 
 from the monthly salary, pay, or compensation of such person an amount equal 
 to the increase made by such promotion during the first three months from the 
 taking effect thereof; and the amounts so deducted and withheld shall be de- 
 posited in the Treasury of the United States to the credit of a special fund to 
 carry out the provisions of section nine of this act. 
 
 Sec. 9. That beginning one year after the first day of July next following 
 the passage of this act, any employee to whom this act applies, who has served 
 the United States for not less than twenty years, and who, by reason of acci- 
 dent or illness not due to vicious habits or by reason of exigencies of the 
 service but without fault or delinquency on his part, has become totally and 
 permanently disabled, may retire from active service prior to the age of retire- 
 ment, and, on certificate from the head of the department or independent office 
 in which he is employed to the Secretary of the Treasury setting forth such 
 
RETIREMENT OF SUPERAISTNUATED CIVIL-SERVICE EMPLOYEES. 213 
 
 disability and the approval of such certificate by the Secretary of the Treasury, 
 may receive, out of the fund created by section eight of this act, an annual 
 disability allowance, payable quarterly, equal to one and one-half per centum 
 of his total compensation during service prior to such retirement. Allowances 
 under this section shall be discontinued on arrival of the employee at the age 
 of retirement unless sooner terminated by the Secretary of the Treasury. 
 
 If upon the retirement of an employee on a disability allowance the money 
 then to his credit under section two of this act, together with interest thereon 
 at three and one-half per centum per annum, compounded annually, will not be 
 sufiicient to purchase an annuity, payable quarterly throughout life, for such 
 employee on arrival at the age of retirement equal to his annual disability 
 allowance, the Secretary of the Treasury shall deduct and withhold from his 
 quarterly disability allowance an amount, computed to the nearest tenth of a 
 dollar, that together with the money then to his credit, with interest, will be 
 sufficient to purchase such annuity. Amounts deducted and withheld from dis- 
 ability allowances shall be treated as deductions under section two of this act. 
 If the money to his credit as aforesaid is in excess of the amount that will be 
 required to purchase such annuity he may withdraw such excess in one cash 
 sum, or in an annuity certain limited to the age of retirement. 
 
 The Secretary of the Treasury shall reduce or terminate the disability 
 allowance granted to any employee whenever in his judgment it is proper to 
 do so, and such action on his part shall be final and conclusive. 
 
 In case of the death of an employee while in the receipt of a disability 
 allowance, the amount to his credit under section two of this act shall be 
 paid to his legal heirs, and the disability allowance shall cease and determine. 
 
 The disability allowances hereby provided for shall at all times be limited 
 to the fund created by section eight of this act, and if the total allowances 
 shall at any time be in excess of such fund the allowances shall be reduced 
 pro rata to a sum within such fund. 
 
 Sec. 10. That in case of reinstatement in the classified civil service of any 
 person who at the time of his separation therefrom received a refund under 
 section seven of this act, his period of service for the purpose of retirement 
 and of making the monthly deduction from his salary shall be computed from 
 the date of such reinstatment, unless he shall, within ninety days after rein- 
 statement, pay to the Secretary of the Treasury the amount refunded to him, 
 with interest at three and one-half per centum per annum, in which case the 
 same shall be replaced to the credit of his account, and the former period of 
 service shall be counted. 
 
 Sec. 11. That beginning with the first day of July next following the pas- 
 sage of this act every employee to whom this act applies shall be entitled, 
 on reaching the retirement age, or having already passed that age, to retire 
 from the service under the provisions hereinbefore contained, and also, in 
 addition to the annuity herein provided for by his own contributions from his 
 salary, to receive from the United States during the remainder of his life 
 an annuity equal to one and one-half per centum of his total compensation 
 during service prior to the taking effect of this act; and the Secretary of the 
 Treasury is hereby authorized and directed to pay such annuity quarterly, 
 upon proper certification of the retirement of such employee by the appointing 
 ofiicer under whom he last served. Annuities from the United States for the 
 period of service prior to the passage of this act shall be payable only on 
 condition that the employee remains in the service until he reaches the age 
 of retirement: Provided, however, That employees of group one may receive 
 the annuity granted by this section on retirement at the age of sixty years 
 or thereafter. On the death of the employee the payment of annuities provided 
 
214 RETIEEMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 for by this section shall cease and determine. Annuities payable by the United 
 States on salaries in excess of two thousand five hundred dollars per annum 
 shall be based upon an annual salary of two thousand five hundred dollars. 
 
 Skc. 12. That the period of service upon which the annuity to be paid by 
 the United States is based shall be computed from original employment, 
 whether as a classified or unclassified employee, and shall include periods of 
 service at different times and service in one or more departments, branches, 
 or independent offices of the Government, the Signal Corps prior to July first, 
 eighteen hundred and ninety-one, and the general service in or under the War 
 Department prior to May sixth, eighteen hundred and ninety-six. 
 
 Sec. 13. That every person to whom this act applies who shall continue in the 
 classified civil service after the passage of this act, as well as every person to 
 whom this act applies who may hereafter be appointed to a position or place, 
 shall be deemed to consent and agree to the deductions made and provided for 
 herein, and shall receipt in full for the salary, pay, or compensation which may 
 be paid monthly or at any other time, and such payment shall be a full and 
 complete discharge and acquittance of all claims or demands whatsoever for 
 services rendered by such person during the period covered by such payment, 
 notwithstanding the provisions of sections one hundred and sixty-seven, one 
 hundred and sixty-eight, and one hundred and sixty-nine of the Revised Statutes 
 of the United States, or of any other law, rule, or regulation affecting the salary, 
 pay, or compensation of any person or persons employed in the classified civil 
 service to whom this act applies. 
 
 Sec. 14. That the Secretary of the Treasury shall prepare and keep all need- 
 ful tables, records, and accounts required for carrying out the provisions of this 
 act. The records to be kept shall include data showing the mortality experi- 
 ence of the employees in the various branches of the service and the rate of 
 withdrawal from the classified service, and any other information that may be 
 of value and may serve as a guide for future valuations and adjustments of the 
 plan for the retirement of employees. The Secretary of the Treasury shall 
 make a detailed comparative report annually to Congress showing all receipts 
 and disbursements under the provisions of this act, together with the total 
 number of persons receiving annuities and disability allowances and the amounts 
 paid them. 
 
 Sec. 15. That the provisions of this act shall apply only to the classified civil 
 service in the District of Columbia, which is hereby defined to include all olficers 
 and employees in the executiA'e civil service of the United States in the District 
 of Columbia, except persons appointed by the President and confirmed by the 
 Senate, and unskilled laborers. No person serving in a position excepted from 
 examination or registration as defined in the civil-service rules shall be included 
 within the provisions of this act unless he has served in a competitive position 
 for at least one year. Whenever any person becomes separated from the classi- 
 fied service by reason of appointment in the unclassified service, such separa- 
 tion shall not operate to take him out of the provisions of this act. The Presi- 
 dent shall have power, in his discretion, to exclude from the operation of this 
 act any group of employees whose tenure of office is intermittent or of uncer- 
 tain duration. 
 
 Sec. 16. That none of the moneys mentioned in this act shall be assignable 
 either in law or equity or be subject to execution or levy by attachment, garnish- 
 ment, or other legal process. 
 
 Sec. 17. That for the clerical and other service and all other expenses neces- 
 sary in carrying out the provisions of this act during the fiscal year nineteen 
 hundred and ten, including salaries and rent in the city of Washington, there is 
 hereby appropriated the sum of twenty thousand dollars out of any money in 
 the Treasury not otherwise appropriated, to be available until expended. 
 
HETlfeEMEiSTT OE StTPERANlSrUATED CiVlL-SEBVlCE EMPLOYEES. 2l6 
 
 Sec. 18. That the Secretary of the Treasury is hereby authorized to perform 
 or cause to be performed any and all acts and to make such rules and regula- 
 tions as may be necessary and proper for the purpose of carrying the provisions 
 of this act into ifull force and effect. 
 
 Appendix B. 
 TEXT or GILLETT BILL. 
 
 [H. R. 22013, Sixty-first Congress, second session.] 
 A BILL for tlie retirement of employees in the classified civil service. 
 
 Be it enacted ty the Senate and House of Representatives of the United States 
 of America in Congress assembled, That beginning with the first day of July 
 next following the passage of this act there shall be deducted and withheld from 
 the monthly salary, pay, or compensation of every officer or employee of the 
 United States to whom this act applies an amount, computed to the nearest 
 tenth of a dollar, that will be sufficient, with interest thereon at three and one- 
 half per centum per annum, compounded annually, to purchase from the United 
 States, under the provisions of this act, an annuity, payable quarterly, through- 
 out life, for every such employee on arrival at the age of retirement as here- 
 inafter provided, equal to one and one-half per centum of his annual salary, pay, 
 or compensation for every full year of service or major fraction thereof be- 
 tween the date of the passage of this act and the arrival of the employee at the 
 age of retirement. The deductions hereby provided for shall be based on such 
 annuity table as the Secretary of the Treasury may direct, and interest at the 
 rate of three and one-half per centum per annum, compounded annually, and 
 shall be varied to correspond to any change in the salary of the employee. 
 
 Sec. 2. That the amounts so deducted and withheld from the salary, pay, or 
 compensation of each employee shall be deposited in the Treasury of the United 
 States and shall be credited, together with interest at three and one-half per 
 centum per annum, compounded annually, to an individual account of the em- 
 ployee from whose salary, pay, or compensation the deduction is made. The 
 moneys so deducted and the income derived therefrom may from time to time 
 be deposited in savings banks designated by the Secretary of the Treasury for 
 that purpose : Provided, however, That the savings banks receiving such de- 
 posits shall pay interest thereon at a rate of not less than three and one-half 
 per centum per annum, compounded annually. For the safe-keeping and prompt 
 payment of the money deposited with them the Secretary of the Treasury shall 
 require the savings banks to give satisfactory security, by the deposit of bonds 
 of the United States, bonds or other interest-bearing obligations of any State 
 of the United States, or any legally authorized bonds issued for municipal pur- 
 poses by any city or town in the United States which has been in existence as a 
 city or town for a period of twenty-five years, and which for a period of ten 
 years previous to such deposit has not defaulted in the payment of any part of 
 either principal or interest of any funded debt authorized to be contracted by it, 
 and which has at such date more than twenty-five thousand inhabitants, as es- 
 tablished by the last national census, and whose net indebtedness does not ex- 
 ceed five per centum of the valuation of the taxable property therein, to be ascer- 
 tained by the last preceding valuation of property for the assessment of taxes; 
 or any legally authorized bonds issued for municipal purposes by any city or 
 
216 BETIEEMENT OF SUPEEANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 town in the United States which has been in existence as a city or town for a 
 period of twenty-five years, and which for a period of ten years previous to 
 such deposit has not defaulted in the payment of any part of either principal or 
 interest of any funded debt authorized to be contracted by it, and which has at 
 such date more than two hundred thousand inhabitants, as established by the 
 last n.itional census, and whose net indebtedness does not exceed seven per 
 centum of the valuation of the taxable property therein, to be ascertained by 
 the last preceding valuation of property for the assessment of taxes. In this 
 clause the words " net indebtedness " mean the indebtedness of any city or 
 town, omitting debts created for supplying the inhabitants with water, and 
 debts created in anticipation of taxes to be paid within one year, and deducting 
 the amount of sinking funds available for the payment of the indebtedness in- 
 cluded. The Secretary of the Treasury shall accept, for the purpose of this 
 act, securities herein enumerated in such proportions as he may from time to 
 time determine, and he may at any time require the deposit of additional securi- 
 ties, or require any bank to change the character of the securities already on 
 deposit. It shall be the duty of the Secretary of the Treasury to obtain in- 
 formation with reference to the value and character of the securities author- 
 ized to be accepted under the provisions of this section, and he shall from time 
 to time furnish information to savings banks as to such bonds as would be 
 accepted as security. "When consistent with the best interests of the fund cre- 
 ated by this act, the Secretary of the Treasury shall distribute the deposits 
 herein provided for, as far as practicable, equitably between the different 
 States and sections. 
 
 If, for any reason, the Secretary of the Treasury shall not be able to make 
 satisfactory arrangements with savings banks for all of the funds, then he may 
 invest the balance in any of the aforementioned securities. 
 
 The moneys deducted from salaries and the income derived therefrom shall 
 be held and deposited or invested, as above described, by the Secretary of the 
 Treasury until paid out as hereinafter provided. Any deficiency in the fund 
 hereby created to carry out the provisions of this act shall be paid out of any 
 money in the Treasury not otherwise appropriated. 
 
 For the purpose of aiding the Secretary of the Treasury in depositing and 
 investing the funds created by this act a board of investment is hereby created, 
 composed of the Treasurer of the United States, the Comptroller of the Cur- 
 rency, the chief of the office created by the provisions of this act, and two 
 persons to be designated by the President from among the employees of the 
 classified civil service. The members of the board of investment shall be 
 sworn, and shall hold office until others are appointed and qualified in their 
 stead. 
 
 Sec. 3. That the retirement age herein referred to shall be sixty-five years 
 for group one, sixty-five years for group two, and seventy years for group three. 
 And the President of the United States shall designate the branches of the 
 service to be included in each group. 
 
 Sec. 4. That if within thirty days before the arrival of an employee at the 
 age of retirement the head of the department or independent office in which 
 lie Is employed certifies to the Secretary of the Treasury that by reason of his 
 efficiency and his willingness to remain in the service the continuance of such 
 employee therein would be advantageous to the public service, such employee 
 may be retained for a term not exceeding two years; and at the end of the 
 two years he may by similar certification be continued for an additional term 
 of two years, and so on : Provided, however, That after the first day of July, 
 nineteen hundred and twenty, no person to whom this act applies shall be con- 
 tinued in the service beyond the age of retirement as herein provided. Upon 
 
RETIREMENT OP SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 217 
 
 the failure of the head of the department or independent office to make the 
 above-described certificate it shall be the duty of the Secretary of the Treasury 
 to place such employee upon the retired list in accordance with the provisions 
 of this act. 
 
 Sec. 5. That if an employee is retained in the service after reaching the re- 
 tirement age a deduction of ten per centum of his monthly salary, pay, or 
 compensation shall thereafter be made while he remains in the service, and the 
 same shall be treated as other deductions under section two of this act. 
 
 Sec. 6. That upon retiring at the age of retirement, or thereafter, the em- 
 ployee may withdraw his savings, with the increment of interest as herein 
 provided, under one of the following options, and if Option I or Option II is 
 selected, receive in addition thereto such annuity, if any, as may be apportioned 
 by the Secretary of the Treasury out of accumulations in excess of three and 
 one-half per centum guaranteed by the provisions of this act, and such appor- 
 tionment by the Secretary of the Treasury shall be conclusive: 
 
 Option I. In an annuity payable quarterly throughout life. 
 
 Option II. In an annuity payable quarterly throughout life, with the pro- 
 vision that in case of the death of the annuitant before he has received, in 
 annuities the amount of his savings, plus the interest credited thereon, the 
 balance shall be paid to his legal heirs. In determining at his death the 
 amount due to his heirs no account shall be taken of the annuities paid to him 
 by the United States under section eleven of this act. 
 
 Option III. In one sum. 
 
 If after retirement the employee does not avail himself of one of the fore- 
 going options, but leaves the amount due him on deposit, interest at the rate 
 of two per centum per annum on the original sum so left on deposit on retire- 
 ment shall be credited thereto for a period not exceeding twenty years, and if 
 not then withdrawn the money so left on deposit, without interest, shall be 
 covered into the Treasury as a miscellaneous receipt. 
 
 Sec. 7. That upon absolute separation from the civil service prior to the 
 retirement age, and only upon such separation, the employee may withdraw his 
 savings in one sum, and in case he has been in such service not less than six 
 years he may also receive in addition thereto interest on his savings at the 
 rate of three and one-half per centum per annum, compounded annually; or, 
 in case his savings amount to at least one thousand dollars, he may withdraw 
 the same under any one of the foregoing options computed on the basis of his 
 attained age. In case of the death of an employee while in the service the 
 amount of his savings, together with the interest credited thereon, shall be 
 paid to his legal heirs. 
 
 Sec. 8. That beginning with the first day of July next following the passage 
 of this act there shall be deducted and withheld from the monthly salary, pay, 
 or compensation of every employee newly entering the service to whom this 
 act applies an amount equal to one-fifth of his monthly salary, pay, or compen- 
 sation during the first six mouths of his employment; and in every case of 
 promotion of any person to whom this act applies there shall be deducted and 
 withheld from the monthly salary, pay, or compensation of such person an 
 amount equal to the increase made by such promotion during the first three 
 months from the taking effect thereof; and the amounts so deducted and with- 
 held shall be deposited in the Treasury of the United States to the credit of a 
 special fund to carry out the provisions of section nine of this act. 
 
 Sec. 9. That beginning one year after the first day of July next following the 
 passage of this act, any employee to whom this act applies, who, by reason of 
 accident or illness not due to vicious habits or by reason of exigencies of the 
 service but without fault or delinquency on his part, has become totally and 
 
218 RETIREMENT OP SUPERANiTtJATEt) ClVlL-SERVlCE EMPLOYEES. 
 
 permanently disabled, may retire from active service prior to the age of re- 
 tirement, and, on certificate from tlie head of the department or independent 
 office in which he is employed to the Secretary of the Treasury setting forth 
 such disability and the approval of such certificate by the Secretary of the 
 Treasury, may receive, out of the fund created by section eight of this act, an 
 annual disability allowance, payable quarterly, equal to one and one-half per 
 centum of his total compensation during service prior to such retirement: 
 Provided, however, That, unless prorated by the Secretary of the Treasury as 
 hereinafter provided, the allowance for disability due to accident shall be equal 
 to not less than twenty per centum of the average annual compensation of the 
 disabled employee prior to such retirement : And provided further. That the 
 allowance for disability due to illness shall only be granted after twenty 
 years of service. Allowances under this section shall be discontinued on ar- 
 rival of the employee at the age of retirement unless sooner terminated by the 
 Secretary of the Treasury. 
 
 If upon the retirement of an employee on a disability allowance the money 
 then to his credit under section two of this act, together with interest thereon at 
 three and one-half per centum per annum, compounded annually, will not be 
 sufficient to purchase an annuity, payable quarterly throughout life, for such 
 employee on arrival at the age of retirement equal to his annual disability 
 allowance, the Secretary of the Treasury shall deduct and withhold from his 
 quarterly disability allowance an amount, computed to the nearest tenth of a 
 dollar, that together with the money then to his credit, with interest, will be 
 suflicient to purchase such annuity. Amounts deducted and withheld from 
 disability allowances shall be treated as deductions under section two of this 
 act. If the money to his credit as aforesaid is in excess of the amount that 
 will be required to purchase such annuity he may withdraw such excess in one 
 cash sum. or in an annuity limited to the age of retirement. 
 
 The Secretary of the Treasury shall reduce or terminate the disability allow- 
 ance granted to any employee whenever in his judgment it is proper to do so, 
 and such action on his part shall be final and conclusive. 
 
 In case of the death of an employee while in the receipt of a disability allow- 
 ance, the amount to his credit under section two of this act shall be paid to his 
 legal heirs, and the disability allowance shall cease and determine. 
 
 The disability allowances hereby provided for shall at all times be limited to 
 the fund created by section eight of this act, and if any valuation of the fund 
 shows the liabilities for allowances to be in excess of the resources of such 
 fund, then the allowances shall be reduced pro rata to a sum within the fund. 
 
 Sec. 10. That in case of reinstatement in the classified civil service of any 
 person who at the time of his separation therefrom received a refund under 
 section seven of this act, his period of service for the purpose of retirement and 
 of making the monthly deduction from his salary shall be computed from the 
 date of such reinstatement, unless he shall, within ninety days after reinstate- 
 ment, pay to the Secretary of the Treasury the amount refunded to him, with 
 interest at three and one-half per centum per annum, in which case the same 
 shall be replaced to the credit of his account, and the former period of service 
 shall be counted. 
 
 Sec. 11. That beginning with the first day of July next following the passage 
 of this act every employee to whom this act applies shall be entitled, on reach- 
 ing the retirement age, or having already passed that age, to retire from the 
 service under the provisions hereinbefore contained, and also, in addition to 
 the annuity herein provided for by his own contributions from his salary, to 
 receive from the United States during the remainder of his life an annuity 
 equal to one and one-half per centum of his total compensation during service 
 
EETIREMENT OP SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 219 
 
 prior to the taking effect of this act : Provided, however, That no annuity shall 
 be paid by the United States for services prior to the passage of this act, which, 
 together with the annuity earned by the employee's own contribution, shall 
 amount to more than six hundred dollars ; and the Secretary of the Treasury is 
 hereby authorized and directed to pay such annuity quarterly, upon proper cer- 
 tification of the retirement of such employee by the appointing officer under 
 whom he last served. Annuities from the United States for the period of serv- 
 ice prior to the passage of this act shall be payable only on condition that the 
 employee remains in the service until he reaches the age of retirement : Provided, 
 hoivever. That employees of group one may receive the annuity granted by tMs 
 section on retirement at the age of sixty years or thereafter. On the death of 
 the employee the payment of annuities provided for by this section shall cease 
 and determine. Annuities payable by the United States on salaries in excess 
 of two thousand five hundred dollars per annum shall be based upon an annual 
 salary of two thousand five hundred dollars. 
 
 Sec. 12. That the period of service upon which the annuity to be paid by the 
 United States is based shall be computed from original employment, whether 
 as a classified or unclassified emploj'ee, and shall include periods of service at 
 different times and service in one or more departments, branches, or independent 
 offices of the (Jrovernment, the Signal Corps prior to July first, eighteen hundred 
 and ntnety-one, and the general service in or under the War Department prior 
 to May sixth, eighteen hundred and ninetj'-six. 
 
 Sec. 13. That every person to whom this act applies who shall continue in the 
 classified civil service after the passage of this act, as well as every person to 
 whom this act applies who may hereafter be appointed to a position or place, 
 shall be deemed to consent and agree to the deductions made and provided for 
 herein, and shall receipt in full for the salary, pay, or compensation which may 
 be paid monthly or at any other time, and such payment shall be a full and 
 complete discharge and acquittance of all claims or demands whatsoever for 
 services rendered by such person during the jieriod covered by such payment, 
 notwithstanding the provisions of sections one hundred and sixty-seven, one 
 hundred and sixty-eight, and one hundred and sixty-nine of the Revised Statutes 
 of the United States, or of any other law, rule, or regulation affecting the salary, 
 pay, or compensation of any person or persons employed in the classified civil 
 service to whom this act applies. 
 
 Sec. 14. That the Secretary of the Treasury shall prepare and keep all needful 
 tables, records, and accounts required for carrying out the provisions of this 
 ace. The records to be kept shall include data showing the mortality experience 
 of the employees in the various branches of the service and the rate of with- 
 drawal from the classified service, and any other information that may be of 
 value and may serve as a guide for future valuations and adjustments of the 
 plan for the retirement of employees. The Secretary of the Treasury shall 
 make a detailed comparative report annually to Congress showing all receipts 
 and disbursements under the provisions of this act, together with the total 
 number of persons receiving annuities and disability allowances and the amounts 
 paid them. 
 
 Sec. 15. That the provisions of this act shall apply only to persons in the 
 classified civil service in the departments and independent offices in the District 
 of Columbia. No person serving in a position excepted from examination or 
 registration as defined in the civil-service rules shall be included within the 
 provisions of this act unless he has served in a competitive position for at least 
 one year. Whenever any person becomes separated from the classified service 
 by reason of appointment In the unclassified service, such separation shall not 
 operate to take him out of the provisions of this act. The President shall have 
 
220 RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 power, In his diaci-Gtion, to exclude from the operation of this act any f?roup of 
 en\i)]()yces wliose tenure of office Is Intermittent or of uncertain duration. 
 
 Sia;. 10. TIi:it none of the moneys mentioned in this act shall be assignable 
 cither in Inw or equity or bo subject to execution or levy by allaohment, f^aruish- 
 nieul, or otlier ie^;il process. 
 
 Sec. 17. That for the clerical and other service and all other expenses neces- 
 sary in carryiug out the provisions of this act during the fiscal year nineteen 
 luMidrod !ind t(Mi, including salaries and rent in tlie city of Washington, there 
 Is hereby iipi)ropriatod Ihe sum of twenty thousand dollars out of any money 
 In the Treasury not otherwise api)roi)ri;ited, to be available until (!xi)ended. 
 
 Seo. 18. That the Secretary of the Treasury is hereby autliorized to perform 
 or cause to be performed any and all acts and to make such rules and regula- 
 tions ;is may be necessnry and proixM- for the purpose of carrying the provisions 
 of tills act into full force and ellect. 
 
 Appendix C. 
 
 TEXT OF AUSTIN BILL. 
 
 flT. R. 71!!) — Slxly-sccoiid Coiif^rcsH, lirst session.] 
 
 A HTT/Tj li'or liici'cnsiiiK llic Kniiirlcs and for llic rctlreuicnt of employees In the classlded 
 
 civil service. 
 
 lie it enacted by the Senate and House of Representatives of the United States 
 of America in Con(;ress assembled, That begiiming with the lirst day of July 
 next following the ])assage of this act the jiunual salary, -jtay, or compensation 
 of every officer or employee of the United States to whom this act apj)lies shall 
 be increased to an amount, computed to the nearest multiple of twelve dollars, 
 that will be equal to one hundred and fifteen per centum of the present grade 
 of salary, pay, or compensation of such ofiicer or emi)loyee, and from such salary, 
 l)ay, or comi)ensation tliere shall be deducted and witiiheld monthly an amount 
 computed to the nonrest tenth of a dollar, that will be suliicient, with interest 
 thereon at live per centum per annum, compounded annually, to purchase from 
 the UniU'd Stales, under the i)rovision of tins act, au annuity, payable quarterly 
 througliout life, for every such employee on arrival at the age of retirement as 
 hereinafter provided, equal to one and owe-half per centum of his annual snhiry, 
 pay, or compensation for every full year of service or major fraction thereof 
 between the date of the passage of this act and the arrival of the employee at 
 the age of retirement. The deductions hereby provided for shall be based on 
 such annuity table as the Secretary of the Treasury nuiy direct, and interest at 
 the rate of five per centum per annum, conqjouuded aimually, and shall be 
 varied to corresi)ond to any cliange in the salary of the employee. 
 
 Sico. 2. That the amounts so deducted and witlilield from the salary, pay, or 
 compensation of each enq)ioyee shall be dei)osiled in tlie Treasury of the United 
 States and shall be credited, together with interest at \\\g per centum i)er an- 
 num, compounded annually, to an individual account of the employee from 
 whose salary, pay, or compensation the deduction Is made. The moneys so 
 deducted and the income derived therefi'om may, from time to time, be de- 
 posited in savings banks d(>signated by the Secretary of the Treasury for that 
 puri)ose: Vrovided, however, That the savings banks receiving such dei)osits 
 shall pay interest thereon at a rate of not less than three and one-half per 
 centum per annum, compounded aiuiually. For the safekeeping and prompt 
 payment of the money deiiosited with tliem the Secretary of the Treasury shall 
 
RETIREMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 221 
 
 require the savings banks to give satisfactory security by the deposit of bonds 
 of the United States, bonds or other interest-bearing obligations of any State of 
 the United States, or any legally authorized bonds issued for municipal pur- 
 poses by any city or town in the United States which has been in existence as a 
 city or town for a period of twenty-five years, and which for a period of ten 
 years previous to such deposit has not defaulted in the payment of any part of 
 either principal or interest of any funded debt authorized to be contracted for by 
 it, and which has at such date more than twenty-five thousand inhabitiints, as 
 established by the last national census, and whose net indebtedness does not 
 exceed five per centum of the valuation of the taxable property therein, to be 
 ascertained by the last preceding valuation of property for the assessment of 
 taxes; or any legally authorized bonds issued for municipal purposes by any 
 city or town in the United States which has been in existence as a city or town 
 for a period of twenty-five years, and which for a period of ton years previous 
 to such do[)Osit has not defaulted in the payment of any part of either principal 
 or interest of any funded debt authorized to be contracted by It, and which 
 has at such date more than two hundred thousand lnhai)itants, as established by 
 the last national census, and whose net indebtedness does not exceed seven per 
 centum of the valuation of the taxable property therein, to be ascertained by 
 the last preceding valuation of property for the assessment of taxes. In this 
 clause the words "net indebtedness" mean the indebtedness of any city or 
 town, omitting debts created for supplying the inhabitants with water, and 
 debts created in anticipation of taxes to be paid within one year, and deducting 
 the amount of sinking funds available for the payment of the indebtedness 
 included. The Secretary of the Treasury shall accept, for the purpose of this 
 act, securities herein enumerated in such proportions as he may from time to 
 time determine, and he may at any time require the deposit of additional securi- 
 ties, or require any bank to change the character of the securities already on 
 deposit. It shall be the duty of the Secretary of the Treasury to obtain infor- 
 mation with reference to the value and character of the securities authorized 
 to be accei)ted under the provisions of this section, and he shall from time to 
 time furnisli information to savings banks as to such bonds as would be accepted 
 as security. When consistent with the best Interests of the fund created by this 
 act, the Secretary of the Treasury shall distribute the deposits herein provided 
 for, as far as practicable, equitably among the different States and sections. 
 
 If for any reason the Secretary of the Treasury shall not be able to make 
 satisfactory arrangements with savings banks for all of the funds, then he may 
 invest the balance in any of the aforementioned securities. 
 
 The moneys deducted from salaries and the Income derived therefrom shall 
 be held and deposited or invested, as above described, by the Secretary of the 
 Treasury until paid out as hereinafter provided. Any defieieney in the fund 
 hereby created to carry out the provisions of this act shall be paid out of any 
 money in the Treasury not otherwise appropriated. 
 
 For the purpose of aiding the Secretary of the Trcasuy in depositing and 
 investing the funds created by this act, a board of investment is hereby created, 
 composed of the Treasurer of the United States, the Comptroller of the Cur- 
 rency, the chief of the office created by the provisions of this act, and two 
 persons to be designated by the President from among the employees of the 
 classified civil service. The members of the board of investment shall be sworn 
 and shall hold office until others are appointed and qualified in their stead. 
 
 Sec. 3. That the retirement age herein referred to shall be sixty-five years 
 for group one, sixty-five years for group two, and seventy years for group three. 
 And the President of the United States shall designate the branches of the serv- 
 ice to be included in each group. 
 
222 IMO'l'lltKIVllON'r (»!'' SIII'I'llfAN NIIA'I'KI) ( 11 V 1 1 j-yERVICE I'iM I'l.OYEES. 
 
 Sioo. 4. Tlml, If vvllliiri lliir-ly «liiys Ix'l'orc llic ari'iviil oC iiii ciiiiiloyci^ Ml (Ik; 
 n^o of rcl ii'cinoiit IIm> hrnd ol' llic (|(>|)iii'tiii<>iil or liKlciiciKlcnl ollico In wlilt'li lie 
 Ih (MMploycd ••crllllcH l<» I lie Hccircliiry ol" I ho TrciiHiiry I lull; by reason of liis 
 <illlcl<'iicy iiikI IiIh vvllliMK'H'HH l<> rcimilii In llio H('rvlc<! tlio conllmmucc of Hiich 
 (•nijiioyct* tlici'ciii would he ndv!iiiliiK<'<>"H <<> Hk' piihiic Horvico, micli oiiiployof,' 
 niny bo rolnliicd for n lorni iiol oxcoodiiif; I wo yciirH, jind ill llio ond of I wo 
 years he iiiiiy by Hliiilliir eertldcatloii bo coiilimiod for an additional term of 
 two years, iind no on : I'nwided, however, That after the flrst day of July, nlno- 
 toon linndrcd iiiid Iwoiily, no perpon to whom this act applloH Hhnll be eontlmied 
 ill IIk' HiM'vlco beyond the ape of retirement aH henMn pi-ovlded. TIi)on the fiiiliuv 
 of Hie lu^iid of the deiiiirlnieiit or liidepciidenl odlce to niiik(> the above-deHcribed 
 eertlllciite It Hhiill be the duly of llio Socrolary of the Treasury to jiiaee such 
 oniployeo njion tlie relln>d list In accordiiiice wllli 1h(> i)rovisloiis of this act. 
 
 Sn:e. r>. 'That If an oinployee Is roliiliied lii lll(^ servicer after reachluK the 
 retlreiuent ago a deduction of Ion ])er (mmiIiiiii of his luonllily siihiry, pay, or 
 conipensiition sluill thei-eiiftei- bo niiide while ho remains In the service, and the 
 same shall be treated as ollior deductions under section two of this act. 
 
 Sko. <;. 'Phut upon retlrluK at IIk^ ii^o of retirement, or thereafter, the employee 
 niiiy willidriiw his HiivlnRS, with the Increment of Interest as herein provided, 
 under oiio of liio foilowliiK oiilloiis, and If Opilon I or Ojitlon IT Is selecled, 
 rec<*ivo ill iiddilioii liiorolo such aiiuiiily, if any, as may bo sipporlionod by the 
 Secrohiry of the Treasury out of accumiiliitlons In excei-'s of (ho per centum 
 fi;uiiriiiitood by the provisions of this act, and such nppcM'llonment by the 
 Hecrelnry of liio Trcnsiiry shiiil bo coucluslvo: 
 
 Option I. In :iii niiuiilly ])ayable quiirteriy lliroiij^liout life. 
 
 Opilon II. Ill nil niinulty i)ayablo quarterly throughout lilV, with the pro- 
 vision lliiil ill ciisc of the death of the aunultnnt before lie has received In 
 aniiullics IIk' jiiii.miiiI of his savings, plus the Interest credited tliereoii, the 
 bniaiico siiiili bo paid lo his lt>gal h(>lrs. Tu detormining at his death the 
 iiiiioiiiil dm' to Ills heirs no account shiill lie taken of the annuities paid to him 
 by the United Sliilos under S(>ctlon oiovoii of liiisact. 
 
 O|i(lon 111. lu <aio sum. 
 
 If after retirement the employe(> does not nvnll himself of one of the fore- 
 RoluK oiitlons, lint loaves the nmoiiut due him on deposit. Interest at the rate of 
 two jier centum per annum on I ho original sum so loft on deposit on retirement 
 shall bo onMllted thereto fttr a period not exceeding twenty years, and If not 
 thou withdrawn, the moiu>y so loft on d(>iv)Slt, without iiit«>r(\sl, sluill be covered 
 Into the Treasury as a miscollaueons roccMjit. 
 
 Sko. 7. Thiit iiiuHi iibsoiiil«» sopnnilion from lh(> civil st>rvico prior lo the 
 nMlronionl age, and only upon such s(>pariilion, the eiiiployoe miiy withdraw his 
 savings in one sum, and in cnse lu^ has Ix'on In such service not less than six 
 years, ho iiiny also nu'elvo In addition thereto Interest on his savings at the 
 rate of live per c(>nlum per annum, compoiuided annually, or. In case his savings 
 ana>uut to at least one Ihousnnd dollars, he may wilhdraw the same under any 
 one of the foregoing options, computed on the basis of his attained ago. In 
 i-aso of the doiilh of an (Mnploy(>(» while In (ho service the amount of his savings, 
 together wKh (ho inlorosi crodil»>d th(«roon, shiiil be paid lo his l(>g!il heirs. 
 
 Sico. R. That bogiuniiig with the llrst day of July next following the passage 
 of (his act (li«M-o shall be deduct(>d and williliold from the monthly siilary, pay, 
 or c(unponsa(lon of every omployoo newly oiitoriiig (ho service to whom this act 
 iipplies an amount (>qual to otio-llfth of his monthly salary, pay, or comiioiisnltoii 
 during the (Irst hIx monlhs of his on\ployment; and In every case of lu'omotion 
 of any person to whom this net applies there shall bo deducted and withheld 
 from the monthly salary, pay, or eoiupousadon of such person an amount equal 
 
RKTiKioiviMN'r OK K(;i'i';u,A N N I J A'ii';i) civil/ SKitvici'; isivii'iiOYi';i';s, 223 
 
 (,o llic liKireilse mado by hhcIi prfitnolion durinij; llic fli'Hl, ilirfc inoiillm Irom IIh; 
 lakliiK oHV'f;!; Ilicn'of; iiiiil llic iiinoiiiilH t^o (Icdiiflcd iind wHldn'lil Hliiill bu 
 (lepOHllcd in ilu; 'Vrcnmivy of Ukj IJ/iil(!(J SIiiUjh (,(j IJu; d'cMlli, of ii H|)''<liil fund to 
 carry oul. I Ik; proviHlonH of hocUoii uIik! of lldH ii(;l. 
 
 Hico, 0. 'I'hJil, b«;KliinliiK one ycinr iifMtr (lio liiHl; dny of July ii<!xl, following IIk; 
 paHHiiKo of IhiH jiot, an einployoe fo whom IliiH act af)i)lleH, wbo, by rcaHon of 
 accident or lilncHH not due to vlclouH habltH or by reason of exlKoneleH of llio 
 BervIcG, but wItJioiit fault or deJInqueney on hlH part, htiH become totally and 
 permanently dlwabled, may retire from active Hervlce prior to the a^ft of rellre- 
 ment, and, on certificate from the head of tin; d(!partm(!nt or IndcpciiKhuit odlce 
 In which he 1h (MnpioyiMl to the Hiicrelary of Ihe 'I'reiiHiiry, HottiiiK forth Huch 
 dlHiil)iiity, and tii(! a|)j)rovjii of hijcIi c<!rtlflca(,(; hy lin; Scci'(iliiry of the TrtKiHury, 
 may r(!ceive, out of the fund creat<!d by Wiction elKht of thlH act, an annual 
 dlaHJibiiily allowiinc^e, p!iyid)le quarterly, ecjuai to one and onci-haif |)er C(!ntuin 
 of his total conqjennatlon <lurlnK Hervlce prhjr to wuch retlrenuint: I'rorAdad, 
 however, 1'hat, uiiIchh f>roratt!d by the Secretary of the TreaHury aH hereinafter 
 provided, the allowance for dlHablllty, duo to accident, Hhall be equal to not leBU 
 than twenty \k\v centum of the average annual coinpenHatloii of th(! dlHnbled 
 emj/loycio prior to Kiich retirement: And provided further, That the allowiince for 
 dlMiildiity due to llhniHH hIijiII only be Krant(fd jift(!r twenty yearw of Hcrvlce. 
 Allowan<;(!H under thlw H(!Ctlo;i Hhnll be dlHconl.irine(J on arrival of the <;in|»loyee 
 at the a;4<! of retiniJiKsnt unleKH Hoon<!r teriniojilf-d by the Hecnthiiy of the 
 TreaHury. 
 
 If upon the retirement of an employee on a dlHablllty allowance the tnoney 
 then to his credit under nectlon two of thiH act, together with Uiterent th<!reon 
 at five per centum per annum, compouruJed annually, will not be Hulllclent to 
 purchaHC an annuity, jtayable qiiarterly throughout life, for Huch employee on 
 arrival at the jikc of n^tirenuint equal to hlH arniual dlHablllty allowance, the 
 Hecrelary of the TreaHury Khali d<;duct and withhold from IiIh qujirlerly dlH- 
 ablllty allowancf! an arnou/it, coni[)ul,<;d to the nearcHt tenth of a dolliir, that, 
 together wllh th«; nion<!y then U> hlH credit, with \^i\^•^■^'.H\, will b(! Hulllclent to 
 purchaHe Huch annuity. AmountH deducted and withheld fr<>ni dlHablllty allow- 
 anccH Hhall be treatefl aw de.<luctlonH under Kectlon two of thiH act. If the money 
 to hlH credit, aH aforenald, Ih In excoHB of tJje amount that will be required tx* 
 purchase HUCh annuity, he may withdraw 8uch cxcchh In one cash Hum, or In an 
 annuity limited to the iif^e of retirement. 
 
 'I'he Kecretary of the 'i"r<«iHury Hhall v*:t\[\c(t or tei'minnlt; the dlHJildiily nilow- 
 ance granted to any employee whenever in hlH JudKnicnt it 1k firopcr to do ho, 
 and Hucli action on bin jmrt Hhall b<! final and conclUHlv*;. 
 
 In cane of the death of an employee while In the receipt of a dlHablllty allow- 
 ance, the amount to hlH ere/lit under nectlon two of thin act Hhall be paid to 
 hlB legal helrH, and the dlHablllty allowance Hhall ceane and determine. 
 
 The diHsiblllty allowancen hereby provided for Bliall at all tlmcH be limited \x) 
 the fiuif' creatxK] by w;ctlon eight of thlH act, and If any vniuatlon of the fund 
 «howH the liabllltl«!H for allowancen to be In excoHH of the rcHoiirccH of hiicIi fund, 
 then the aliowanccK Hhall he reduced pro rata to a Hum within the fund. 
 
 Hioc. 10. 'J'hat In cane of reinKbitement In tlie clnHHifled civil service of any 
 perHcm who at the time of bin Hepanit'on therefrom n!c:elved a refund undor 
 section Heven of thin act, bin period of service for the purpose of retirement nnd 
 of making the monthly deduction from his salary shall be computed from the 
 dfite of such reinstatement, unless he shall, within ninety dfiys after reinstate- 
 ment, pay to the Secretary of the Treasury the amount refunded to him, with 
 Interest at five per centum per annum. In which cawi the same shall be replaced 
 to the credit of his account, a/id the former period of service shall be counted. 
 
224 RETIEEMENT OF SUPERANNUATED CIVIL-SERVICE EMPLOYEES. 
 
 Sec. 11. That beginning with the first day of July next following the passage 
 of this act every employee to whom this act applies shall be entitled, on reach- 
 ing the retirement age, or having already passed that age, to retire from the 
 service under the provisions hereinbefore contained, and also, in addition to 
 the annuity herein provided for by his own contributions from his salary, to 
 receive from the United States during the remainder of his life an annuity 
 equal to one and one-half per centum of his total compensation during service 
 prior to the taking effect of this act ; and the Secretary of the Treasury is 
 hereby authorized and directed to pay such annuity quarterly, upon proper 
 certification of the retirement of such employee by the appointing officer under 
 whom he last served. Annuities from the United States for the period of serv- 
 ice prior to the passage of this act shall be payable only on condition that the 
 employee remains In the service until he reaches the age of retirement : Pro- 
 vided, however, That employees of group one may receive the annuity granted 
 by this section on retirement at the age of sixty years or thereafter. On the 
 death of the employee the .payment of annuities provided for by this section 
 shall cease and determine. Annuities^ payable by the United States on salaries 
 in excess of two thousand five hundred dollars per annum shall be based upon 
 an annual salary of two thousand five hundred dollars. 
 
 Sec. 12. That the period of service upon which the annuity to be paid by the 
 United States is based shall be computed from the original eaiployment, whether 
 as a classified or unclassified employee, and shall include periods of service at 
 different times and service in one or more departments, branches, or independent 
 offices of the Government, the Signal Corps prior to July first, eighteen hundred 
 and ninety-one, and the general service in or under the War Department prior 
 to May sixth, eighteen hundred and ninety-six. 
 
 Sec. 13. That every person to whom this act applies, who shall continue in 
 the classified civil service after the passage of this act, as well as every person 
 to whom this act applies, who may hereafter be appointed to a position or place, 
 shall be deemed to consent and agree to the deductions made and provided for 
 herein, and shall receipt in full for the salary, pay, or compensation which may 
 be paid monthly or at any other time, and such payment shall be a full and 
 complete discharge and acquittance of all claims or demands whatsoever for 
 services rendered by such person during the period covered by such payment, 
 notwithstanding the provisions of sections one hundred and sixty-seven, one 
 hundred and sixty-eight, and one hundred and sixty-nine of the Revised Statutes 
 of the United States, or of any other law, rule, or regulation affecting the salary, 
 pay, or compensation of any person or persons employed in the classified civil 
 service to whom this act applies. 
 
 Sec. 14. That the Secretary of the Treasury shall prepare and keep all needful 
 tables, records, and accounts required for carrying out the provisions of this act. 
 The records to be kept shall include data showing the mortality experience of 
 the employees in the various branches of the service and the rate of withdrawal 
 from the classified service and any other information that may be of value and 
 may serve as a guide for future valuations and adjustments of the plan for the 
 retirement of employees. The Secretary of the Treasury shall make a detailed 
 comparative report annually to Congress showing all receipts and disburse- 
 ments under the provisions of this act, together with the total number of per- 
 sons receiving annuities and disability allowances and the amounts paid them. 
 
 Sec. 15. That the provisions of this act shall apply to all persons entering the 
 classified civil service after the first day of July next following the passage of 
 this act, and to all persons in the classified civil service prior to the taking effect 
 of this act who shall, by written application to the Secretary of the Treasury 
 within one year after the first day of July next following the passage of this 
 
RETIEBMENT OF SUPEEANNUATED CIVIL-SERVICE EMPLOYEES. 225 
 
 act, elect to become subject to the provisions of tbis act. Tbe classified civil 
 service is hereby defined to include all oflicers and employees in the executive 
 civil service of the United States except unskilled laborers and persons ap- 
 pointed by the President and confirmed by the Senate. 
 
 No person serving in a position excepted from examination or registration as 
 defined in the civil-service rules shall be included within the provisions of this 
 act unless he has served in a competitive position for at least one year. When- 
 ever any person becomes separated from the classified civil service by reason 
 of appointment in the unclassified service, such separation shall not operate to 
 take him out of the provisions of this act. The President shall have power, in 
 his discretion, to exclude from the operation of this act any group of employees 
 whose tenure of office is intermittent or of uncertain duration. 
 
 Sec. 16. That none of the moneys mentioned in this act shall be assignable 
 either in law or equity or be subject to execution or levy by attachment, gar- 
 nishment, or other legal process. 
 
 Sec. 17. That for the clerical and other service and all other expenses neces- 
 sary in carrying out the provisions of this act during the fiscal years nineteen 
 hundred and eleven and nineteen hundred and twelve, including salaries and rent 
 in the city of Washington, there is hereby appropriated the sum of fifty thousand 
 dollars, out of any money in the Treasury not otherwise appropriated, to be 
 available until expended. 
 
 Sec. 18. That the Secretary of the Treasury is hereby authorized to perform 
 or cause to be performed any and all acts and to make such rules and regula- 
 tions as may be necessary and proper for the purpose of carrying the provisions 
 of this act into full force and effect. 
 
 74196°— S. Doc. 745, 61-3 15 
 
I 
 
 APPENDIX B. 
 
 (Senate Document No. 290, 61st Congress, 2d Session.) 
 
 CIVIL-SERVICE RETIPvEMENT— GREAT BRITAIN 
 AND NEW ZEALAND 
 
 BY 
 
 HERBERT D. BROWN. 
 
 Prepared under the direction of Chas. P. Neill, Commissioner of Labor. 
 
In the Senate of the United States, 
 
 April 5, 1910. 
 Ordered, That 1,000 copies of Senate Document No. 290, Sixty-first Congress, second session, entitled 
 "Civil-service retirement in Great Britain and in New Zealand," by Herbert D. Brown, be printed, with 
 corrections, for the use of the Committee on Civil Service and Retrenchment. 
 
 Chakles G. Bennett, 
 
 Secretary. 
 
LETTER OF TRANSMITTAL. 
 
 Department of Commerce and Labor, 
 
 Office of the Secretary, 
 Washington, January 13, 1910. 
 Sir: In pursuance of Senate resolution of January 11, 1910, direct- 
 ing this department to furnish, as soon as practicable, ''such infor- 
 mation as may now be in the possession of the Bureau of Labor on the 
 subject of foreign and domestic retirement plans for employees of 
 government civil service and in the service of industrial and trans- 
 portation corporations," I have the honor to transmit herewith 
 reports relating to civil-service retirement in Great Britain and in 
 New Zealand. 
 
 The Bureau of Labor now has in course of preparation reports 
 covering civil-service retirement systems in Austria-Hungary, Canada, 
 France, Germany, New South Wales, and other foreign countries, and 
 also a report covering existing provisions for retirement for public- 
 school teachers and -other municipal employees, and for employees of 
 railroads in the United States. These reports will be transmitted at 
 as early a date as practicable. 
 
 The forthcoming Twenty-third Annual Report of the Bureau of 
 Labor, which will be available within a few days, covers quite fully 
 old-age retirement systems in force in industrial and transportation 
 companies in this country. 
 
 Respectfully, - Ben. S. Cable, 
 
 • Acting Secretary. 
 
 Hon. James S. Sherman, 
 
 President of the Senate, Washington, D. G. 
 
 3 
 
CIVIL-SERYICE RETIREMENT IN GREAT BRITAIN. 
 
CONTENTS. 
 
 Page. 
 
 Letter of transmittal 3 
 
 Civil-service retirement in Great Britain, by Herbert D. Brown: 
 
 Summary 11 
 
 Superannuation provisions before 1810 16 
 
 Tlnx)ugh life offices, sinecures, pluralism, and substitute schemes 16 
 
 Through funds created in various departments from fees and taxes 18 
 
 Through funds created in the excise and customs by deductions from 
 
 salaries 20 
 
 Superannuation act of 1810 — first general law, a provision for free pensions. 21 
 Report of committee on public expenditures, 1808, the basis for act 
 
 of 1810 21 
 
 Main features of the act 23 
 
 Superannuation act of 1822 24 
 
 Treasury minute of 1821 establishing principle of deductions from 
 
 salaries the basis for act of 1822 24 
 
 Main features of the act 25 
 
 Repeal of the act 25 
 
 Second period of free pensions, 1824-1829 26 
 
 Report of select committee on public income and expenditure, 1828, 
 
 recommending reestablishment of the system of deductions 26 
 
 Treasury minute of 1829 reestablishing system of deductions 28 
 
 Superannuation act of 1834 30 
 
 Scale of deductions and superannuation allowances 31 
 
 Comparison of schemes of 1822 and 1834 32 
 
 Select committee of 1856 34 
 
 Grievances presented by committee of civil servants 34 
 
 Three general grounds of complaint against act of 1834 39 
 
 (1) Dislike of distinctions between different classes of civil serv- 
 
 ants 39 
 
 (a) Pensions paid chief officers of state and members of legal 
 establishments compared with those paid other civil 
 
 employees 40 
 
 (6) Pensions paid employees whose appointments antedated 
 
 1829 compared with those paid other civil employees. . 44 
 
 (2) Dislike of pension scale and forfeiture of contributions 45 
 
 (a) Forfeiture provision objectionable as a form of tontine.. . 46 
 (6) Forfeiture provision especially unjust in cases of clerks 
 
 dying in the service 48 
 
 (c) Forfeitable deductions together with inadequate salaries 
 
 a bar to life insurance 51 
 
 (d) Free pensions desired with compulsory deductions for 
 
 purpose of life insurance 54 
 
 7 
 
8 CONTENTS, 
 
 Civil -service retirement in Great Britain, by Herbert D. Brown — Continued. 
 
 Select committee of 1856 — Continued. Page. 
 Three general grounds of complaint against act of 1834 — Continued. 
 (3) Distrust of actuarial soundness of plan embodied in act of 
 
 1834 57 
 
 (a) Flat-rate assessments considered inequitable and possi- 
 bly inadequate 59 
 
 (6) Accrued liabilities possible cause of insolvency in case of 
 
 fund 65 
 
 Defense of act of 1834 by men responsible for its enactment 68 
 
 Defense of wisdom of providing superannuation allowances 70 
 
 Investigation of actuaries proved deductions inequitable and inade- 
 quate 70 
 
 Resolutions of the committee condemning system of deductions and 
 
 recommending revision of salaries 72 
 
 Superannuation commission, 1857 73 
 
 Commission's reasons for advocating a superannuation system 73 
 
 Commission's objections to a contributory scheme 75 
 
 Recommendation that deductions from salary be abolished 76 
 
 Refusal of the commission to recommend an insurailce fund 77 
 
 Indifference of the commission to actuarial phases of the problem 78 
 
 Indifference of the commission to cost of free pension scheme 80 
 
 Repeal of the twenty-seventh section of the superannuation act of 1834, 
 
 1857 80 
 
 Bill for repeal introduced by Lord Naas 80 
 
 Bill opposed by the ministry 82 
 
 Debate on the bill 85 
 
 Vote on the bill 92 
 
 Text of the repeal 93 
 
 Analysis of the vote 94 
 
 Superannuation act of 1859 95 
 
 Bill embodied minor recommendations of superannuation commission. . 95 
 
 Bill introduced and defended by the Government 97 
 
 Debate on the bill 100 
 
 Main featmes of the act 104 
 
 Select committee of 1873 105 
 
 Testimony showing — 
 
 Value to the public service of a superannuation system 106 
 
 Compulsory retirement at a given age advisable 107 
 
 Cost of maintaining free pension system 108 
 
 Pension charge reduced by reducing number of pensionable clerks . 109 
 
 Development of idea that pension is a substitute for part of salary. 109 
 
 Committee's recommendation of compulsory retirement at a given age. 110 
 
 Playfair commission, 1874 Ill 
 
 Optional retirement after twenty years' service proposed and rejected . Ill 
 
 Select committee of 1885 112 
 
 Committee's recommendation of a contributory pension scheme 112 
 
 Ridley commission, 1886 113 
 
 Growth of the deferred-pay argument 113 
 
 Abolition of pensions proposed by Sir Robert Hamilton in favor of sav- 
 ings scheme through accumulation of deferred pay 114 
 
 Approval of Sir Robert Hamilton's proposal expressed by officers of the 
 
 Treasury 117 
 
 Assumption that postponed charge is made by the State to pay pensions 
 
 accepted by Sir Reginald Welby 118 
 
CONTENTS, 9 
 
 Civil-service retirement in Great Britain, by Herbert D. Brown — Continued. 
 
 Ridley commission, 1886 — Continued. Page. 
 
 Confusion in Sir Reginald's mind as to amount of postponed charge. . . 119 
 Assumption that postponed charge is made by the State to pay pensions 
 
 accepted by Sir Herbert Maxwell 120 
 
 Confusion in Sir Herbert's mind as to amount of postponed charge 123 
 
 Disapproval of Sir Robert Hamilton's proposal expressed by Mr. 
 
 Mowatt 123 
 
 Confusion in public mind regarding Mr. Mowatt's testimony as to 
 
 amount of postponed charge actually made by the State 125 
 
 Approval of Sir Robert Hamilton's proposal expressed by other high 
 
 officials 126 
 
 (1) Would prevent pensions being charged to posterity 126 
 
 (2) Would facilitate dismissal of inefficient employees 127 
 
 Approval of Sir Robert Hamilton's proposal expressed by civil serv- 
 ants 130 
 
 Growing cost of civil pensions 133 
 
 Report of the commission 134 
 
 Rejection of Sir Robert Hamilton's proposal 135 
 
 Recommendation that deductions be made from salary to be re- 
 tm-ned on separation from service but forfeited on acceptance of 
 
 pension 135 
 
 Minor recommendations 137 
 
 Criticism of the commission's chief recommendation 139 
 
 Superannuation act of 1887 ■ 141 
 
 Summary of laAV under superannuation acts of 1834, 1859, 1887 143 
 
 Courtney commission, 1902 147 
 
 Appointment of commission due to "deferred pay committee" 147 
 
 Growth in cost of civil pensions since Ridley commission 148 
 
 Relation between cost of pensions and salary charge confused with 
 
 amount of postponed charge made by State to pay pensions 150 
 
 Request of civil servants that theoretical contributions be funded 155 
 
 Request of civil servants for insin-ance out of surplus theoretical con- 
 tributions 156 
 
 Fact of postponed charge established but amount not determined .... 158 
 Request of civil servants that amount of postponed charge be deter- 
 mined 160 
 
 Voluntary insurance organizations maintained by civil servants 161 
 
 Per cent of salaries paid for life insurance by civil servants 162 
 
 Testimony of commission's actuary, showing necessity of provision for 
 
 refund of contributions 163 
 
 Report of commission 165 
 
 Pensions acknowledged to be " deferred pay " 165 
 
 Theoretical deductions from salary held to be only sufficient for 
 
 pension 166 
 
 Funding of theoretical contributions held to be not justified 166 
 
 Recommendation that pensions be reduced one-quarter and differ- 
 ence given in insurance and cash 166 
 
 Minority report of commission adverse to any change 168 
 
 Workmen's compensation act, 1906 171 
 
 Superannuation act, 1909 173 
 
 Main features of the present law 173 
 
 Discussion of the act in Parliament. 175 
 
 Conclusions 181 
 
10 CONTENTS. 
 
 Page. 
 
 Appendix I. Superannuation act of 1834 , 188 
 
 Appendix II. Superannuation act of 1859 195 
 
 Appendix III. Superannuation act of 1887 198 
 
 Appendix IV. Warrant regulating grant of gratuities, etc., under section 1 of 
 
 act of 1887 201 
 
 Appendix V. Scheme of compensation in case of in j ury to government workmen . 203 
 
 Appendix VI. Superannuation act of 1909 205 
 
CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 
 
 BY HERBERT D. BROWN." 
 
 SUMMARY. 
 
 The British Government has been experimenting for over a century 
 with different schemes for solving the problem of superannuation in 
 the civil service. 
 
 The first general act dealing with the subject of superannuation 
 in all the offices of the Government was passed in 1810. From a 
 very early period, however, superannuation funds had existed both 
 in the Customs and the Excise departments. After 1810 those funds 
 were appropriated by the Government and paid into the exchequer, 
 and a general system obtained of granting superannuation allowances 
 to the civil service out of the revenues of the country, without the 
 existence of any superannuation fund. This system continued in 
 force for twelve years. 
 
 The expenditures for pensions increasing very rapidly. Parliament 
 passed an act in 1822 which readopted the liberal scale of super- 
 annuation allowances of the year 1810, but with the provision that 
 deductions should be made from the salaries of those employees of 
 the civil service receiving more than £100 ($486.65) per annum. The 
 deductions were formed into a fund, and when a civil servant died in 
 office or when he resigned or was removed from office without receiv- 
 ing a retiring allowance, the whole amount of his contributions was 
 repaid to him. The law also provided that half of the superannua- 
 tion allowances granted after that period should be paid from the 
 fund so created and that the other half should be paid from the Con- 
 solidated Fund. This scheme was not given a fair trial, for only 
 two years later, in 1824, Parliament repealed the act and ordered that 
 the sums which had up to that time been deducted be paid back. 
 
 From 1824 until 1829 followed a second period during which pen- 
 sions were granted by the State, without deduction from the salaries 
 of civil-service employees. 
 
 In 1829 the Treasury, accepting the contention that it had no 
 right to tax existing members of the service, but desirous of lessening 
 the pension charge, passed a minute directing that contributions 
 should be paid by all those who might afterwards be appointed to the 
 
 a Mr. Brown desires to give credit to Harriet Connor Brown for valuable assistance 
 
 in the collection of historical data. 
 
 11 
 
12 CIVIL-SEEVICE RETIREMENT IN GREAT BRITAIN. 
 
 civil service. The deductions from salary were 2^ per cent from 
 salaries not exceed ino; £100 ($487) per annum and 5 per cent from 
 those exceeding that amount. This was understood to be a provi- 
 sional measure, subject to the final decision of ParHament. 
 
 The Superannuation Act of 1834 gave parliamentary sanction to 
 this Treasury minute of 1829, and from 1829 to 1857 the contributory 
 system of granting superannuation allowances was in force for all 
 who entered tlie civil service subsequent to August 4, 1829. This 
 act contained no express direction for the creation of a superannua- 
 tion fund and it made no provision for the return of contributions in 
 case of death or resignation before the contributor had received a 
 retiring allowance. Owing to the fact that the contributions of the 
 employees were turned into the general exchequer instead of being 
 funded and that no account was kept of the amounts thus collected 
 and the amounts returned in the shape of pensions, it was not known 
 whether the contributions were adequate in the aggregate to meet the 
 expenditure for pensions, or whether they were inadequate. An 
 impression prevailed that they were more than sufficient and that 
 the Government was, therefore, making a profit out of its employees. 
 In view of the fact that the salaries were felt to be inadequate, this 
 impression created widespread discontent in the service. This dis- 
 content was deepened by the fact that the law required forfeiture of 
 contributions in the case of all employees save those who lived to the 
 pensionable age. It was calculated that only one of every seven 
 employees lived and remained in the service to that age. The fact 
 was bitterly resented that many employees contributed for years to 
 their pensions but, dying in harness, or soon after retirement, had to 
 forfeit all or nearly all they had thus set aside, while their famiUes 
 were perhaps left in want. The fact, too, that pensions were paid 
 those who had entered the service prior to August 4, 1829, without 
 deductions being made from their salaries, and on a more hberal 
 scale than that allowed the general body of the service, was another 
 cause of discontent. Because of these various inequities and dis- 
 criminations the dissatisfaction of the service with the provisions of 
 the act came in time to be very intense. 
 
 In 1846 a large number of civil employees formed themselves into 
 an association for the purpose of bringing their grievances to the 
 attention of Parliament. This association was in existence for about 
 ten years, during which time it worked out various data and classi- 
 fications which it laid before a select committee of the House of 
 Commons appointed in 1856 to consider the regulations respecting 
 the grant of superannuation allowances to members of the civil 
 service. Besides desiring that the scale of pensions should be made 
 more liberal, and that pensions should be granted free by the State, 
 one branch of this committee of civil servants was desirous that 
 
CIVIL-SERVICE RETIEEMENT IN GREAT BRITAIN, 13 
 
 Gompiilsory deductions should continue to be made from salaries, 
 but that they should be used to create a mutual insurance fund. 
 
 The Select Committee took testimony from a great number of 
 public officials and clerks and also engaged the services of two actua- 
 ries to investigate the question of the sufficiency of the deductions 
 made from the salaries of the civil servants to meet the pensions 
 provided under the Act of 1834. To the surprise of the public gen- 
 erally, since an impression to the contrary had prevailed, the actua- 
 ries reported that the contributions of the civil servants were not 
 adequate to meet the charges to which the public was liable under 
 the Act of 1834. In other words, had the deductions from salaries 
 been funded from the first, the fund would, by that time, have been 
 hopelessly insolvent. 
 
 Before the report of the actuaries had been submitted, however, 
 the Civil-Service Superannuation Commission, which succeeded, the 
 Select Committee, had recommended the abolition of the contribu- 
 tory system on the ground of its inequities and the consequent dis- 
 satisfaction of the civil employees with its provisions. Section 
 XXVII of the Superannuation Act of 1834, providing for deductions 
 from salaries, was accordingly repealed in 1857. 
 
 Following this repeal, the Superannuation Act of 1859 was passed. 
 It repealed most of the Act of 1834 and established a system of 
 uniform free pensions for all persons employed in the '^ permanent 
 civil service of the State." The scale of pensions established was 
 that of one-sixtieth of salary for every year of service, with a maxi- 
 mum allowance of forty-sixtieths. Retirement on a superannuation 
 allowance was permitted at the age of 60, or in case of mental or 
 physical infirmity after ten years' service, but no powc^r was given 
 the State to compel retirement at any age. In cases of infirmity 
 when the period of service had been less than ten years, a gratuity of 
 one month's pay for each year of service was given. The desire of 
 the civil employees for the creation of an insurance fund was ignored. 
 As regards the main body of pensionable civil employees the scheme 
 inaugurated in 1859 has remained substantially unaltered down to 
 the present year (1909). 
 
 The Superannuation Act of 1887 and the Workmen's Compensation 
 Act of 1906 have made supplementary provision for the award of 
 pensions and gratuities to various classes of government employees 
 not provided for by the Act of 1859. There are also special acts 
 relative to the pensions of judges, diplomatic and consular officers, 
 colonial governors, police and constabulary, elementary-school teach- 
 ers, etc. Except in the case of the elementary-school teachers, who 
 have a contributory fund, these pensions have been paid f)ut of the 
 public treasury. No special funds are set aside for the purpose, but 
 Parliament votes from year to year the amount required. 
 
14 CIVIL-SEKVICE RETIREMENT IN GREAT BRITAIN. 
 
 Although it might be supposed that the estabhshment of a straight 
 pension system would have been entirely satisfactory to the em- 
 ployees themselves, the evidence submitted to various select com- 
 mittees and special commissions shows that such was not the case. 
 The theory gradually gained ground — especially after the investi- 
 gation of the civil establishments made by the Ridley Commission in 
 1886-1888 — that the pensions were taken into account in fixing 
 salaries, and that the salaries were accordingly less than they would 
 be had no pension system been adopted. This theory was based 
 on the contention that pensionable members of the civil service are 
 paid less than nonpensionable members. The Ridley Commission 
 recommended that a deduction of 5 per cent of salaries be set aside 
 to form a savings account, but the recommendation was not acted 
 upon. 
 
 A committee of employees, which took the name of the Deferred 
 Pay Committee, was organized, and as a result of their agitation, the 
 Courtney Commission was appointed in 1902 to investigate the 
 grievances of the civil employees. The latter held that not only 
 were their salaries lower than they would have been had the pension 
 system not been adopted, but that the amount withheld from their 
 salaries was more than sufficient to pay the pensions. They thought 
 at first that they had high Treasury authority for believing that from 
 16 to 20 per cent was withheld from salaries to pay pensions. Know- 
 ing that that per cent of pay is considerably more than had been 
 found necessary in industrial pension system.s for the payment of 
 retiring allowances, they asked that life insurance be given them in 
 addition to the pension and as an offset to the excessive deductions 
 from salary. Inquiry developed the fact that the current idea that 
 from 16 to 20 per cent was deducted from salaries was based on an 
 erroneous interpretation of statements made by Treasury officials. 
 The employees then urged that an investigation be made to ascer- 
 tain just what percentage of salary was being deducted for that pur- 
 pose. This request was not granted, the commission holding arbi- 
 trarily that no more than the amount necessary to pay pensions 
 was withheld from salaries. They recommended, therefore, that life 
 insurance be granted the employees, not in addition to the pension, 
 but in substitution of part of it. 
 
 The recommendations of the Courtney Commission were submitted 
 by the Deferred Pay Committee to a plebiscite of the civil service, 
 with the result that 80 per cent of the service declared themselves 
 in favor of the change. On September 20, 1909, a law was accord- 
 ingly passed reducing the amount of the pension by one-quarter, 
 and substituting in its place a provision for a cash payment in case 
 of death or retirement from the service. Instead of receiving a 
 pension of one-sixtieth of salary for each year of service rendered, 
 
CIVIL-SERVICE EETIEEMENT IN GREAT BRITAIN. 15 
 
 as formerly, the civil employee of England will receive, henceforth, 
 a pension of one-eightieth of salary for each year of service. Since 
 the maximum period of service which is recognized is forty years, it 
 follows that the pension is reduced from a maximum pension of 
 two-thirds pay to a maximum pension of one-half pay. To balance 
 this reduction of pension several new benefits are given. Any 
 employee who retires after two years' service gets, in addition to the 
 pension (if any) or the gratuity (if any), an additional lump-sum 
 allowance of one-thirtieth of his annual salary for every year he has 
 served. In case an employee dies after five years' service, a cash 
 sum, as a life insurance, equal to one year's pay, is given to his legal 
 representatives. If an employee dies after he has retired from the 
 service, before receiving the whole of a year's pay, the State pays 
 the difference to his family. 
 
 This last legislation must be regarded as a recognition of the 
 employees' contention that, in fixing salaries, the practice has grown 
 up of taking into account the value of the pension. The civil pension 
 in England has come to be the equivalent of a deferred annuity paid 
 for by the difference between the salary actually received and the 
 salary that would be received were there no pension. Hence, in 
 practical operation, the pension system of England is virtually a 
 contributory system. (°) 
 
 The cost of the British system is interesting. Under date of Feb- 
 ruary 19, 1909, the British Foreign Office made the following state- 
 ment, in reply to an inquiry sent out by the Department of Com- 
 merce and Labor concerning Great Britain's pension plan for civil 
 servants : 
 
 Speaking generally, the greater part of the clerical establishment of 
 the civil service (except persons engaged in routine duties such as 
 copying) is pensionable, while in the arsenal, dock yards, etc., pension 
 rights are, as a rule, confined to the directing posts, and a proportion 
 only of the lower staff. The number of existing civil pensioners is 
 approximately 22,500, and the amount voted for pensions, etc., in 
 respect of the civil service proper (i. e., exclusive of provision for ele- 
 mentary school-teachers, constabulary, and police), in the current 
 year, was £ 1 ,842,260 ($8,965,358). The great majority of existing pen- 
 sioners are men, the employment of women in the public service in 
 anything like considerable numbers being of comparatively recent date. 
 
 What the total noneffective charge is, including pensions for the 
 established employees and gratuities for the nonestablished, besides 
 the pensions payable to teachers, constabulary, police, members of 
 the judiciary, and other public servants provided for under special 
 acts of Parliament, is not given. Since, however, the total charge for 
 pensions, gratuities, and compensation allowances was stated in 
 1902-3 to the Courtney Commission to be approximately two and a 
 
 oSee Conclusions, p. 181. 
 
16 CIVIL-SEE VICE EETIKEMENT IN GEEAT BEITAIN. 
 
 half million pounds ($12,166,250), it is safe to estimate that it is no 
 less than that in 1909. That it will grow less is very unlikely, for 
 the history of civil pensions throughout the world shows that there 
 is always a constant tendency to extend the benefits of a pension 
 system to new classes of public servants. 
 
 SUPERANNUATION PROVISIONS BEFORE 1810. 
 
 From an early date it seems to have been taken for granted in 
 Great Britain that the Government was under a moral obligation to 
 make provision for its civil employees in case of retirement from 
 office by reason of age or infirmity. Such an opinion was rendered 
 by the commissioners of inquiry appointed in 1786 by the act of 25 
 Geo. 3, c. 19, to inquire into the fees, gratuities, perquisites, and 
 emoluments received in certain public offices. It was indorsed in 
 the report of the three principal Secretaries of State to the Lord 
 President, dated February 23, 1795, in the following words: 
 
 When an officer either from age or infirmity is obliged to retire, we 
 agree with the commissioners in opinion that a decent provision ought 
 to be afforded him, and we do not see that any objection can arise to 
 its being paid out of the general fund; but with respect to the extent 
 of such provision, we think it ought to be decided on a consideration 
 of the merit and service of such an officer, and not by any fixed rule. 
 
 Pensions to officers of the Crown, especially those who had held 
 high and important positions in the civil service for a shorter or 
 longer period, had accordingly been granted from time to time. 
 
 Through Life Offices, Sinecures, Pluralism, and Substitute 
 
 Schemes. 
 
 Not, however, until the beginning of the nineteenth century was 
 any general system of superannuation established. Before that 
 time, recourse was had to inconvenient devices for securing the funds 
 necessary for the payment of old age and infirmity allowances. 
 Public officers who retired from the civil service were provided for in 
 various ways. In some cases the practice of granting certain offices 
 for life dispensed with the necessity of any such provision. The case 
 of an employee in the Treasury, who had become superannuated 
 without retirement, was noted in the following language by the 
 commissioners of 1786: 
 
 The attendance of one of the chief clerks having been of late years 
 dispensed with on account of his age and infirmities, the duty has 
 devolved entirely upon the remaining three, who have been found 
 sufficient for the execution thereof. (") 
 
 In some cases the existence of sinecures proved a haven for the 
 worn-out and inefficient. In the opinion of the Commissioners of 
 
 o Report on the Operation of the Superannuation Act. 1857. Appendix XII, p. 152. 
 
CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 17 
 
 Inquiry, for instance, the establishments of the Home Secretary, with 
 an office force of sixteen, and the Foreign Secretary, with a corps of 
 fifteen, might have been maintained with half the number. They 
 said: 
 
 From what we have been able to collect, the general business of 
 the office is scarcely sufficient to furnish full employment for the 
 clerks at present borne upon the establishment, and we consider 
 their present number as rather to be justified by the propriety of 
 having fit persons always in readiness upon any extraordinary 
 pressure of business than from the degree of employment which the 
 office ordinarily affords. If they were reduced to eight in each 
 department, Your Majesty's service might not suffer from such 
 reduction. ( ") 
 
 Only the official records can give any adequate idea of the extent 
 of pluralism in the British civil service during the eighteenth century. 
 Provision was made for old age by officers in active service through 
 saving and investment of incomes derived from offices, the duties of 
 which were executed by deputies. For years almost every officer of 
 rank in the Treasury had some provision of this kind. In other 
 departments also there were many receiving double salaries. The 
 receiver-general of the Post-Office was a commissioner of the Salt 
 Office. The superintending president of the Post-Office was searcher 
 of the customs for the port of Chichester. The receiver and registrar 
 of the Hackney Coach Office was comptroller of the Tea Warehouse 
 under the Board of Customs. Nor was the system confined to the 
 higher appointments. A clerk in the Penny Post-Office was also 
 deputy to the husband of the Four-and-a-half per cent duties in the 
 Customs. A messenger in the Bye-letter Office was a stamper in the 
 Stamp Office. Concerning this state of things the commissioners of 
 1786 had this to say: 
 
 So far as these emoluments (alluding to those arising from sinecures) 
 have been applied to increase the incomes of officers inadequately 
 paid, and to form a provision for them on retirement, but so far 
 only they have been of use, and, while officers remain on their present 
 footing, are, perhaps, in some degree, necessary. But we think that 
 an establishment may, and ought in wisdom, to be found, in which 
 such a species of emolument would be superfluous and redundant; 
 an establishment by which every public officer should be paid for 
 his services, not under false pretenses and in uncertain measure, 
 but openly, and in proportion to the service he performs; an estab- 
 lishment which should entitle him to a provision upon retirement, 
 not dependent upon caprice or accident, or arising from the per- 
 petuation of abuses, but known and certain, free from the competition 
 of individuals, or the animadversion of the public. (^) 
 
 o Report on the Operation of the Superannuation Act. 1857. Appendix XII, p. 151. 
 & Idem, p. 154. 
 
 35885— S. Doc. 290, 61-2 2* 
 
18 CIVIL-SEEVICE RETIREMENT IN GREAT BRITAIN. 
 
 The practice, at that time common, of charging the salaries of 
 public officers with retiring allowances to their predecessors — a form 
 of what is now advocated in the United States in certain quarters 
 under the name of the ''substitute plan" — afforded still another 
 means of providing for retired employees. The following case was 
 noted in the Treasury by the Commissioners of 1786: 
 
 The keeper of the papers has a salary of £400 [SI, 946. 60] a year, 
 reduced by the one shilling duty, and an allowance of £40 [$194.66] 
 to his deputy, to £340 [$1,654.61], the whole of which he pays to 
 Thomas Pratt, esq., during life, who resigned office in his favor in 
 the month of January, 1783. C'^) 
 
 A similar and more flagrant case recorded by the commissioners in 
 their report on the Post-Office Department was that of the packet 
 agent at Dover, who granted allowances to his predecessor and received 
 them from his successor in another office. 
 
 He has a salary of £150 [$729.98] a year, reduced by taxes, etc., 
 to £123, 13s. 8d. [$601.90]; he has an allowance of £200 [$973.30] 
 a year for providing extra boats when the service requires, reduced 
 by agency m London to £194, 18s. 8d. [$948.64], and an allowance 
 of £10 [$48.67] a year for stationery; he likewise derives certain 
 emoluments from agency on the passage, which is at the rate of 10s. 
 in every guinea on what is called 'allowed freight;' the average of 
 which, from the 15th July 1775, to the 5th January 1787, being 
 eleven years and a half, was £941, 18s. [$4,583.76], making the 
 average of his net annual receipt £1,270 10s. 4d. [$6,182.97], which 
 he now receives for his own use; but previous to the death of Mr. 
 Barham, which happened in October last, he paid to him £800 
 [$3,893.20] a year, as a compromise for the clear annual income of this 
 office, which by order of the Postmaster-General, dated 16th Novem- 
 ber 1774, he was directed to pay to him during his life; to indemnify 
 him for such payment, he was to receive from Mr. Lees, his successor 
 in Ireland, the clear annual income of his office, as secretary to the 
 Post Office there, during the life of Mr. Barham, which was likewise 
 compromised for a net payment of £750 [$3,649.88] during the life 
 of Mr. Barham, and of £150 [$729.98] annually after his death; 
 which engagement is now in force, and will add so much to his 
 annual receipt. ( ^) 
 
 Through Funds Created in Various Departments from Fees 
 
 AND Taxes. 
 
 The power then existing in different departments of granting pen- 
 sions chargeable upon various funds, such as fee funds and contin- 
 gencies, offered another means of providing for the superannuated. 
 The commissioners of 1786 found three instances in the Treasury in 
 which allowances had been charged to the fee fund, which proved 
 inadequate for the strain thus put upon it. The record is as follows: 
 
 O' Report on the Operation of the Superannuation Act. 1857. Appendix XII, p. 152. 
 t> Idem, p. 153. 
 
CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 19 
 
 One of the three superannuated clerks, Thomas Tomkins, retains 
 only his salary of £100 [$486.65] out of the civil list. The two others, 
 Frederick Reynolds and James Royer, have allowances by order of a 
 minute of the Treasury Board of 16th December 1783, of £300 
 [$1,459.95] a year each, charged on the fee fund, besides which the 
 latter has a salary of £200 [$973.30] a year out of the Customs, having 
 been formerly a clerk in the Revenue Office, and his name still remain- 
 ing on that establishment; but Mr. Royer, notwithstanding frequent 
 applications, has not yet received any part of his allowance of £300 
 [$1,459.95] a year out of the fee fund, this fund not having proved 
 sufficiently productive for that purpose, in which case the minute 
 directed that it should be paid out or any other fund the board might 
 think fit. («) 
 
 From taxes levied on official salaries an annual sum was obtained 
 which formed a substantial addition to the national revenue and was 
 regarded as an offset to the amount paid out by reason of superan- 
 nuation in office. The taxes so levied appear to have been three in 
 number. A land tax, amounting in certain cases to a deduction of 20 
 per cent and originally intended to operate as an equitable income 
 tax on real and personal property, was still charged on some classes of 
 salaries. A duty of 6d. in the pound (termed the civil-hst duty) and 
 a duty of Is. in the pound were also imposed. The amount produced 
 in 1796 from these two last-named duties was no less than £73,991 
 ($360,077.20). These duties were not collected, of course, without 
 expense. The receivers were remunerated by a poundage; ''one 
 class of servants having, it must be presumed, been overpaid, it was 
 necessary to pay others in order to cover the excess." In cases 
 where salaries were avowedly not more than sufficient, it was pointed 
 out by the commissioners that such taxes only recoiled upon the 
 public "by creating Hew claims to consideration, which must in 
 justice besatisfied," and they recommended, therefore, that the salaries 
 of officers should be exempted from all taxes and duties. 
 
 As afterwards pointed out by the Commissioners of 1857, any such 
 mode of retiring servants as those just described, was ''obviously 
 most objectionable in principle, and liable to great abuse in practice, 
 both as regards due economy in the pubhc expenditure, and the fair 
 and equal remuneration of public servants. Indeed, it may be 
 doubted whether such a state of things could have continued so long, 
 had not the whole number of civil servants been at that time small, as 
 compared with the amount of our present establishments. In time, 
 however, it became apparent that, if a provision were to be made for 
 retired servants, the objectionable means hitherto employed for that 
 purpose had become quite inadequate; as well from the great increase 
 in the number of civil servants, as from the effects of financial reforms 
 in drying up the Sources from which means had been obtained." 
 
 « Report on the Operation of the Superannuation Act. 1857. Appendix XII, p. 152. 
 
20 civil-seevice retirement in great britain. 
 
 Through Funds Created in the Excise and Customs by Deduc- 
 tions FROM Salaries. 
 
 An attempt was made, therefore, early in the nineteenth century, 
 to estabHsh a system of granting superannuation allowances, and to 
 make it apply to the rank and file of the civil service as well as to 
 the high officials. From a very early period superannuation funds 
 had existed both in the departments of Excise and of Customs. 
 The Excise fund, which was originally called "The Excise Charity 
 Fund," was established by a Treasury minute, dated February, 1686, 
 by a deduction of 3d. in the pound on the salaries of all ''general 
 riders, general supervisors, collectors, surveyors, gangers, and clerks." 
 In the disposal of the money the following rules were to be observed: 
 
 First. No officer who had not served seven years was to receive 
 any sum of money or pension, unless disabled by accident. 
 
 Second. The pensions were to vary according to the grade of the 
 officers, the maximum being £30 (S146) and the minimum £15 ($73). 
 
 Third. No officer was to be allowed a pension, if, from any other 
 source, he possessed an income equal to the pension assigned to 
 his grade. 
 
 An act (49 Geo. 3, c. 96) was passed in 1809, which granted to 
 officers incapacitated by age or infirmity, after ten years' service, 
 three-fourths of their salary, taken on the average of the last seven 
 years. The same proportion of last salary was granted to officers 
 disabled by accident, irrespective of length of service, but it was 
 provided that no such superannuation should be granted to an 
 officer in receipt of less than £180 ($875.97) per annum. 
 
 The Customs fund appears to have existed at least as early as the 
 year 1708. It was confined at first to the inferior officers of the 
 service. The rate of deduction was 3d. in the pound and the fund 
 was increased by the fines imposed on officers for breach of discipline. 
 Gradually the benefit of the fimd was extended to classes higher in 
 rank than those for which it had originally been formed. A Treas- 
 ury warrant of 1779 added landing surveyors, landing waiters, and 
 other superior officers. Fees belonging to 196 offices, abolished in 
 1798 by the 38th of Geo. 3, c. 86, were turned in to the superannu- 
 ation fund. 
 
 The first formal proceedings of the Government looking toward 
 the establishment of a general system of superannuation allowances 
 are found in Treasury minutes of 1802, 1803, and 1807. The first 
 minute, dated July 30, 1802, granted allowances ranging from £100 
 ($486.65) to £200 ($973.30) on retirement in consequence of physical 
 infirmity, under the name of compensation, to a few. classes of officers 
 of the Customs. No regulations were made as to age or length of serv- 
 ice. The second minute, dated the 10th of August, 1803, was passed 
 
CIVIL-SERVICE RETIREMENT IlST GREAT BRITAIN. 21 
 
 because the Lords of the Treasury had discovered that the allowances 
 granted the previous year did not bear a fair proportion to the 
 emoluments of the respective offices. They fixed, therefore, the 
 sums which were to be taken as the annual incomes of the several 
 grades and then prescribed a graduated scale of allowances, accord- 
 ing to which one-third of the salary was allowed to officers who had 
 served ten years and were reported incapable of executing their duties ; 
 one-half was allowed after service of from ten to twenty years, and 
 two-thirds after twenty years, to officers retiring at less than sixty 
 years. In the case of officers more than sixty years of age two-thirds 
 of salary was allowed after only fifteen years of service. The third 
 minute, dated November 7, 1807, extended the arrangement to 
 numerous other classes of officers of the Customs, and in this position 
 the matter stood at the passing of the general act of 1810. 
 
 SUPERANNUATION ACT OF 1810. 
 Report of Committee of 1808 the Basis for Act of 1810. 
 
 In the year 1808 a report was made by the Committee on Public 
 Expenditures on the subject of the pensions, sinecures, and rever- 
 sionary grants paid out of the public revenues, which led to the first 
 general enactment on the subject of superannuation. Although there 
 was at that time no regular system of superannuation, except in the 
 Customs and Excise, as explained above, a large number of retired 
 allowances, included under the general head of "pensions," came 
 under the notice of the committee. The entire want of fixed rules 
 governing the grant of superannuation allowances was noted and 
 deplored by them. Their attention was drawn particularly to a 
 large amount of "dead wood" in some offices, the practice having 
 arisen, in case of deficiency of the fee fund, of carrying pensioners on 
 the regular civil list. This meant that much of the sum voted for any 
 oflSce for current expenses was not paid out in the form of salaries to 
 those carrying on the work, but was spent for pensions to those no 
 longer able to work. The committee held that "annual allowances 
 ought not to be granted generally, and without special reasons, to 
 persons retiring from official situations," and that when pensions 
 were granted in any office the accounts should be kept entirely 
 separate from the salary account. 
 
 In view of the loose way in which provision was made for the pay- 
 ment of superannuation allowances, the committee recommended 
 that a stricter account be kept of pensions granted and the reasons for 
 their bestowal. They suggested the expediency of limiting allowances 
 to a certain proportion of the former salary and laid stress on the 
 principle that duration of service should be taken into consideration 
 
22 CIVIL-SERVICE EETIEEMENT IF GEEAT BEITAIN. 
 
 in fixing the amount of the allowance. Their recommendations are 
 contained in the following extract: 
 
 Under all these circumstances your committee do not hesitate in 
 submitting to the House, that all allowances in the nature of pensions, 
 which are not strictly superannuations, should be classed under their 
 proper head, and paid at the exchequer; preserving, at the same time, 
 entries of such pensions, together with the circumstances under which 
 they have been granted, on the establishment of the offices in which 
 the services have been performed. 
 
 It may be also expedient to limit the sums in which allowances may 
 be applied to cases of superannuation, so as not to exceed a certain 
 proportion of the former salary. 
 
 The regulations under which superannuations are granted in the 
 Customs deserve the attention of the House, as uniting a due con- 
 sideration toward long and meritorious service, with a just atten- 
 tion to economy. 
 
 By a resolution of the House of Commons of Ireland, 7th April 
 1784, no yearly allowance was permitted to be placed on incidents 
 in cases of superannuation, except for officers who shall have served 
 forty years without censure, or officers who shall have received a 
 wound or hurt in the service, amounting to a total disability, or 
 for widows of officers who shall have lost their lives in the service of 
 the revenue; but by a subsequent revision of that resolution, 26th 
 July 1793, twenty-five years were substituted instead of the term 
 of forty years, as being sufficient to answer the purposes of the said 
 resolution respecting the placing on incidents any yearly allowance 
 for superannuated officers of the revenue, who have already served, 
 or shall have served, the said term of twenty-five years without 
 censure. 
 
 These general, unqualified expressions, have been, perhaps, liable 
 to misconstruction, as if they were calculated to convey a sort of right 
 of superannuation after twenty-five years of service ; whereas it is to 
 be presumed that it never would have been the intention of the House 
 of Commons to countenance a new claim on the part of the officers, 
 but, on the contrary, to impose a restraint upon executive govern- 
 ment, from granting any such allowances even to superannuated offi- 
 cers, unless where they had served meritoriously the prescribed num- 
 ber of years, or had otherwise been incapacitated in the public serv- 
 ice, as described in the resolution. 
 
 With regard to the salary and emoluments of each separate depart- 
 ment, the public ought unquestionably to be served as cheaply as is 
 consistent with being served with integrity and ability; but it must 
 be recollected that what makes office desirable in the higher depart- 
 ments is not the salary alone, but the consequence and consideration 
 attached to it, the power of obliging fTiends, and of creating depend- 
 ents ; and in the lower degrees the chance of gaining advancement by 
 industry and talent. The principle of gradually increasing salaries 
 after certain periods of service, and at fixed intervals, if they are not 
 made too short, is highly to be approved, as holding out a due encour- 
 agement to diligence and fidelity. In all cases of superannuation, 
 duration of service should be an essential requisite, and even then 
 regard should be had to the condition of each individual, as to his 
 ability of continuing the official labors, and to his situation in life 
 from other causes. 
 
 I 
 
CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 23 
 
 In many instances, where allowances have been granted as com- 
 pensation for the loss of office, or upon the plea of superannuation, 
 the persons who have obtained them have, at subsequent periods, 
 been appointed to other offices, in both which cases it is obvious that 
 the allowances ought to have ceased. 
 
 The true principle applicable to all offices is, that public money 
 should not be granted without reference to duty; and all exceptions 
 whatever ought to be justified under the special circumstances attend- 
 ing such case.(") 
 
 Main Features of the Act. 
 
 As a result of the report of the Committee on Public Expenditure 
 and their recommendation that the regulations under which super- 
 annuations are granted in the Customs should be considered by the 
 House, "as uniting a due consideration toward long and merito- 
 rious service, with a just attention to economy," the Act of 1810 
 (50 Geo. 3, c. 117) was passed. The principal features of this act 
 were the provision for an annual statement of the increase and dimi- 
 nution of public salaries, pensions, and allowances, the prohibition of 
 the practice of charging superannuations or compensations on the 
 expenses or funds of any office without the concurrence of the Treas- 
 ury, and the separation of military and naval pensions from civil 
 allowances in the annual estimates of the Army, Navy, and Ordnance. 
 Provision was also made that in offices having a fee fund, compensa- 
 tion and superannuation should be chargeable in the first instance 
 on such fund, the deficiency, if any, being made good, in the offices 
 of the Secretary of State, the Privy Council, and the Treasury, out of 
 the civil list; in other cases by a parliamentary vote. The scale of 
 remuneration was similar to that prescribed by the minute of 1803 
 for retired officers of the Customs, with the addition that any officer 
 over 65 years of age might receive a pension of three-fourths of salary 
 in case he had served forty years or more, or the whole of salary in 
 case his length of service had been fifty years or more. 
 
 Since this act made pensions to Customs and Excise officers payable 
 out of the public revenues, a Treasury minute was passed March 26, 
 1811, directing that the accumulated Customs fund, consisting of 
 about £165,000 ($802,972.50) stock should be paid into the exchequer. 
 Two acts were passed in the year 1812 directing that the Excise fund, 
 consisting then of £73,900 ($359,634.35) three per cent consols, the 
 value of which was £45,324 ($220,569.25), should also be paid into 
 the exchequer. (^) 
 
 The superannuation funds which existed in the Customs and 
 Excise having been appropriated by the Government and paid into 
 
 a Report on the Operation of the Superannuation Act. 1857. Appendix XII, pp. 
 154, 155. 
 
 b Report on Civil Service Superannuation. 1856. p. 2. 
 
24 CIVIL-SERVICE EETIEEMENT IN GREAT BRITAIN. 
 
 the exchequer, there existed then under the Act of 1810 a general 
 system of granting superannuation allowances to the civil service out 
 of the revenues of the country without the existence of a superannu- 
 ation fund of any kind. This act continued in force for twelve years, 
 and during that period pensions were granted from the Consohdated 
 Fund without any abatement from salaries, and entirely at the cost 
 of the public. 
 
 The Act of 1810 was undoubtedly intended to operate as a check 
 upon the grant of pensions. It had, however, exactly the opposite 
 effect. The act made no regulations to check retirements from office. 
 The liberaHty of the pension scale established was really a tempta- 
 tion to seek retirement. It should be noted that although one-third 
 was fixed as the maximum allowance for ten years' service, the Treas- 
 ury was left at liberty, as soon as the ten years had been exceeded by 
 the smallest interval, to grant one-half. Furthermore, the superan- 
 nuation was to be calculated upon the salary of which the individual 
 was in receipt at the time of retirement, not on the average of that 
 received during a certain number of years. A great increase in the 
 pension charge resulted. The charges of the years 1810 and 1820 for 
 superannuation allowances, including compensations for loss of office, 
 in the purely civil departments were, respectively, £94,550 ($460,- 
 127.58) and £291,068 ($1,416,482.42), and those of the civil branch 
 of the Ordnance Department had increased from £27,916 ($135,- 
 853.21) to £54,718 ($266,285.15). («) 
 
 SUPEKANNUATION ACT OF 1822. 
 
 Treasury Minute of 1821 the Basis for Act of 1822. 
 
 The next important step in the history of English superannuation 
 measures was taken by the Treasury. In a minute of August 10, 
 1821, it laid down a principle that proved to be extremely influential 
 in the subsequent legislation on the subject. This was a period of 
 marked reduction in public expenditure following . the war, and it 
 was the spirit of retrenchment which animated the Treasury minute. 
 "My Lords are of opinion that it is essentially necessary that some new 
 regulations should be adopted, with a view of limiting this branch of 
 the public expenditure in future (that is, the superannuation allow- 
 ances), and they are of opinion that the mode of regulation which 
 seems in all respects most eligible, is, to require that the individuals 
 themselves who may hereafter enjoy the benefit of superannuation 
 allowances, should be called upon to contribute to a superannuation 
 fund, to be administered under the direction of their Lordships." 
 This Treasury minute contained recommendations for a plan along 
 the lines afterwards established by the Act of 1822. On January 8, 
 
 o Report on the Operation of the Superannuation Act. 1857. Appendix XII, p. 157. 
 
CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 26 
 
 in the following year, another minute was issued recommending a 
 general revision of the salaries of the civil establishments. 
 
 Main Features of the Act. 
 
 Based on these two minutes, an act of Parliament was passed in 
 August, 1822 (3 Geo., 4, c. 113), which granted the same liberal scale 
 of retiring allowances authorized by the Act of 1810 but required con- 
 tributions from all civil servants whose salaries exceeded £100 
 ($486.65) per annum. This act required that upon salaries between 
 £100 ($486.65) and £200 ($973.30), 2^ per cent should be deducted; 
 that upon salaries of upwards of £200 ($973.30), 5 per cent should be 
 deducted, to the extent of the regulated salary authorized by the 
 minute of January, 1822; and that for any salary which any officer 
 then holding office might receive above the regulated amount, 10 
 per cent should be paid. It was also directed that the abatements so 
 made from salary should be formed into a fund, to be carried to the 
 credit of the commissioners, for the reduction of the national debt at 
 the Bank of England. Provision was made that, if any civil servant 
 died in office, the whole amount of his contribution was to be paid to 
 his legal representatives. Even after his resignation or removal 
 from ofiice, his contribution was paid back to him, provided he had 
 not received any benefit from the fund. 
 
 The object of this act was thus explained by the Chancellor of 
 the Exchequer : 
 
 The persons who, in ordinary cases, were to receive these allow- 
 ances, it was intended to make contribute to a fund out of which 
 such allowances in future were to issue. That arrangement would 
 operate as something like reduction of salaries; but it would be a 
 case of infinitely less hardship to make persons contribute in the 
 active part of their lives to a fund which, ia the decline of life and in 
 retirement, would be a provision for them, than suddenly, and at one 
 blow, to cut down their salaries without holding out any correspond- 
 ing advantage. C^) 
 
 Repeal of the Act. 
 
 This law held less than two years, for on June 24, 1824, it was 
 repealed by an act of Parliament (5 Geo., 4, c. 104), which directed 
 that all superannuation allowances granted after that date were to 
 be paid from the Consolidated Fund and all contributions received 
 under the previous act were to be returned to the contributors. 
 There is a Treasury minute, dated January 25, 1824, which contains 
 the details of that repayment. The sum then in hand, after pay- 
 ing the few pensions during the interval, amounted to £107,800 
 ($524,608.70), which was repaid in the proportions there specified. C") 
 
 o Report on the Operation of the Superannuation Act. 1857. Appendix XII, p. 158. 
 6 Report on Civil Service Superannuation. 1856. p. 3. 
 
26 CIVIL-SERVICE EETIEEMENT IN GEEAT BRITAIN". 
 
 The reason for the repeal of the Act of 1822 was the plea on the 
 part of the civil servants that compulsory deductions from their 
 salary constituted a violation of contract on the part of the Gov- 
 ernment. The debates which occurred in Parliament on the subject 
 indicate that the repeal was made entirely on that ground. The 
 system of deductions was not popular with either Parliament or the 
 civil service. 
 
 In the meantime the charge of superannuation allowances con- 
 tinued to increase. In 1827 it amounted, including compen- 
 sation allowances, in the purely civil departments to £484,081 
 ($2,355,780.19); in the civil branch of the Ordnance to £64,364 
 ($313,227.41). («) 
 
 SECOND PERIOD OF FREE PENSIONS (1824-1829). 
 Report of Select Committee of 1828, Recommending Reestab- 
 
 LISHMENT OF SySTEM OF DEDUCTIONS. 
 
 In the year 1828 the Select Committee on Public Income and 
 Expenditure made important recommendations in regard to the 
 salaries and pensions of civil employees. This committee inquired 
 into the salaries given to the clerks in the India House, the Bank 
 of England, two insurance offices, and one of the principal banking 
 houses of London, and compared them with the salaries granted 
 clerks in the civil service. As a result of this inquiry they stated 
 in their report on salaries that "there does not appear to be any 
 fixed system of superannuation allowances in commercial houses, 
 and although some such allowances are given, the amount of them 
 is small." They then proceeded to indorse the principle of deduc- 
 tions from salary for the purpose of creating a superannuation fund 
 in the following language: 
 
 The committee are aware that there is not a strict analogy between 
 the duties performed by clerks in public offices and those in commer- 
 cial establishments; still, as far as comparison can be made, it appears 
 that the salaries in the Ordnance Department admit of diminution. 
 At present, without precluding themselves from hereafter advising a 
 further reduction on a general and systematic principle, should it 
 appear proper on more accurate investigation, they confine them- 
 selves to a recommendation to revert to the principle laid down in 
 the minute of the Treasury in 1821, of making these salaries sub- 
 ject to a charge for forming a superannuation fund, the details of 
 which they intend in the course of a few days to submit to the House 
 in a separate report on superannuation allowances, half -pay, and 
 pensions. (^) 
 
 In the committee's report they accordingly recommended the 
 reestablishment of the system of deductions. They alluded with 
 
 o Report on the Operation of the Superannuation Act. 1857. Appendix XII, p. 158. 
 b Idem, p. 159. 
 
CIVIL-SERVICE KETIKEMENT IN GEEAT BEITAIN. 27 
 
 approbation to the principle laid down in the Treasury minute of 
 August 10, 1821, that pensions should be provided by making deduc- 
 tions from the salaries of the persons entitled to them. The select 
 committee proposed that deductions should be made from all 
 salaries, both of those who had taken service previously to that date 
 and of those who might afterwards enter the service. They recom- 
 mended that those already in the service should be pensioned on 
 the then existing liberal scale (the difference between the value of 
 their pensions and the value of their contributions to be made up 
 from the public purse), but that those who might afterwards enter 
 the service should be given pensions equivalent only to the value 
 of the deductions from their salaries so that the public might not 
 eventually have to bear any part of the expense of these allowances. 
 They pointed out that the loss occasioned the public by the repeal 
 of the Act of 1822, which they considered to have been an admirable 
 measure, was no less than £500,000 ($2,433,250). They stated that 
 from 1822 to the end of 1827 the superannuation and compensation 
 allowances had increased in annual amount from £331,746 ($1,614,- 
 441.91) to £484,081 ($2,355,780.19). («) 
 
 The Chancellor of the Exchequer accordingly introduced a bill 
 founded upon this report, and intended to give effect to the recom- 
 mendations contained in it. He introduced it in language which 
 showed plainly enough that the main interest of the Government in 
 connection with the bill was the reduction of expenses rather than 
 the establishment of a model superannuation measure, and that the 
 deduction from salaries was preferred to a reduction of salaries. His 
 speech is reported as follows: 
 
 The House had appointed a committee for the purpose of revising 
 the expenditure of the country; and that committee had almost 
 unanimously declared that such a measure as that which he had 
 introduced ought to be carried into effect. Standing in the situa- 
 tion which he had the honor to fill, he should have been charged with 
 a high degree of cowardice, if, after such a recommendation, he had 
 refused to bring the measure before the House. On that account 
 he was prepared to vindicate the bill, and to state the reasons on 
 which the committee had come to their decision. The whole expendi- 
 ture for the service of the country, the committee found to amount 
 to twenty-one millions, and of this, five millions were appropriated 
 to the ineffective service, including superannuation, pension, and 
 retired allowances. The committee was anxious not to deprive the 
 country of the active service of those who were engaged in the public 
 departments; and they therefore turned their attention to consider 
 if it were possible, without any deviation from just principle, pros- 
 pectively to diminish the expenditure for services that were passed. 
 Of the five millions which the ineffective service of the country cost, 
 the committee found that nearly half a million was appropriated to 
 the payment of the civil pensions, and this sum has been increased 
 
 oReport on the Operation of the Superannuation Act. 1857. Appendix XII, p. 160. 
 
28 CIVIL-SERVICE KETIEEMENT IN GREAT BRITAIN. 
 
 within a few years from £330,000 [$1,605,945] to £447,111 [$2,175,- 
 865.68]. Finding that this sum was increasing so rapidly, they 
 thought it their duty to recommend the measure before the House. 
 He knew that the committee had balanced long between a reduction 
 of the salaries, and this measure of making the officers contribute 
 to their own superannuation. He, for one, opposed the reduction of 
 salaries, because they had been fixed in the year 1821, after the effects 
 of peace had been fully felt, and the measures for restoring the metal- 
 lic currency had been adopted. It was better, on the whole, he 
 thought, and the least likely to affect the future prospects of the 
 different officers of our civil establishments, to adopt this measure 
 relative to their superannuation, than to alter their salaries. ('*) 
 
 Sir Henry Parnell also stated that the opinion of the committee 
 was in favor of a considerable reduction of salaries, but that they 
 had taken, instead, a course much more favorable to the clerks, 
 namely, that of proposing to reduce them by a small percentage, in 
 the way provided in the Act of 1822. And he added his conviction 
 that "the clerks had much better consent to this arrangement than 
 defeat it, and thus make it necessary to examine more closely what 
 ought to be the exact reduction which the public interests required 
 to be made." 
 
 The bill was withdrawn, however, in consequence of an objection 
 made on hehalf of the civil servants, on the same ground as before, 
 that the imposition of deductions would, as regards them, be con- 
 trary to their terms of service. Strong statements were also made 
 to the effect that the salaries were not sufficiently high to bear 
 deductions, although the select committee had recorded its opinion 
 otherwise, as follows: 
 
 It is obvious that in recurring to the provisions of the Act of 1822, 
 the rate of salary attached to each office should be such as may be 
 deemed fairly sufficient to bear the deduction which it is proposed to 
 make from it; and when it is considered that the Treasury revised 
 and fixed the salaries of the several departments in 1821, when the 
 deductions in aid of the superannuation fund were first established, 
 it does not appear that a revival of that principle would press too 
 hardly at the present time, and under the present circumstances of 
 the country, upon the fair emoluments of the officers and clerks who 
 are now in office. C*) 
 
 Treasury Minute of 1829 Reestablishing System of Deductions. 
 
 Although the bill was withdrawn, Treasury officials did not give up 
 the notion of reducing pension charges by exacting contributions 
 from the civil servants. They observed that the objection which 
 had been made successfully against the Act of 1822 and the proposed 
 bill of 1828 that deductions from salary would mean a violation of 
 the terms of contract did not apply to future entrants. They accord- 
 
 o Report on the Operation of the Superannuation Act. 1857. Appendix XII, p. 160. 
 & Report on Civil Service Superannuation. 1856. p. 4. 
 
CIVIL-SEEVICE KETIKEMENT IN GEEAT BRITAIN. 29 
 
 ingly proceeded to issue the famous minute of August 4, 1829, direct- 
 ing that contributions should be paid by those who might afterwards 
 be appointed to the service. The text of this important minute 
 reads as follows : 
 
 My Lords have under their consideration the necessity of adopting 
 some regulation, with a view to reduce, at a future period, the heavy 
 charge which is now annually incurred in providing superannuation 
 for such persons as are incapable, from infirmity of mind or body, of 
 discharging the duties of their public situations. 
 
 My Lords trust that they shall be enabled, at an early period, to 
 make such an arrangement as shall be just to parties entering into 
 the public service, while it shall ultimately lead to a large reduction 
 of expense. 
 
 My Lords therefore deem it advisable that a distinct intimation 
 should be given to every individual who may hereafter enter into the 
 civil service of the Crown at the time of his admission to office; that he 
 will be subjected to a deduction from his annual salary and emolu- 
 ments, and to such regulation with respect to superannuation as my 
 lords may hereafter lay down. 
 
 Let a communication therefore be made to the several offices 
 hereinafter mentioned, directing them, in every case of appointment 
 to office, to make such a communication to the person appointed, and 
 to make a deduction from all salaries and emoluments not exceeding 
 £100 [$486.65] a year at the rate of 2h per centum per annum, and 
 from all other salaries and emoluments at the rate of £5 [$24.33] per 
 centum per annum, for the purpose of providing, in such manner as 
 my Lords may hereafter direct, for superannuation on retirement of 
 such persons as shall hereafter enter the civil service. C*^) 
 
 In issuing this minute the Lords of the Treasury acted under the 
 general financial powers entrusted to them by Parliament. This 
 Treasury minute was in effect nothing more than a prospective regula- 
 tion of the salaries of all civil servants who might enter the service 
 after the date of the minute. The Treasury had always been accus- 
 tomed to exercise the full and entire right of raising and reducing the 
 salaries of the lower grades of the permanent civil service, submitting 
 the salaries so revised to Parliament, at its next meeting, in the 
 estimates. A minute dated June 15, 1832, directed that the fund 
 realized by these deductions from salaries was to be invested in 
 exchequer bills to be held subject to the disposal of Parliament, and 
 it was so held till Parliament decided on the question by the Act of 
 1834. After Parliament had sanctioned the deductions by that act, 
 the amount of the deductions was directed by a minute of November 
 14, 1834, to be stated on the face of the estimates submitted to Par- 
 liament for the ensuing year, and to be deducted from the sum voted 
 to defray the charge of superannuation and retired allowances. 
 
 Previous to 1832 the superannuation estimate had been confined 
 to the pensions of officers of certain departments which possessed no 
 
 « Report on Civil Service Superannuation. 1856. Appendix No. 1, p. 346. 
 
30 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 
 
 fee funds, whereas the pensions of officers of departments possessing 
 fee funds (namely, the Treasury, the offices of the three Secretaries 
 of State, the Council Office, and the Board of Trade) were not sub- 
 mitted to Parliament, though, of course, such pensions contributed to 
 the deficiencies in the fee funds which Parliament had to vote. Fur- 
 ther, some of the departments without fee funds included the pen- 
 sions to their officers in the same estimate as their salaries. 
 
 But in 1832 all that was changed; in the estimates of that year all 
 the fee fund pensions, and most of the other pensions hitherto included 
 in the votes for salaries in the other departments were brought 
 together in a superannuation estimate. The cost, however, of super- 
 annuation in the Revenue Departments, the Admiralty, the War 
 Office, and the Royal Irish Constabulary was not included in the 
 civil service vote, but was provided for in the votes for their depart- 
 ments, as will be seen in the various returns showing the annual 
 charges for civil pensions. (") 
 
 SUPERANNUATION ACT OF 1834. 
 
 The last stage in this course of legislation was reached when the 
 Superannuation Act (4 and 5 Will. 4, c. 24) was passed July 25, 
 1834. By this act the Treasury minute of August 4, 1829, requiring 
 deductions from salary was confirmed, and by it the old scale of 
 pensions prescribed in the Act of 1822 was maintained as regards the 
 persons who had taken office previously to the date of the Treasury 
 minute of August 4, 1829, but as regards the persons who entered 
 subsequently to that date, a lower scale of pensions was prescribed, 
 which seemed to be calculated as equivalent to the value of the de- 
 ductions directed to be made by the minute, according to the prin- 
 ciple of the report of 1829. Section XXVII of the act reciting the 
 minute of 1829 and adopting the precise scale of deductions laid 
 down in it reads as follows : 
 
 And whereas the commissioners of the Treasury did, by a minute 
 dated the fourth day of August, one thousand eight hundred and 
 twenty-nine, record their intention to adopt certain regulations with 
 a view to reduce prospectively the charge incurred in providing for 
 superanhuation allowances, of which notice was given in the several 
 public departments, for the information of those who should there- 
 after enter the public service: And whereas in pursuance of the said 
 minute, an annual abatement hath been made from the salaries and 
 emoluments of the several persons who have entered the public 
 service subsequent to the date thereof: And whereas it is expedient 
 to continue such abatement in those cases, and to extend it to others, 
 as herein after provided; Be it therefore further enacted. That from 
 and after the passing of this act there shall be an annual abatement 
 made, in quarterly proportions, by the proper officer in each respec- 
 
 O' See pages 41-43. , 
 
CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 31 
 
 tive department, from the salaries and emoluments of the several 
 officers and persons employed in the several civil offices and depart- 
 ments specified in the schedule to this act, or to be specffied in the 
 addition authorized to be made thereto, and not within the excep- 
 tions thereof, who have since the date of the said minute entered or 
 shall hereafter enter the public service, in such manner and under 
 such directions as shall from time to time be given in this respect by 
 the commissioners of the Treasury or of the Admiralty, as the case 
 may be, the amount of which abatement shall be according to the 
 respective rates following ; (that is to say,) 
 
 Scale of Deductions and Superannuation Allowances. 
 
 From salaries and emoluments not exceeding the annual sum of 
 one hundred pounds [$486.65], an abatement after the rate of two 
 pounds ten shillings per centum [2 J per cent] ; 
 
 And from salaries and emoluments exceeding one hundred pounds 
 [$486.65] five pounds per centum [5 per cent]; 
 
 And in the cases of all persons whomsoever at present holding 
 office and entitled to superannuation allowance under this act, who 
 shall have been appointed to such office subsequently to the issue of 
 the minute of the lords commissioners of His Majesty's Treasury, 
 bearing date the fourth day of August one thousand eight hundred 
 and twenty-nine, for the future regulation of the several civil depart- 
 ments of the public service, and who shall hereafter, upon promotion, 
 obtain any increase of salary or allowances in respect of their offices, 
 an annual abatement, after the like rates respectively, shall be made 
 from the amount of such increase from time to time, commencing from 
 the period when the same shall take place. 
 
 The superannuation allowance to persons who had entered the 
 service before August 5, 1829, was, according to section IX of the act, 
 as follows: 
 
 To an officer, clerk, or person who shall have served ten years and 
 upwards, and under fifteen years, any annual allowance not exceed- 
 ing in amount four-twelfths of the annual salary and emoluments of 
 his office: 
 
 For fifteen years and upwards, and under twenty years, not ex- 
 ceeding five-twelfths of such salary and emoluments : 
 
 For twenty years and upwards, and under twenty-five years, not 
 exceeding six-twelfths of such salary and emoluments: 
 
 For twenty-five years and upwards, and under thirty years, not 
 exceeding seven-twelfths of such salary and emoluments : 
 
 For thirty years and upwards, and under thirty-five years, not 
 exceeding eight-twelfths of such salary and emoluments : 
 
 For thirty-five years and upwards, and under forty years, not 
 exceeding nine-twelfths of such salary and emoluments: 
 
 For forty years and upwards, and under forty-five years, not 
 exceeding ten-twelfths of such salary and emoluments : 
 
 For forty-five years and upwards, and under fifty years, not ex- 
 ceeding eleven-twelfths of such salary and emoluments : 
 
 And for fifty years or upwards, any annual allowance not exceeding 
 the net amount of the salary and emoluments of his office. 
 
32 CIVIL-SEEVICE EETIEEMENT IN GEEAT BEITAIN. 
 
 In contrast to these provisions was the superannuation allowance 
 granted by section X to persons who had entered or who might 
 enter the service subsequent to August 4, 1829: 
 
 To an officer, clerk, or person who shall have served ten years and 
 upwards, and under seventeen years, an annual allowance not ex- 
 ceeding in amount three-twelfths of the salary and emoluments of 
 his office: 
 
 For seventeen years service and upwards, and under twenty-four 
 years, not exceeding four-twelfths or such salary and emoluments: 
 
 For twenty-four years service and upwards, and under thirty-one 
 years, not exceeding five-twelfths of such salary and emoluments: 
 
 For thirty-one years and upwards, and under thirty-eight years, 
 not exceeding six-twelfths of such salary and emoluments : 
 
 For thirty-eight years and upwards, and under forty-five years 
 not exceeding seven-twelfths of such salary and emoluments: 
 
 And for forty-five years and upwards, not exceeding eight-twelfths 
 of such salary and emoluments : 
 
 And in no case, except as hereinafter is especially provided, shall 
 any superannuation or allowance exceeding two-thirds of the salary 
 and emoluments of any such officer, clerk, or person be granted. 
 
 Comparison of Schemes of 1822 and 1834. 
 
 The Superannuation Act of 1834 was the law of the land for twenty- 
 three years. It will be noted that it was in every way distinctly less 
 favorable to the civil service than the Act of 1822 which, owing to 
 the protests of the civil employees themselves, had been thrown out 
 after only two years' trial. 
 
 In the first place, the scale of deductions established by the minute 
 of 1829 and the law of 1834 was higher than that fixed by the law of 
 1822. The scale of 1822 exempted entirely salaries under £100 
 ($486.65) a year, while the scale of 1829 imposed 2 J per cent on sala- 
 ries under £100 (S486.65) a year. The old scale of 1822 imposed 2^ 
 per cent on salaries between £100 ($486.65) and £200 ($973.30) a 
 year, whereas the scale of 1829 imposed 5 per cent on those salaries. 
 In only one respect was the scale of 1822 less favorable than that of 
 1829 and that was in respect to the limited number of persons who 
 happened in the year 1822 to have their salaries above what had 
 recently been settled to be the regulated salaries of the offices, and 
 who were charged 10 per cent on the excess. 
 
 In the second place, the Act of 1822 contained specific directions 
 with respect to the creation of a superannuation fund; namely that a 
 fund should be created, and the account kept in the Bank of England, 
 and the monies lodged in the hands of certain commissioners. The 
 Act of 1834, on the other hand, contained no express direction for the 
 creation of a fund. There was only a general presumption derived 
 from the tenor of the act and the preliminary proceedings that the 
 deductions were intended to defray the pensions of the contributors. 
 
CIVIL-SEKVICE KETIKEMENT IN GEEAT BEITAIN. 33 
 
 The only indication which the act contained as to the intention of 
 Parhament in making those deductions was found in the words, 
 ''with a view to reduce prospectively the charge incurred in providing 
 for superannuation allowances." Undoubtedly, it was not intended 
 to keep the same strict account of the deductions as was done under 
 the law of 1822, but though no fund was created, those who stood 
 sponsors for the bill of 1834 spoke as if there had been, seeming thus 
 to indicate that the intention of the act was to limit the use of the 
 deductions to the payment of superannuation allowances. In intro- 
 ducing the bill in the House of Commons, Sir James Graham said: ''It 
 was recommended by the Finance Committee in 1828, and this clause 
 follows out the recommendation, that a deduction should be made in 
 the salaries of all men in public offices, in order to provide a fund on 
 the principle of insurance. They will pay the premiums themselves, 
 and will receive the whole amount of the benefit." And Lord Grey, 
 who had charge of the bill in the House of Lords said: "In August, 
 1829, a minute was made by the Lords of the Treasury of that day, by 
 which it was provided, that in order to avoid the heavy charge which 
 had been produced by this practice of superannuation, there should 
 be in future a superannuation fund established arising out of a 
 deduction of a certain percentage from the salaries of all civil ofiicers 
 who received their appointments subsequently to that time." In 
 actual practice, however, according to the testimony of Sir Charles E. 
 Trevelyan, no separate account was kept of deductions or of the 
 mode of appropriating them. In the sense in which a professional 
 accountant would use the word "fund," there was no fund. At first, 
 the deductions were carried by the different departments to the 
 credit of the votes for pensions for their respective departments, and 
 after that, on a more improved arrangement of accounts, they were 
 collected by the Paymaster-General, and carried to the credit of the 
 aggregate annual vote for superannuations and compensations. 
 Since all members of the service were pensionable but only part of the 
 service — that which had entered subsequently to 1829 — contributed 
 to the pensions and since those contributions were not funded, it was 
 not known at any time during the more than quarter of a century that 
 the Act of 1834 was in force whether the contributions were adequate 
 or not. The general impression prevailed that they were more than 
 adequate, probably because pensions were bestowed on noncon- 
 tributors — those who entered the service before 1829 — as well as on 
 contributors. 
 
 In the third place, the Act of 1822 distinctly provided for the refund 
 of contributions in case of the resignation or death of the contrib- 
 utor before receiving a retiring allowance whereas the Act of 1834 
 made no such provision. The result was that a civil servant might 
 35885— S. Doc. 290, 61-2 3* 
 
34 CIVIL-SEIIVICE EETIEEMENT IN GREAT BEITAIN. 
 
 contribute for many years to the pensions of others, and if he hap- 
 pened to die before reaching an age or condition which permitted him 
 to retire, neither he nor his family could receive any return from 
 those contributions. 
 
 While it was apparent from the beginning that the selfishness of 
 those who had entered the service before 1829 had resulted in the 
 passage of a law more advantageous for themselves but much less 
 so for the service generally than the one first proposed, it was not 
 apparent, for some time, how bad the law of 1834 really was. The 
 class of public servants most vitally interested in the matter — those 
 appointed since 1829 — was hardly in existence. They were com- 
 paratively few in numbers and officially less than 5 years old at the 
 time of the passage of the act. They were not alert to their special 
 interests as were the older civil servants, and there was no one in 
 Parliament who seemed to perceive their peculiar position or who 
 at least undertook to defend them. It was only as time went on and 
 those who had been youths in the service became elderly men that the 
 body of employees generally began to realize the essential injustice 
 of the law and the unfair discriminations sanctioned by it. 
 
 SELECT COMMITTEE OF 1856. 
 Grievances Presented by Committee of Civil Servants. 
 
 In 1846 a committee of civil servants drawn from those appointed 
 subsequently to the date of the Treasury minute of 1829 was formed 
 for the purpose of bringing their grievances to the attention of the 
 Government. It continued in existence until 1856, working out 
 various data and classifications with reference to the civil service, 
 but on the appointment by Parliament of a select committee "to 
 consider the existing regulations respecting the grant of superannua- 
 tion allowances to persons who have held civil offices in Her Majesty's 
 service," the committee of civil servants felt that it was expedient for 
 them to dissolve. 
 
 The chairman of the civil servants' committee appeared before the 
 Select Committee and testified to the dissatisfaction of the service. 
 The committee of civil servants consisted of thirty deputies, repre- 
 senting all the principal departments of the Government. Their 
 complaint was twofold : That the scale of pensions was not sufficient, 
 and that the abatements from the salaries were oppressive. They 
 were divided in their request for increase of pensions, one faction 
 requesting that the maximum scale of rates for ordinary pensions be 
 increased from two-thirds to the full amount of salary, and the other 
 faction contenting itself with the request for relaxation in the severity 
 of the law relating to the amount of benefits. The two factions were 
 
CIVIL-SEE VICE KETIREMENT IN GREAT BEITAIN. 35 
 
 agreed in considering the abatement from salaries a growing evil. 
 Said Mr. Bromley, the representative of one of the factions : 
 
 The general body of civil servants who have signed that petition, 
 of 9,000 persons, agree with me, and agree with the committee with 
 which I have been acting, that all those abatements ought to be 
 abolished entirely for the purpose for which they are now levied. 
 * * * There is this further distinction between us, that they [the 
 other faction] wish to place the five per cent abatement in their own 
 pockets; and those with whom I act, desire to have that abatement 
 continued, if I may so speak, for the purpose of our widows and 
 children; in fact, upon the principle of an insurance fund, so that 
 every single man as well as every married man shall benefit by the 
 abatement. (®) 
 
 Each of these factions presented a petition to the Select Committee 
 setting forth their grievances, with some variations of detail, but 
 agreeing in the main line of argument. The petition of the first 
 faction requesting that the maximum pension be equal to the full 
 amount of salary, and that deductions from salary be abolished — in 
 other words, that the petitioners be put on exactly the same footing 
 as those civil employees appointed prior to the date of the Treasury 
 minute of 1829 — was as follows :(^) 
 
 Petition of civil servants of the Crown, whose appointments date 
 subsequently to 1829. 
 
 To the honorable the Commons of the United Kingdom of Great 
 Britain and Ireland, in Parliament assembled. 
 
 The humble petition of the undersigned civil servants of the Crown, 
 whose appointments date subsequently to 1829, showeth. 
 
 That the civil service numbers about 16,000 persons. 
 
 That for the last 40 years a system of strict economy, by reducing 
 public salaries and abolishing indirect emoluments, has so greatly 
 lessened the incomes of the civil servants, that the average salary of 
 the entire body is only £141 [$686.18], while that of two-thirds does 
 not exceed £86 [$418.52] per annum. 
 
 That such incomes are very inferior to those of members of the open 
 professions, and, considering the social position and educational 
 requirements of government servants, are barely sufficient for the 
 present maintenance and future provision of their families in that 
 degree of respectability which is expected of them as servants of the 
 Crown. 
 
 That previous to 1829 this reduced rate of salary was paid without 
 any deduction, and the civil servant was assured of a reasonable 
 pension when worn out in the public service. 
 
 That in the year 1834, however. Government, in answer to a 
 demand for still greater retrenchment, passed the Superannuation 
 Act, 4 & 5 Will. 4, c. 24 (having a retrospective effect to 1829), 
 which greatly reduced pensions, and levied a tax of 5 per cent on 
 salaries over £100 [$486.65], and 2^ per cent on salaries under that 
 
 o- Report on Civil Service Superannuation. 1856. Minutes of evidence, p. 80. 
 b Report on Civil Service Superannuation. 1856. Appendix No. 16, pp. 461, 462. 
 
36 CIVIL-SERVICE EETIEEMENT IN GEEAT BEITAIN. 
 
 amount, with a view to reduce prospectively the charge for super- 
 annuation. 
 
 That by this act your petitioners, though compelled to contribute 
 towards superannuation, can not claim it as a right, nor retire from 
 the service until 65 years of age, unless incapacitated by infirmity 
 of body or mind; while the utmost that they can receive is two- 
 thirds of their salary should they survive 45 years' service. 
 
 That it has been calculated that this scale of pensions is only half 
 the value of that which will be awarded to your petitioners' fellow 
 officers who entered prior to 1829, and who, though belonging to the 
 same social rank, and performing the same official duties, at present 
 receive their salaries in full. Moreover, although all your petitioners 
 during their entire official career are thus taxed for superannuation, 
 yet, as it is estimated, according to the average duration of life, that 
 not more than one in ten can be superannuated, it follows that the 
 contributions of the remaining nine-tenths are absolutely lost to 
 them and their families. 
 
 That oppressive and disheartening as this act has already proved, 
 its effects will be greatly aggravated as the period approaches when 
 its enactments, as thej apply to your petitioners, come into general 
 operation, because that unwilhngness to retire which is often mani- 
 fested at present by old officers who are entitled to the better scale 
 of pensions will be much increased, when to do so even after 31 years' 
 service will involve, as in the case of your petitioners, a sacrifice of 
 one-half of their income. 
 
 That in the absence of strict regulations enforcing retirement, old 
 and infirm men entitled to repose must be suffered to remain in office, 
 to the detriment of the public service, as well as to the injury of the 
 younger members of each department. Thus when the officers who 
 entered before 1829 have all retired, and been succeeded by others 
 subject to the tax. Government will be receiving the highest amount 
 of deductions from your petitioners' salaries, while the latter are 
 receiving the least possible benefit from superannuation. 
 
 That the tax is felt to be the more unjust, because, while it is levied 
 on the humblest salaried servant of the Crown, an exception is made 
 in favor of the following, viz: ministers of State, diplomatic officers, 
 judges, and other officials of the superior, county, and sheriffs' courts 
 throughout the United Kingdom, and the chief officers of many of 
 the civil departments of the State. 
 
 That, though the amount gained by the nation from this tax is at 
 present only £60,000 [$291,990] per annum, yet, as it bears exclusively 
 on your petitioners, who are subject to all the ordinary taxes of the 
 country, it has the effect of nearly doubling direct taxation in their 
 case, as compared with all other classes of Her Majesty's subjects. 
 
 That the principle of granting gratuitous pensions has been repeat- 
 edly affiirmed by Parliament, and is applied by the British Govern- 
 ment to all its servants, with the exception of your petitioners; also 
 by the East India Company and the Bank of England; and your 
 petitioners humbly submit that it is an obligation sanctioned by 
 necessity and sound policy, as well as natural justice; because when 
 an officer becomes infirm after spending nearly a lifetime in the 
 
 f)ublic service, at a scale of remuneration purposely reduced to the 
 owest rate, and which forbids the possibility of accumulating an 
 independence, it is no less necessary, for maintaining the efficiency 
 
CIVIL-SEEVICE RETIREMENT IF GREAT BRITAIN. 37 
 
 of that service, that he should be withdrawn when incapacitated, 
 than it is due to him that that withdrawal should be upon terms 
 which he may willingly accept, as involving no serious privation 
 during the few remaining years of his life. 
 
 May it therefore please your honorable House — 
 
 1st. To amend the 10th, 11th, and 12th sections of the Act 4 & 5 
 Will. 4, c. 24, and to grant to your petitioners a scale of pensions equal 
 in value to that at present given to those officers who entered prior 
 to 1829, but graduated upon shorter intervals and smaller fractional 
 allowances, and with permission to retire after 30 years' service, if 
 60 years of age. 
 
 2nd. To repeal the 27th section, levying the percentage tax, and 
 thus leave your petitioners subject only to the ordinary taxation of 
 the country. 
 
 (9,791 signatures). 
 
 The petition of the second faction requesting that more leniency 
 in the matter of benefits be exercised, and especially that the abate- 
 ments from salary be applied to the formation of a civil-service 
 insurance fund was as follows : (") 
 
 The humble petition of the general committee of civil servants 
 of the Crown employed in the several public departments of the 
 State, whose appointments bear date subsequently to the 4th day 
 of August 1829, showeth. 
 
 That your petitioners have been deputed by the officers and 
 clerks in their respective departments to form a general committee, 
 which committee has been in existence since the year 1846, for the 
 purpose of endeavoring to obtain relief from the abatements made 
 from their salaries for superannuation purposes. 
 
 That your petitioners have since that period uniformly labored 
 to effect that object, supported as they have been in their view by 
 the general sympathy accorded to them. 
 
 That a petition on behalf of the civil servants of the Crown was 
 
 Presented oy your petitioners to your honorable House on the 3rd 
 )ecember 1852, and a letter to the late Chancellor of the Exchequer, 
 dated 7th December 1853, was laid before your honorable House 
 during the last session of Parliament, forwarding the signatures of 
 more than 3,000 civil servants expressing their concurrence in the 
 prayer of that petition. 
 
 That your petitioners now respectfully beg, with reference to the 
 aforesaid petition, to entreat the consideration of your honorable 
 House to the following statement of the position in which the civil 
 servants of the Crown are placed as respects superannuations under 
 the provisions of the 10th, 11th, 12th and 27th sections of the Act 
 4&5 Will. 4, c. 24; viz: 
 
 That the pensions granted to them have been reduced in value 
 by one-half. 
 
 That this reduction will effect a saving to the country of about 
 £300,000 [$1,459,950] a year, or nearly 60 per centum of the entire 
 amount of the annual charge for civil superannuations. 
 
 That a permanent saving has also been effected, since that act 
 was passed, in the annual charge for civil salaries amounting to up- 
 wards of £270,000 [$1,313,955] a year. 
 
 <» Report on Civil Service Superannuation. 1856. Appendix No. 16, pp. 460, 461. 
 
38 CIVIL-SERVICE EETIEEMENT IN GEEAT BEITAIN. 
 
 That all other classes of public servants receive gratuitous pen- 
 sions; but that class represented by your petitioners is subjected 
 to a tax of 2| or 5 per centum on their salaries, for the purpose of 
 reducing the charge to be incurred for their pensions. 
 
 That the amounts so abated from their salaries have hitherto 
 been applied in payment of the pensions of other classes of civil 
 servants who are not subjected to the tax, and who are pensioned 
 on a superior scale. 
 
 That the abatements have not been formed into a separate fund 
 for the individual benefit of the contributors as was intended at the 
 time of passing the act. 
 
 That the amount of abatements from salaries in excess of the 
 pensions paid has already reached upwards of £750,000 [$3,649,875]; 
 and, had those abatements been funded, they would by this date 
 have accumulated to a surplus of £1,000,000 sterling [$4,866,650], 
 producing, at the rate of only 3 per centum, the annual interest of 
 £30,000 [$145,995]. 
 
 That these abatements were imposed for the sole purpose of 
 reducing the charge of civil superannuation allowances, which 
 object has been, as shown above, already attained. They have, 
 moreover, been ascertained to be so excessive and disproportionate, 
 that, if continued, the mere interest on the surplus amount accu- 
 mulated will, within 60 years from the present time, suffice to defray 
 the entire charge of civil pensions in perpetuity. 
 
 That civil servants can now no longer be considered as receiving 
 pensions from the State, but are compelled to purchase on excessive 
 terms deferred annuities, not only for themselves, but also for all 
 their successors. 
 
 That in cases of death in active service the families of the deceased 
 derive no benefit whatever from the abatements made for super- 
 annuation, but, on the contrary, the tax is even imposed after death 
 upon the residue of salary paid to the legal representatives. 
 
 That these abatements made from salaries which average only 
 £141 [$686.18] a year deprive the civil servants, as a body, of the 
 means of effecting insurances on their lives. There are consequently 
 numerous instances of men whose energies are depressed and spirit 
 weighed down by the hopelessness of ever securing an adequate 
 provision for those whose subsistence depends upon their precarious 
 lives, and who are thus precluded from giving their best thoughts 
 and exertions to their official duties. 
 
 Your petitioners therefore humbly pray — 
 
 That the limited number of civil servants who are incapacitated 
 for active service may be granted, as formerly, during their few 
 remaining years, pensions at the expense of the State, in common 
 with all other servants of the public. 
 
 That your honorable House will be pleased to relax the severity 
 of the 10th, 11th, and 12th sections of the above-mentioned act 
 (4 & 5 Will., 4, c. 24), in such manner and to such extent as in the 
 wisdom of your honorable House may be considered most conducive 
 not only to the well-being of the civil servants, but also to the effi- 
 ciency of the public service. 
 
 That the abatements made from the salaries of the civil servants 
 of the State, in pursuance of the 27th section of the said act, which 
 have been proved to be excessive in amount and to be no longer 
 required for the purposes specified therein, may be applied to the 
 
CIVIL-SERVICE EETIREMENT IN GREAT BRITAIN. 39 
 
 formation of a civil service insurance fund, and be considered as pre- 
 miums paid for the insurance of their Hves for the benefit of their 
 famines and representatives; upon which simple principle of insur- 
 ance there would not be any annuitants either as widows or orphans 
 chargeable upon the fund or the public, since the amount insured 
 would in each case be paid over at death to the representatives of 
 the deceased, whether he were married or single. 
 
 Three General Grounds of Complaint Against Act of 1834, 
 
 From these petitions and from the testimony given by various 
 officials and clerks of the service in the course of the hearings it is 
 apparent that the complaints against the superannuation scheme 
 established by the Treasury minute of 1829 and confirmed by the 
 Act of 1834 may be roughly classed under three general heads: (1) 
 Dislike of the invidious distinctions made in the act between different 
 classes of the public service ; (2) discontent with the provisions of the 
 act, particularly the scale of pensions and the absence of a refund in 
 case of death or withdrawal from the service before reaching the age 
 of superannuation; and, (3) distrust of the actuarial soundness of the 
 plan. 
 
 (1) Dislike of distinctions hetween different classes of civil servants. 
 
 The body of civil servants generally felt aggrieved that all other 
 classes of public servants received gratuitous pensions while on them, 
 the humblest-salaried servants of the Crown, a tax which they could 
 ill afford was levied to meet the expenses of their superannuation. 
 They saw, on the one hand, that ministers of State, diplomatic officers, 
 judges, and other officials of the superior, county, and sheriffs' courts 
 throughout the United Kingdom, and the chief officers of many of 
 the civil departments of the State were retired on liberal pensions 
 often after only a few years' service ; and they saw, on the other hand, 
 that their fellow-officers who had entered the service prior to 1829, 
 individuals of the same social rank, performing the same official duties, 
 received their full salaries without deduction and were retired on a 
 scale of pensions about twice the value of those awarded themselves. 
 
 The testimony of Sir Charles E. Trevelyan brought out the fact 
 that particularly large pensions were paid to certain great officers 
 of State appointed to their positions by reason of political favor and 
 to members of the judicial establishments. Sir Charles E. Trevelyan, 
 who was Assistant Secretary to the Treasury and deeply interested in 
 the subject of civil-service reform, gave the committee much valuable 
 information. Returns prepared by him for the Chancellor of the Ex- 
 chequer showed that the total annual salaries of the civil establishments 
 of the United Kingdom were £5,599,409 ($27,249,523.90), and the total 
 annual compensations and pensions, £1,122,844 ($5,464,320.33). C*^) 
 The pensions, therefore, were to salaries in the proportion of nearly 
 
 o Report on Civil Service Superannuation. 1856. Appendix No. 2, p. 357. 
 
40 CIVIL-SERVICE RETIEEMENT IN GREAT BRITAIN. 
 
 one to five, or 20 per cent, but this statement is hardly fair to the 
 permanent civil service, for it covered two great divisions, one of the 
 judicial establishments of the three kingdoms and the other of all other 
 civil establishments. The total amount of pensions and compensa- 
 tions of all the judicial establishments of England, Ireland, and 
 Scotland was nearly 34 per cent (") of the total amount of salaries, 
 whereas the total amount of compensations and superannuation 
 allowances of what was commonly called the " civil service," including 
 the departments which paid contributions, was only 18 per cent of 
 the total amount of salaries. It should be noted also that this 18 
 per cent included the pensions paid to great officers of State, especially 
 provided under the first clauses of the Act of 1834 with pensions 
 much more generous than any allowed the members of the general 
 body of civil servants. These pensions included £1,000 ($4,866.50) 
 each after ten years' service to Under Secretaries of State, to Clerk of 
 the Ordnance, Second Secretary of Admiralty, and Secretaries of the 
 India Board; those of £1,200 ($5,839.80) after five years' service to 
 JointSecretariesoftheTreasury, First Secretary of Admiralty, and Vice- 
 President of the Board of Trade; those of £1,400 ($6,813.10) after five 
 years' service to the Chief Secretary of Ireland and the Secretary at 
 War; and those of £2,000 ($9,733) after only two years' service to 
 the First Lord of the Treasury, Secretaries of State, Chancellor of the 
 Exchequer, First Lord of the Admiralty, President of the India Board, 
 and President of the Board of Trade, 
 
 (a) PENSIONS PAID CHIEF OFFICERS OF STATE AND JUDICIARY COM- 
 PARED WITH THOSE PAID OTHER CIVIL EMPLOYEES. 
 
 All the objections which applied to the ordinary pension hst 
 apphed in an aggravated degree to the pensions of the great legal 
 establishments, the arrangements connected with which were, in 1856, 
 in the same crude and elementary state in which those relating to the 
 other civil establishments were at the beginning of the century. For 
 instance, there was no check upon first appointments and there was 
 no limitation as to the age of entrance into the service, a matter which 
 has a very important bearing upon the pension list. Officers of the 
 legal establishments paid no deductions, or if they paid them, it was 
 only in the case of new appointments made subsequently to the date 
 of the special acts by which the establishments were regulated. 
 When an ordinary civil establishment was placed by the Treasury on 
 the schedule of the superannuation act, the persons belonging to it 
 were made to pay up the arrears of deductions from the date of their 
 appointment, supposing they were appointed subsequently to the 
 4th of August, 1829; whereas under the special acts of Parliament, 
 by which a few of the judicial estabfishments were placed under the 
 
 « This should apparently be 31 per cent. See note to statement on p. 42. 
 
CrVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 
 
 41 
 
 Superannuation act, the deductions always commenced not from the 
 date of the commencement of the service of the officer, but from the 
 date of the act. 
 
 The return prepared by Sir Charles E, Trevelyan and submitted to 
 the Select Committee on March 4, 1856, showing the total annual 
 salaries, compensations, and pensions of the civil establishments of 
 the United Kingdom was as follows: (°-) 
 
 TOTAL ANNUAL SALARIES, COMPENSATIONS, AND PENSIONS OF THE 
 CIVIL ESTABLISHMENTS OF THE UNITED KINGDOM. 
 
 Total annual salaries of tlie civil establishments of the 
 
 United Kingdom £5, 599, 409 [$27, 249, 524] 
 
 Total annual compensations and pensions 1, 122, 844 [5, 464, 320] 
 
 Being in the proportion of nearly 1 to 5, or 20 per cent. 
 JUDICIAL ESTABLISHMENTS. 
 
 Court. 
 
 Salaries. 
 
 Compen- 
 sations 
 
 and 
 pensions. 
 
 England: 
 
 Court of chancery 
 
 Court of Queen's bench 
 
 Court of common pleas 
 
 Court of exchequer 
 
 Court of requests 
 
 County courts 
 
 Court of admiralty and others. 
 Marshalsea and Palace court. . 
 
 Abolished courts of record 
 
 Bankruptcy court 
 
 Insolvent court 
 
 Total, England. 
 
 Ireland: 
 
 Court of chancery , 
 
 Court of Queen's bench 
 
 Court of common pleas 
 
 Court of exchequer 
 
 Lord treasurer's remembrancer and others. 
 
 Registrar of judgments 
 
 Clerks of writs 
 
 Taxing officers in common law business 
 
 Prerogative court 
 
 Court of appeals 
 
 Bankrupt court 
 
 Insolvent court 
 
 Admiralty court 
 
 Assistant barristers 
 
 Total, Ireland. 
 
 Scotland: 
 
 Court of session 
 
 Sheriffs of counties . . 
 Sheriffs' substitutes . 
 
 Total, Scotland . . . 
 
 S834,614 
 217,406 
 177,944 
 188, 781 
 
 499,999 
 34, 187 
 
 290,817 
 40,952 
 
 2,284,700 
 
 333,316 
 132,719 
 
 104,742 
 112,134 
 
 5,596 
 9,490 
 8,760 
 14, 599 
 3,582 
 19,709 
 20,887 
 2,433 
 157,811 
 
 925,778 
 
 284, 564 
 100, 128 
 164,415 
 
 549, 107 
 
 $451,991 
 76,039 
 61,858 
 65,206 
 49,867 
 15, 573 
 
 6,682 
 18, 157 
 
 2,929 
 119,059 
 
 1,727 
 
 142, 447 
 23,593 
 15,631 
 
 28,255 
 5,786 
 
 2,920 
 
 5,986 
 '4; 633 
 
 229,251 
 
 72,331 
 
 72,331 
 
 SUMMARY OF JUDICIAL ESTABLISHMENTS. 
 
 England... 
 
 Ireland 
 
 Scotland... 
 
 Total 
 
 $2,284,700 
 925, 778 
 549, 107 
 
 3,759,585 
 
 6 229,222 
 72, 331 
 
 1,170,641 
 
 oReport on Civil Service Superannuation. 1856. Appendix No. 2, p. 357. 
 
 6 This amount does not agree with the total for Ireland shown above, but is the equivalent of the amount 
 (£47,102) shown in the original report. No explanation is given for the discrepancy. 
 
42 
 
 CIVIL-SERVICE EETIEEMENT IN GREAT BRITAIN. 
 
 The total amount of compensations and pensions of all the judicial establishments 
 of the United Kingdom is therefore nearly 34 per cent(«) on the total amount of 
 ealaries. 
 
 If the four superior courts of England and Ireland are taken separately, the per- 
 centage is above 41 per cent, viz : 
 
 ENGLAND. 
 
 Salaries. 
 
 Compen- 
 sations. 
 
 Court of chancery 
 
 Court of Queen 's bench 
 Court of common pleas. 
 Court of exchequer 
 
 $834,614 
 217, 406 
 177,944 
 188, 781 
 
 $451,991 
 76,039 
 61,858 
 65,206 
 
 1,418,745 
 
 655, 094 
 
 54 per cent of the salaries. 
 35 per cent of the salaries. 
 35 per cent of the salaries. 
 34 per cent of the salaries. 
 
 46 per cent of the salaries. 
 
 IRELAND. 
 
 Court of chancery 
 
 Court of Queen's bench 
 Court of common pleas . 
 Court of exchequer 
 
 $333,316 
 132,719 
 104,742 
 112,134 
 
 682,911 
 
 $142,447 
 23,593 
 15,631 
 28,255 
 
 209,926 
 
 42 per cent of the salaries. 
 18 per cent of the salaries. 
 15 per cent of the salaries. 
 25 per cent of the salaries. 
 
 30 per cent of the salaries. 
 
 OTHER CIVIL ESTABLISHMENTS. 
 
 Names of ofRces. 
 
 House of Lords 
 
 House of Commons 
 
 Great ofHcers of State: 
 
 Class I 
 
 Class II 
 
 Class III 
 
 Class IV 
 
 Diplomatic establishments , 
 
 Treasury 
 
 Privy council olTice 
 
 Board of trade and registrar of merchant seamen . 
 
 Secretary of State, 1 lome l>epartment 
 
 Secretary of State, Foreign Department 
 
 Secretary of State, Colonial Department 
 
 Secretary of State, for War 
 
 Commander in chief's office 
 
 A dj utant-general "s o Iflce 
 
 Q uartermaster-genoral's offlce 
 
 War ottice 
 
 Judge-advocate-general's offlce 
 
 Chelsea hospital 
 
 Koyal military college 
 
 Koyal Miilitary asylum 
 
 .\ rniy medical ilepartment 
 
 Ordnanc* olTices 
 
 Artificers' wages for 1853-54 
 
 Commissariat oUice 
 
 Admiralty cilices 
 
 Artificers' wages for 1853-54 
 
 Audit offlce 
 
 Koyal mint 
 
 I'ay master-general's offlce 
 
 K xchequor offlce 
 
 Customs offlcers and coast guard 
 
 Inland revenue 
 
 I'ost-otllce 
 
 Stationery offlce 
 
 State paper offlce 
 
 Record offlce 
 
 Salaries. 
 
 $75,431 
 236,093 
 
 128,002 
 19,466 
 38,932 
 60,831 
 
 681,310 
 
 153,777 
 57,361 
 
 190,066 
 68,048 
 
 114,723 
 73,781 
 41,059 
 30,172 
 20,026 
 18,356 
 
 187,871 
 8,735 
 14,570 
 28,878 
 9,339 
 11,534 
 ,044,541 
 
 763,165 
 
 23,354 
 
 ,222,728 
 
 ,618,515 
 
 210,763 
 53,098 
 
 103,588 
 35,998 
 
 ,155,239 
 
 ,798,157 
 
 ,910,739 
 
 48,568 
 
 7,276 
 
 36,601 
 
 Compensation and superan- 
 nuation. 
 
 Compen- 
 sation. 
 
 $2,920 
 
 21,631 
 
 140 
 
 8,298 
 
 1,946 
 2,925 
 
 60,627 
 
 78 
 
 14,950 
 
 4,764 
 
 808 
 
 3,528 
 
 45,809 
 
 15,923 
 105,949 
 
 18,862 
 28,328 
 80,915 
 
 270,149 
 
 213,688 
 
 18,945 
 
 Superan- 
 nuation. 
 
 $28,985 
 
 72,024 
 
 125,157 
 37,706 
 2,068 
 2,506 
 18,507 
 20,488 
 1,630 
 
 3,913 
 5,708 
 
 29,773 
 
 1,294 
 
 4,638 
 
 5,149 
 
 978 
 
 1,752 
 
 188,713 
 
 33,048 
 
 17,374 
 
 267,964 
 
 312,157 
 
 44,091 
 
 10,760 
 
 4,833 
 
 3,893 
 
 890,701 
 
 856,738 
 
 140,306 
 
 4,725 
 
 43S 
 
 2,959 
 
 Total. 
 
 $31,905 
 
 72,024 
 
 125,157 
 
 59,337 
 
 2,068 
 
 2,652 
 
 20,405 
 
 20,488 
 
 9,928 
 
 5,859 
 8,633 
 
 90,400 
 
 1,372 
 
 19,588 
 
 9.913 
 
 1,786 
 
 5,280 
 
 234,522 
 
 33,048 
 
 33,297 
 
 373,913 
 
 312,157 
 
 62,953 
 
 39,088 
 
 85,748 
 
 3,893 
 
 1,160,860 
 
 1,070,426 
 
 159,251 
 
 4,725 
 
 438 
 
 3,494 
 
 o The percentage here given is according to the original report. According to the 
 figures shown in preceding table it should apparently be 31 per cent. 
 
CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 
 OTHER CIVIL ESTABLISHMENTS-Contlnued. 
 
 43 
 
 Names of ofTiees. 
 
 Registrar-general's office 
 
 Lunacy commission 
 
 Metropolitan police offices 
 
 Queen's prison 
 
 National debt office 
 
 Public works loan commission. 
 
 Office of woods, etc 
 
 Office of worlcs 
 
 Colonial land emigration 
 
 Consuls restricted from trade. . . 
 
 India board 
 
 Queen's remembrancer 
 
 Board of fisheries 
 
 General register office 
 
 Queen's and lord treasurer's remembrancer. 
 
 IRELAND. 
 
 Chief secretary's office 
 
 Board of worlcs 
 
 Paymaster of civil services 
 
 General register olhce 
 
 Kilmalnham liospital, etc 
 
 Hibernian military school 
 
 Dublin metropolitan police offices. 
 
 Total 
 
 Salaries. 
 
 $62,588 
 47,692 
 
 166,936 
 14,726 
 62,204 
 11,996 
 69,236 
 81,246 
 35,637 
 
 223,372 
 77,231 
 27,238 
 
 24,060 
 
 4,818 
 
 12,779 
 
 63,182 
 92,809 
 31,944 
 7,932 
 11,675 
 12,517 
 46,470 
 
 23,489,939 
 
 Compensation and superan- 
 auation. 
 
 Compen- 
 sation. 
 
 $1,202 
 
 1,626 
 "46,'4i2' 
 
 23,067 
 4,789 
 
 146 
 331 
 
 1,001,195 
 
 Superan- 
 nuation. 
 
 S253 
 
 16,059 
 
 5,475 
 
 10,502 
 
 3,650 
 
 5,129 
 
 701 
 
 08 
 
 45,842 
 
 22,274 
 
 827 
 
 10,473 
 
 2,273 
 
 6,054 
 
 6,701 
 
 5,319 
 
 253 
 
 837 
 
 628 
 
 8,161 
 
 3,292,456 
 
 Total. 
 
 $253 
 
 16,059 
 
 5,475 
 
 11,704 
 
 3,650 
 
 6,755 
 
 701 
 
 68 
 
 92,254 
 
 22,274 
 
 827 
 
 10,473 
 "2,'273 
 
 29,121 
 
 11,490 
 
 5,319 
 
 253 
 
 983 
 
 959 
 
 8,161 
 
 4,293,650 
 
 Note. — The proportion which the total amount of the] 
 compensation allowances of this class bears to the total [1-23^(1 part, or 4} percent, 
 amount of salaries is about J 
 
 Note. — The proportion which the total amount of the] 
 compensation allowances of this class bears to the superan- >l-7th part, or 14 per cent, 
 nuation allowances is about J 
 
 Note.— The proportion which the total amount of thel 
 compensation allowances of this class bears to the compen->l-5^th part, or 18 per cent, 
 sation and superannuation allowances is about J 
 
 Sir Charles Trevelyan considered the principle of abatements thor- 
 oughly objectionable, but he took the stand that if it were to be con- 
 tinued it should be extended to all alike, both to the higli political 
 officers of the State and to the judges, and from the judges down to 
 the lowest paid messenger. He defended his position with great 
 ability, showing how the pensions enjoyed by the diplomatic and 
 political servants were not only paid for by the State, but that the 
 rates of pension were much higher in proportion than those of ordi- 
 nary civil employees, that they were granted after a much sliorter 
 period of service, and were altogether more easily and frequently 
 obtained. As his opinion seems to have reflected to a great degree 
 the sentiment of the civil service itself, some of his remarks should 
 be quoted. lie said: 
 
 Equality belongs to the very essence of justice, but there are some 
 independent, powerful classes, especially the large class of diploma- 
 tists and lawyers, not merely the judges, but the much larger class of 
 
44 CIVIL-SEEVICE RETIREMENT IN GREAT BRITAIN. 
 
 adminis'-.rative officers of tfie courts in England, Ireland and Scotland, 
 and the county court judges, and treasurers and clerks, and the as- 
 sistant barristers in Ireland, and the sheriffs depute in Scotland, all 
 together forming a very large class indeed, who are almost entirely 
 exempted from the deductions. _ The Treasury, in its various deaUngs 
 with the subject of superannuation, has from time to time endeavored 
 to bring the several sections of this great class under contribution, but 
 we have almost always been foiled ; and even when we have succeeded 
 in some degree, they have always prescribed conditions to us much 
 more favorable to themselves than those to which the clerks are sub- 
 jected; then, as the powerful few, so are the powerful many. There 
 are 24,000 dockyard men, workmen employed in the arsenals, and 
 post-office sorters and letter carriers and so forth, all of whom have 
 at this moment a contingent right to a pension, without paying any 
 deduction whatever; and the inequality there is more remarkable, 
 because the exemption from deduction is extended to £200 [$973.30] 
 in the dockyards. I presume it was not considered advisable to touch 
 any of the large class of workmen, so that although the clerks and 
 messengers pay on whatever salaries they may receive, however small 
 they may be, a large class of persons in the dockyards are exempted 
 up to £200 [$973.30]. («) 
 
 Although questioned very closely by members of the Select Com- 
 mittee, Sir Charles Trevelyan would not admit that difference in the 
 terms of service of different classes of public officers, permanence in 
 office, or payment by fees, gave just ground for any difference of 
 treatment with regard to deductions. He said: 
 
 My argument is, that all should be dealt with alike. If jt is proper 
 that one class of public servants should contribute to their own pen- 
 sions, it is proper that all should contribute toward their pensions. 
 If it is proper that large sections of the civil service should be ex- 
 empted from deductions, and should have their pensions provided for 
 them by the State, it is equally proper that all other sections should 
 be so exempted, * * * j would have either a system of universal 
 superannuation fund, or a system of universal free pension, granted 
 by the State; and of the two I very much prefer the latter. C") 
 
 (h) PENSIONS PAID EMPLOYEES WHOSE APPOINTMENTS ANTEDATED 
 1829 COMPARED WITH THOSE PAID OTHER CIVIL EMPLOYEES. 
 
 If the opposition of the members of the civil service forced to make 
 contributions from their salaries to a hypothetical fund on which 
 the chances were seven to one they would never draw was stimulated 
 by the exemption of the great officers of State and the lowest work- 
 man of the Government from such requirement, it was fanned to a 
 flame by the exemption of certain fellow-officers thus favored simply 
 because their appointments antedated August 4, 1829. The civil 
 servants appointed subsequently to 1829 saw that they suffered in 
 comparison a double disadvantage; they had a lower scale of pen- 
 
 a Report on Civil Service Superannuation. 1856. Minutes of evidence, p. 23. 
 b Idem, p. 29. 
 
CIVIL-SERVICE EETIEEMENT IN GREAT BRITAIN. 45 
 
 sions, and their salaries were subject to considerable deduction. The 
 law was very liberally interpreted for the benefit of the early comer. 
 Even if he had held a very inferior situation previous to 1829, if he 
 had been an extra clerk, for instance, or had held only a temporary 
 situation, he was considered to have entered the service previous to 
 1829, and was therefore exempted from deductions. However small 
 his salary before 1829 and however large his salary in 1856, at the 
 time of the investigation, he was exempted from deductions upon the 
 whole of his salary. About one-third of the service was at that 
 time exempt from paying deductions. As the other two-thirds were 
 working in the same offices, at the same tasks, often more efficiently, 
 it can easily be understood that there seemed to be some ground for 
 complaint. 
 
 (2) Dislike of pension scale and forfeiture provisions. 
 
 In the second place, the civil servants were discontented with the 
 provisions of the law. Not only did they think the scale of pensions 
 too low (apart from the matter of deductions), but they felt it unjust 
 that they should be required to pay a tax during the whole of their 
 official lives and receive noticing in return except in case of retire- 
 ment under the rigid rules of the service. The complete forfeiture 
 of their contributions in case of voluntary withdrawal from the serv- 
 ice before reaching a condition of superannuation or infirmity, in 
 case of dismissal from office, or in case of death while in office, was 
 resented as a confiscation of property. This lack of provision for 
 refund of contributions, and not so much the fact that deductions 
 were made from salaries, was the deep-seated reason for the antago- 
 nism of the civil servants to the system of abatements. There was a 
 general feeling that the Government should pension outright the 
 whole body of permanent employees, as was not unnatural in 
 a country where political pensions were awarded frequently and on 
 a most liberal scale, but it is equally apparent that had the law of 
 1834 established a contributory plan which was equitable as between 
 different classes of employees and which made provision for refund 
 of contributions in each and every case the chief complaints to which 
 the Select Committee of 1856 listened would never have been made. 
 
 The opinion of a distinguished civil employee. Sir John Herschel, 
 no longer in the public service, in regard to the injustice of con- 
 fiscating contributions, was quoted by Mr. Bromley: 
 
 Whatever is paid to any person employed in remuneration of service 
 should be absolutely his property, at least so far as not to be revocable 
 at the pleasure of the employer, or defeatable by the accident of death. 
 
 The payment, no doubt, may be made partly in money, and partly 
 in the form of a right; but the right should be a vested one, and not 
 liable to annulment. The only mode consistent with justice of 
 dealing with such portion of a man's salary as may be withheld from 
 
46 CIVIL-SEKVICE RETIBEMENT IN GREAT BRITAIN, 
 
 him is to regard it as held in trust and managed for his absolute 
 benefit, to be either handed over to him, with accumulations, at the 
 termination of his service, or paid over to his executors, etc., in case 
 of death, or invested for him (if possible on more advantageous 
 terms than he could individually obtain) in such way as he shall 
 himself approve, to meet his case as a bachelor, husband, or father. 
 Whatever is kept back as constituting a lien upon him for the con- 
 tinuance of his services, or as affording a hold upon him for good 
 conduct, ought rather to be called caution money than salary. So 
 far as its accumulation is an advantage, it is yet one contingent con- 
 ditional and liable to forfeiture. It is not his, and may never become 
 his. If he die in the service, it is lost; he has been mulcted of it 
 without fault on his part; and if it be forfeited by misconduct he has 
 in effect been fined by anticipation. 
 
 To men from whose motives fortune and fame are excluded; who 
 labor in obscurity, and see their equals passing them in the career 
 of life; the sole redeeming feature of whose position is its certainty, 
 it does seem most incongruous to introduce an element of this nature. 
 
 An objector to the present system might say, "If you assert that a 
 man has a salary of £100 [$486.65] per annum, you are bound to give 
 it him in some form or other of hard cash, and not of expectations, 
 which may be disappointed. If with his consent, by means of a 
 forced bargain, or in his ignorance of its nature at the moment of his 
 engagement, you keep back a part of it,- you are bound to pay it, not 
 to some other party in whom he has no interest, but to himself or his 
 nominees, and that whether his conduct has been good or bad (pun- 
 ishing bad conduct by dismissal, and criminal by the penal law). 
 You incur this obligation, not with him, but with mankind, that 
 words should correspond to things and mean realities. You assume pro 
 tanto the position of a savings bank, and are bound to account to the 
 uttermost farthing, not to the mass of your contributors, but to each 
 individual. An act of Parliament may legalize, but can not justify, 
 a contrary view of the matter. (") 
 
 It will be remembered that in the petition to the committee 
 signed by 9,791 members of the civil service, out of an aggregate 
 number of about 16,000 persons, the following statement was made: 
 
 Although all your petitioners during their entire official career are 
 thus taxed for superannuation, yet, as it is estimated, according to 
 the average duration of life, that not more than one in ten can be 
 superannuated, it follows that the contributions of the remaining 
 nine-tenths are absolutely lost to them and their families. (^) 
 
 (a) FORFEITURE PROVISION OBJECTIONABLE AS A FORM OF TONTINE. 
 
 The calculation of Dr. William Farr, head of the Statistical Office 
 of the Department of the Registrar-General, was that about one in 
 eight of the whole number of persons in the civil service whose 
 salaries are liable to deductions became superannuated, while Felix 
 John Hamel, esq., solicitor to the Board of Customs, told the Select 
 
 a Report on Civil Service Superannuation. 1856. Appendix No. 9, p. 416. 
 b Idem, Appendix No. 16, p. 462. 
 
CIVIL-SEKVICE RETIREMENT IN GREAT BRITAIN. 47 
 
 Committee that, according to his calculations, not more than one in 
 seven of the contributors in the Customs reached the age of super- 
 annuation. The others died or left the service before reaching the age 
 at which they could claim a superannuation allowance, so that the 
 statement of the civil servants in their petition that "according to 
 the average duration of life" not more than one in ten can be super- 
 annuated was apparently an exaggeration of the fact, being based on 
 incomplete reasoning, since the average rate of resignations and 
 dismissals is a factor in such calculations as much as "the average 
 duration of life." The truth, however, was bad enough and showed 
 that the civil employees were justified in their lack of enthusiasm 
 for a system which compelled them to contribute to an object by 
 which not more than one-seventh or one-eighth of their number 
 could possibly profit. Mr. Hamel's calculation showed the volun- 
 tary resignations before the age of 61 at 14 per cent of the whole 
 number of clerks, the dismissals at 20 per cent, and the deaths at 50 
 per cent, making a total of 84 per cent of the civil servants who 
 never reached superannuation. 
 
 "Under this arrangement for granting allowances out of deduc- 
 tions," declared Doctor Farr to the Select Committee, "you necessarily 
 have to take the deductions from men who never derive any benefit 
 whatever from the fund. This is, I conceive, an insuperable objection 
 to the system. The families of the men who die are harshly dealt 
 with; you take from the widow and fatherless children the deductions 
 of the men who die, to enable you to pension those who live. Now, 
 it is impossible to convince the widows or the orphan children of 
 the officers who die in the service that it is just to deprive them of 
 the advantage derived from the contribution of the parent, to enable 
 you to pay the superannuation allowances of those officers who are 
 so fortunate as to live."(^) And a week later he told the Select 
 Committee the same thing with a different choice of words: "Sup- 
 posing that 1,000 men commence paying those deductions, and you 
 receive those deductions, and invest them at interest, and let them 
 go on accumulating for forty years, at the end of that time you will 
 have to divide the money among the survivors only of the 1,000. 
 This system of the Government is a tontine, and the objections 
 against tontines hold against this scheme of deferred annuities." C") 
 
 Doctor Farr was one of the most eminent actuaries of his day and 
 his testimony to the committee in the course of this investigation 
 was particularly helpful in making clear the unsoundness of the 
 superannuation scheme established under the Act of 1834. The 
 civil employees did not need to be actuaries, however, to perceive 
 the nature of the system of which they were victims. 
 
 oReport on Civil Service Superannuation. 1856. Minutes of evidence, p. 176. 
 6 Idem, p. 243. 
 
48 CIVIL-SEKVICE RETIREMENT IN GREAT BRITAIN. 
 
 Asked what was the objection of the civil service to the system of 
 abatements, Mr. Bromley, chairman of the committee of civil serv- 
 ants, said: 
 
 The main objection which we entertain is this: that the scale of 
 pubhc salaries is fixed as a just payment for the work to be done, 
 and that the abatement made from those salaries to secure a deferred 
 annuity is an object for which we consider the State itself ought to 
 provide; that is the broad issue. We consider that the State itself 
 ought to provide for its worn-out servants. The present law of 1834 
 directs that the servants shall provide for themselves; but the abate- 
 ment is not now levied upon a mutual principle; it is upon the 
 principle of a lottery, or rather upon the principle of a tontine, that 
 a great many gentlemen shall put in a certain sum, and the longest 
 fiver shall derive the benefit. Upon these grounds we object to the 
 abatements. (") 
 
 (&) FORFEITURE PROVISION ESPECIALLY UNJUST IN CASES OF CLERKS 
 
 DYING IN HARNESS. 
 
 The hearings abound in citations of cases of civil servants who 
 contributed for years to the supposed '^ Superannuation Fund" and 
 dying left their families in destitute circumstances. Letters from 
 individual clerks bring out this grievance strongly. 
 
 The widow of John Kendall, who held the position of consul in the 
 Cape de Verde Islands from 1839 to 1854, begged the committee to 
 grant her indemnification for the pecuniary loss she had sustained by 
 the death of her husband, on the ground that during the sixteen years 
 of his service he had contributed to the ''Superannuation Fund" with 
 the impression that he was at the same time securing to his wife and 
 family benefits to be derived in the future, and that the deduction 
 from his salary precluded him devoting any other proportion of his 
 income to the insurance of his life. 
 
 D. H. Harris, a landing waiter in the Customs service, wrote, on 
 March 24, 1856, to F. J. Hamel, solicitor to the Board of Customs, a 
 letter setting forth the woes of his class : 
 
 My nominal salary is £200 [$973.30] per annum; I only receive 
 £167 6s ($814.16). The remainder is swallowed up in income tax, 
 superannuation tax, and premium for insurance of £300 in the customs 
 benevolent fund. These deductions amount to about 17 per cent, 
 or one-sixth of my actual receipts. 
 
 As the relative condition of the officers in the civil service has 
 formed part of the inquiry before the committee of the House of 
 Commons, permit me to draw your attention to the fact that, with 
 this same salary of £200 [$973.30] per annum, either in the service 
 of the Bank of England, the East India Company, or the London 
 Dock Company, I should be at least 12 per cent better off than as a 
 
 « Report on Civil Service Superannuation. 1856, Minutes of evidence, p. 80. 
 
CIVIL-SEEVICE EETIEEMENT IN GEE AT BEITAIN. 49 
 
 civil servant of the Crown, because the former pay the salaries of 
 their servants in full, and give retiring allowances without deductions ; 
 the latter deduct not only income tax, but abatements for superan- 
 nuation also. The hours of work and attendance are similar. I 
 find that, as a body, the condition of the officers of the Customs is a 
 depressed one; they are for the most part ill paid, and, in the event 
 of early or sudden death, their families are often left in a most 
 wretched state of destitution. * * * 
 
 After enumerating a number of cases that had come under his 
 observation, he continued: 
 
 Under the superannuation law a man may pay twenty, thirty, or 
 forty years, and never receive a shilling. The longer he serves the 
 less chance he has of receiving any benefit, because the older he gets the 
 less the probability of his surviving to receive it; and if he dies with 
 part of his salary due, his widow is actually mulcted five per cent of 
 the balance due, though it is then utterly impossible that any benefit 
 can accrue from it. Another feature presents itself: when the 
 poor day-pay officer is sick his day pay is stopped; but from his 
 small salary, when the quarter comes round, is deducted the super- 
 annuation tax of 2^ per cent upon the sums which he did not receive. 
 If he should die, his widow would be forced to contribute to the super- 
 annuation tax upon the unreceived half-crowns, the lack of which, 
 perhaps, induced exhaustion to her husband, and want of bread to 
 her children. When the officer entering the service first hears of 
 this deduction, he consoles himself with the idea that it is for some 
 certain though perhaps far-off benefit which will accrue to him; he 
 next finds that it is a tax to reduce the charge upon the country for his 
 probable superannuation; next, that it is not only more than enough 
 to reduce that charge, but sufficient to confer a large benefit on 
 noncontributors, and that he who must pay may possibly never get 
 Nft shilling. (") 
 
 W. B. Hambly, a clerk in the Royal Engineer Department, wrote 
 the comnuttee on the civil service superannuation bill partly as 
 follows : 
 
 Whilst this momentous question is under consideration by your 
 honorable committee, and before its fate is sealed by act of Parlia- 
 ment, something is due to the widow and orphan of the civil servant; 
 for it seems hard indeed that his last dying thoughts were to be em- 
 bittered by the terrible idea that his wife and children, whom, whilst 
 the Almighty had been pleased to grant him life and health, he had 
 toiled to provide for, cherish and comfort, should at his death be 
 thrown penniless on the world, and the fund to which he had all his 
 life subscribed be shut against them. It seems but j ust, that whatever 
 allowance this fund entitled him to, should, at his death, be handed 
 down as a support (if bona fide required) to his wife and children; 
 for I may here remark, that it is not in the power of any Government 
 
 o Report on Civil Service Superannuation. 1856. Appendix No. 15, p. 453. 
 35885— S. Doc, 290, 61-2 i* 
 
50 CIVIL-SEEVICE EETIEEMENT IN GEEAT BEITAIN. 
 
 clerk (except those in the high offices) to provide out of their pay 
 anything for the future support of either wife or children. The pay 
 is altogether too inadequate for such a purpose, and the Government 
 deductions are so heavy, that it is with difficulty they can live on the 
 pay received. Therefore, out of the civil servants' superannuation 
 fund, it is the more incumbent on Government to provide for their 
 wives and children; and that in the event of the husband dying in 
 office, that they should receive the full allowance the length of service 
 would have entitled the deceased to; or when death occurred, after 
 being superannuated, that the same allowance should be continued 
 to the wife as the husband had been enjoying, and, as he had paid 
 for it, his family might fairly be entitled to it. (") 
 
 The fact that the committee of civil servants was seeking chiefly 
 not an abolition of the compulsory deductions but a limitation of the 
 deductions to 2^ per cent for the creation of an insurance fund is 
 sufficient proof that among a large number of the civil employees 
 there was no serious objection to the deductions, as such, provided 
 they were used for the benefit of the families of those whose salaries 
 were thus taxed. This point is brought out even more clearly by 
 William Willis, esq., the secretary of the committee of civil servants. 
 Asked by the chairman of the parliamentary committee to state the 
 objections entertained by the members of the association which he 
 represented to the present system of superannuation, he said: 
 
 The objections are numerous. The first is, that the abatements 
 operate with very great severity upon a class whose incomes are 
 small; coupled with the income tax, they amount to a deduction of 
 11 per cent. The origin of the movement arose in our finding such 
 great distress to exist amongst the families of the clerks. I was my- 
 self aware of it to some extent, and have had applications before me 
 of a most painful nature from the widows of officers petitioning for 
 the collection of even a few shillings; in one case the body of an 
 officer could not be buried for want of means, nor until subscriptions 
 had been collected in the office to which he had belonged. Fmding 
 that this distress was very general, and as our inquiries also led us 
 to believe that insurance was effected in but a very small minority of 
 cases amongst the civil servants, we were induced to inquire whether 
 means could not be adopted of providing some insurance fund. 
 
 "If I understand your statement correctly, the first object that 
 your society had in view was the establishment of an insurance fund 
 for the widows and children of deceased public servants?" asked the 
 chairman. "It was." 
 
 "How did you propose to accomplish that object? 
 
 "We proposed to establish an insurance fund by means of con- 
 tributions from the service; but we found that that was wholly out 
 of the question, ^Decause these abatements precluded the civil serv- 
 ants from subscribing to any such association. It was these abate- 
 ments which debarred them from the power of making insurances." (^) 
 
 a Report on Civil Service Superannuation. 1856. Appendix No. 15, p.455. 
 b Idem. Minutes of evidence, pp. 144, 145, 
 
CIVIL-SEE VICE KETIKEMENT IN GREAT BEITAIN. 51 
 
 On this point Doctor Farr was also equally clear. "One objection 
 to the deduction in its present form," he told the Select Committee, "is 
 that it prevents so large a number of the public servants from insuring 
 their lives ; but if you remit the deduction for the purpose of super- 
 annuation they would be enabled to appropriate at least a part of 
 their salaries for the insurance of their lives." («) 
 
 (c) FORFEITABLE DEDUCTIONS WITH INADEQUATE SALARIES A BAR TO 
 • LIFE INSURANCE. 
 
 Doctor Farr had been consulted a number of years before this by 
 the committee of civil servants formed for investigating the subject of 
 superannuations. They had claimed that cases of distress occurred 
 very frequently in the service in consequence of the fact that many of 
 the civil employees were unable to insure their lives, owing to the insuf- 
 ficiency of their salaries and the deductions made from those sala- 
 ries. Doctor Farr had requested them to procure information from 
 the public departments. They did so, and he embodied the infor- 
 mation in a paper read before the Statistical Society of London on 
 December 18, 1848. This showed that 16,353 officers, either paying 
 contributions or in offices liable to pay contributions to the superan- 
 nuation fund, had, on an average, salaries of £141 ($686.18) a year; 
 that is the nominal salary, which would be further reduced by the 
 deduction to £135 ($656.98) a year. Two-thirds of those salaries did 
 not exceed £100 ($486.65) a year; they were on an average £86 
 ($418.52) a year. Information of another kind showed that of the 
 16,353 officers, about 11,023 had wives living, as well as 21,952 
 children under 15 years of age, making in the aggregate 49,328 per- 
 sons more or less dependent on the salaries. Each married civil 
 employee in the station of life in which he is would keep one or more 
 servants; that would imply that there was about £34 ($165.46) a 
 head on the total number of persons dependent on the civil servants 
 contributing to the fund. Doctor Farr stated to the Select Com- 
 mittee that that appeared to him to substantiate the statement 
 of the civil servants that their salaries scarcely permitted them to 
 insure their lives. C*) 
 
 In connection with the oft-repeated statement that the salary of 
 the average civil service clerk was not sufficient to bear deductions 
 the statement of the annual expenditure of a married clerk, compiled 
 by J. T. Hammack, of the Statistical Department of the Registrar- 
 General's Office, "from information that can be relied upon," is inter- 
 
 o Report on Civil Service Superannuation. 1856. Minutes of evidence, p. 188. 
 b Idem, pp. 159, 160. 
 
52 CIVIL-SEKVICE KETIKEMENT IN GREAT BEITAIN. 
 
 esting. This statement showed "the annual expense, regulated with 
 the strictest regard to economy, of a family consisting of five persons, 
 viz, a civil service clerk, his wife, two children, and a servant." The 
 total annual expenditure was shown to be £183 7s. 5d. ($892,37). 
 The salary of a civil service clerk appointed after August, 1829, 
 amounting to £200 ($973.30), was subject to a superannuation abate- 
 ment of 1 shilling in the pound (5 per cent) or £10 ($48.67), and to an 
 income tax of Is. 4d. in the pound (6§ per cent) or £12 13s. 4d. 
 ($61.64) («), or a total deduction of £22 13s. 4d. ($110.31). This left 
 him a net amount of salary of £177 6s. 8d. ($862.99), so that a nominal 
 salary of £200 ($973.30) per annum, unsupported by private resources, 
 would be insufficient to enable the clerk to meet the above expendi- 
 ture to the extent of £6 9d. ($29.38). This estimate omitted all 
 allowance for the education of children, sittings in a place of worship, 
 Ufe assurance, excursions into the country during vacation, and 
 indeed all other recreation attended with expense, made no provision 
 for lengthened illness or death in the family of the clerk; and in the 
 event of the death of the clerk liimself there was no provision what- 
 ever for his wife and children or other dependent relatives. It was 
 argued that the sum deducted for superannuation, £10 ($48.67) 
 would, if remitted, enable the clerk to effect a small insurance upon 
 his life. Fuller details of the statement of expenses are as follows : (^) 
 
 ANNUAL EXPENDITURE OF A MARRIED CLERK. 
 
 [Statement showing the annual expense, regulated with the strictest regard to economy, of a family con- 
 sisting of five persons, viz, a civil-service clerk, his wife, two children, and a servant.] 
 
 ITEMS OF EXPENDITURE. 
 
 House rent and taxes : 
 
 Rent of a six-roomed house (in the suburbs of London) $121. 66 
 
 House tax (9d. in the pound (3f per cent) on the rent paid) 4. 56 
 
 Poor rate (say, 3s. in the pound (15 per cent) on a rating of £22 
 
 ($107.06) 16. 06 
 
 Lighting, paving, and highway rates (say) 6. 09 
 
 Water rate 5. 11 
 
 $153.48 
 
 Provisions and other household necessaries (per week, for five per- 
 sons) : 
 
 Bread, 32 lbs., at 2id. (4.6 cents) per lb., 6s. ($1.46); flour, 1 
 
 quartern, lOd. (20 cents) 1. 66 
 
 Meat, 14 lbs., at 8d. (16 cents) per lb 2. 27 
 
 Tea, ^ lb., 2s. (49 cents); coffee, | lb.. Is. (24 cents) 73 
 
 Sugar, 3 lbs., at 5d. (10 cents) 30 
 
 Butter, 2 lbs., 2s. 4d. (57 cents); eggs, bacon, cheese. Is. 4d. 
 
 (32 cents) 89 
 
 oThe amount here given is according to the original report. Calculated on the 
 basis shown it should apparently be £13 68. 8d. ($64.89). 
 
 & Report on Civil Service Superannuation. 1856. Appendix No. 14, p. 451. 
 
CIVIL-SEEVICE EETIREMENT IN GREAT BRITAIN. 53 
 
 Provisions and other household necessaries (per week, for five per- 
 sons) — Continued. 
 
 Vegetables and fruit, 3d. (6 cents) per day |0. 43 
 
 Beer, 3 pints per day, 21 per week, at 2d . (4 cents) .85 
 
 Milk, 1 pint per day, at 2d. (4 cents) .29 
 
 Candles -37 
 
 Firewood, and materials for cleaning house .24 
 
 Soap, mustard, vinegar, pepper, rice, &c .16 
 
 Washing (done at home), 6d. (12 cents) per head .61 
 
 Per week 8. 80 
 
 Per annum 457. 61 
 
 Coals (in the year), 5 tons, at 25s. ($6.08) 30.42 
 
 $488. 03 
 
 Servant's wages 38. 93 
 
 Clothing: 
 
 The clerk 73.00 
 
 His wife 43.80 
 
 His children 38. 93 
 
 -. 155. 73 
 
 Medical attendance on family (average) 14. 60 
 
 Renewal and repair of furniture, house linen, &c 19. 46 
 
 Fire insurance on furniture £200 ($973.30), premium 5s. ($1.22), duty 6s. 
 
 ($1.46) 2. 68 
 
 Pocket money for omnibuses, and other incidental personal expenses 19. 46 
 
 Education of children 
 
 Sittings in place of worship 
 
 Excursion into country during vacation 
 
 Wine and spirits 
 
 Insurance on life, to make some small provision for his family in the event 
 of his decease 
 
 Total annual expenditure 892. 37 
 
 The salary of a civil-service clerk appointed since August, 1829, amounting 
 
 to £200 ($973.30) is subject to the following deductions: 
 Superannuation abatement. Is. in the pound (5 per cent) £10. $48. 67 
 Income tax. Is. 4d. in the pound (6| per cent) £12 13s. 4d. . « 61. 64 
 
 $110. 31 
 
 Leaving the net amount to be received by him 862. 99 
 
 So that a nominal salary of £200 ($973.30) per annum, unsupported 
 by private resources, would be insufficient to enable the clerk to 
 
 meet the above expenditure to the extent of 29. 38 
 
 892. 37 
 
 The combined effect of superannuation abatements and income 
 tax on the salary of the civil servant was shown by the following 
 statement : C*) 
 
 o The amount here given is according to the original report. Calculated on the 
 basis shown, it should apparently be £13 6s. 8d. ($64.89). 
 b Report on Civil Service Superannuation, 1856. Appendix No. 14, p. 452. 
 
54 CI?IL-SEEVICE RETIREMENT IN GREAT BRITAIN. 
 
 COMBINEP EFFECT OF SUPERANNUATION ABATEMENTS AND INCOME TAX. 
 
 [Statement showing the difference between the nominal salary of a civil servant appointed since August, 
 1829 and the net amount payable to hun after deducting the superannuation abatement and income tax, 
 on salaries from £80 (S389) to £500 ($2,433).] 
 
 
 Deductions for— 
 
 Net 
 
 
 Nominal yearly 
 
 
 
 
 Remarks. 
 
 salary. 
 
 Super- 
 annua- 
 tion. 
 
 Income 
 
 tax. 
 
 Total. 
 
 amount. 
 
 
 $389.32 
 
 $9.73 
 
 
 $9.73 
 
 $379. 59 
 
 
 437. 99 
 
 10.95 
 
 
 10.95 
 
 427. 04 
 
 Superannuation, 6d. ($0.12) per pound ($4.87). 
 
 486. 65 
 
 12.17 
 
 
 12.17 
 
 474. 48 
 
 
 510. 98 
 
 25.55 
 
 
 25.55 
 
 485. 43 
 
 Superannuation, Is. ($0.24) per pound ($4.87). 
 
 a 535. 32 
 
 26.77 
 
 "$24." 35" 
 
 51.12 
 
 484. 20 
 
 
 583.98 
 632. 65 
 681.31 
 
 29.20 
 31.63 
 34.07 
 
 26.58 
 28.77 
 31.00 
 
 55.78 
 60.40 
 65.07 
 
 528. 20 
 572. 25 
 616. 24 
 
 Superannuation, Is. ($0.24) per pound ($4.87). 
 Income tax. Hid. ($0.23) per pound ($4.87). 
 
 729. 98 
 
 36.50 
 
 33.21 
 
 69.71 
 
 660. 27 
 
 
 778. 64 
 
 38.93 
 
 49.31 
 
 88.24 
 
 690. 40 
 
 
 827.31 
 
 41.37 
 
 52.40 
 
 93.77 
 
 733. 54 
 
 
 875. 97 
 
 43.80 
 
 55.48 
 
 99.28 
 
 776. 69 
 
 
 924. 64 
 
 46.23 
 
 58.56 
 
 104. 79 
 
 819.85 
 
 
 973. 30 
 1,216.63 
 1,459.95 
 
 48.67 
 60.83 
 73.00 
 
 61.64 
 77.05 
 92.46 
 
 110.31 
 137.88 
 165. 46 
 
 862. 99 
 1,078.75 
 1,294.49 
 
 Superannuation, Is. ($0.24) per pound ($4.87). 
 Income tax. Is. 4d. ($0.32) per pound ($4.87). 
 
 1,703.28 
 
 85.16 
 
 107. 87 
 
 193. 03 
 
 1,510.25 
 
 
 1,946.60 
 
 97.33 
 
 123. 28 
 
 220.61 
 
 1,725.99 
 
 
 2, 189. 93 
 
 109. 50 
 
 138. 70 
 
 248. 20 
 
 1,941.73 
 
 
 2, 433. 25 
 
 121.66 
 
 154.11 
 
 275. 77 
 
 2, 157. 48 
 
 
 6 2,433.25 
 
 m 
 
 162. 22 
 
 162. 22 
 
 62,271.03 
 
 
 a It will be observed that upon the promotion of a clerk from £105 ($510.98) to £110 ($535.32) he is a posi- 
 tive loser by the step. 
 b Salary of an officer appointed prior to August, 1829, and therefore exempt from superannuation tax. 
 
 (d) FREE PENSIONS DESIRED WITH COMPULSORY DEDUCTIONS FOR 
 PURPOSE OF LIFE INSURANCE. 
 
 Taking all these facts into consideration, and realizing besides the 
 actuarial unsoundness of certain features of the existing superannua- 
 tion scheme, as will be explained later on, Doctor Farr threw the weight 
 of his influence with the arguments of those civil servants who asked 
 that pensions be granted free by the State and that a compulsory- 
 insurance fund be formed out of 2^ per cent deductions from all sal- 
 aries above £100 ($486.65) a year. This would have been a decided 
 improvement over the existing scheme, as it meant practically an 
 increase of 2^ per cent in salary, an insurance benefit in case of death, 
 and a pension in case of superannuation. The advisability of so 
 arranging matters as to make it possible to compel the civil employee 
 to insure his life was thus set forth by Doctor Farr: 
 
 The utility of life insurance is universally admitted. Insurance 
 could be effected on very advantageous terms by the servants them- 
 selves: it would save many hundreds of families from deep distress; 
 and it would raise the character of the service. Upon this subject 
 there are now differences of opinion, but those who differ from the 
 committee are equally animated by a desire to leave a provision for 
 their wives and their children: they think that it should be done 
 entirely on the voluntary principle; I, on the contrary, think that it 
 should be to a certain extent on a settled principle, for reasons which 
 I will very briefly state to the committee. Children, women and 
 
CIVIL-SERVICE EETIEEMENT IN GREAT BRITAIN. 55 
 
 men advanced in years can rarely earn enough to supply themselves 
 with subsistence. Men who enter a profession have therefore, during 
 their years of active life, not only to supply the current wants of their 
 families, but to make a provision for the infirmities of sickness or age, 
 and, in consequence of the mortality of their nature, for their widows 
 and children. In Great Britain, to every 100 wives, there were at the 
 census 23 widows living: there are now living about 2,300 widows of 
 deceased civil servants, and an unknown number of fatherless chil- 
 dren, which the returns leave undetermined. The children of pos- 
 sessors of property are naturally provided for under our laws, and the 
 children of the man whose income is derived from his industry gener- 
 ally enjoys the same privilege; but the source of income depending 
 on his life, they are liable at any time to be thrown on the community 
 for support, which is, in a high degree, precarious. In the middle and 
 in the higher classes they are practically thrown upon the hands of 
 their relatives, of the charitable, and, in some rare instances, of the 
 parish. Life insurance meets the risk of mortality; but it unfortu- 
 nately happens in all professions, and in the civil service among others, 
 that life insurance to an adequate extent is not effected by the great 
 majority of husbands, and more particularly by those whose lives are 
 most liable to be cut short, and whose large families are likely to prove 
 the severest pressure of want — the heaviest burden on the commu- 
 nity. Society has therefore a right, and, whenever an opportunity 
 offers, perhaps a duty, to see that such a deduction is made from the 
 adequate income in active life as will lighten the sufferings of the 
 fatherless children and widows of its members. If the Government 
 set the example in the public service, it may be copied by other 
 classes, and would ultimately prove a great boon and an economy to 
 the nation. (*) 
 
 The amendment to the superannuation bill relating to insurance 
 proposed by Mr. Bromley and his adherents and indorsed by Doctor 
 Farr was as follows : 
 
 And whereas great distress from time to time occurs amongst the 
 families of deceased civil servants, and various efforts have been made 
 to establish departmental benevolent funds for their relief, but all 
 such funds have failed without contributions being made in aid thereof 
 by the State, or indirect assistance afforded in the collection of the 
 same ; it is expedient that such contributions or assistance, if given at 
 all, should be for the general benefit of the whole service, and not for 
 particular departments ; it is therefore directed that from and after the 
 first day of April one thousand eight hundred and fifty-six, when the 
 abatements made under the twenty-seventh section of the aforesaid 
 act shall cease, there shall be an abatement made in quarterly or 
 monthly proportions, by the proper officer in each department, from 
 the annual salaries of the several officers and persons employed in the 
 civil offices and departments to which this act applies, who have since 
 the fourth day of August one thousand eight hundred and twenty- 
 nine entered or shall hereafter enter the public service, the amount of 
 which abatement shall be at the annual rate of two pounds and ten 
 shillings per centum [2 J per cent]. The amount so abated and 
 brought to account in the books of each respective department shall 
 
 o Report on Civil Service Superannuation. 1856. Minutes of evidence, p. 184. 
 
56 CIVIL-SERVICE RETIEEMENT IN GREAT BRITAIN. 
 
 be paid over quarterly to the National Debt Commissioners, for the 
 purpose of forming a "Civil Service Insurance Fund," in which name 
 an account shall be opened in the books of the Bank of England, and 
 such fund shall be directed and controlled for the benefit of each 
 individual contributor, upon the common principles of life assurance, 
 by such persons and in such manner as the lords commissioners of Her 
 Majesty's Treasury may from time to time direct; and in making such 
 settlement full credit shall be given to each individual who may have 
 already contributed in aid of the aforesaid sum of eight hundred 
 thousand pounds [$3,893,200], in fixing the amount of insurance to 
 which his contributions may entitle him; all which proceedings and 
 regulations shall from time to time be laid before Parliament, and the 
 accounts of the said fund shall be submitted periodically to the com- 
 missioners for auditing the public accounts, and after each annual 
 audit by them, a copy of the said account, with the report of the 
 auditors thereon, shall be by them laid before Parliament. (") 
 
 Mr. Bromley's reasons for advocating this measure, as explained to 
 the committee, make an interesting contribution to a discussion 
 which has continued down to the present year. Said he : 
 
 The very great distress in the lower ranks of the service induced me 
 to take up this question, and I was at the time encouraged to do so by 
 the debate in Parliament in March 1844, relative to the distressed 
 state of the family of Doctor Morrison, who died in China, after he had 
 rendered valuable public service. 
 
 All attempts to form voluntary funds for the purpose had failed ; an 
 order in council was obtained in 1819 to establish a fund in the Admi- 
 ralty, but it did not succeed. Indeed, the distress in the revenue de- 
 partments was admitted by the Government to be so general, that in 
 the Customs a benevolent fund was established by act of Parliament 
 in 1816; it was however found necessary to require a compulsory con- 
 tribution for its support, added to which, the profits of the bill of 
 entry (somewhat analogous to the profits of the London Gazette) 
 were given up by the Government in aid thereof. 
 
 In the Post-Office the Government have allowed the property 
 found in dead letters to be applied in aid of a charitable fund. 
 
 In the Inland Revenue, the Government assist the Atlas Assurance 
 Office in collecting premiums, &c., from officers who insure in that 
 office under certain advantages. 
 
 In the Ordnance Department certain pensions are paid to the 
 widows of clerks by the Government. 
 
 If the principle is correct in these cases, it does not appear to be 
 just to exclude other civil servants from such advantages; and as 
 the compulsory principle has been adopted by Parliament with re- 
 spect to a large body of its civil servants, although the great majority 
 of them derive no benefit therefrom, it does appear to be sound poHcy 
 to extend that system to all, to be coupled, however, with this most 
 just provision, that the proposed contributions shall be applied for 
 the benefit of each individual, according to the value of his contribu- 
 tion. 
 
 o Report on Civil Service Superannuation. 1856. Appendix No. 9, p. 417. 
 
CIVIL-SEE VICE RETIREMENT IN GREAT BRITAIN. 57 
 
 It has been ascertained that 83 per cent of civil servants are un- 
 insured in the local funds already established, notwithstanding the 
 aid afforded them by the Government. 
 
 It is doubtless higher ground to advocate the voluntary rather 
 than the compulsory principle of life insurance, and were its truth- 
 fulness equally enforced by experience, it might require no arguments 
 to recommend its adoption; but unfortunately in this, as in most 
 other instances, there is a wide discrepancy in human conduct be- 
 tween what ought to be and that which actually takes place; and it 
 is to be feared there is no alternative in this case but to fall back upon 
 some inflexible law external to itself; and this I conceive will best 
 be met by a compulsory conversion of a moiety of the present super- 
 annuation assessments into an insurance fund, for the benefit of rep- 
 resentatives of deceased civil servants. 
 
 This is no new theory which it is desired to urge upon the State 
 or the public; as, in the case of the navy and army services, provi- 
 sion is made, as a rule, for the wives and families of naval and military 
 servants, independently of the additional pension granted for loss 
 of life in action, there is likewise a compulsory abatement imposed 
 upon the whole medical force of the Navy for the support of their 
 widows only; the East India Company likewise enforces a contribu- 
 tion from its servants for the support of their families; the Emperor 
 of the French has also established a compulsory provision for the 
 families of the employees of the State. The Bank of England re- 
 quires its servants to insure their lives, and several private estab- 
 lishments have adopted a similar course. 
 
 Such a concurrence of testimony, and from such various sources, 
 must be considered, upon all fair terms of reasoning, as incontro- 
 vertibly establishing the principle under consideration. 
 
 It is, therefore, from the conviction that the position of the civil 
 servants will be materially improved by the adoption of the com- 
 pulsory principle of life insurance, and also from the consideration 
 that the State is preeminently interested in relieving its servants as 
 much as possible from the cares and desponding influences which 
 can not fail to have a most depreciating effect upon their official 
 energies, that I am induced to lay such stress upon the formation of 
 this fund by an appropriation of one-half of the present superannua- 
 tion percentage to that purpose, remitting the remaining half to the 
 civil servants to meet immediate exigencies. C*^) 
 
 (3) Distrust of actuarial soundness of i^lan embodied in Act of 1834. 
 
 In the third place there was distrust of the actuarial soundness of 
 the plan. This was not so general, however, as might be supposed. 
 The statement is frequently made that the contributory plan failed 
 in England because it was found in 1857 that the superannuation 
 fund was hopelessly insolvent; that it was therefore turned into the 
 general exchequer and pensions were thereafter paid by the Govern- 
 ment. This is not strictly correct, because, as has been shown in 
 the previous pages, no fund was established under the Act of 1834, 
 
 a Report on Civil Service Superannuation. 1856. Appendix No. 9, p. 417. 
 
58 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 
 
 and the contributions had been turned into the general exchequer 
 from the very beginning. Furthermore, even if there had been a 
 fund and it had been found in a very satisfactory condition, the sec- 
 tion of the act which provided for contributions from the civil serv- 
 ants would probably have been repealed in 1857 just as it was, for 
 the discontent of the civil servants, which moved Parliament to act, 
 rested, as has been shown, on quite different grounds. They brought 
 no charge of insolvency against the fund, but rather one against the 
 Government of confiscation of property rights and inequitable treat- 
 ment as between different classes of the service. Instead of believing 
 the fund insolvent — supposing their contributions had been funded — 
 the civil employees were inclined to believe that their contributions 
 had been much more than adequate for the payment of their pen- 
 sions, as shown, for instance, in the last sentence of Mr. Harris's 
 letter quoted above: ''It (the deduction) is not only more than 
 enough to reduce that charge, but sufficient to confer a large benefit 
 on noncontributors." The final action of the Civil Service Super- 
 annuation Commission which was appointed to succeed the Select 
 Committee in 1857 was taken quite without reference to this actuarial 
 question of the adequacy of the contributions; in fact, it was not 
 known until nearly a year after the abolition of deductions had been 
 recommended by the commission that the contributions of the civil 
 servants were inadequate for the payment of the pensions provided 
 under the Act of 1834. 
 
 Before the Select Committee went out of existence it engaged 
 Messrs. Arthur Morgan, F. R. S., actuary to the Equitable Society 
 of London, and Charles Ansell, F. R. S., actuary of the Atlas Assur- 
 ance Office, to prepare answers to certain questions. Messrs. 
 Ansell and Morgan furnished the committee with such information 
 as was within their power; but with reference to the most important 
 question submitted to them, namely, whether the deductions taken 
 under the Act of 1834 were more than adequate to meet the charge 
 under the act for this class of civil servants, they declared their ina- 
 bility to give a satisfactory answer "until they should be provided 
 with certain voluminous statistical returns with reference to the 
 civil servants employed in the different public offices, and until they 
 should have had time to complete the laborious calculations which 
 would be required for extracting the desired information from these 
 returns." The committee was obliged, therefore, to conclude its 
 labors without the desired information, and the Superannuation Com- 
 mission, which succeeded it, was prepared with its report in May, 
 1857, long before the actuaries were ready to answer the question 
 asked of them. So laborious did they find their task that not until 
 March 19, 1858, were the actuaries able to submit their report. In 
 the meantime, the commission, not comprehending the technical 
 
CIVlL-SEKVICE RETIREMENT IK GREAT BRITAIN . 59 
 
 difficulties of the subject, and therefore not inchning to distrust their 
 own conclusions, had made various recommendations, and toward 
 the latter end of the session of Parliament, 1857, an act was passed 
 for effecting the abolition of abatements from salaries, the most 
 important of their suggestions. "Having found," wrote the com- 
 missioners, "on a full consideration of the subject referred to us, 
 that our recommendations could not be affected by the result of these 
 inquiries of the actuaries, we did not consider ourselves justified in 
 withholding our report until we were acquainted with the conclu- 
 sions at which they might arrive." 
 
 When the report of Messrs. Ansell and Morgan was finally com- 
 pleted the following year, the commissioners transmitted it to the 
 Lords Commissioners of the Treasury with the following comment : 
 
 It will be seen that, with regard to the main subject of their inqui- 
 ries, Messrs. Ansell and Morgan are decidedly of opinion that the 
 deductions made from the salaries of the civil servants, under the 
 authority of the Act of 1834, were not adequate to meet the charge 
 to which the public was liable under that act. This conclusion may 
 be considered a sufficient answer to the claim which was made on 
 behalf of the civil servants, on the ground that the deductions were 
 more than sufficient to provide the retired allowances, and that the 
 public were making a profit of the transaction at the expense of the 
 civil servants. But as we expressly repudiated in our report the 
 notion of any contract between the public and the body of the civil 
 ^servants, and as we founded our recommendation of the abolition of 
 deductions upon totally different grounds, our conclusions cannot 
 be affected by any opinion at which the actuaries may have arrived 
 on this question. ("') 
 
 While it can not be said, therefore, that there was any general 
 appreciation of the fact that the superannuation scheme established 
 by the Act of 1834 was actuarially unsound, study of the hearings 
 shows that most of the witnesses questioned the reasonableness as 
 well as the justice of some feature of the plan, and those witnesses 
 who had special knowledge of statistical or actuarial problems 
 pointed out its inconsistencies or dangers. 
 
 The chief actuarial faults of the plan were two, and these two faults 
 were criticised more or less blindly by various witnesses before the 
 Select Committee who felt that something was wrong but found dif- 
 ficulty in defining it. They were (1) the provision for flat-rate assess- 
 ments, and (2) the lack of provision for taking care of the accrued 
 liabilities. 
 
 (a) FLAT-RATE ASSESSMENTS CONSIDERED INEQUITABLE AND POSSIBLY 
 
 INADEQUATE. 
 
 The law provided for a flat-rate assessment of salaries regardless 
 of the age at which contributors entered the service — an arrangement 
 which is always unjust to the younger contributors. The rates of 
 
 «■ Supplemental report on the Operation of the Superannuation Act. 1858. p. 3. 
 
60 CIVIL-SEEVICE RETIEEMENT IN GREAT BRITAIN. 
 
 contribution of 2^ per cent on all salaries of £100 ($486.65) and under 
 and 5 per cent on all salaries above £100 ($486.65) were, of course, 
 inadequate to provide retiring allowances ranging from fifteen-six- 
 tieths of salary after ten years' service up to forty-sixtieths after 
 forty-five years' service. While this was not the issue before the civil 
 service or before Parhament, which had become disgusted with the 
 plan on other grounds, it is fortunate for students of the subject that 
 actuaries were engaged to inquire into the sufficiency of the deduc- 
 tions to meet the claims under the law, because the result of their 
 valuation shows very clearly the practical difficulty of making any 
 plan self-supporting which is based on flat-rate contributions required 
 without reference to the age at which the contributors enter the serv- 
 ice. While theoretically it may be a simple matter to fix a flat rate 
 of contribution which will be adequate in a given problem, practi- 
 cally it never seems to be feasible owing to the difficulty of valuation, 
 and the experience of Great Britain is simply corroborative of the 
 general rule that a superannuation plan based on flat-rate assess- 
 ments usually means too low a rate and therefore inadequate con- 
 tributions, leading ultimately to the insolvency of the superannuation 
 fund. Since there really was no fund to be insolvent in this case, and 
 since there was nothing in the Treasury minute of 1829 or the Act of 
 1834 to indicate that it had been the intention of the Government to 
 make the contributions sufficient to meet the charges, the inadequacy 
 of the rate of contributions can hardly be justly criticised in this plan. 
 The language of the act sanctioning the Treasury minute, "with a view 
 to reduce prospectively the charge incurred in providing for super- 
 annuation allowances," was not such as to indicate that the Govern- 
 ment did so with the expectation of making the plan entirely self- 
 supporting. The discovery that the contributions were inadequate, 
 unexpected as it was, merely showed the British pubhc the undesir- 
 ability, from a new viewpoint, of the plan which they had already set 
 aside for other reasons. 
 
 But the injustice of the flat-rate assessment as between individ- 
 uals was apparent to many before it was known that the rate was 
 inadequate. "It is the grand and fatal objection to the scheme as it 
 at present exists," said Doctor Farr to the committee, "that there is 
 no proportion between what is taken and what is given." And again 
 he said, "Under the present arrangement there is no equitable rela- 
 tion between the premium paid and the benefit granted; I prove to 
 you that in a large class of cases you take too much, and, on the other 
 hand, I say that in those cases where a clerk remains on a low salary 
 for a great many years, and then goes up to a high salary, and is 
 superannuated on the high salary, he evidently gets from you more 
 than his premium would entitle him to under the principles of equita- 
 ble insurance." In answer to a request of the committee that he 
 
CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 61 
 
 explain the effect of the deductions, looking at the question as a ques- 
 tion of insurance, Doctor Farr differentiated very clearly between the 
 two questions involved in the flat-rate deductions from salary and 
 the benefits provided thereby — the question of equity on one hand 
 and the question of the adequacy of the contributions on the other. 
 Said he: 
 
 I have looked into that question carefully, and I will state very 
 shortly my opinion upon that subject. I gather from the 27th sec- 
 tion of the Superannuation Act that it was the intention of the Legis- 
 lature to make the officers in the civil service pay only a portion of the 
 premiums to provide for superannuation allowances, not the full 
 premium. But the question of equity, which was, I believe, first 
 raised by Mr. Gladstone, can only be discussed in this form: Does 
 the act take from the salary of each ofiicer quarterly the precise pre- 
 mium which, on the principles of life insurance, will provide the super- 
 annuation allowance? Is more or less deducted than the just pre- 
 mium? The question of equity must thus arise on each case, and on 
 every separate class of cases, as in life insurance, where a man of the 
 age of 30 can insure £100 [$486.65] by an annual premium of £2 [$9.73], 
 and if this man is compelled to pay £4 [$19.47] a year instead of £2 
 [$9.73] the injustice is not repaired by another transaction in which 
 a premium of £2 [$9.73] only is taken from a man of 51 years of age, 
 who ought strictly to pay £4 [$19.47] a year premium to secure £100 
 [$486.65] at death. It is important, then, to discuss the two questions 
 separately. First, Is each civil servant dealt with as fairly and 
 equitably under the Superannuation Act as a person who insures his 
 life at a life office? The second question would be. Will the public 
 exchequer gain or lose by the superannuation system of the Act of 
 1834? That is a totally different question from the question of 
 equity; the first question I answer, without any hesitation, in the 
 negative. The scheme is full of injustice, for there is no definite rela- 
 tion between the premium and the promised annuity. 
 
 Doctor Farr then proceeded to illustrate the inequity of the scheme 
 by a calculation relative to fixed salaries, showing that in a numerous 
 class of cases a great deal too much was deducted for the object con- 
 templated. As regards ascending salaries, he showed that the deduc- 
 tions were often much too low and often too high. He said: 
 
 The act stops 6d. in the pound [2| per cent] on salaries not exceed- 
 ing £100 [$486.65] a year, and Is. [5 per cent] in the pound on salaries 
 exceeding £100 [$486.65] a year. What does it promise in return? 
 It is not easy to reply ; but it lays down a maximum allowance rang- 
 ing in amount from three to eight-twelfths of the salary; that is, from 
 15-60ths to 40-60ths, wliich the Treasury has practically reduced in 
 many cases to 12-60ths and 32-60ths of the salary. In the calcula- 
 tions which I am about to submit to the committee I leave out of 
 account all the contributions of persons who quit the service, and I 
 assume that the maximum allowance is paid, that the fifth is not 
 deducted. The salaries in the public service are paid in a great vari- 
 ety of ways, which may be referred to two great classes; first, fixed 
 salaries; second, ascending salaries on a great variety of scales, as 
 
62 CITIL-SEEVICE KETIEEMEISTT UST GREAT BRITAHsT. 
 
 will be seen in the estimates of the year; sliding scales they may be 
 called. I will take first the fixed salaries, on which the highest and 
 many of the lowest ofiicers are paid ; they present the simplest cases ; 
 and I shall assume that the allowance is of the nature of a deferred 
 annuity, the premium being uniform and constant. The annuity 
 which the invariable premium will purchase varies, first, with the 
 age of entr}^, and, secondly, with the age at the date of superannua- 
 tion. Let the salary be £200 [$973.30] a year; it is difficult to form 
 a calculation of this sort; I have therefore made the case as simple 
 as possible, but on this case all other cases of this kind can be decided; 
 then the premium will be £10 [$48.67] a year; the age of entry ranges 
 from 17 to 45 years. I have returns showing the ages of entry, which 
 are very various. The period of service ranges from 10 to 60 years, 
 as is shown by the Table which I have submitted to the committee. 
 If the age of entry is 25 years, and the period of service 40 years, the 
 premium purchases £159 ($773.77), while the act allows at the utmost 
 £116% ($567.76), which the Treasury rule may reduce to £93 3/^ 
 ($454.21). Assuming that the grant is represented by a deferred 
 annuity, that is a strict calculation, which would be made on the same 
 principle as a calculation for a life ofiice. If the age of entry is 20, 
 and the period of service 45 years, the premium pays for an annuity 
 of £206% ($1,005.71) ; the act allows at the utmost £133H ($648.87), 
 or, after the fifth has been deducted, £106% ($519.09). Take a high 
 office, salary £2,000 ($9,733), age of entry 30, period of service 40 
 years; the premium purchases an annuity of £2,349 ($11,431.40) ; the 
 act allows £1,166 ($5,674.34). If the period of service is 45 years, 
 the officer pays for an annuity of £5,229 ($25,446.93), and is allowed 
 £1,333 ($6,487.04). Again, the act grants the same proportion of 
 salary for two entirely different rates of premium; this is a violation 
 of the principles of equitable insurance; if 2^ per cent is enough, five 
 is too much; but take one of the lower offices, salary £100 ($486.65); 
 age of entry, 20; service, 50 years; the premium of 24- provides an 
 annuity of £99 ($481.78) ; the act allows £66% ($324.43"), reduced by 
 the rule to £53 1/^ ($259.54). The sickness and infirmity under the 
 age of 65, if real, must in nearly all cases shorten life, shorten the 
 term of the annuity, and therefore diminish its value. In this numer- 
 ous class of cases too much is evidently deducted; in another series 
 of cases the deduction is insufficient. The fund may even be worked 
 against the public by officers being put in young and remaining for 
 10 or 15 years, and then leaving in a state of health little impaired. 
 Thus by entering on salaries of £100 ($486.65) a year, and remaining 
 10 years, they would pay £2 10s. ($12.17) a year, or £25 ($121.66), 
 which would purchase an annuity of £1 13s. ($8.03) during their 
 future lives; the annuity granted is £25 ($121.60) or £20 ($97.33), 
 and you might lose £18 ($87.60) a head annually. The sliding- 
 scale salary is uncertain in its operation, and varies almost in every 
 office; its tendency is to raise the rate of allowance; in some cases 
 the fund gains, in others it loses enormously. 
 
 In the absence of definite data as to the age, length of service, and 
 salary increases of members of the service, such as were afterward 
 collected and furnished to Messrs. Ansell and JMorgan, Doctor Farr was 
 unable to give a positive answer to the second question, Will the 
 public exchequer gain or lose by the superannuation system of the 
 
CIVIL-SERVICE EETIREMENT IN GREAT BRITAIlSr. 63 
 
 Act of 1834? While he said that he beheved the Government would 
 gain on the whole, under a strict interpretation of the act, thus con- 
 curring in the impression which prevailed among the civil servants 
 generally, he stated distinctly that his opinion was not the result of 
 any strict calculation, such a calculation being impossible under the 
 circumstances. He said : 
 
 I think the committee clearly understands that the cases which I 
 have put here, in a more distinct form, show that the deductions 
 from a large number of the salaries will provide annuities of a greater 
 amount than are actually paid under the act of Parliament. I con- 
 ceive that in many cases the civil servants do not pay a sufficient 
 sum to provide the annuity, and that is particularly the case in the 
 various kinds of sliding scales, where the salaries begin very low, and 
 remain low, and then go up to the high sum on which the super- 
 annuation is paid; but the number of those scales is so numerous, 
 that it is exceedingly difficult to form any calculation as to the 
 aggregate result; that is, whether the Government will gain or lose 
 by the whole transaction ultimately. * * * j^ appears to me, on 
 the whole, that the public servants pay too much. If you take the 
 whole, as a class, the Government would gain rather than lose by the 
 transaction, if the act of Parliament was carried out strictly; but I 
 merely wish the committee to consider that as my general opinion; 
 it is not the result of any strict calculation; such a calculation is, as 
 far as I see at present, impossible. 
 
 Doctor Farr pointed out too that the 5 per cent deduction had 
 not been fixed on as the result of any scientific calculation. Said he: 
 
 I have often asked on what data the rate of deduction of five per 
 cent was fixed ; whether any calculations had been made by the Gov- 
 ernment; and I have not been able to ascertain that any calculations 
 have been made. The first traces of this rate appear in the Act of 
 1822; but the terms of that act were very different from the harder 
 terms of the Act of 1834. * * * -pj-^g committee will see that the 
 Government of 1834 appears not to have had any calculation them- 
 selves in fixing this rate of five per cent.('*) 
 
 While unwilling to commit himself, in the absence of a. reliable 
 salary scale, to any positive statement about the adequacy of the 
 contributions in the aggregate to meet the charge of superannuation, 
 Doctor Farr presented numerous tables to show that the value of the 
 contributions was greater than the value "of the pensions to all the 
 faithful employees who had devoted many years to the service of 
 the Government. ''I think," said he, ''that the faithful public 
 servant who remains at his post, undoubtedly pays more than the 
 value of his pension by his deductions, but those who remain a short 
 time, or go out in a state of perfect health, make an excellent bar- 
 gain. They derive a large profit from the Government." This was, 
 however, an illustration of the inequity of the scheme and proved 
 nothing as to the adequacy or inadequacy of the sum of contributions. 
 
 a Report on Civil Service Superannuation. 1856. Minutes of evidence, p. 173. 
 
64 CIVIIi-SEKVICE EETIEEMENT IN GREAT BRITAIN. 
 
 Doctor Farr's opinion that the existing superannuation scheme was 
 unfair and inequitable was shared by other eminent actuaries of the 
 day. Five of them signed a statement to that effect which they pre- 
 sented to the committee in which they also upheld Doctor Farr's con- 
 tention that the value of the pensions was considerably less than the 
 value of the contributions. This declaration was as follows: ("') 
 
 We have examined the statements and calculations with reference 
 to the pensions granted after various periods of service, to civil 
 servants, and we are unanimously of opinion — 
 
 1st. That the deductions of 2^ per cent, on some salaries, and 5 
 per cent, on others, are unjust, because the pensions of those who 
 remain long in the service, and have paid the higher rate for a longer 
 time, are virtually diminished, to make up the pensions of those who 
 retire early, the larger proportion of whose payments may have been 
 at the smaller rate. 
 
 2nd. That the age of entry, and the age of receiving the pension, 
 not being duly considered, those who have paid the fewest number 
 of contributions may in many cases receive much more than the pro- 
 portionate annuity; and the effect must necessarily be that the remain- 
 ing pensioners have not the full benefit which they could obtain from 
 their deductions of salary if the fund was managed on the same prin- 
 ciples as it would be in an assurance or annuity company. 
 
 These tables show that the average value of the pensions actually 
 granted is considerably less than that of the pensions that should 
 be given for the contributions deducted from the salaries of officials 
 in the civil service, even leaving out of view the profits arising from 
 resignations, and discharges, and the Treasury deduction of 20 per 
 cent. 
 
 J. Hill Williams, 
 English and Scottish Law Life Assurance Company. 
 Edwin James Farren, 
 Actuary, Gresham Life Insurance Co. 
 Robert Tucker, 
 Pelican Life Insurance Office. 
 Charles Jellicoe, 
 
 Eagle Insurance Co. 
 Samuel Brown, 
 Actuary of the Guardian Assurance Company. 
 
 Doctor Farr's belief that the deductions from salary were more than 
 sufficient to pay for the benefits under the act was also indorsed 
 by every actuary called before the committee, including Thomas 
 Rowe Edmonds, esq., actuary of the Legal and General Assurance 
 Society of London, Charles Ansell, esq., actuary of the Atlas Insurance 
 Office, and Peter Hardy, esq., actuary of the London Assurance 
 Company. The fact that the careful investigation of Messrs. Morgan 
 and Ansell later proved that the employees' contributions were inade- 
 
 « Report on Civil Service Superannuation. 1856. Appendix No. 14, p. 448, 
 
CIVIL-SEEVICE RETIREMENT IN GREAT BRITAIN. 65 
 
 quate in the aggregate is a striking illustration of the difficulty 
 attending any rough calculations in which there is a flat-rate contri- 
 bution made without reference to entrance age and resulting in a 
 commingling of assets. 
 
 (b) ACCRUED LIABILITIES POSSIBLE CAUSE OF INSOLVENCY IN CASE OF 
 
 FUND. 
 
 It is possible, of course, that with the high rate of interest then 
 prevailing, the deductions of 2 J and 5 per cent might have been 
 sufficient to meet the charges under the act, but for the second great 
 actuarial fault in the plan, the fact that no provision had been made 
 to take care of the accrued liabilities. There were naturally a great 
 many elderly persons in the service in 1834 at the time of the passage 
 of the act who became superannuated immediately and retired from 
 the service on an allowance. There were a great many others retir- 
 ing every year thereafter whose contributions had been small in 
 comparison to the benefits which they began to receive immediately 
 on retirement. Had the contribution been funded, the fund would 
 have become insolvent in its efforts to carry the retirement of the 
 older employees through taxation of the younger employees alone. 
 It would have reached this stage soon after the investigation of 
 1856, and when the employees who were young in 1829 and who had 
 been contributing to the fund all the intervening years became super- 
 annuated there would have been nothing left on which to retire 
 them. Plain as the necessity for a sharp line of demarcation between 
 past liabilities and future liabilities is to the student of retirement 
 plans, it seems remarkable that it should have escaped the ministers 
 of the British Government who brought forward the Superannua- 
 tion Act of 1834, except that this mistake is one that has been com- 
 mon to many ministers in other countries who have wrestled with 
 the problem of superannuation and to the managers of fraternal 
 benefit associations the world over. That ''hindsight is better than 
 foresight" was well exemplified, however, in the follewing colloquy 
 between the chairman of the Select Committee and Sir Charles E. 
 Trevelyan : 
 
 Although the act of Parliament is very loosely worded, yet, seeing 
 the statements made by the two persons charged with bringing 
 forward this measure, does it not appear to you that the intention 
 clearly was, that the persons contributing to the fund were to have 
 an interest in that fund for their own benefit, and that it was not to 
 be made a subject of debtor and creditor with the whole civil service, 
 including those branches of the civil service which, previously to 
 1829, had established their exemption from contribution? 
 
 That is my view. 
 
 Supposing the minister of the day had fairly put the question 
 before Parliament thus: "Here is a service which, previously to 1829, 
 
 35885— S. Doc. 290, 61-2 5* 
 
66 CrVIL-SEEVICE EETIEEMENT IN GEEAT BEITAIE". 
 
 has been chargeable upon the country for superannuation, but, in 
 order to reheve the pubHc from that for the future, we will make a 
 compact with those who hereafter enter the service that they shall 
 contribute to a superannuation fund;" would not then a clear separa- 
 tion have been made between those who contributed to the fund and 
 those who were entitled to claim superannuation allowances without 
 a contribution? 
 
 In those days the class of public servants interested in this matter 
 hardly existed; they only commenced in the year 1829; they were 
 only five years old in official life in the year 1834, when the act was 
 passed; they were mere youths; their interests were not thought of; 
 that parliamentary return was made out with very little regard to 
 them; the question had not been raised; there had been no discus- 
 sion about it. I conceive that if the annual parliamentary return 
 had been made out according to the intention and spirit of the act, 
 it would have been divided into two ; the first portion would have 
 been for the old servants who received the higher rate of pension, and 
 whose pensions were entirely charged upon the consolidated fund, 
 and who had no deduction from their salary. The other portion 
 would have shown a debtor and creditor account of the receipts in 
 the shape of deductions from and of the payments in the shape of 
 pensions to the new class. (") , 
 
 That the actuarial objections to the plan established under the Act 
 of 1834 were not more generally understood was undoubtedly due to 
 the fact that they were somewhat obscured by the failure of the act 
 to direct the formation of a superannuation fund. Had there been 
 a fund in the strict sense of the term and had the accounts been care- 
 fully kept, the atmosphere would have been clearer, and the inade- 
 quacy of the rates to meet future liabilities and the insufficiency of 
 the fund to cover past liabilities as well would undoubtedly have 
 been perceived much earlier than was the case. A great deal of the 
 committee's time was consumed in questioning witnesses and dis- 
 cussing with them the probable meaning and intention of the Legis- 
 lature when it passed the Act of 1834 without mention of a fund and 
 the difference such a provision would have made in the claims which 
 the civil servant might or might not have had on the country. It 
 was estimated that in the twenty-seven years that had elapsed since 
 the passage of the Treasury minute of 1829 the civil servants had 
 lodged about £800,000 ($3,893,200) with the Government. A reading 
 of the evidence shows that there was a deep sense of injury among the 
 civil servants but no very clear perception of where the trouble lay. 
 Frederick Locock of the Colonial Ofhce wrote the Select Committee 
 on April 13, 1856, in a way that suggests, however, that he at least 
 felt the Government had done wrong in not investing the civil serv- 
 ants' money and keeping a strict account of it. Said he: 
 
 What greater advantage * * * will accrue to the clerks 
 through their savings being invested by the Government, than when 
 
 o Report on Civil Service Superannuation. 1856. Minutes of evidence, pp. 15, 16. 
 
CIVIL-SEEVICE EETIKEMENT IN GREAT BRITAIlSr. 67 
 
 invested by themselves? Greater security, indeed, they would seem 
 at first sight to gain; besides also the expenses of management being 
 saved to them. But to what has this plan already practically been 
 found to lead? Calculations have been made which seem to show 
 that the Government has, for these twenty years past and more, for- 
 gotten what was the essential principle, the virtual understanding, on 
 which such a plan must be framed. It has forgotten that the savings 
 of a man's income are his own property equally with the income itself. 
 It has forgotten that contributions given for a special object can be 
 applied to that object alone. It has forgotten to put out the deduc- 
 tions to interest, and has not even so much as hid them in the earth, 
 but has said, ' 'Lo, there thou has thine own in part, but the rest I have 
 given to others." Yea, strong indeed in possession, but weak in posi- 
 tion, it has even been driven to deny the right of the clerks to the full 
 amount of their income itself. Where then is the security? Where 
 the advantage? Let not the Government any longer talk of special 
 reward, when even the daily wages it has withheld; for not reward, 
 not bounty, not compensation is here in question, but the simple 
 restitution of what is due, the rendering an account of monies 
 entrusted. ("-) 
 
 In the absence of knowledge to the contrary, the belief was general 
 that the Government had made money by taxing its employees, and 
 this belief undermined the loyalty of the service. Its demoralizing 
 effect was set forth in strong terms by Sir Charles Trevelyan. Said he : 
 
 I conceive that there has been no breach of faith in reference to the 
 abatement>3, but that the arrangement is in its nature inequitable, and 
 that it belongs to that class of bad laws which are contrary to the 
 natural sense of justice of mankind; in criminal jurisprudence the 
 effect of such laws is that juries will not convict upon them. In civil 
 administration the effect is, that they obstruct and baffle all our 
 endeavors for the improvement of the civil service. However much 
 we may endeavor to improve first appointments, (^) to establish the 
 principle of promotion according to qualifications and merit, to con- 
 solidate cognate establishments, to make a proper division of labor, 
 or to fix responsibility, this question of abatements continually meets 
 us, by raising discontent. Organization is a very important thing, 
 but the maintenance of a proper feeling and spirit on the part of the 
 public servant, is a still more important consideration; rules and sys- 
 tems are a poor security compared with that habitual sense of duty 
 which induces a public servant, under all circumstances, to do the best 
 he can for the public as a faithful steward of his time and opportuni- 
 ties ; and that sense of duty can not be practically arrived at without 
 the sentiment and feeling that the servants are equitably and gener- 
 ously dealt with. 
 
 According to general understanding in such cases, the Government 
 in withholding a portion of the salary; that is, of the property of its 
 servants, incurs the obligation of applying it in some manner for the 
 benefit of the owner. * * * jtj[ terms of service ought to be of a 
 very simple kind. Hence the impossibility of getting rid of the idea 
 
 « Report on Civil Service Superannuation. 1856. Appendix No. 13, p. 430. 
 b The Civil Service commission had just been established the year before, 1855. 
 
68 CIVIL-SERVICE EETIEEMENT IN GREAT BRITAIN. 
 
 of an appropriated fund. It rises upon us continually, almost daily. 
 We have always, although the act did not prescribe it so in detail, 
 spoken and written, and in a great measure acted upon the supposition 
 of its being an appropriation for the purpose of paying the pensions 
 of the contributors. For instance, in the receipt which we give for 
 our salaries at the Treasury at the end of every quarter it is said, so 
 much deducted for superannuation fund. * * * But there is a 
 more painful illustration of it. For years past, and to this day, we 
 are continually receiving applications from widows and orphans of 
 servants who have died in harness, applying to have the abatements 
 restored, and they state that their fathers or husbands have paid for 
 so many years, 10, 15, 20, or 25 years, those deductions from their 
 authorized salaries, but that they never obtained any benefit from 
 them. * * * The answer that has been always returned has been 
 that the deductions were made in accordance with the act, and that 
 we had no power to restore them; but nothing has been able to 
 persuade these poor people that they were not unjustly dealt with. 
 I lately got out a bundle of applications of that kind, and the answers 
 to them for the last four or five years, a great number, and they 
 alone represented a mass of discontent and presumptive grievance, 
 which was enough to spoil the tone of any public sevice. {^) 
 
 Defense of Act of 1834 by Men Responsible for its Enactment. 
 
 Interesting light on the reasoning which had led to the passage of 
 the Act of 1834 was given the committee by Sir James Robert George 
 Graham, a member of the House of Commons, who had introduced 
 the measure a quarter of a century before in behalf of Lord Grey's 
 Government and Sir Francis Thornhill Baring, a member of the com- 
 mittee who had been a lord of the Treasury at that time. They both 
 stoutly defended the act they had helped to pass in the one case and 
 to interpret in the other, both in respect to the absence of a funding 
 provision and the provision for deductions from salaries. Both 
 stated positively their conviction that the formation of a fund was 
 never contemplated by the Treasury minute of 1829, the Act of 1834, 
 or the minute of November, 1834. Sir James Graham would not 
 admit that the civil servants suffered any injury in consequence of the 
 annual deductions not having been funded, maintaining, indeed, that 
 the claim in equity of the civil servants was merely to the amount of 
 superannuation laid down by the act, and administered through 
 the Treasury, whether such amount were more or less than the 
 deductions would provide. It was his recollection that the deduc- 
 tions were intended to operate as a reduction of salaries, which should 
 more than cover the superannuations of the parties contributing. 
 Sir Francis Baring stated, on the other hand, that the reduction of 
 salaries was at the time expected to be insufficient to meet the 
 expenses of the superannuations, and he felt that if the contrary had 
 proved to be the case, it was a question of equity whether they ought 
 
 « Report on Civil Service Superannuation. 1856. Minutes of evidence, pp. 13, 14. 
 
CiVIL-SEEVICE RETlKEMENT IN GREAT BEITAIlSr. 69 
 
 not to be revised. Both men were agreed that the main object of the 
 act had been economy, and that a larger reduction of salaries would 
 have been made in 1829 than really was carried out, had it not been for 
 the imposition of the deductions. Both regarded the positive notice 
 given in regard to the deductions as sufficient answer to the charge of 
 inequity. 
 
 Each of them made a statement in defense of the system, however, 
 wliich is a sound and interesting contribution to the arguments in 
 favor of a contributory plan as against a straight pension. After 
 contending that the system was "the best arrangement, on the whole, 
 that could have been made," Sir James Graham was asked if he did 
 not think the deduction a firmer security for the continuance of the 
 pensions than a mere act of Parliament, which might be abrogated 
 by a future Parliament, and replied: "Infinitely more security, 
 and more steadiness in its operation. This system has existed now 
 for 28 years without disturbance, whereas in the short experience 
 before that enactment, both Treasury minutes and acts of Parlia- 
 ment varied almost every two or three years." In this connection. 
 Sir Francis Baring stated that "there is one great advantage for the 
 civil servant in the deductions, which is, that they are a shield 
 against the House of Commons in any momentary feeling of economy 
 running in, and making a great alteration with regard to the retired 
 allowances. That is a feeling of which many honorable members 
 now around me are not aware; but I was in the House of Commons 
 when that feeling did strongly exist, and I know that at the time 
 this deduction was taken many of the best and wisest of the civil serv- 
 ants, such as Mr. James Stewart, the Assistant Secretary at the 
 Treasury at the time, considered it as a great advantage to the civil 
 servant as a protection to him, and that he would be safe in future 
 from having his retired allowances interfered with." 
 
 It had been argued, on the other hand, by those who opposed the 
 system of abatements from salaries, that it put the Government in a 
 position of less freedom in dealing with the civil servants than would 
 have been the case had there been no such system of deductions. 
 Sir Charles Trevelyan said : 
 
 One incidental objection to the abatements is, that it deprives the 
 Government of its freedom of action in dealing with its servants; if 
 the Government itself gave the pensions from the Consolidated Fund, 
 it would be able to deal more freely with all classes of public servants, 
 because there would be no vested interests arising from the abate- 
 ments. (") 
 
 The special interest attached to this criticism and others like it 
 expressed to the conmiittee is the fact that the speaker did not seem 
 
 a Report on Civil Service Superannuation. 1856. Minutes of evidence, p. 55. 
 
70 CIVIL-SEKVICE KETIEEMENT IN GEEAT BRITAHST. 
 
 to realize that it was an attack on the lack of provision for refund of 
 deductions, not an attack on the system of deductions itself. 
 
 Defense of Wisdom of Providing Superannuation Allowances. 
 
 It is worthy of note that in all the mass of criticism and suggestion 
 submitted to the committee there was no question of the wisdom of 
 providing superannuation allowances for civil servants. On the con- 
 trary, the policy was warmly indorsed by high and low, whether 
 they argued for straight pensions or for a system of deductions. 
 
 Doctor Farr said : 
 
 Experience has shown that there are great advantages attending 
 the present mode of remunerating public servants, partly by salaries, 
 and partly by superannuation. * * * They are such as have led 
 almost all the nations of Europe to adopt the system of paying partly 
 by superannuation allowances. In the first place, it is a guarantee 
 of fidelity; in the second place, it encourages efficient service; in 
 the third place, it retains good men in the service; in the fourth 
 place, it induces men to retire when they become old or inefficient 
 from any cause; and in the fifth place, it prevents old pubHc 
 servants from falling into a state of disgraceful dependence, or of 
 distressing destitution, which would be a public scandal, and might 
 deter young men from bexjoming candidates for office. These advan- 
 tages appear to me to be so great that I should very much regret to 
 see the system of superannuation abolished. ('^) 
 
 Investigation Proved Deductions Inequitable and Inade- 
 quate. 
 
 The Select Committee having taken evidence for three months 
 finally passed a resolution on May 20, that before coming to any deci- 
 sion they would lay the evidence before Messrs. Ansell and Morgan, 
 the actuaries, with instructions that they direct their attention to 
 the two debatable points so clearly indicated by Doctor Farr: {^) 
 
 Whether the system of superannuation pensions and deductions 
 from salaries established by the Act of 1834 is founded on principles 
 of fairness and equity, in a pecuniary point of view, with respect to 
 civil servants whose salaries are liable to deductions? 
 
 Or whether the deductions taken under this act are more than 
 adequate to meet the charge under the act for this class of civil 
 servants ? 
 
 On June 16, the actuaries responded that they found the system 
 not established on principles of pecuniary fairness and equity. Their 
 conclusion was in exact agreement with that of Doctor Farr and the 
 other actuaries who had expressed their views: {") 
 
 We are of opinion that there is sufficient reason for believing that 
 the present rates of deduction do press unequally on different per- 
 
 o Report on Civil Service Superannuation. 1856. Minutes of evidence, p. 180. 
 
 b See page Gl. 
 c See page 64. 
 
CiVIL-SERVICE EETIREMENT IN GREAT BRITAIN. 71 
 
 sons in the civil service; so that, other things remaining the same, 
 those who enter the service at early ages contribute relatively more 
 than those who enter late in life. 
 
 And further, that those who, starting with equally low rates of 
 salary, but who subsequently rise to the highest salaries, and there- 
 fore become entitled to a higher rate of superannuation, do contribute 
 relatively less than those who, having entered on the same low rate 
 of salary, are so placed in the service as to give them little prospect 
 of advancing beyond comparatively low or moderate salaries. C'*) 
 
 Like Doctor Farr, Messrs. Ansell and Morgan were unable to answer 
 the second question without more information concerning the ages, 
 salaries, and periods of service of the employees. They requested 
 that elaborate data regarding the personnel of the service be pre- 
 pared for their use. With great detail they explained their difficulty 
 to the Select Committee in a letter from which the following extract 
 is taken: 
 
 In respect to the second question, of the great importance of 
 which we are fully sensible, we regret to be obliged to state that we 
 do not find in the papers or evidence, the data on which we should 
 feel ourselves justified in answering it with a conviction that we had 
 made a sufficiently near approximation to the truth ; and it is our 
 duty to state, that before we can arrive at such a conclusion as we 
 should desire, other and additional data must be laid before us. 
 
 The subject on which we are called upon to form an opinion, and 
 to state that opinion to the committee, we consider to be far too 
 important to the public service, and to the individuals comprising 
 the civil service, to permit us hastily to draw conclusions from what 
 appear to our minds insufficient statements of facts. * * * 
 
 We think, therefore, that before we can form any opinion upon 
 which we could ourselves rely, we ought to be furnished with returns 
 from several of the large and principal civil services of the country, 
 showing, 
 
 1st. A return of all the persons now employed in the civil service 
 in their respective departments, stating the nature of their appoint- 
 ments, their present ages, and present salaries. 
 
 2nd. A return of all the persons who have really left the service 
 from other causes than death or superannuation during the last 10 
 years; the dates at which they respectively entered the service, and 
 the dates at which they left it ; also, the salary of each at the time of 
 entry and the subsequent additions made thereto, with the date of 
 each addition. 
 
 3rd. A return of all the persons who have been pensioned during 
 the last 20 years; stating the dates of their entry into the service, the 
 nature of their appointments, their salaries at the commencement, 
 with the amount and date of each rise, the date of superannuation, 
 and the amount of superannuation allowance. 
 
 4th. A return of all those persons who were on the superannuated 
 list at the time when Return No. 3 might commence; stating their 
 ages at that time, and the dates of death of such persons as having 
 been on that list have died, or such other details as would show the 
 
 o Report OQ the Operation of the Superannuation Act. 1857. Appendix I, p. 4. 
 
72 CIVIL-SEEVIGE EETIREMENT IN GKEAT BRITAIN. 
 
 rate of mortality which has prevailed amongst those who have been 
 superannuated. 
 
 With information of this character before us to a sufficient extent, 
 we should be ready, satisfactorily to ourselves, to form a fair judg- 
 ment on the second question submitted to us; * * * but we 
 believe that delay must inevitably take place if we are to investigate 
 the subject in a way satisfactory to our own minds. (^) 
 
 This letter was written June 16, 1856. The four returns asked for 
 were furnished by practically all the departments of the Government, 
 and Messrs. Ansell and Morgan set to work. On March 19, 1858, 
 they submitted their report, showing that the deductions made from 
 the salaries of the civil servants under the authority of the Act of 
 1834 were not adequate to meet the charge to which the public was 
 liable under that act. Included in their report are fourteen tables 
 covering a great variety of data concerning the 15,219 individuals 
 comprising the British civil service. They had made "a most labo- 
 rious arrangement of the facts communicated" to them and pre- 
 sented ' ' many collateral results ' ' which they naturally thought would 
 be matters of interest to the Superannuation Commission appointed 
 to carry on the work begun by the Select Committee of 1856. 
 
 Resolutions of the Select Committee. 
 
 In the meantime, the Select Committee had agreed to certain reso- 
 lutions, one condemning the principle of abatement of salaries, and 
 one affirming the policy of a revision of salaries, with reference to the 
 abatements. What they recommended therefore was not an absolute 
 remission of abatements, but a qualified and conditional remission — 
 that qualification and condition being that the salaries of the entire 
 civil service should be revised with regard to the deduction. The 
 resolution ran as follows: 
 
 That in the opinion of this committee it is desirable to do away 
 with the system by which a portion of the salaries of civil servants is 
 deducted on account of superannuation allowances. 
 
 That, as a condition of such deductions being done away with, the 
 rates of payment in the various branches of the civil service shall, 
 at the earliest possible period, be revised with a due regard to the 
 amount of deductions remitted, as there is no ground for an indis- 
 criminate augmentation of salaries, which would otherwise result 
 from the change proposed; that the revision now referred to shall be 
 made previous to the 1st of April, 1857, when the abatements shall 
 cease. 
 
 In consequence of this action of the committee, the Government 
 brought in a bill, which was introduced by the Chancellor of the Ex- 
 chequer, Sir G. Cornwallis Lewis, at the close of the session. This bill 
 proposed to remove the deductions paid by the civil servants and also 
 
 » Report on the Operation of the Superannuation Act. 1857. Appendix I, p. 4. 
 
CIVIL-SERVIOE RETIREMENT IN GREAT BRITAIN. Y3 
 
 to reduce the salaries to the amount of the deduction remitted. The 
 bill failed to meet with general approval, and owing partly to that 
 cause and partl}^ to the advanced period of the session it was with- 
 drawn. 
 
 SUPERANNUATION COMMISSION, 1857. . * 
 
 During the Parliamentary recess of 1857, following the failure of 
 the Select Committee's bill, the Lords Commissioners of the Treasury 
 proceeded to appoint a royal commission 'Ho investigate this impor- 
 tant subject in all its branches." It appeared from this that the 
 Government was not willing to attempt to force into legislation the 
 recommendations of the parliamentary committee, but thought it 
 wise to refer the matter to still another tribunal. 
 
 Owing to the fact that it resulted in such important legislation, the 
 report of this commission is worthy of special study. After reviewing 
 the history of superannuation measures under the British Govern- 
 ment, from the earliest times down to the passage of the Superannua- 
 tion Act of 1834, the commission considered the inequalities and anom- 
 alies under the existing law, noted the consequent dissatisfaction of 
 the civil servants, and came to the conclusion that a new system of 
 superannuation must be established. 
 
 Commission's Reasons for Advocating a Superannuation 
 
 System. 
 
 There seems to have been no doubt in the minds of the commis- 
 sioners that it was necessary for the good of the service to continue 
 -the practice of retiring the superannuated on an allowance. The only 
 question was as to what was the best system, and how the existing 
 regulations would have to be altered in order to adapt them to the 
 new system. Said they : 
 
 The first question which presents itself with reference to this sub- 
 ject is the expediency of providing superannuation allowances at all. 
 It has sometimes been argued that the only duty of the Government 
 is to offer due remuneration in the shape of salary for the services 
 performed, and that it ought to be the business of the civil servant to 
 make provision out of that salary for his own future wants or those 
 of his family. Although this question must be considered as settled 
 by the established practice of this country, and also as assumed by the 
 appointment of the present commission, it may be convenient, with 
 reference to our future course of argument, that we should state the 
 grounds for the opinion which we hold upon it. Having regard to 
 public interests alone, we think that there are ample reasons for main- 
 taining a system of superannuation allowances. 
 
 1st. It must be recollected that incapacity, caused by illness or 
 other infirmity, may happen at any period of life, and is not a calamity 
 for which it is easy to provide by means of insurance, as in the case of 
 death ; and it must also be borne in mind that, with a view to the due 
 performance of his duty, it is important that a civil servant should feel 
 
74 OIVIL-SEEVICE EETIREMENT IN GEEAT BEITAIN. 
 
 himself in a safe and independent position, and that his mind should 
 not be harassed or distressed by anxiety respecting his future con- 
 dition. 
 
 2nd. Supposing an assiduous and devoted pubHc servant, who has 
 spent the best part of his hfe in the service of the State, to become 
 suddenly incapacitated by disease or bodily infirmity, public opinion 
 would not allow that such a man should be permitted to starve. 
 Although the want of any provision may be attributable to his own 
 improvidence, this would not be considered as exonerating the Gov- 
 ernment from making some special provision for him. Sir J. Graham 
 says, in his evidence before the Committee of 1856: "I have the 
 strongest opinion that whether there were any deduction made or 
 not, and whether there were any specific contract made by the State 
 or not, cases of such extraordinary hardship would present themselves 
 on the part of faithful servants, worn out in the public service, that 
 the claim for pension upon retirement would be irresistible." Such 
 cases might not infrequently occur, and an irregular and objection- 
 able practice of making special provision for particular cases would 
 thus be gradually introduced. There can be little doubt that it 
 would be more for the interest of the service to establish, beforehand, 
 general rules under which superannuations should be awarded; and 
 it is also probable that this system would, in the long run, be found 
 more economical, inasmuch as the prospect of a provision on retire- 
 ment would be considered as a part of the remuneration for the serv- 
 ices to be performed, and would be taken into account in regulating 
 the amount of the salary. 
 
 3rd. It is probable that, in many cases, the hardship of removing 
 an estimable public servant without provision would be avoided by 
 retaining him in the service after he had become incompetent to per- 
 form his duties. This is, perhaps, the strongest argument in favor of 
 a system of superannuation. It may be true that it is strictly the 
 duty of heads of departments to remove from the service all public 
 officers who have become, from any cause, incompetent fully to dis- 
 charge their duties, without regard to their feelings or their future 
 position; but experience has shown that this is a duty the perform- 
 ance of which it is most difficult, if not impossible, to enforce; and as 
 it is impracticable, by any regulations, to define beforehand at what 
 stage of declining health or increasing bodily or mental infirmity 
 incompetence begins, the result is that, in the absence of superannu- 
 ations, inefficient persons are retained in the public service. * * * 
 The injury caused to the service by the retention of inefficient officers 
 might, no doubt, be in part corrected by increasing the numbers of the 
 establishment beyond what would have been required had all the 
 servants been effective; but it would be impossible to justify such an 
 arrangement, and under such circumstances the public service would 
 be a loser for want' of superannuation allowances, probably in actual 
 money, and, at all events, in the less direct results. The evil conse- 
 quences of retaining a single civil servant in an important post for 
 which he has become incompetent can not be estimated in money, 
 and may be much more than an equivalent for the expense of the 
 superannuation of a whole department. For these reasons we are 
 unhesitatingly of opinion that the pubhc interests will be best con- 
 sulted by maintaining a system of superannuation allowances. (*^) 
 
 o Eeport on the Operation of the Superannuation Act. 1857. pp. X, XI. 
 
civil-service retieement in great beitain. 75 
 
 Commission's Objections to a Contributory Scheme. 
 
 Having thus explained the grounds on which they thought it 
 desirable to retain a system of granting superannuation allowances, 
 they proceeded next to consider whether it was desirable to establish 
 a fund for the purpose, to be supported by the contributions of the 
 civil servants, and decided that it was not. Their reason for this 
 decision was that experience had proved it difficult "to prescribe 
 beforehand any scale of contribution which shall be so adjusted as to 
 supply the requisite amount without material surplus or deficiency. 
 If then, the fund should prove deficient," they argued, "such defi- 
 ciency must be supplied from the public revenue, and no object will 
 have been gained by carrying the compulsory contributions of the 
 civil servants to a separate account. If, on the other hand, the fund 
 should prove to be in excess, difficult questions must arise as to the 
 equitable appropriation of the surplus." They were, therefore, dis- 
 posed to agree with the legislature of 1834 in considering it inexpedient 
 to establish a superannuation fund. 
 
 Assuming that no such fund was to be created, the commission 
 next considered whether the civil servants should be charged with 
 deductions from their salaries on account of superannuations, and 
 came to the conclusion that such a course was undesirable and that 
 a system of "engaging public servants at a certain net amount of 
 salary, with a conditional prospect of superannuation on certain 
 terms," was simpler and more straightforward. They gave as one 
 of the reasons for this conclusion the opinion that a system of deduc- 
 tions "has an injurious effect in creating an erroneous impression as 
 to the real nature of the transaction. The payment of a charge on 
 the salary for the purpose of providing superannuations almost neces- 
 sarily suggests the idea," said they, "of the existence of a fund to 
 which each civil servant has contributed, and in which he, therefore, 
 may be supposed to possess a certain right of property," and they 
 were led to doubt whether the impression could be entirely removed, 
 except by an alteration of the system. Their other objection to the 
 system of deductions was the fact that it necessarily ' ' raised questions 
 as to the sufficiency or insufficiency of the superannuation allowances 
 considered as an equivalent for the deductions paid, and this not only 
 with reference to the whole service, but with regard to particular 
 departments, or even individual cases." In this connection, they 
 noted the complaint of individuals compelled to pay deductions, 
 although from special circumstances there was little or no chance of 
 their ever deriving benefit from superannuations. In short, the great 
 overwhelming impression which the commissioners received of the 
 system which they were investigating was of the inequalities which 
 the system of deductions as administered sanctioned in the remunera- 
 tion of different classes of civil servants. 
 
76 civil-seevice retirement list great britain. 
 
 Recommendation that Deductions from Salary be Abolished. 
 
 They saw only two ways of removing these inequahties — either by 
 reducing the advantages of the favored classes or by improving the 
 condition of the others. Feeling reluctant to interfere with the posi- 
 tion of those civil servants entitled to full superannuation without 
 the payment of deductions, they recommended as the only alternative 
 the abolition of deductions, thus increasing by that amount the 
 incomes of the civil servants then paying deductions. They justified 
 this recommendation with the statement that ''by such a measure 
 the members of all the leading departments of the civil service would 
 be placed on an equal footing as to salaries, inasmuch as all would 
 alike receive, without abatement, the salaries which are stated to 
 have been awarded to them on equal terms." 
 
 Besides recommending the abolition of deductions, the commission 
 recommended six other changes in the system of granting superan- 
 nuation allowances. They were: 
 
 (1) The adoption of a new scale of retired allowances. 
 
 (2) The reduction of the age of voluntary retirement from the 
 public service from 65 to 60. 
 
 (3) Compulsory retirement from the service at 65 years of age, 
 except in certain special cases. 
 
 (4) The application of a more liberal scale of superannuation to 
 certain officers requiring professional knowledge, and the power of 
 applying a special scale to other individual cases where, on the first 
 appointment, it might appear, for special reasons, to be proper. 
 
 (5) The application of the ordinary rules of superannuation to 
 various officers and departments which had previously been treated 
 as exceptional cases, so as to secure, so far as might be practicable, a 
 uniformity of system. 
 
 (6) The power to award gratuities or pensions in certain cases to 
 civil servants who might by reason of ill health or bodily injury be 
 required to retire before they had become entitled to a retired allow- 
 ance, and to regulate the amount of compensation to be awarded on 
 the abolition of offices. 
 
 The fifth recommendation applied to the Permanent Under Secre- 
 taries of State, the Second Secretary of the Admiralty, and the Per- 
 manent Secretary of the India Board, who were all treated by the 
 Act of 1834 as political functionaries, although those offices were 
 never held by members of Parliament and never vacated on a change 
 of administration. The commission held that they should be placed 
 under the rules of the ordinary civil service, giving them, of course, 
 the benefit of an exceptional rate of superannuation, if on inquiry 
 they should appear to fall within the principles laid down. With 
 regard to the judicial officers (whose pensions were regulated by 
 
CIVIL-SERVICE RETIEEMENT IN GREAT BRITAIN. 77 
 
 many different acts) the commission did not think it within their 
 province to decide which of them should be placed under the provi- 
 sions of the general superannuation act; but thought that in all 
 cases in which it was deemed right to place them under the general 
 act they should have the benefit of the exceptional rule recommended 
 above. With regard to the inferior officers in the dockyards and 
 victualing yards and to certam artificers in the arsenals, who had 
 complained that they received their superannuation according to an 
 antiquated scale considerably lower than that applied to the ordinary 
 civil service, the commissioners held that there was no good reason 
 for making any one department an exception from the general rule. 
 To reform the anomalies in the Department of the General Post- 
 Office, the commission recommended that the system of granting 
 superannuation should be revised with a view to placing it on a 
 more uniform principle. This recommendation applied also to the 
 peculiar class of clerks employed in public offices under the name of 
 extra clerks, although a portion of them at least had come to be 
 permanently employed. The commission found that there was no 
 good reason for pensioning them on a lower scale than the other 
 clerks, assuming them to be permanently employed. 
 
 Refusal of the Commission to Recommend an Insurance Fund. 
 
 The petition of a large body of civil servants that compulsory con- 
 tributions be required for the purpose of creating an insurance fund, 
 to be managed by the civil service but under the general control of 
 the Government, received very slight consideration from the com- 
 mission. Confusing this request apparently with the idea of pen- 
 sions for widows and children — a very different proposal — they dis- 
 missed it in the following words : 
 
 In some countries the provision made by the State for its servants 
 has been carried still further, and has included their widows and 
 children after their death. As a question has been raised in some 
 of the niemorials of the civil servants as to the expediency of such 
 an extension of the system, it may be right to notice the subject. It 
 appears to us that none of the three reasons which have been stated 
 in favor of superannuation allowances apply to the case of a provi- 
 sion for widows and children. 
 
 1st. It is true that many civil servants may feel an equal anxiety 
 for the future welfare of their wives and children as for their own; 
 but against the chance of premature death there is a certain and easy 
 mode of providing by means of insurance; and it can not be doubted 
 that those who would suffer from anxiety on this subject would be 
 likely to have recourse to this means. 
 
 2nd. It does not appear that in this country, at least, public opinion 
 would require that the civil servant should be relieved from the duty 
 of providing, by insurance or otherwise, for the future support of his 
 family, and that this burden should be thrown upon the State. It is 
 
78 CIVIL-SEKVICE EETTKEMENT IN GREAT BEITAIN. 
 
 true that sympathy has of late years been excited in favor of some 
 claims for assistance made by the widows of deceased civil servants; 
 but in these cases the applications were grounded, not upon a general 
 claim for provision as widows of civil servants, but on the fact that 
 their husbands had made large contributions under the name of 
 deductions to a supposed fund, from which they had themselves 
 received no benefit, and on which it was, therefore, supposed that 
 their families might have an equitable claim. The third reason is, of 
 course, inapplicable to the present case.(") 
 
 Indifference of the Commission to Actuarial Phases of the 
 
 Problem. 
 
 This memorable report strikes the student of superannuation 
 schemes as remarkable for two important omissions. It ignored 
 absolutely all actuarial phases of the subject and it barely mentioned 
 the interests of the British taxpayer. 
 
 The most important recommendation— the abolition of deductions 
 from salaries to meet the charges of superannuation — constituted a 
 change of the whole system from a contributory to a noncontributory 
 plan. It meant the establishment of a civil pension list similar to the 
 military pension list. It meant that members of the civil service were 
 to be retired thereafter out of the public revenues without cost to 
 themselves. 
 
 This momentous change was recommended by the commissioners 
 because they saw the inequalities of the system in vogue, recognized 
 the fact that the civil servants had just cause for complaint, and 
 knew of no other remedy. Failing to perceive that fixed mathe- 
 matical principles must underlie any sound superannuation scheme, 
 and that if any given plan proves inequitable and unsatisfactory it is 
 because it violates such principles, they came to the conclusion that 
 the easiest and quickest way to cut what seemed to them a Gordian 
 knot was to recommend a free, general pension for everybody in Her 
 Majesty's permanent civil service. 
 
 As previously explained, the eminent actuaries who had been 
 engaged by the Select Parliamentary Committee to determine 
 whether the deduction made under the Act of 1834 was adequate to 
 meet the charges, had found it necessary, before they could answer 
 this question, to make a thorough study of the whole civil service of the 
 country, classifying the members according to age, length of service, 
 average and aggregate salaries, and the amount of aggregate deduc- 
 tion to which they would have been liable under the Act of 1834. 
 From this mass of data they deduced some valuable tables. With 
 these as a foundation it would have been entirely possible for them to 
 work out a contributory plan of retirement based on scientific princi- 
 ples, fair to the civil servant, fair to the taxpayer, and equitable as 
 
 o Report on the Operation of the Superannuation Act. 1857. pp. XI, XII. 
 
CIVIL-SERVICE EETIEEMENT IN GREAT BRITAIN. . 79 
 
 between different classes of civil servants. Work similar to that done 
 by Messrs. Ansell and Morgan with respect to the 15,219 individuals 
 of the British civil service in 1856, who were contributing from 
 their salaries, has recently been performed (in 1907) by Mr. Mor- 
 ris Fox, the government actuary of New Zealand, with respect to 
 the 5,593 individuals of the New Zealand civil service, and in 1906 
 by the author of this report with respect to 103,030 individuals 
 of the civil service of the United States, and again in 1908 with 
 respect to 170,228 members of the service, including practically all 
 those classified. The task of Mr. Fox and of the author was, in 
 each case, more laborious than that accomplished by the British 
 actuaries of 1856, because the former were required, in the one in- 
 stance by the Public Accounts Committee of New Zealand's House 
 of Representatives and in the other by the committees on civil serv- 
 ice in the two houses of the American Congress, not only to make 
 a classification of the members of the respective civil services as 
 to age, salary, length of service, etc., but also to compute the cost 
 of establishing a superannuation scheme based on sound actuarial 
 principles and on the statistics of the given services. Had the British 
 actuaries been asked to carry their work to its logical conclusion in 
 similar fashion, they could undoubtedly, after their study of the serv- 
 ice, have presented to the Government a superannuation scheme 
 sound in principle and detail, and suited to the requirements of the 
 British service, and with it a reliable calculation as to the possible 
 maximum cost of putting it into operation. But the actuaries of 
 Great Britain were entirely disregarded. Not even waiting to receive 
 their report, and failing to perceive that the problem was a technical 
 one capable of accurate and positive solution, the civil service super- 
 annuation commissioners hastened to urge the abolition of the con- 
 tributory system. The law establishing the pension system was 
 passed before the actuaries had finished their report or before any 
 one had had a chance to consider it. 
 
 This haste of the commissioners to abolish the system of deductions 
 seems all the more astonishing in view of the fact that a large number 
 of the civil servants had gone on record as not averse to compulsory 
 abatements from their salaries, provided those abatements were used 
 to create an insurance fund — in other words, provided they were turned 
 to the benefit of the contributor' s family in case of death. Doctor Farr, 
 who had advised a general pension system in preference to the exist- 
 ing contributory plan, had not asked for the complete abolition of 
 deductions. He knew that that would not meet the needs of the 
 situation. He had urged the straight pension only in connection 
 with the diversion of deductions to the payment of insurance pre- 
 miums. Through the half century that has elapsed since the Act of 
 1859 was passed; the need of some provision in case of death before 
 
80 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 
 
 reaching pensionable age or just after has continued to be felt and 
 to be dwelt upon. It has lately been officially recognized by passage 
 of the Act of September 20, 1909. It seems strange, therefore, under 
 all the circumstances, that the whole subject was not thrashed out 
 with more thoroughness, with the help of the expert actuarial talent 
 that was available at the time the momentous change was made. 
 
 The indifference of the commissioners of 1857 to the actuarial 
 phases of the problem is evidenced by various details in their report. 
 They recommended, for instance, the adoption of a new scale of 
 retired allowances, without making a single calculation as to the cost 
 of such a change. They also recommended that the age of voluntary 
 retirement be reduced from 65 to 60 years, without apparently con- 
 sidering the enormous increase in the cost of annuities purchased at 
 the earlier age, an increase caused by two counts, the greater number 
 eligible at the age of 60 and the higher scale of values. 
 
 Indifference of the Commission to Cost of Free Pension 
 
 Scheme. 
 
 The most obvious and fundamental objection to any universal 
 pension scheme is that of the expense which it puts upon the people of 
 the country. This well-known fact was noted by the commissioners, 
 but did not deter them from recommending a general pension. Their 
 discussion of that subject was confined to the following paragraph: 
 
 The single, but not unimportant, objection to this solution of the 
 difficulty is, the additional charge which it would impose on the public 
 revenue. We are not disposed to treat lightly the pecuniary view 
 of the question, and we are well aware of the reluctance which the 
 Legislature must feel in imposing an additional burden on the public 
 finances. {"') 
 
 The commissioners appear to have made no attempt to calculate, 
 or even estimate, the amount of that ''additional charge" which they 
 recommended. Convinced, apparently, that a civil pension, payable 
 out of the public treasury, was the only solution of the problem which 
 was puzzling them, they seemed resolved not to "count the cost," 
 
 REPEAL OF THE TWENTY-SEVENTH SECTION OF THE 
 SUPERANNUATION ACT OF 1834, 1857. 
 
 The report of the Superannuation Commission was submitted to 
 the Treasury Lords on May 15, 1857. On June 30 Lord Naas in the 
 House of Commons moved for leave to introduce a bill to repeal the 
 twenty-seventh section of the Superannuation Act of 1834, which was 
 the section providing for deductions from salaries. The bill met with 
 opposition from the Government, but was finally passed by a large 
 majority in both houses of Parliament. 
 
 a Report on the Operation of the Superannuation Act. 1857. p. XXI, 
 
civil-service retirement in great britain. 81 
 
 Bill for Repeal Introduced by Lord Naas. 
 
 In the course of his speech asking for leave to introduce the meas- 
 ure Lord Naas reviewed the history of superannuation measures in 
 England down to the passage of the Act of 1834, and then proceeded 
 to point out some of ''the inequalities and anomalies" of that act, 
 such as the fact that "out of 56,740 employed in the civil service, 
 at salaries amounting in the aggregate to £5,595,000, ($27,228,067) 
 only 15,311 were subject to abatements; the other 41,429, whose 
 salaries amounted to £3,172,000 ($15,436,538), were guaranteed their 
 pensions, but suffered no abatements." In addition to these ine- 
 qualities, he considered that there were three weighty objections to 
 the whole system of the civil service: First, that the civil servants 
 were not altogether sufficiently remunerated, the average pay being 
 only £141 ($686) per annum, and of two-thirds of that number the 
 average salaries amounted to but £86 ($418) per annum; second, 
 that many of those who contributed to the fund did not get any 
 benefit from it, the most delicate calculations of all the actuaries in 
 the world not being able to persuade the six out of the seven who 
 never received any allowance that they were fairly treated; and third, 
 the fact that the amount of reduction was more than equal to the 
 whole superannuation paid, the tax amounting to upward of £66,000 
 ($321,189) a year and the allowances paid to only about £11,000 
 ($53,531), and the entire contributions of the civil servants during 
 the twenty-seven years the act had been in operation to £900,000 
 ($4,379,850), of which £80,000 ($3,893,200) only had been returned 
 to the contributors in the shape of allowances, leaving a balance of 
 £820,000 ($3,990,530), which if it had been funded would have 
 amounted to £1,000,000 ($4,866,500). Lord Naas referred in terms 
 of warm approval to the report of the Superannuation Commission, 
 saying that, considering the high position and experience of the com- 
 missioners, and the long time that the question had been debated, 
 he was justified in looking at their decision in the light of an arbi- 
 tration between the civil servants and the Government. On their 
 decision he rested his whole case, and h& craved the attention of the 
 House to this very important passage of their report (which is the 
 one usually quoted wherever authority is sought for a sweeping 
 condemnation of contributory systems, but which seems to the stu- 
 dent only a frank confession of the commissioners' puzzled and 
 bafiied consciousness). 
 
 It has not been without much anxious consideration that we have 
 arrived at the conclusion that it is our duty to recommend the aboli- 
 tion of deductions for the purpose of superannuation, without any 
 corresponding reduction in the salaries on which such deductions 
 have been charged. Our first impression in entering on the inquiry 
 referred to us was adverse to this arrangement; but on a careful 
 review of all the difficulties of the case we became satisfied that, with 
 a view to public interests alone, we could recommend no other set- 
 
 35885— S. Doc. 290, 61-2 6* 
 
82 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 
 
 tlement of the question as likely to be permanent and satisfactory. 
 We are aware that the present system of deductions has had high 
 authorities in its favor, and at the time when it was introduced it 
 may have been considered a convenient mode of carrying into effect 
 the unpopular measure of a general reduction of salaries. Never- 
 theless, for the reasons which we have already stated, we believe it 
 to be unsound in principle; and we think that its inherent defects 
 have developed themselves in difficulties of administration of which 
 the effect has been to create a mass of anomalies and inconsistencies 
 most injurious to the public service. In this as in other similar cases 
 it may be found impracticable to escape from a vicious principle and 
 to establish a reasonable and uniform system without some tempo- 
 rary pecuniary sacrifice; but believing that there is no other satis- 
 factory solution of the difhculty, being confident that the ultimate 
 advantage of the public will be much more than a compensation for 
 any possible temporary loss, and having regard to the importance 
 of maintaining the character and efficiency of the civil service, we 
 are of opinion that by the recommendation which we have made 
 we shall best discharge the duty which has been assigned to us.(^) 
 
 Lord Naas said, in conclusion, that he thought he had shown that 
 there was a sufficient reason for the immediate abolition of the super- 
 annuation tax, and as the Government declined to do anything in 
 the matter, he called upon the House to support his bill. The remedy 
 which he proposed was to introduce a bill containing but one clause, 
 repealing the twenty-seventh section of the Act of 1834, wliich author- 
 ized the deductions. This course, however, he said, would not pre- 
 vent the Government from imposing such conditions as they might 
 deem necessary. 
 
 BILL OPPOSED BY THE MINISTRY. 
 
 To the student of the subject it would seem that Lord Naas had 
 given sufficient proof of the anomalies and inconsistencies of the law, 
 but had hardly shown that the abolition of deductions was the cor- 
 rect and only remedy for them. This failure of Lord Naas was 
 pointed out by Sir. G. Cornwallis Lewis, the Chancellor of the Ex- 
 chequer, who rose to the defense of the Government, saying: "The 
 subject is too wide, the questions involved are too large, the civil 
 service, whose interests are affected, is so important, and the sum of 
 money which the noble lord proposes to vote away is too great to 
 allow me to be silent on this occasion." After reviewmg the course 
 of previous legislation he concentrated his arguments on the sensible 
 plea that no piecemeal legislation should be enacted by the House, 
 but that the subject should be considered, as a whole, in all its bear- 
 ings, and action taken only after the actuaries' final report had been 
 submitted and the subject thoroughly discussed in the light of that 
 report. He said that : 
 
 The question which now arises is whether the House shall at once 
 proceed to repeal the clause in the Act of 1834 without any further 
 
 oHansard's Parliamentary Debates, 3d series. CXLVI, pp. 690-698. 
 
CIVIL-SERVICE RETIEEMENT IN GREAT BEITAIN. 83 
 
 legislation on the subject, merely upon the suggestion of the facts 
 brought under their notice to-night. The noble lord did not state to 
 the House that the recormnendations of the commissioners involved 
 a great number of questions which do not belong strictly to the sub- 
 ject of these abatements, and if he founds his case upon the report of 
 the commissioners he is bound to give effect to the whole of their 
 recommendations. * * * Another part of the question which 
 must be considered is the great magnitude of the sum involved, and 
 the importance of not taking a hasty step or legislating on imperfect 
 information on account of the large pecuniary interests which are at 
 stake. * * * I am perfectly willing to concede to the noble lord 
 that the present system, under which superannuation allowances are 
 granted, is full of anomalies and inconsistencies, and that the present 
 rule with respect to the abatement is far from satisfactory. I can not 
 admit, however, that the creation of a fund was ever promised, either 
 by Parliament or by the Government ; neither can I admit that there 
 has been any breach of a contract by any Government. The com- 
 missioners themselves distinctly state their opinion that no such 
 breach of contract has taken place, and that the civil servants have 
 no claim on the ground of equity for the proposed change. The 
 commissioners recommend the change on the ground of expediency. 
 They say, "the system is a bad one; you must pay forfeit for the 
 abolition of it; you can not get rid of it without surrendering £60,000 
 ($291,990) or £70,000 ($340,655) a year, and we think the system is 
 so bad that we advise you to abandon it, even at that cost." I admit, 
 then, that the system is a bad one, and I regret that it was ever intro- 
 duced. * * * Looking, then, to the extensive consequences of 
 the simple alteration of one clause which the noble lord proposes, and 
 considering the necessity of legislating upon this subject — if it is to 
 be legislated upon at all — in a more comprehensive manner and with 
 a wider regard to consequences than is now proposed, it is not in my 
 power to vote in favor of the motion of the noble lord. I would also 
 say that I do not see how the Government would be justified in 
 undertaking to do anything with regard to this question until the 
 report of the actuaries has been received. The subject is now under 
 the consideration of the actuaries, and the commissioners promise 
 the result in a supplementary report. Under all the circumstances 
 then, and looking at the position in which the question stands, I do 
 not see how it would be possible for me to accede to the motion of the 
 noble lord. It is for the House to say whether the question can be 
 decided in this summary manner, and whether, as guardians of the 
 public purse, considering the large sum of money involved in this 
 motion, they think themselves justified in deciding in favor of it.^^) 
 
 The Chancellor of the Exchequer assented to the introduction of the 
 bill, however, on the understanding that the object of such concession 
 was merely to give an opportunity for fuller discussion. The bill 
 was accordingly read for the first time. 
 
 On the motion for the second reading of the bill, on July 23, Mr. 
 Wilson, then Secretary for the Treasury, stated the reasons for the 
 Government's opposition to the bill. Taking up, first, the general 
 belief that the contributions which the civil servants of the Crown 
 
 "Hansard's Parliamentary Debates, 3d series. CXLVI, pp. 703-707. 
 
84 CIVIL-SEEVICE EETIREMENT IN GREAT BRITAIN. 
 
 had made toward their pensions were considerably larger than neces- 
 sary to provide for those pensions, he said that he was prepared to 
 admit that if that case could be established, whatever the terms of 
 the compact, it would be politic to abandon the charge or at least to 
 reduce the charge to what was merely sufficient to provide the pen- 
 sions. Repudiating the idea that there had been any breach of 
 engagement on the part of the Crown with the civil servants, he next 
 said that the whole question resolved itself into one of policy, and that 
 it had been justly stated in the report of the commissioners that, 
 after all, this was a question of the remuneration of public servants, 
 and that the claim of pension could not be separated from the 
 amount of salaries. Reviewing the salary question, Mr. Wilson 
 argued that if there were injustices in the matter of remuneration 
 paid different classes of employees, those injustices would only be 
 increased by the general abolition of abatements from salaries. 
 He said that: 
 
 Although the insufficient remuneration of public servants might 
 be a just ground for revising the scale of salaries, it could be no reason 
 for an indiscriminate increase of salaries, without regard to merit 
 or efficiency. The proposition of the noble lord would amount to 
 an indiscriminate increase of salaries throughout the public service 
 to the extent of 5 per cent upon salaries exceeding £100 and £2 10s. 
 per cent on salaries below that amount. Now, supposing some por- 
 tions of the public service were at present underpaid, an increase of 
 2 J or 5 per cent upon the existing salaries might be quite insufficient 
 to raise those salaries to a proper amount; and would it be any sat- 
 isfaction to persons in such a position to receive this increase when 
 the same increase was given to a large body of public servants who 
 could not complain of being underpaid ? Some years ago a proposal 
 was made to reduce the salaries in all public departments by a 
 uniform rate of 10 per cent, and that proposal was opposed on the 
 ground that if any portion of the public servants were overpaid it 
 would be proper to reduce their salaries, but that the indiscriminate 
 reduction proposed was neither just nor reasonable. * * * There 
 was one point to which he begged to call the serious attention of the 
 House. Until the noble lord introduced this bill no proposition had 
 ever been made to give up the abatement unaccompanied by a revision 
 of salary. («) 
 
 Coming to consideration of the bill itself, Mr. Wilson attacked it 
 as bound to create an anomaly greater than any which now existed. 
 He showed that the commissioners had pointed out existing anomalies 
 without end, with not one of which the bill proposed to deal. Said he : 
 
 It proposed to repeal a single clause in the Act of 1834 — the clause, 
 namely, which imposed the abatements. The noble lord left the 
 act in every other respect as it was. Now, the effect of that act was 
 that certain persons only were entitled to pensions. The bill of the 
 noble lord sought to relieve these persons from the payment of abate- 
 ments, but it did not propose to give pensions to any other class of 
 public servants. The officers of the Poor-Law Board were not entitled 
 
 oHansard's Parliamentary Debates, 3d series. CXLVII, pp. 249-253. 
 
CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 85 
 
 to pensions, and they felt that they had no reason to complain, 
 because they were not required to pay abatements. The officers 
 of the Treasury, on the other hand, were entitled to pensions, and 
 therefore they had no right to consider themselves aggrieved in 
 being called upon to pay abatements. Under the bill of the noble 
 lord the officers of the Treasury would continue to be entitled to 
 pensions, although relieved from the payment of abatements ; while 
 the officers of the Poor-Law Board would not be more entitled to 
 pensions than they were at the present moment. Nothing could be 
 more unjust than such a distinction. If all public servants were to 
 be put upon the same footing with regard to abatements, so ought 
 they also with respect to pensions; and if the bill of the noble lord 
 passed, it would be impossible to resist their demand. * * * 
 That bill, if passed, would destroy the line of demarcation between 
 those who were and those who were not entitled to pensions. It was 
 proposed that they should then give up a sum of £100,000 ($486,650) 
 without any discrimination, to public servants ; but he would answer 
 for it that if that proposal were adopted they would have to add 
 another sum of at least £250,000 ($1,216,625) for pensions to persons 
 who were not at present entitled to receive them. He would go 
 farther and express his belief that, under that proposed arrangement, 
 they should look forward to an addition to the public expenditure 
 of not less than from £300,000 ($1,459,950) to £400,000 ($1,946,600) 
 in the course of the next eight or nine years. C^) 
 
 Mr. Wilson closed his speech by declaring that the question was 
 not between the civil servants and the Government, but between 
 them and the taxpayers of Great Britain. He therefore hoped that 
 if the House of Commons, judging between their constituents, the 
 taxpayers, and the civil servants, should decide that the latter were 
 inadequately paid and that therefore they were justified in throwing 
 away £100,000 ($486,650) a year directly, besides some £300,000 
 ($1,459,950) or £400,000 ($1,946,600) a year indirectly, they would 
 be equally willing, when they had forced the Government into a 
 corner and it became necessary to propose new taxes for meeting 
 that increased expenditure, to support the Government in adding to 
 the income tax or imposing any new tax that might be required to 
 equalize the expenditure and the means of the country. 
 
 Debate on the Bill. 
 
 At the close of Mr. Wilson's speech, Mr. Weguelin, who had been 
 one of the commissioners who inquired into this subject, spoke in 
 favor of the bill and against the arguments for delay urged by the 
 Chancellor of the Exchequer and the Secretary for the Treasury. 
 He said that: 
 
 Another reason urged for delay was the non-presentation of the 
 report of the actuaries. He could not understand why that should 
 be urged as a reason. If the abatement had accumulated, and the 
 Government admitted that a fund had been created, the case would 
 be different. But if they said the clerks among themselves had no 
 right to the principle of mutual assurance, he could not tell why they 
 
 ^Hansard's Parliamentary Debates, CXLVII, pp. 256-257. 
 
86 CIVIL-SEE VICE EETIKEMENT IN GEE AT BRITAIN". 
 
 should wait for the report of the actuaries. The appointment of 
 actuaries necessarily assumed that there was a fund — that the de- 
 ductions paid by other classes had formed a fund out of which to pay 
 the superannuations. They were then in this dilemma; either there 
 was a fund, which was contrary to the statement of the honorable 
 gentleman, or if not, then there was no occasion to wait for the report 
 of the actuaries. He thought the real question for the House of 
 Commons was, as to the policy of continuing these abatements. 
 Everybody, when they came to examine the matter, abandoned 
 them. The committee appointed to investigate the matter had 
 thrown them over; the commissioners had given them up; every 
 debate in the House had been conducted on the principle of the 
 abandonment of the system of abatements, and the real question 
 now before the House appeared to him to be, whether or not there 
 ought to be an increase of salary on account of these deductions. 
 That question of salary he admitted the House were incompetent to 
 enter into ; it must be left to a committee of the Treasury. Judging 
 from what he saw around him, he believed that salaries generally 
 were on the increase. He knew they were in commercial concerns ; but 
 with respect to that the right honorable gentleman made a statement 
 which was not exactly in accordance with the fact. He stated that 
 the average salaries at the Bank of England were lower than the 
 average salaries paid to the civil servants. The general average, 
 however, in the Bank was £195 ($948) per annum, whereas in the 
 civil service it only amounted to £147 ($715). C^) 
 
 The position of the Government was next defended by Sir Francis 
 Baring. As one of those responsible for the passage of the Act of 
 1834, he was naturally inclined to defend the system of deductions, 
 but he nevertheless conceded that the question of deductions had 
 been settled, the Government having yielded that principle. The 
 real question, he maintained then, was not about deductions, but 
 the second reading of the bill, and to that he had objections. Not 
 only did he object to the bill because it would be no settlement of 
 the question, but because it would make a large increase in the sala- 
 ries of the public servants in a manner not required, and at the same 
 time most injudicious. They were going to increase the higher serv- 
 ices by 5 per cent, and to increase the salaries of the lower class of 
 civil servants, by only 2^ per cent. The bill, therefore, gave advan- 
 tage to the highest and best-paid class of public servants, which it 
 withheld from the poorer and hardest-working servants. 
 
 Mr. Seymour Fitzgerald, who had been a member of the Select 
 Committee, defended Lord Naas's bill on the general ground that the 
 civil servants had just cause for complaints, and that members of the 
 House should be ready to face the extra expense for the sake of the 
 extra advantage from the increased efficiency of the public service. 
 
 An energetic speech against the bill was made by Mr. Rich, who 
 said it was "imperfect in its form, would be unjust in its operation, 
 was quite unnecessary, based upon erroneous statements, involved 
 
 a Hansard's Parliamentary Debates, CXLVII, pp. 268-269. 
 
CIVIL-SERVICE EETIREMEiSTT IN GREAT BRITAIN. 87 
 
 an extravagant expenditure of the public money and recognized a 
 breach of contract." He said the question was not one of abate- 
 ment, which had been inquired into and decided against; but it was 
 a question whetlier £100,000 ($486,650) a year should be added to 
 the salaries of the best paid of the public servants. 
 
 Lord Naas next took up the debate, answering the attacks madf^ 
 on his bill by the members of the Government. Particularly inter- 
 esting to the student of retirement plans are his conclusions, based 
 on the opinions of the several actuaries, who had testified that the 
 average value of the pensions received was less in individual cases 
 than what the contributions would have purchased. It has been 
 shown that tliis opinion was perfectly sound, but it is also known 
 (what Lord Naas was unwilling to wait to find out) that the actuaries 
 then investigating the matter discovered that the contributions 
 would be inadequate in the aggregate to pay the pensions promised. 
 Lord Naas said that: 
 
 The Secretary for the Treasury (Mr. Wilson), whose motives in 
 opposing the bill no one could doubt were very proper, had, however, 
 made some statements of facts and figures in a manner which tended 
 to create a false impression. The honorable gentleman had stated that 
 there was "an impression" abroad that the civil servants of the 
 public were called upon to pay more in deductions than they received 
 back in pensions. That was not "an impression;" it was a distinct 
 matter of fact, and it could be proved beyond all dispute that the 
 contributions of the civil servants far exceeded in amount the pen- 
 sions that were granted to them. That matter ought to have been 
 set at rest after the evidence which had been taken before the com- 
 mittee which sat last year upon the subject. They examined Doctor 
 Farr, Mr. Edmonds, and Mr. Hardy, actuaries of the highest emi- 
 nence, and documents were produced showing that six other dis- 
 tinguished actuaries agreed with them in an opinion that the average 
 value of the pensions actually granted was considerably less than 
 what should have been given in return for the contribution paid by 
 the civil servant, even omitting all profits arising from resignations 
 and discharges. It was true that an inquiry was going on, or was 
 supposed to be going on, directed in some measure to that point; but 
 the evidence before the House would lead them to believe that it was 
 unlikely there would be an}'^ different conclusion arrived at than had 
 been come to by the committee. 
 
 Lord Naas closed his remarks with the argument that the system 
 of abatements had been generally condemned and the House would 
 do well to recognize that fact and act at once, rather than wait and 
 allow the dissatisfaction of the civil servants to become intensified. 
 He said that: 
 
 Those who complained that the measure did not settle the whole 
 question nor embrace the whole recommendations of the commis- 
 sioners ought to bear in mind that their great leading recommendation 
 was contained in his bill. If the bill did not sweep away all the 
 anomalies and inequalities that existed, still it swept away the most 
 grievous anomaly, and he believed it would pave the way for the 
 
88 CIVIL-SEEVICE RETIREMENT IH GREAT BRITAIN. 
 
 abolition of all the others. But the question he had now to ask was, 
 what did the Government propose to do ? * * * He wished to 
 know from the right honorable gentleman the Chancellor of the 
 Exchequer whether the Government meant to set their face once and 
 for all against every attempt to do away with the abatements made 
 for superannuation allowances ? His decided opinion was that they 
 must make up their minds to do away with these abatements or not 
 deal with the question at all; unless they made the principle of non- 
 abatement the root of their measure it would be unsatisfactory to the 
 civil servants, and, he believed, to the House and country. The 
 system had been condemned by that House, by the press, and by 
 the good sense of the people of this country. * * * j^ ]-^g^f| been 
 condemned by a committee of that House, which had given long 
 consideration to the subject; and lastly by a royal commission, 
 whose report should be looked at more in the light of an arbitration 
 than anything else. In fact, the whole system of taxing salaries 
 stood condemned; and although there might be honorable members 
 who thought the system just and proper, he trusted that with the 
 weight of authority to which he had alluded to support them, the 
 Government would put the matter on a satisfactory footing. The 
 continuance of the existing system caused great dissatisfaction among 
 a large and important body of public servants whom it was most 
 desirable to keep contented. They felt they had a grievance to com- 
 plain of, and the House might depend upon it they would not be 
 satisfied till that grievance was removed. The agitation would go 
 on, and they would not rest contented with less than was now pro- 
 posed for the relief. Next year the demands of the civil servants 
 instead of being lessened might be enlarged; and the House might 
 find that it was not one grievance only they were called on to redress. 
 We boasted in this country of the stability, the firmness, and the 
 integrity with which the business of every department was conducted. 
 These we owed very much to the exertions and abilities of the civil 
 servants of the Crown, and when they were told by high authorities 
 that this class labored under an oppressive grievance he maintained 
 that the House ought to redress it at the earliest possible opportunity, 
 and he trusted the House would, by accepting his bill, put an end to 
 the grievance at once, and thus confer a boon and recognize a right. (**) 
 
 One of the strongest speeches against the bill was made by Mr. 
 Gladstone, who took exception particularly to Lord Naas's statement 
 that the system of deductions was a condemned system, and who 
 pointed out that the matter could not be cleared up before the report 
 of the actuaries was received. Said he: 
 
 It is stated or assumed that the system of making deductions from 
 the salaries of the civil servants with a view to providing funds for 
 superannuation is a system which has been condemned on all hands. 
 It has been condemned, it is said, by a parliamentary committee, by 
 the royal commission, and it is assumed to have been condemned 
 by the Government. It was condemned, I am sorry to say, by the 
 parliamentary committee — I greatly regret that such should liave 
 been the case — it has been condemned by a royal commission, which 
 I look iipon as being of less authority; whether it has been condemned 
 by the Government or not I am not aware. But the system which at 
 
 « Hansard's Parliamentary Debates, CXLVII, pp. 649-656. 
 
CIVIL-SEEVICE RETIREMENT IF GREAT BRITAIN. 89 
 
 present exists was founded under recommendations entitled to quite as 
 much weight as any of the recommendations which have been made 
 in the opposite direction. 
 
 Mr. Gladstone then quoted the opinions of such eminent men as 
 Sir James Graham, Mr. Tierney, Mr. A. Baring, Lord Althorp, Mr. 
 Herries, Mr. Gouldburn, and Sir Henry Parnell to prove that the 
 policy of making deductions from a salary as an equivalent for a 
 prospective superannuation is "sound in principle and in effect is 
 excellent." He said that: 
 
 They were men, most of them among the most experienced ad- 
 ministrators of their day, and one or more of them had originally 
 belonged to the permanent civil service. The weight of testimony, 
 therefore, in favor of this system is sufficiently strong, not perhaps to 
 induce you to maintain it under all circumstances, but at least en- 
 tirely to deprive the noble lord of the right of saying that it is a 
 condemned system. The noble lord and those who go with him 
 argue that the pensions which are to be awarded out of the fund ac- 
 cumulated by the deductions will not in the long run exhaust the 
 whole proceeds of the fund. In the first place, that fact has never 
 been proved, and if it had it would not affect the question. The 
 noble lord quoted these opinions of certain actuaries, and he says 
 that these opinions ought to settle the question; but the noble lord 
 was very glad to fall back upon the royal commissioners as arbitra- 
 tors when it suited the purposes of his argument. But the royal com- 
 missioners do not state that this was a settled fact; on the contrary, 
 in the last page of their report, they treat it as a matter not yet 
 cleared up. The committee of last year did not treat it as a question 
 which was decided. The right honorable gentleman the member for 
 Portsmouth (Sir F. Baring), a great authority, is distinctly and 
 strongly of opinion that the money value acquired in respect of pen- 
 sions is greater than the money value paid in deductions. 
 
 Believing thus, that there was a great weight of expert authority 
 on the side of the system of deductions as against it, and that the 
 matter was not yet settled, Mr. Gladstone opposed the bill chiefly on 
 the ground that what it really proposed was an indiscriminate increase 
 of salaries and that such increase was not justified. Said he : 
 
 It is all very well to come down here and say with a chivalrous air 
 that it is beneath the House of Commons to inquire what is the value 
 of labor in the market — that we ought to be above such consideration 
 in fixing the payments of our public servants. That would be all 
 very well if we were dealing with our own private fortunes, but we 
 happen to be dealing with the pubfic taxes. The bulk of these taxes 
 are levied upon the wages of the laborers of England, which are regu- 
 lated by supply and demand; and if the laborer, -whether artisan, 
 mechanic, or peasant, can obtain no more than his labor is worth in 
 open market, what right have we to make deductions from the fruit 
 of his labor, and dehver them to servants of the Crown, according to 
 our own ideas of generosity ? There is no doubt that the civil servant 
 gets at least what his labor is worth in the market. Here let me draw 
 a distinction. There is a labor so valuable that you can not pay for 
 
90 CIVIL-SERVICE BETIREMENT IN GREAT BRITAIN. 
 
 it in money. There are men who devote themselves to the civil 
 service with so much enthusiasm, with such ability, and with such an 
 entire absence of the ordinary motives which a prospect of fame 
 affords, that it is impossible to commend or to pay them too highly. 
 Men of that order we must set aside. You may give them salaries 
 which are liberal according to the estimate of the world, but I grant 
 that such salaries, even in the present liberal humor of Parliament, 
 must fall far short of the value of the services which these persons 
 render. I am not here to discredit the civil service in general. At 
 the same time I must say that, so far as my ex{)erience has gone, the 
 civil servants of the Crown are not only not an ill-paid, but are, hav- 
 ing reference to their great mass, a well-paid body of servants. Recol- 
 lect what has happened within the last two years. There is no reason 
 to suppose that the candidates presented for employment in the civil 
 service during that period' have been inferior to those presented in 
 previous years; but the establishment of the test of an independent 
 examination has led to the rejection of one-third of them as unfit to 
 enter the civil service of the country. At any rate, there is no doubt 
 that these persons do not enter the civil service by compulsion. 
 After Hstening to the debates in this House one would really suppose 
 that the ballot, which has been abolished as regards the militia, had 
 been established for the civil service; that every parish, every hun- 
 dred, was called upon year by year to supply two or three young rnen 
 for that service against their will ; and that the grievance of receiving 
 only £141 per annum, taking tidewaiters and all together, was so 
 great that there would be a market for substitutes, and that_ large 
 payments would be made to induce persons to relieve the individuals 
 chosen by ballot from this frightful evil. It would be needless to 
 detain the House with a description of what is really the state of the 
 case; but, while the quaUty of your candidates is improving, and 
 their quantity undiminished, I want to know what will be our justifi- 
 cation to the taxpaying constituencies, to the laboring classes of 
 England, if we accede to the representation of the noble lord and pass 
 a bill which, without reference to merit — on the contrary, with a 
 decided preference of the higher classes of officers, to whom we are to 
 make a double payment — will place a certain sum in the pocket of 
 every civil servant. (") 
 
 Mr. Disraeli made a speech in support of the bill, taking the stand 
 that the principle of abolition of deductions in the salaries of a certain 
 class of public servants had received the sanctions of three great 
 authorities, a Parliamentary committee. Her Majesty's Government, 
 and a royal commission, and should therefore be respected. He 
 stated his agreement with Mr. Gladstone that, considering not only 
 the present state of finances, but the gloomy future in prospect with 
 regard to expenditure, it would be most unwise thoughtlessly to 
 increase the expenditure of the country, but he said that "no one 
 should refuse to perform an act of justice on considerations of mere 
 economy." Mr. Disraeli, in conclusion, expressed his belief that the 
 operation of the measure, if it became a law, would be "virtually to 
 settle this important question." 
 
 a Hansard's Parliamentary Debates, CXLVII, pp. 655-G65. 
 
CIVIL-SERVICE KETIEEMENT IN GREAT BRITAIN. 91 
 
 In this debate on the motion for a second reading of the bill, the 
 Chancellor of the Exchequer, Sir G. Cornwallis Lewis, again made an 
 attempt to show the House that hasty action was inadvisable, since it 
 had not yet been proved by competent authority (that is, by the 
 actuaries) that the civil servants had been unjustly treated. Said he: 
 
 The committee had a large amount of evidence brought under their 
 consideration, and not being able to make up their mmds as to that 
 which I may term the question whether the deductions which had 
 been made from the salaries of the civil servants were or were not 
 greater in value than the pensions to which they would become en- 
 titled as an equivalent — resolved to refer the matter to two actu- 
 aries, who were to be furnished with the whole evidence, and to report 
 thereupon. The noble lord, the member for Cockermouth (Lord 
 Naas), has indeed quoted the testimony of the actuaries who were ex- 
 amined before the committee, to prove that its members were satis- 
 fied with the information which had been laid before them; but I 
 appeal to the recollection of those honorable gentlemen who were 
 members of the committee to corroborate the statement which I have 
 made, that the committee, not being satisfied with the evidence before 
 them, came to a deliberate resolution to refer the question for the 
 report of two actuaries specially selected, who were to be furnished 
 with the evidence for that purpose. I therefore entirely dispute the 
 statement that the Select Committee were satisfied upon the ground 
 of equity and justice. The result of the investigation of the commit- 
 tee was, in my opinion, to leave the question of insurance quite unde- 
 termined, and I may add that their labors were brought to a close 
 before the report of the two actuaries to whom the point had been 
 submitted could be received. The claim of the civil service has, 
 nevertheless, been reargued in this House upon the ground of justice 
 * * *. Now, I utterly deny the validity of the claim of the civil 
 servants upon that ground. * * * j maintain that the contract 
 which was entered into with them by act of Parliament is, in its 
 terms, perfectly clear and precise; that every one of them who has 
 taken office since the passing of that act has accepted it upon condi- 
 tions which were well known ; that those conditions have been strictly 
 adhered to by successive governments; and that it is absolutely im- 
 possible to prove that even if a fund had been created, any additional^ 
 benefit to the members of the civil service would be the result. 
 
 The Chancellor then went on to show the enormous additional ex-"' 
 pense to which the country would be liable in case the bill passed and 
 to combat the statement as to the general insufficiency of the salaries 
 paid civil servants. In conclusion, the Chancellor said: 
 
 This brings me to the last point which I have now to put before the 
 House, namely, whether they are prepared to agree to the measure pro- 
 posed by the noble lord, which involves the simple and unconditional 
 abolition of the deductions now made from the pay of the civil service. ' 
 I have already stated my opinion that the right of the civil service to such 
 a concession can not be established ; and in the official position which I 
 hold, I do notf eel myself j ustified in asking the House to be generous with 
 the public money. If the House think fit to perform an act of liberahty 
 and generosity, it is no doubt competent for the House so to act ; but it 
 
92 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 
 
 would ill beseem me, as Chancellor of the Exchequer, to propose any 
 increase in the salaries of the civil service, except upon the g:round of 
 justice, or of the insufficiency of tlie present scale of remuneration. 
 No doubt it is perfectly competent for the House of Commons, if it 
 think fit, in a spirit of "gratuitous liberality, to bestow upon the civil 
 servants of the country this annual sum in addition to their existing 
 salaries, and to diffuse the increase rateably over the whole service 
 without any reference to individual merit, or to any augmentation in 
 the amount of work performed. On the other hand, if the House is 
 not disposed to take that step, they may accompany the remission 
 of these abatements by the principle which was adopted by the com- 
 mittee of hist session — that is to say, they may call on the Government 
 to make ii rechiction in the salaries equivalent to the abatements re- 
 mitted. In that manner either the whole or a considerable part of 
 the (kxhictions to be abolished would be recovered in the shape of 
 a diminution in the regular rate of pay. That, however, is a matter 
 entirely for the House to consider. For my own part, standing in 
 the situation which I have the honor to fill, 1 see no sufficient ground 
 to justify me in acceding to the proposition of the noble lord.C") 
 
 Vote on the Bill. 
 
 Following the Chancellor's speech, the question was put and a 
 division of the House resulted. The second reading of the bih was 
 carried by a majority of 60 in a house of 282, all the members of the 
 administration voting with the minority. 
 
 On July 30 Mr. Seymour Fitzgerald asked the First Lord of the Treas- 
 ury what course the Government proposed to pursue with reference 
 to the civil service superannuation bill, the second reading of which 
 had been carried the previous day by so large a majority. 
 
 To this Viscount Palmerston replied that Her Majesty's Govern- 
 ment felt it their duty to state to the House at considerable length 
 the objections they felt to the bill proposed by Lord Naas, consider- 
 ing that the effect of it would be to add a very large sum to the 
 annual expenditure of the country, but the House having in a very full 
 attendance and by a very considerable majority confirmed the second 
 reading of the bill, the Government would not deem it respectful to the 
 House to offer any further opposition to the progress of the measure. 
 
 Mr. Gladstone then asked whether it was the intention of the Gov- 
 ernment to institute any revision of the salaries of persons holding 
 offices in the civil service in connection with the removal of the 
 tleductions to which they were liable. In answer to this question. 
 Viscount Palmerston stated that the effect of the bill would be to 
 add 2^ per cent in some cases and 5 per cent in others to those sal- 
 aries, but the only revision that would naturally arise out of it would 
 be a revision bj^ which the salaries would be diminished in propor- 
 tion to the alteration made by the bill, and that that woukl hardly 
 be consistent with the decision of Parliament. 
 
 ^Hansard's Parliamentary Debates, CXLVII, pp. 673-682. 
 
CIVIL-SERVICE RETIEEMENT IN GREAT BRITAIN. 93 
 
 When the motion for the third reading of the bill was put, the 
 Chancellor of the Exchequer protested, for the last time, that he was 
 not prepared to bring in a bill before he received the report of the 
 actuaries who had been appointed, and he charged Lord Naas with 
 undue impatience in trying to secure for the public servants "benefits 
 to which in a spirit of good-natured credulity he considered them to 
 be entitled." 
 
 Sir John Trelawny then said the reason he had opposed the bill 
 was because he wished to protect the national exchequer. The bet- 
 ter plan, he thought, would have been to appoint a committee to 
 inquire into the whole of the civil service. 
 
 Mr. Berkeley said he was surprised to hear Lord Naas accused of 
 good-natured credulity. The Government might more justly, he 
 thought; be accused of ill-natured obstinacy. "Nine out of every 
 ten men in cities," said he, "are in favor of the noble lord's bill." 
 
 Finally, Mr. Ayrton said he must complain of the undue haste 
 with which the bill had been pressed forward, and the extraordinary 
 zeal which the civil servants had exhibited in soliciting members to 
 support it. "The measure, in short" said he, "is the result of an 
 organized conspiracy on the part of the public servants, is unjust in 
 its provisions, and based on erroneous statements." 
 
 The question was then put and the third reading of the bill was 
 carried by a majority of 68. During the same session there were 
 short debates in the House of Lords respecting the report of the 
 royal commission, and it was very evident that the lords were almost 
 unanimously in favor of the abolition of abatements. 
 
 Text of the Kepeal. 
 
 The act as finally passed was very short and read as follows: 
 
 An act to repeal the twenty-seventh section of the superannuation 
 act, 1834. 
 
 Whereas an act was passed in the fourth and fifth years of the reign 
 of his late Ma^'esty, intituled: "An act to alter, amend, and consolidate 
 the laws for regulating the pensions, compensations, and allowances 
 to be made to persons in respect of their having held civil offices in 
 His Majesty's service;" and whereas it is expedient to enforce the 
 provisions of the said act, so far as relates to the abatement to be 
 made under the twenty-seventh section of the said recited act from 
 the salaries of those civil servants of the Crown who have taken office 
 since the 4th day of August, 1829; be it therefore enacted by the 
 Queen's Most Excellent Majesty, by and with the advice and consent 
 of the lords, spiritual and temporal, and Commons, in this present 
 Parliament assembled and by the authority of the same, as follows : 
 
 1. The said twenty-seventh section of the said recited act shall be, 
 and the same is hereby, repealed from and after the 30th day of June, 
 1857. 
 
94 civil-sekvice retirement in great britain. 
 
 Analysis of the Vote. 
 
 It will be seen from a study of these debates in Parliament that, 
 while there was an overwhelming sentiment in favor of the abolition 
 of deductions, the bill which effected it was not passed without en- 
 countering the intelligent opposition of some of the most thoughtful 
 men in the House of Commons. These included not only the mem- 
 bers of the Government, but such a distinguished member of the 
 Opposition as Mr. Gladstone. Without understanding the techni- 
 calities of the superannuation problem any better, in all probability, 
 than did those in favor of the bill, they yet took cognizance of the 
 existence of such technicalities and seemed to feel that it would be 
 only sensible and prudent to await the verdict of the men supposed 
 to understand those technicalities who had been appointed to inves- 
 tigate them before taking action in the matter. They realized that 
 the subject of superannuation bears a close and inseparable rela- 
 tionship to that of salaries and suspected that a just reform in one 
 field could only be achieved through reform in the other. Although 
 urged to remember that the commissioners of 1857 had recommended 
 the abolition of deductions, '^ without any corresponding reduction 
 in the salaries," they were also not disposed to forget that the par- 
 liamentary committee of 1856 had recommended a revision of salaries 
 as the condition on which the deductions should be abolished. Inas- 
 much as the British public paid the salaries of its civil servants, they 
 saw the importance to the public, as well as to the service, of consid- 
 ering the whole subject thoroughly before enacting any legislation 
 supposed to be remedial. 
 
 Those who supported the bill were actuated by motives which 
 were more of a credit to their hearts than to their heads. They saw 
 the "anomalies and inequalities" of the existing law and hoped that 
 by abolishing the system of deductions they could wipe out such 
 objectionable conditions. They realized that such a course might 
 be expensive for the State, but argued that the State, as a model 
 employer, should not hesitate to do right by its employees merely 
 because that action was expensive. The keynote of Lord Naas's 
 argument was the cry that the civil servants labored under "an 
 oppressive grievance" which, taken together with Mr. Berkeley's 
 statement that "nine out of every ten men in cities were in favor of 
 the noble lord's bill," showed that the people of the country sup- 
 ported the bill because they believed that in so doing they were 
 rendering an act of justice. Undoubtedly this high tone appealed 
 ".o many members of Parliament who failed completely to see that 
 the problem was a technical one and was not to be solved by good 
 intentions and generous resolutions. Then, too, many were weary of 
 the agitation, and therefore inclined to think, like Mr. Disraeli, that 
 
CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 95 
 
 it would be well to abolish the system of deductions, since they hoped 
 by such action ''virtually to settle this important question." How 
 little this hope has been realized is shown by the fact that the dis- 
 content of the civil employees with the superannuation system has 
 persisted down to the present year and has only recently been 
 appeased by the passage of a law making such radical modifications 
 in the system as to change the character of it completely from a 
 so-called free pension system to a scheme virtually a contributory 
 plan. Parliament's generous action in 1859 failed to "settle this 
 important question" simply because the solution offered was unsound 
 and unscientific and ignored certain fixed principles of human nature, 
 as will be shown in subsequent chapters. 
 
 SUPERANNUATION ACT OF 1859. 
 
 Bill Embodied Minor Recommendations of Superannuation 
 
 Commission. 
 
 A bill to embody the minor recommendations of the Superannuation 
 Commission was introduced into Parliament late in the session of 1858 
 but was not pressed. A similar bill was accordingly introduced on 
 February 7, 1859, by Mr. Benjamin Disraeli, then Chancellor of the 
 Exchequer. In moving for leave to bring in the bill, the Chancellor 
 said that the principal heads of difference between the proposed bill 
 and the existinglaw were with regard to the duration of services and 
 the time of superannuation. It was intended that superannuation 
 should commence at the termination of ten years, and that the full 
 superannuation allowance should be granted at the end of forty 
 years' service. Under this bill every person in the civil service, of the 
 age of sixty, would be permitted to receive his full superannuation, 
 and at sixty-five retirement from the public service would be com- 
 pulsory. The most important provisions of the bill, he said, were 
 those which regulated the new scale of superannuation. One of the 
 greatest defects of the existing system was that superannuation was 
 fixed at the end of a septennial term of service and hence the same 
 benefits were often enjoyed by persons who had really served very 
 different terms. These defects were remedied by the proposed bill, 
 superannuation being calculated by the yearly services of the public 
 servants. The bill contained provisions regulating the superannua- 
 tion to which professional men who entered the public service com- 
 paratively late in life should be entitled. It also provided for the 
 abolition of offices and other matters of an analogous character, which 
 hitherto had not been satisfactorily settled; or if so, were arranged 
 rather by the discretion of the Treasury than by the sanction of the 
 law. 
 
96 CIVIL-SEKVICE EETIREMENT IN GREAT BRITAIN. 
 
 At the conclusion of the Chancellor's remarks, Mr. Wilson said he 
 did not rise to oppose the introduction of the bill, but he wished to 
 remind the House that when Lord Naas had brought in a bill for the 
 abolition of deductions two years before, he (Mr. Wilson) had called 
 attention to one of the consequences which would follow from it — 
 that its effects would be to do away with all distinctions between the 
 public servants in regard to superannuation. Under the Act of 1834, 
 no persons in the civil service had any legal claim to superannuation 
 allowances, except they had submitted to the abatements provided 
 for under that act, but if the enactment creating abatements was 
 repealed, allowances could not be denied to any person in the public 
 service. Having, however, been induced to take that step, Mr. Wilson 
 held that it now only remained for the House "to do justice, and to 
 allow the superannuation allowance to bear the same proportion to the 
 salary, whether great or small, of every man in the public service." 
 
 Mr. Rich, who had made a strong speech two years before, in oppo- 
 sition to the bill abolishing the abatement system, allowed himself 
 the satisfaction, on this occasion, of saying politely: "I told you so." 
 He reminded the House that when the bill of Lord Naas was debated, 
 it had been said that this was not merely a question of abatement, but 
 that the House would be "pestered" by every pubhc servant for a 
 pension. He said that they saw the beginning of that state of things 
 now, for every public servant was claiming superannuation. He 
 would throw out, for the consideration of the Chancellor of the 
 Exchequer, that superannuation allowances represented a capital of 
 £3,000,000 ($14,599,500). As the Government were changing their 
 opinions on other points perhaps they would reinstate the abatement 
 clause, which would furnish them with an answer to everyone asking 
 for a pension. 
 
 On the motion for the second reading of the bill. Sir H, Willoughby, 
 who had previously declared himself to be ''one of those who took 
 a fearful view of the increasing charge for superannuation allow- 
 ances," declared his belief that the bill "would throw an enormous 
 burden upon the country." He said that: 
 
 The Government ought to inform the House what that superan- 
 nuation would cost the country. In the shape of compensation and 
 superannuation the country was at this moment paying £1,400,000 
 ($6,813,100), and if the whole civil service of the country was to be 
 entitled to superannuation he would ask where was it to end ? Al- 
 though the tax, which amounted to £70,000 ($340,655), had been 
 abolished, there was nevertheless a new scale and state of things 
 established. He objected to the form of the bill, and to that bit-by- 
 bit legislation it proposed, for in dealing with the question of super- 
 annuation they ought to deal with it as a whole. (") 
 
 a Hansard's Parliamentary Debates. 3rd series. Vol. CLII, p. 592. 
 
civil-sekvice eetikement in gkeat bkitain. 97 
 
 Bill Introduced and Defended by the Government. 
 
 Sir Stafford Northcote, then Secretary for the Treasury, next 
 defended the bill as a Government measure, saying that it was "the 
 wish of the Government that the bill should accomplish that which 
 it was principally intended to accomplish, namely, the putting all 
 classes of the civil service on one uniform footing, as well as putting 
 an end to these anomalies that had at present, and for a long time, 
 existed in the system of superannuation." He also reminded the 
 House very justly that, with regard to the additional expense which 
 this bill would throw upon the country by taking off abatements, 
 the Government had to consider not what were the recommendations 
 of the select committee or the royal commission, but what was the 
 act of that House. He said that: 
 
 This question should not be looked upon as a mere question of 
 pounds, shillings, and pence, as the honorable Baronet had put it. 
 For what was the object of the superannuation system? Its object 
 was to get good men for the civil service at moderate prices, to keep 
 them as long as their services were valuable to the country, and to 
 provide for their retirement when their services were not sufficiently 
 valuable to the country. If that system were to be continued it 
 must be clear, intelligible, and uniform, because if you had a system 
 by which people, when appointed were uncertain as to whether they 
 would receive superannuation, you could not, on the one hand, 
 when you engaged them, get the benefit of the system by engaging 
 them at moderate salaries, nor could you, on the other, from consid- 
 erations of humanity, dispense with their services just at the time 
 when they began to be of less value to the country than when they 
 were engaged. The last great settlement of the superannuation 
 question was in 1834, but in that settlement there were several 
 blemishes. One was that the superannuation was confined to a 
 certain number of offices named in a schedule to the act. A great 
 number of offices, however, had grown up since the Act of 1834, 
 which did not come within the scope of its provisions. The persons 
 holding those offices were not subject to abatements, but they got 
 pensions, though on a very irregular and unsatisfactory system. For 
 instance, the officers of the Poor-Law Board, and some others, were 
 paid off, not on any established system, but in an irregular manner. 
 One of the objects of this bill was to put an end to the scheduling of 
 offices, and to make the superannuation apply to the whole civil 
 service. With regard to the additional expense consequent upon 
 introducing all those other classes of persons, he thought the honorable 
 Baronet formed an exaggerated opinion of it. Although it was 
 perfectly true there was a large number of persons interested in the 
 passing of this bill, it was to a great extent because they desired 
 certainty and something like a fixed system that they were so inter- 
 ested. The great class who would probably be brought within the 
 superannuation provision, in addition to those who were now included, 
 would be persons employed in country Post-Offices. He could not at 
 that moment give an exact estimate of the number of that class of 
 35885— S. Doc. 290, 61-2 7* 
 
98 CIVIL-SEEVICE KETIREMENT IN GEEAT BRITAIN. 
 
 persons; but the Postmaster General and the authorities in the Post 
 Office had represented that the department suffered seriously by not 
 having a proper system of superannuation and retirement, and by not 
 being able to get rid of persons who were past service. The measure, 
 therefore, if the House looked at it in a broad light, was one for the 
 improvement of the civil service generally, and he believed it to be 
 one of true econom}^. It was one of a series of measures which the 
 present and the late Government had been taking for some time past 
 for improving generally, and so economizing the civil service. C^) 
 
 On March 18 Sir Stafford Northcote moved that the House resolve 
 itself into a committee on the bill, and in making the motion con- 
 tinued his defense of the bill. In this speech he laid emphasis on the 
 desire of the Government to treat all members of the civil service 
 uniformly and equitably, something that had never been accom- 
 plished under the Act of 1834. He said the bill would apply only to 
 persons who were permanently employed in the service in such 
 capacities as rendered it necessary for them to give up all other busi- 
 ness and devote themselves wholly to the service of the State, thus 
 excluding country postmasters who were also the keepers of shops. 
 Another condition necessary to entitle persons to such allowances 
 was that they should be paid out of Imperial funds; and therefore 
 all persons paid out of county rates — such as prison, workhouse, and 
 other poor law officers — would be excluded from the benefit of the 
 act. Neither would the bill apply to persons who were paid by fees. 
 Such persons were not entitled to superannuation, because the prin- 
 ciple upon which that system rested was that in fixing a man's remun- 
 eration how much he ought to have by way of salary was considered 
 and how much by way of retiring allowance; and the difficulty with 
 regard to persons paid by fees was that, although they were employed 
 in the service of the State and were to a considerable extent under its 
 control, they generally held their offices partly at the will of other 
 persons and might be dismissed by them. 
 
 Discussing the important subject as to what increase of expense 
 would be caused by the provisions of this bill Sir Stafford lamented 
 that ''that must be so much a matter of conjecture that he felt it 
 quite impossible to make any satisfactory statement with regard to 
 it." He said that there were three ways in which the expense of 
 superannuations would be affected by the passing of the bill. In the 
 first place there was the adoption of the new scale. The existing 
 scale was what was called a "jumping" one; it went by periods of 
 seven years. That provided by the proposed bill was a "sliding" 
 scale, advancing year by year by sixtieths. It stopped at the same 
 maximum as the existing scale, namely two-thirds, or forty-sixtieths 
 of the salary; but under it a man would arrive somewhat earlier at 
 his maximum allowance than he did at present. The scale was, 
 
 o Hansard's Parliamentary Debates, CLII, pp. 592-595, 
 
CIVIL-SERVICE EETIKEMENT IN GEEAT BRITAIN. 99 
 
 however, so arranged that while it gave an advantage to those who 
 had served long periods, it diminished the allowances of those who 
 had been engaged in the service of the State for shorter ones. In 
 order, therefore, to determine how much the expense of superannua- 
 tions would be increased by the bill, it was necessary to calculate after 
 what periods of service civil servants were likely to retire. Another 
 way in which the bill might add to the expense of superannuation, 
 Sir Stafford said, was by bringing new classes of officers under the 
 provisions of the act. There again, however, he found it exceed- 
 ingly difficult to come to any kind of conclusion. Upon being asked 
 what classes and what number of officers would be brought under the 
 bill, the different departments replied by inquiring to what classes 
 the bill was intended to apply, and a difficulty arose as to who were 
 and who were not to be included under the term ''permanent civil 
 servants of the State." A third way in which the bill would to some 
 small extent add to the expense, Sir Stafford said, was by adding to 
 the number of civil servants entitled to superannuation. One of the 
 clauses gave permission to officers to retire at the age of 60, and 
 another made it compulsory so to retire at the age of 65, unless they 
 were specially asked to stay as being efficient servants. Upon inquir- 
 ing at the different departments what number of officers would be 
 required to resign on account of age he was met by the same kind of 
 counterquestion instead of answer — namely, what classes of persons 
 were intended to come under the provisions of the bill. The result 
 of all their inquiries had convinced the Government of the necessity 
 of limiting the operation of the bill and of laying down some more 
 stringent rule than was afforded by the words "permanent civil serv- 
 ice of the state. " He therefore intended to move the insertion of a 
 clause, stating who were to be deemed civil servants. No person 
 was to be deemed a civil servant unless he either held his appoint- 
 ment directly from the Crown or was admitted with a certificate from 
 the Civil Service Commissioners. He said that: 
 
 The question of obtaining a certificate from the commissioners 
 was distinct from, though connected in some degree with, that of 
 open competition, because the system was applicable to all kinds of 
 admissions, and included not only literary, but what were equally 
 important, medical examinations. He believed, for his own part, 
 that by adopting a system which seemed calculated not only to 
 procure able and efficient officers, but to ensure them fair and 
 equitable treatment, the House would do much to allay the present 
 uncomfortable and excited state of the civil servants and to perma- 
 nently improve the condition of the civil service itself ; and although 
 his statement with respect to the possible expense of the proposed scale 
 of superannuation might appear unsatisfactory to some honorable 
 members, he would entreat the House to look at this subject in a 
 broader point of view. What the country really wanted was not to 
 save so many pounds, shillings, and pence in the superannuation of 
 
100 CIVIL-SEEVICE EETIREMENT IN GEEAT BEITAIN. 
 
 its civil servants, but an adequate supply of good, cheerful, and 
 willing servants, and the adoption of measures which would enable 
 those m its employment to retire at the proper time without a feeling 
 of hardship. (") 
 
 Debate on the Bill. 
 
 As soon as Sir Stafford had taken his seat, Sir Henry Willoughby 
 renewed his previously expressed objection to the bill, ''an objection 
 grounded upon the total ignorance in which the House was as to the 
 increase of expense the bill would cause." He said that — 
 
 This speech of the honorable baronet, clear as it was in other 
 respects, was rather obscure as to the question of what would be the 
 additional expense that would fall on the public by the passing of 
 this bill, and this was a very serious question. The amount paid 
 already yearly for ]icnsions and superannuations was enormous — it 
 amounted to a million and a half. As an approximation toward 
 it, he would take the civil-service salaries at £5,339,000 ($25,982,243), 
 and he inferred that the charge with regard to that sum imposed by 
 the bill would be £1,122,000 ($5,460,213) for superannuations. Add 
 to that the £74,000 ($360,121) lost by abolishing the deductions from 
 the salaries and' the compensations consequent on the abolition of 
 the ecclesiastical courts, and other compensations amounting toward 
 £1,500,000 ($7,299,750). The select committee who sat on this 
 question had recommended the repeal of such portions of existing 
 acts as provided for reductions from the salaries of the civil servants 
 to form the superannuation fund, but they also recommended a revi- 
 sion of the salaries. The point he desired to impress on the House 
 was this: Let the civil servants have the benefit of it, but let the 
 House not increase the scale of superannuation. His object was to 
 do justice to the civil service and certainly at the same time to the 
 taxpayers. He said, therefore, by all means give them the advantage 
 of a repeal of the tax, but adhere to the scale of 1834. He did not 
 mean to argue for the infallibility of that scale, and if the jump 
 every seven years were unwise, let it be altered. Let them not, 
 however, increase the scale of superannuation. C*) 
 
 Mr. Gladstone next took up the debate, saying that he did not 
 propose to enter at any length into a discussion of the bill, but he 
 thouglit that his honorable friend, the Secretary for the Treasury, had 
 made a large demand on the House when, as financial secretaiy, he 
 exhorted them to take a broad view in this matter, and to enact a 
 system of pensions on a new basis, without knowing what classes 
 were to be included within the provisions of the measure, and with- 
 out being aware of the extent of the burden about to be added to 
 the already heavy burdens on the public finances. He further 
 warned his hearers that this was a subject upon which it was emi- 
 nently necessary the House should have full knowledge of that which 
 they were about to do, because they were not enacting to-day that 
 which would take effect to-morrow, and of which to-morrow would 
 
 a Hansard's Parliamentary Debates, Vol. CLIII, p. 360. 
 b Idem, pp. 362-363. 
 
CTVIL-SERVICE RETIEEMENT IN GREAT BRITAIN. 101 
 
 give experience for correction the day after. They were enacting 
 now that which would not take full effect for the next forty or fifty 
 years, and they were now entering into a new set of engagements, 
 every one of wliich, even if it reached over half a century or more, 
 must be kept absolutely sacred, however onerous might be the con- 
 sequences. Mr. Gladstone next protested that the passage of the 
 bill abolishing deductions had been accomplished on the understand- 
 ing that salaries were later to be reduced correspondingly, but 
 instead of doing that the Government was now proposing to still 
 further augment salaries ''entirely irrespective of the particular 
 merits, duties, or features of the different cases." He said that — 
 
 When this c[uestion was examined and it was first decided by a 
 committee of that House that it was desirable to remit the deductions 
 which had been levied under act of Parliament from the salaries of 
 the civil servants, the committee recommended that the salaries 
 of civil servants should undergo a revision generally corresponding 
 to the deductions, and only a few years previously the House had 
 been almost upon the point of adopting a vote for a general diminu- 
 tion of the salaries of civil servants, entirely irrespective of any 
 relief they were to receive by a revision of these deductions, but the 
 deductions having been remitted the revision of salaries appeared to 
 have been forgotten. He did not make any charge against anyone, 
 and he was perhaps wrong in saying it had been forgotten, for he 
 hoped it was still intended to carry that process into effect. But it 
 might be said that the civil servants were very insufficiently and 
 illiberally paid. But his honorable friend had said that at this very 
 hour, when the House was determining to remit these deductions, 
 the Civil Service Commission were showing by the result of their 
 examinations that the system of admission to the civil service had 
 been extremely lax, and that no inconsiderable number of persons 
 had been allowed to hold offices and to receive salaries for the dis- 
 charge of duties to which they were incompetent. Upon that 
 ground, therefore, as well as upon others, he submitted that there 
 was no case of injustice on the part of the civil service as a body. It 
 could not be alleged, with the slightest color of truth, that that service 
 as a body was underpaid. Everything that the public had con- 
 tracted to do for them had been rigorously and faithfully performed, 
 and he asked, therefore, whether it was just to the people of England 
 that wholesale, without the slightest respect either to the merits of 
 individuals or classes, or to the relations between the salary and the 
 duty to be discharged, the House should proceed to remit the form 
 of deductions and to add in that manner to the public burdens, 
 while at the same time it entirely ignored the corresponding recom- 
 mendation of its committee that with reference to this deduction a 
 revision of the salaries should take place ? He hoped to hear from 
 the Government, first, some declaration as to the manner in which it 
 was intended to proceed with regard to the classes of persons who 
 ought to be included within the provisions of the act; secondly, some 
 promise that before the bill was read a third time an estimate should 
 be framed of the addition which was likely to accrue to the public 
 expenditure; and, thirdly, a statement whether it was intended that 
 the remission of the reduction should be followed by a reconsideration 
 
102 CIVIL-SEEVICE BETIEEMENT IN GEEAT BEITAIN. 
 
 of the rates of salary, or whether, on the other hand, it was meant 
 that that remission of deductions should stand as a simple, sweeping, 
 wholesale augmentation of the salaries of the civil service, entirely 
 irrespective of the particular merits, duties, or features of the differ- 
 ent cases. (") 
 
 Mr. Wilson then told the House that, two years before, when it had 
 been his duty to bring to the consideration of the House an estimate 
 of ^ what the results of a fair superannuation measure would be, he 
 had stated that the ultimate additional cost that would be entailed 
 upon the country by the proposed measure would be about £100,000 
 ($486,650) for the remission of abatements, and another £100,000 
 for the creation of additional pensions. He did not understand that 
 the present bill proposed any additional scale for superannuation. 
 The result of the bill would be merely to give effect to the practice 
 which had prevailed, in awarding pensions under former acts, of 
 apportioning the pensions to the exact number of years of service. 
 His advice to the House was to settle the question "upon a broad 
 principle, which everyone could understand, and which would be 
 just to all." He believed that the best way to promote content 
 would be to establish uniformity, and he did not believe that the 
 operation of the bill would add more than 12 or 13 per cent on 
 that which was now paid, or increase the charge more than £100,000 
 ($486,650). 
 
 Sir Francis Baring said that he had opposed the motion of Lord 
 Naas for getting rid of the old system of making deductions from 
 the salaries of public servants, and he did his best to persuade the 
 House that it would be unwise and most expensive to adopt that 
 step. The House, however, contrary to the opinion of the Govern- 
 ment of the day and the committee, was pleased to get rid of the 
 system. The only question, then, was how much they had to pay. 
 By the old scale a discretion was allowed to the Treasury within 
 certain limits to give the good servants a larger, and the indifferent 
 servant a smaller superannuation. By the present system that dis- 
 cretion was a good deal removed, and upon the whole he preferred 
 the new plan to the old. He entreated the House most earnestly 
 to settle the question, saying that whatever it did, it could not do 
 worse than leave the matter unsettled. It had only two courses 
 open to it, either to revert to the old system or go on. It could not 
 revert to the old system, and so its only course was to go on "even 
 though it might have to pay somewhat dearly for its whistle." 
 
 Sir George Lewis said he was ready to accept the consequences of 
 the decision that the abatements should be abolished, and that the 
 distinction which the payment of those abatements previously made 
 between the class of public servants entitled to superannuation al- 
 lowances by reason of their being subject to such abatements and the 
 
 oHansard's Parliamentary Debates, Vol. CLIII, pp. 366-367. 
 
ClVlL-SERVICE KETIEEMENT IN GEEAT BRITAIN. 103 
 
 class of officers not entitled to superannuation allowances by reason 
 of not being subject to such deductions should be done away with. 
 But he was not prepared to go beyond that principle. He could see 
 no reason for an increase in the scale of superannuations. 
 
 The Chancellor of the Exchequer closed the debate. He contended 
 that the increase in cost of superannuations under the bill would be 
 slight and due to no increase in salaries but to the fact that the scale 
 had been framed to obtained the annual progression which was 
 considered desirable. He said that in urging the bill the Govern- 
 ment had established a principle which would guide it in the man- 
 agement of all cases, namely, that those who received the privilege 
 of superannuation shall pass under the examination of the Civil Serv- 
 ice Commission. He then answered Mr. Gladstone as follows : 
 
 The right honorable member for the University of Oxford (Mr. 
 Gladstone) has said that before this discussion terminates he expects 
 from the Government information on three points — first, the class of 
 persons whom we propose to bring under this act ; secondly, whether 
 we intend to revise the public salaries; and thirdly, he wishes to have 
 an estimate of what will be the increase of charge if this bill passes. 
 With regard to the first point — the class of persons who will come 
 under this act — I will say at once that all those who are included in 
 the original schedule of the existing act, all added since, such as Poor 
 Law Commissioners and others, and all those who have become 
 entitled to be added, will come under the provisions of this act, also 
 those classes mentioned in this debate — namely, those employed in 
 the dockyards and the Post-Office. As to the second point, whether 
 it is the intention of Government to institute a revision of the salaries, 
 I would beg to refer to the opinion given on that subject by the royal 
 commissioners. The royal commissioners were of opinion that such 
 revision would be impracticable, and they gave their reason for their 
 conclusions. Our opinion agrees with that of the royal commissioners, 
 and we do not think that it is expedient, taking a general view of all 
 the circumstances connected with the question, that a general revision 
 of the salaries should take place. I need hardly touch upon the third 
 point, the increase of the amount of charge if the bill passes — because 
 the honorable member for Devonport (Mr. Wilson) has given his 
 opinion to the House, an opinion founded on experience, and entitled 
 to be regarded as of authority on this point. I would say that I 
 believe the estimate of the honorable gentlemen is well founded ; but 
 I believe the expenditure would be rather under that figure than not. 
 And if that is the case, can the House hesitate to pass a bill of this 
 kind, which I think is founded on principles of policy and justice, 
 which has been recommended, and fairly recommended, by the 
 public, and which after a long discussion appears to receive the 
 approbation of the House. C^) 
 
 On the third reading of the bill, there was no debate, but Sir Henry 
 Willoughby asked the Government for an estimate of the expense 
 which its provisions would entail on the country. 
 
 aHansard's Parliamentary Debates, Vol. CLIII, pp. 374-375. 
 
104 CIVIL-SEKVICE EETIREMENT IN GREAT BRITAIN. 
 
 Sir Stafford Northcote stated in reply that the increase of expendi- 
 ture consequent upon the passing of the bill might possibly be 
 £70,000 ($340,655) a year at the utmost, taking into account the 
 additions to be made by taking in a new class of officers, and the 
 possible effect of an alteration in the scale. 
 
 Sir Denham Norreys thereupon said he considered this was one of 
 the most improper and uncalled-for bills the House had ever passed. 
 It was founded on a promise of a revision of salaries, but that revision 
 had never been and probably never would be carried out; and yet 
 the bill would inflict a burden of £70,000 ($340,655) upon the 
 country. 
 
 Mr. Drummond also said the bill was a most improper one, both in 
 principle and detail. If it were just in principle, which he denied, 
 every banker and merchant ought to provide superannuation allow- 
 ances for his clerks and every private person for his servants. 
 
 Mr. Weguelin said that, as one of the commissioners who had 
 originally investigated this subject, he was desirous of expressing his 
 belief that the bill contained the only practical conclusion that could 
 be come to upon it. The revision of salaries referred to could only be 
 prospective, as it was almost impossible to reduce the salaries of 
 existing officers. The bill might throw an additional charge upon the 
 revenue for the present, but ultimately it would result in a saving to 
 the country. 
 
 The bill was then read for the third time in the House of Commons 
 and passed. Unfortunately, the most valuable recommendation of 
 the Superannuation Commissioners, the recommendation to render 
 retirement compulsory at the age of sixty-five, did not meet with the 
 approval of the House and that provision was expunged from the 
 act in committee. Undoubtedly the effort of the Government to 
 obtain uniformity in the treatment of all civil servants was praise- 
 worthy, and to that extent the Act of 1859 was an improvement over 
 the Act of 1834. 
 
 Main Features of the Act. 
 
 The chief recommendations of the Civil-Service Superannuation 
 Commission of 1857 were accordingly embodied in the superannua- 
 tion act which became a law April 19, 1859. The act practically 
 repealed the Act of 1834, only two provisions of that law being opera- 
 tive since then. Those are Section XII, which regulates the salary 
 upon which a pension is to be calculated as the average for three years 
 preceding retirement, and Section XX, which provides that the total 
 receipts for pension and salary combined of an employee recalled 
 to the service after retirement shall not exceed the amount of his 
 former salary. (") 
 
 o See Sections XII and XX, Act of 1834. Appendix I. 
 
CIVIL.-SEEVICE RETIEEMENT IN GEEAT BEITAIN, 105 
 
 Under the Act of 1859 it became necessary in order to qualify 
 for a pension — 
 
 (1) That a civil servant should have been admitted to the service 
 with a certificate, unless appointed directly by the Crown or placed 
 under the professional section of the act. 
 
 (2) That he should have given his whole time to the public service. 
 
 (3) That he should draw the emoluments of his office from public 
 funds exclusively. 
 
 (4) That he should be certified to have served with diligence and 
 fidelity to the head of his department, else the full amount of pension 
 may not be awarded. 
 
 (5) That he should have served for not less than ten years, unless 
 in the case of abolition of office. 
 
 (6) That if under the age of 60 he should be certified to be per- 
 manently incapable, from infirmity of body or mind, of discharging 
 his official duties, or his place must have been abolished. 
 
 On qualification for retirement under the six general conditions 
 explained above a civil servant became entitled to a pension calcu- 
 lated at one-sixtieth of his retiring salary for each year of service, 
 subject to a maximum of forty-sixtieths. The pension was calcu- 
 lated upon the average of his emoluments during the last three years. 
 
 A free and universal pension for all members of the permanent 
 civil service having been inaugurated by the Act of 1859, it would 
 seem that all those who had the good fortune to be among those 
 thus "established" might have been satisfied. Such, however, was 
 not the case. Mutterings of discontent soon began to be heard. 
 On the one hand were heard the criticisms of the public generally 
 as to the growing cost of the system, and on the other hand the 
 complaint of the beneficiaries that the system made no provision 
 for the dependents of civil servants and that various bodies of 
 employees not classified as members of the permanent service were 
 excluded from the benefits of the act. 
 
 SELECT COMMITTEE OF 1873. 
 
 In 1873 a select committee was appointed by Parliament to inquire 
 whether any reductions could be effected in the expenditure for civil 
 services. The system of pensions or superannuation received some 
 attention from this committee. The witnesses examined, who were 
 high officials of State, testified without exception to the public 
 value of a superannuation system as increasing both efficiency 
 and economy in the service. The opinion of any two or three 
 of them may be taken as representative of all. Sir Thomas Fre- 
 mantle, who was chairman of the Board of Customs at the time, and 
 
106 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 
 
 who had previously been Secretary for Ireland, Secretary at War, and 
 twice Secretary to the Treasury, so that he had had a very large offi- 
 cial experience for many years, was asked if he was satisfied that 
 every member of the civil service should be pensioned. 
 
 ''Indeed I am," he answered, "I should be very sorry to interfere 
 with the scheme of superannuation. 
 ' "For the work of the establishments?" queried the chairman. 
 
 "For those who are on the permanent establishment." 
 
 "You do not think that the country would get as good service 
 unless that prospect of pension was held?" 
 
 "I think not, and in one respect the country would get very much 
 worse service, because in the case of an officer who is nearly worn 
 out and unable to do his work in a satisfactory manner, it is really 
 essential for the transaction of the business of the establishment that 
 that man should be removed; and if we are able to say 'you are 
 entitled to superannuation,' we can put pressure upon him and get 
 rid of him, but if he had no superannuation it would be practically 
 impossible to remove a man."(^) 
 
 Value to the Public Service of a Superannuation System. 
 
 Sir William Henry Stephenson, chairman of the Board of Inland 
 Revenue, who had formerly been for many years in the Treasury and 
 had had great experience in the organization of the public service 
 generally, and of inlaxid revenue service in particular, said: 
 
 "I think there is a great advantage in superannuation as regards 
 permanent officers; it is a great hold upon them. 
 
 "Even down to messengers and persons who are engaged on weekly 
 wages?" asked the chairman. 
 
 "Yes, I think it is quite as important with them. It is an immense 
 power that you have over a man's disposition to behave himself 
 we^''^*) 
 
 The Chancellor of the Exchequer declared himself with especial 
 emphasis in favor of the pension. 
 
 "I think that superannuation is a very good institution indeed," 
 said he. "We get men young; we teach them their business; we 
 shall get them I think with a fair prospect of having men of good 
 intelligence; and by practicing their business, they learn it until they 
 become very valuable, and worth indeed a great deal more than the 
 salaries in the public service, which are not very high. By superan- 
 nuation we contrive to retain them in the service, whereas, if we 
 had not superannuation, we should always have to be teaching and 
 bringing up persons who would be going oflP and carrying their attain- 
 ments to a higher market. I think that superannuation is a very 
 good institution, and an economical one."('=) 
 
 a Third Report on Civil Services Expenditure. 1873. Minutes of evidence, p. 203. 
 b Idem, p. 209. 
 cidem, p. 230. 
 
civil-seevice retirement in great britain. " 107 
 
 Compulsory Retirement at a Given Age Advisable. 
 
 While agreeing that a superannuation system was desirable, the 
 witnesses were not by any means convinced that the scheme estab- 
 lished by the Act of 1859 was beyond criticism. One weakness of 
 the system was felt by all. This was the failure of the law to make 
 retirement compulsory at some given age. Mr. Robert G. W. Her- 
 bert, the permanent Under Secretary of the Colonial Office who had 
 previously been with the Board of Trade and with the Railway De- 
 partment and had therefore had a variety of experience of official 
 and departmental organization, was asked if he did not observe a 
 tendency of persons to hang onto their offices long after they had 
 become inefficient. 
 
 "Yes," said he, "there is that tendency. There is no legal means 
 of requiring a man to leave. The English superannuation act does 
 not exact that at a certain age a person shall retire; it is merely by 
 what I suppose I may call a friendly arrangement that he goes when- 
 ever it is found necessary for him to go. I think the superannua- 
 tion act ought to contain a proviso that at a certain age, either 60 
 or whatever other age might be thought expedient, a clerk should be 
 compelled to leave the service, unless he were asked to remain for a 
 particular time, say two or three years longer, by the head of his 
 department, on special grounds, I think that retirement should, as a 
 general rule, be compulsory at a certain age."(") 
 
 Asked if he would wish to have the power of compulsory superan- 
 nuation. Sir William H. Stephenson said, 
 
 I should be very glad to see it, and I think it would be a very use- 
 ful power both to the public and very often to the individual him- 
 self. * * * I have seen many instances in my own knowledge, 
 both recently and in former times, of men far overstaying their 
 energies. (*•) 
 
 Mr. Reginald Earle Welby, principal clerk for financial business of 
 the Treasury, was asked if he did not think that, in the interests of 
 economy, superannuation might be withheld from certain classes of 
 civil employees, and answered rC"") 
 
 "I am always afraid of sweeping away the right to pension, be- 
 cause I feel convinced that it will mean keeping men in the service 
 after they have ceased to be efficient; I feel that so strongly that I 
 think, if I may venture to say so, that retirement throughout the 
 service ought to be compulsory at the age of sixty-five. 
 
 " It is compulsory as against the Government at the age of sixty, 
 is it not ? asked the chairman. 
 
 "Yes, but there is no limit as against the officeholder. 
 
 "There is no reciprocity, is there? 
 
 "There is no reciprocity." 
 
 o Third Report on Civil Service Expenditure. 1873. Minutes of evidence, p. 166. 
 b Idem, p. 209. 
 cidem, p. 7. 
 
108 CIVIL-SEE VICE EETIREMENT IN GEEAT BEITAIN. 
 
 Cost of JVIaintaining Free Pension System. 
 
 The question of expense in connection with the maintenance of 
 civil pensions was recognized to be of first importance. Mr. Welby 
 handed in the following estimate of the sum required for the current 
 year (1873-74) to pay salaries and superannuation to all civil serv- 
 ants. This included not merely those employed in the civil service 
 proper but also civilian employees of the Army, Navy, Judiciary, and 
 Revenue departments, and showed that the total charge for " non- 
 effective civil services" was estimated to be £1,829,931 ($8,905,359.21). 
 Noting this fact, the chairman of the committee asked Mr. Welbj 
 if that expenditure was tending to diminish or to increase. 
 
 "The superannuation proper is tending to increase in one direc- 
 tion and to decrease in another," said he, ''It increases, of course, as 
 fresh departments are formed as part of the civil service; it has a 
 tendency to decrease as the number of established officers entitled to 
 pension is diminished. For instance, if a department which had 
 had fifty clerks on the establishment is reduced to thirty clerks on 
 the establishment, the tendency of course will be a diminution of 
 the pension list; in addition to that we are still under the effect of 
 the superannuation regulations before 1829, which were on a much 
 more liberal scale than those which are now accorded to the civil 
 service, but the pensions granted previous to 1829 are of course fall- 
 ing off rapidly now, and the pensions now granted are upon the lower 
 scale, therefore there are those three different influences at work."('P) 
 
 The estimate furnished by Mr. Welby was as follows : C*) 
 
 ESTIMATE (APPROXIMATE) OF THE AMOUNT TO BE PAID IN SALARIES AND ALLOW- 
 ANCES IN RESPECT OF EFFECTIVE AND NONEFFECTIVE CIVIL SERVICES OF THE 
 ARMY, NAVY, CIVIL, AND REVENUE DEPARTMENTS DURING 1873-4. 
 
 [Only those salaries are included which will carry with them a claim to pension.] 
 
 
 Charged on votes. 
 
 Charged on Consolidated Fund. 
 
 
 
 Ordinary 
 services. 
 
 Political 
 services. 
 
 Total. 
 
 Ordinary 
 services. 
 
 Political 
 services. 
 
 Total. 
 
 Total. 
 
 Army: 
 
 $1,233,521 
 834, 507 
 
 3, 883, 419 
 1, 423, 919 
 
 6, 082, 629 
 1,209,939 
 
 5,136,912 
 1, 033, 601 
 
 3,913,673 
 737, 946 
 
 14,792,325 
 2, 348, 772 
 
 146, 232 
 
 $1,279,753 
 834, 507 
 
 3,915,051 
 1, 423, 919 
 
 6,359,654 
 1, 209, 939 
 
 5, 192, 750 
 1,033,601 
 
 3, 913, 673 
 737, 946 
 
 14, 792, 325 
 2, 348, 772 
 
 
 
 
 $1,279,753 
 
 
 
 
 
 834, 507 
 
 Navy: 
 
 31, 632 
 
 
 
 
 3, 915, 051 
 
 
 
 $10,706 
 
 97, 330 
 d 159, 018 
 
 $10, 706 
 
 148,282 
 d 250, 099 
 
 2, 458, 444 
 1, 055, 870 
 
 1, 434, 625 
 
 Civil service: 
 
 Effective 
 
 277,025 
 
 $50, 952 
 91, 081 
 
 2, 458, 444 
 1, 055, 870 
 
 6,507,936 
 
 
 d 1,460, 038 
 
 Criminal and judicial: 
 Law and justice — 
 
 55, 838 
 
 7, 651, 194 
 
 
 
 2,089,471 
 
 Police^ 
 Effective 
 
 
 
 3,913,673 
 
 Noneffective 
 
 Collection of revenue: 
 
 
 
 
 . 
 
 737, 946 
 
 
 
 
 
 14, 792, 325 
 
 
 
 
 
 
 2,318,772 
 
 
 
 
 
 
 
 Total: 
 
 35, 042, 479 
 
 7,588,684 
 
 410,727 
 
 35,453,206 
 
 7, 588, 684 
 
 2, 509, 396 
 1, 146, 951 
 
 97,330 
 169, 724 
 
 2,606,726 
 1, 316, 675 
 
 38, 059, 932 
 
 
 8, 905, 359 
 
 
 
 
 a Third Report on Civil Service Expenditure. 1873. Minutes of evidence, p. 7. 
 
 b Idem, Appendix No. 10, p. 406. 
 
 c In the military aud postal departments a large amount is paid in salaries, the recipients of which will 
 not, in all cases, receive superannuation. As each case will be decided by itself on no general rule, they 
 have not been included in this return. 
 
 d Includes £11,380 ($55,381) hereditary pensions. 
 
civil-seevice retirement in great britain. 109 
 
 Pension Charge Reduced by Reducing Number of Pensionable 
 
 Clerks. 
 
 A very interesting fact in connection with the efforts made by the 
 Treasury to reduce the cost of superannuation was brought out by 
 Mr. Welby's testimony. This was the pohcy of the Treasury to 
 substitute as far as possible those persons outside the permanent 
 civil service for permanent officers entitled to superannuation. 
 The result was a small number of classes of established clerks and a 
 considerable number of subordinates. Mr. Welby was asked: 
 
 Is it your opinion that the tendency which you have explained at 
 the Treasury to substitute nonestablished for established employees 
 will ultimately produce a considerable reduction in the charge for 
 superannuation ? {"■) 
 
 To this he answered: 
 
 I should think so; I will take, as an instance, the result of the 
 enquiries during a period of years into the Customs; I think the 
 result of that has been to reduce something like 650 established 
 clerks to a little over 400, and, of course, the future charge for super- 
 annuation will be reduced in that proportion. ("') 
 
 This avowed policy of the Treasury threw into bold relief the most 
 obvious objection to a straight pension; that is, the great expense 
 and the difficulty of keeping a civil pension list within bounds. 
 The method resorted to by the Treasury may have been effective, 
 but the question naturally arises, Did it not result in the defeat of 
 the system and the revival of that invidious distinction between 
 different classes of employees complained of at the time of the pas- 
 sage of the Superannuation Act of 1859? 
 
 Development of Idea that Pension is a Substitute for Salary. 
 
 Through all these hearings before the Select Committee of 1873 
 runs an idea destined in later years to develop into more definiteness. 
 This is the idea that superannuation allowances are a substitute for 
 greater salaries. It was generally held that from the Government's 
 point of view it is wiser to grant pensions and give less pay than to 
 pay higher salaries and give no pensions. 
 
 Mr. Thomas Henry Farrer, permanent head of the Board of Trade, 
 who had been in the public service for twenty-three years, said: 
 
 I used to be of opinion that it would be a better plan to pay higher 
 salaries and give no pension; but seeing the extreme difficulty of 
 ever getting rid of an old public servant, however useless, without a 
 pension, I have changed my opinion, and I think that there must be 
 pensions for the upper part of the establishment. C") 
 
 o Third Report on Civil Service Expenditure. 1873. Minutes of evidence, p. 7. 
 6Idem;p. 190. 
 
110 CIVIL-SEE VICE RETIKEMENT IN GEEAT BRITAIN. 
 
 Sir William H. Stephenson was asked if lie did not think that a 
 civil servant engaged for a limited period, after which he was to be 
 compulsorily retired, with no provision for a superannuation allow- 
 ance, might not be naturally expected to make arrangements out 
 of his salary on his own account. His answer was : 
 
 Yes; but then I fall back upon the question of economy. I think 
 that if you introduce that system, you would find yourself drifting 
 into a higher payment of salaries. 
 
 Of the same opinion was the Hon. Adolphus Liddell, Under Secre- 
 tary of State for the Home Department. Said he: 
 
 I am not very good at figures or finance, but it does seem to me, as 
 an ordinary being, that if you give a man an extra salary to enable him 
 to insure, you do the same thing by giving him that extra salary as 
 by giving him a superannuation allowance with a somewhat less 
 salary. 
 
 "On the whole, you would rather have things as they are?" he was 
 asked. 
 
 I would. I think you would by that means insure a more satisfied 
 and more permanent servant. C^) 
 
 The gentlemen who appeared before the Select Committee were 
 questioned in passing as to their views of a system of deductions 
 ■from salaries as a substitute for the expensive pension system in 
 vogue. While most of them showed familiarity with the provisions 
 of the Act of 1834, under which the old contributory system of super- 
 annuation was carried on, and appreciated its avoidable faults and 
 the reasons for public discontent under that system, they seemed 
 to think that the heartburnings of that period had been such as to 
 make it unwise to revive the principle of deductions from salaries as 
 a mode of paying pensions and compensations. "The action of 
 Parliament in the matter," said Mr. Welby, * * * "was looked 
 upon as closing the chapter." 
 
 Recommendation of the Committee. 
 
 As a result of these hearings the committee included in its third 
 report a recommendation for the compulsory retirement of officers 
 at a given age. The paragraph relating to the subject was as follows: 
 
 With respect to superannuation, what your committee have al- 
 ready stated will indicate the doubt they feel as to the practicability 
 of excluding any considerable body of the clerical establishments 
 from its benefits. The advantages of the system, as retaining in the 
 service trained officers, as protecting the public from combinations, 
 and as a means of enforcing discipline, are obvious. On the other 
 hand, the aggregate charge on the exchequer for superannuations and 
 pensions is increasing; and your committee fear that the extent to 
 which it is likely to grow may produce an effect on the public mind 
 
 o Third Report on Civil Service Expenditure. 1873. Minutes of evidence, p. 212. 
 
CIVIL-SEEVICE RETIEEMENT IF GEEAT BEITAIN. Ill 
 
 unfavorable to the whole system. Whether, however, it should or it 
 should not be thought desirable to limit for the future the numbers 
 entitled to the benefits of the superannuation act, your committee 
 recommend that powers should be sought from Parliament for com- 
 pelling the retirement of officers at a given age (say 65), if in the 
 opinion of the head of the department such retirement would be for 
 the public benefit. {"■) 
 
 Great as was the need of fixing compulsory retirement at some 
 given age, it was years before the recommendation of the Select 
 Committee of 1873 was acted upon. The same recommendation is 
 found fifteen years later among the recommendations of the Ridley 
 Commission in its second report, printed in 1888, but it was not until 
 the issue of the order in council dated November 29, 1898, that re- 
 tirement from the civil service was made compulsory at the age of 65. 
 
 PLAYFAIR COMMISSION, 1874. 
 
 In 1874, the year following the parliamentary inquiry into civil 
 service expenditures just noted, a commission was appointed by 
 Treasury minute to inquire into the following subject connected with 
 admission to and service in the civil departments of the State : {^) 
 
 1. The method of selecting civil servants in the first instance. 
 
 2. The principles upon which men should be transferred from 
 office to office, especially in cases when one establishment has been 
 abolished or reduced in number, and when there are, consequently, 
 redundant employees, whose services should, if possible, be made 
 available in other departments. 
 
 3. The possibility of grading the civil service as a whole, so as to 
 obviate the inconveniences which result from the difference of pay in 
 different departments. 
 
 4. The system under which it is desirable to employ writers or 
 other persons for the discharge of duties of less importance than those 
 usually assigned to established clerks, or duties of a purely temporary 
 character. 
 
 Optional Retirement After Twenty Years' Service Proposed 
 
 AND Rejected. 
 
 The work of this commission resulted in the adoption of a scheme 
 of reorganization for the civil establishments. The subject of super- 
 annuation had not been referred directly to the Playfair Commis- 
 sioners, but they stated in their first report that it had been ''forced 
 on their attention." The chief obstacle to the establishment of 
 their scheme of organization was the presence of large numbers of 
 old men in the offices who had not died out nor been compulsorily re- 
 tired. The only proposal relating to superannuation with which they 
 
 o Third Report on Civil Service Expenditure. 1873. Minutes of evidence, p. v, 
 & Twenty -fourth Report of the Civil Service Commissioners. 1879. Appendix 
 IX, p. 568, 
 
112 CIVIL-SERVICE EETIEEMENT IN GREAT BRITAIN. 
 
 dealt, however, was one that the State should give an option of 
 retirement with superannuation allowance after twenty years' serv- 
 ice, with a view principally of quickening promotions. This they did 
 not recommend. Said they: 
 
 It has been urged that it would be economical for the State to give an 
 option of retirement with superannuation allowance after twenty years' 
 service ; various witnesses support this proposal, chieflj?^ on the ground 
 that it might quicken promotion. No doubt there is considerable 
 force in this view if the present division into classes continues; but 
 it has little weight if a service scale such as we have proposed be 
 adopted. In that case the question will be simply whether a man 
 with twenty years of service has an equitable right to a pension of 
 20/60ths of his existing salary, just as a man at the age of 60 has to 
 x/60ths, according to the number of years of his service. We do not 
 see any abstract justice in the proposal. The increments upon the 
 original salary have only the justification of the increased value to the 
 State acquired by the official experience of the clerk. But if he leave 
 the public service in the prime of life with a pension calculated upon 
 this augmented salary, the State will derive little or no advantage 
 for the increments which represent maturity in work ; on this ground 
 we have not deemed it right to support the proposal. Another con- 
 sideration has also weighed with us. If it were fair that a clerk 
 -should have an option of resigning after twenty years' service, with 
 superannuation, on the ground that the service did not suit him, it 
 would be necessary, in justice for the State to exercise the power which 
 it now possesses in theory, but rarely exercises, of dismissing a clerk 
 after twenty years when he did not suit the service. But this would 
 place the clerks in a worse position than they are at present, for they 
 are now entitled after a service of twenty years to count ten years in ad- 
 dition to their service when they are compelled to retire on abolition 
 of office. There is a further consideration, viz, that the adoption of 
 this principle would have the effect of weakening the tie which now 
 binds a man to the service, and of inducing him to look outside that 
 service for his prospects of advancement. On the whole, therefore, 
 we do not see any advantage, either to the State or to the clerks, in 
 the proposal made to us.('^) 
 
 SELECT COMMITTEE OF 1885. 
 
 Committee's Recommendation of a Contributory Pension 
 
 Scheme. 
 
 In 1885 a select committee was appointed by Parliament to inquire 
 into the subject of national provident insurance. Its labors continued 
 for about two years, during the course of which much evidence was 
 taken concerning conditions imposed by various private employers 
 of labor upon those in their employment, in order to provide for their 
 superannuation. This committee was impressed with the growing 
 cost of pensions, and came to the conclusion that not only the civil 
 
 ffl Twenty-fourth Report of the Civil Service CommissionerB. 1879. Appendix IX, 
 p. 592. 
 
CIVIL-SEKVICE KETIKEMENT IN GKEAT BEITAIN. 113 
 
 but the military establishments of the State also might well follow 
 the example of private business firms in requiring employees to con- 
 tribute to their pensions. They stated in their report that they — 
 
 Are of opinion that all persons hereafter appointed to the service 
 of the Crown, whether civil or military whose service at present 
 counts towards pension, should contribute towards that pension by 
 a percentage deduction from salaries or pay. The steady and rapid 
 growth of the pension list points to a proximate revision of the entire 
 policy of burdening the public with the provision of pensions; the 
 enterprise of private individuals and firms indicate the advantage 
 of self-help as a condition of employment (which it might be proper 
 to supplement with state-help) ; and your committee recommend 
 that not only in service counting under the present system towards 
 pension, but also in the police and other unpensioned branches of the 
 public service, contribution to a pension fund should be made oblig- 
 atory. (") 
 
 KIDLEY COMMISSION, 1886. 
 
 On September 20, 1886, a royal commission, of which Sir Matthew 
 White Ridley was chairman, was appointed to inquire into the 
 condition of the civil establishments. The commission was author- 
 ized to inquire into the numbers, salaries, hours of labor, superan- 
 nuation, cost of the staff, and the administration, regulation, and 
 organization of the civil offices. They were instructed as follows: 
 
 You will state whether, in your opinion, the work of the different 
 offices is efficiently and economically performed; whether it can be 
 simplified; whether the method of procedure can be improved; and 
 whether the system of control is deficient or unnecessarily elaborate. 
 
 As ten years have now elapsed since the adoption of the scheme 
 of organization recommended by the Playfair Commission, the time 
 has come when the working of the scheme may, with advantage, be 
 reviewed. You will, therefore, report whether the scheme has 
 been fairly tried; whether its provisions have met the requirements 
 of the service, and deserve confirmation and whether any modifi- 
 cations are needed to give it complete development. 
 
 Lastly, you will examine the non-effective charge of the civil 
 service, and advise whether the present pension scales and regula- 
 tions are equitable alike to the State and to its servants. C") 
 
 Growth of ''The Deferred Pay" Argument. 
 
 Wliile the recommendations of this commission in regard to super- 
 annuation were not acted upon, the record of the inquiry made by 
 it into the working of the pension scheme and the evidence sub- 
 mitted to it on the feeling of the civil servants in regard to the way 
 
 « Second Report of Commission on Civil Establishments. 1888. Appendix, p. 423. 
 6 Idem, p. V. 
 
 35885— S. Doc. 290, 61-2 8* 
 
114 CIVIL-SEEVICE RETIREMENT IN GREAT BRITAIN. 
 
 in which they were pensioned are of great significance to the student 
 of the British superannuation system. The most striking fact 
 brought out was the development of the idea suggested to the Com- 
 mittee on Civil Expenditures appointed in 1873, that the pension is 
 a substitute for increase of salary, or, as it may be more forcibly 
 stated, that the pension is actually paid out of the salary. The 
 phrase that came into vogue at the time of this inquiry and which 
 has been current ever since was this: "Pensions are deferred pay." 
 We see, instead of gratitude for the grant of pensions the growth of 
 a conviction that salaries are lower than they would be without 
 pensions, and by an amount more than sufficient to pay the cost of 
 pensions, and a spirit of discontent spreading from that belief. 
 
 Abolition of Pensions Proposed by Sir Robert Hamilton in 
 Favor of Savings Scheme. 
 
 A memorandum was submitted to the commission by Sir Robert 
 Hamilton which created the greatest interest both among members 
 of the commission and members of the civil service, and which 
 became the center of debate that has ever since continued around 
 the words "deferred pay." 
 
 Attackmg the existing pension system as a system of "deferred 
 pay," and maintaining therefore that it is "clearly inequitable to 
 withhold from the representatives of a man who dies on full pay the 
 deferred pay which he has earned," Sir Robert Hamilton proposed 
 a complete change in the system. Assuming that part of the salary 
 was being withheld as "deferred pay" to be returned to those mem- 
 bers of the service who became pensionable, he suggested that it 
 would be better to place this amount to each man's credit in the 
 government savings bank, to be returned to him with interest on 
 his withdrawal from the service or to his representatives in case of 
 his death. What he proposed was virtually an abolition of the 
 pension system and the adoption of a savings arrangement. In 
 view of the serious consideration given his memorandum and the 
 discussion of the basic principles underlying the whole theory of 
 superannuation which it opened up and which has gone on ever 
 since in England, the most important part of that memorandum is 
 here given: (") 
 
 The reference to the commission to "examine the noneffective 
 charge of the civil service, and advise whether the present pension 
 scales and regulations are equitable alike to the State and to its 
 servants," is an extremely important one. The Playfair Commission 
 did not deal with this subject beyond expressing their opinion that it 
 would not be desirable to give clerks the option of retiring, say, after 
 
 « Second Report of Commission on Civil Establishments. 1888. Memorandum, 
 pp. 572, 573. 
 
CIVIL-SEEVICE KETIREMENT IN GREAT BRITAIN. 115 
 
 20 years' service, instead of being required as at present to serve until 
 they are 60 years of age. I have long thought that the present 
 pension system required radical alteration. 
 
 Payment of superannuation can not be defended on the ground of 
 its being a charitable contribution, for the State as the trustee of the 
 
 Seople's money would not be justified in making any such use of it. 
 lut it can be defended on the ground that it is a means of procuring 
 cheaper service and keeping down the amount of the salaries which 
 would otherwise be payable. In other words, it represents deferred 
 fay; but if this be so, it appears to me to be clearly inequitable to 
 withhold from the representatives of a man who dies on full pay the 
 deferred pay which he has earned. 
 
 Another defect of the present system is, that while deferred pay 
 should bear some proportion to the varying rates of pay received for 
 active employment, the pension is fixed solely with reference to the 
 salary paid in the last three years of service. 
 
 Again, in the civil service, but still more so in the military services, 
 huge future liabilities are often incurred by some concession or alter- 
 ation which makes but little addition to the estimates of the year in 
 which the change is effected, and which never receive the attention 
 they deserve. To give a very simple case : If an officer receiving, say, 
 £600 [$2,919.90] a year, is allowed to progress by £25 [$121.66] a 
 year to £900 [$4,379.85], the estimates for the year show only an 
 increase of £25 [$121.66] a year until the maximum is reached. But 
 when that man comes to retire instead of getting two- thirds of £600 
 [$2,919.90] or £400 [$1,946.60] a year as pension he gets two-thirds of 
 £900 [$4,379.85] or £600 [$2,919.90] a year. The capital value of 
 this addition in the shape of pension (taking the rates laid down for 
 commutation) would be £200 [$973.30] x 9.19 = £1,838 [$8,944.63]. 
 
 If it were possible to make the estimates of each year bear the 
 whole charge, both effective and noneffective, incurred in that year, 
 a most valuable check would be created upon extravagant retire- 
 ment schemes, and Parliament would know exactly what it was 
 asked to sanction. 
 
 I think a scheme for superannuation could be devised which would 
 meet this important requirement, and also secure that each man, or 
 his representatives, received the exact amount of his accumulated 
 deferred pay. The only real difficulty and objection is that it would 
 involve a largely increased charge during the period of transition 
 from the one system to the other. 
 
 Assuming that for every £100 [$486.65] now paid in salaries there 
 is £20 [$97.33] paid in pensions, and that this is a fair proportion to 
 maintain, when a clerk is appointed at £100 [$486.65] a year, £120 
 [$583.98] should be provided in the votes in respect of him. Of this, 
 £100 [$486.65] would be paid .to him, and £20 [$97.33] placed to his 
 credit in the Government savings bank. On this amount he would 
 have no claim whatever until his retirement. But when his service 
 came to an end, he or his representatives, if he died in service, would 
 receive his deferred pay which would be accumulating to his credit 
 at compound interest. 
 
 The advantages attending such a plan over and above the two main 
 ones which I have pointed out would be very great: 
 
 (1) The proportions of deferred pay could be varied to suit the 
 differences of service, e. g., in services such as certain grades of the 
 
116 CIVIL-SEEVICE EETIEEMENT IN GREAT BEITAIN. 
 
 Army and Navy, and the Police, in which physical energy is essential, 
 and it is not desirable to retain men beyond 40 or 50 years of age, the 
 proportion of deferred pay might be greater than in the case of clerks. 
 It might also be somewhat raised to meet the case of what is called 
 ''professional qualifications" under sec. 4 of 22 Vict., c. 26. 
 
 (2) So long as the service did not suffer from the withdrawal of the 
 official experience of a clerk, and the office should of course always 
 have the power of vetoing a retirement, it would not matter from a 
 pecuniary point of view after what length of service a clerk might elect 
 to retire. 
 
 (3) It would be much easier than it is at present for a department 
 to get rid of inefficient men. Some small addition might be added 
 for compensation when a clerk was required to retire before 60 years 
 of age; but this would have to be provided for in the estimates for 
 the year in which he retired, and would only be awarded if his record 
 was very good. In other cases it would be a condition of service that 
 he must retire when required to do so by the head of his department, 
 on his deferred pay alone. I attach great importance to this power. 
 Men, especially towards the top of an office, should be judged by a 
 high standard, and removed without hesitation if they fail or cease 
 to come up to it. 
 
 (4) No trouble could arise about re-employing men who had been 
 pensioned, for the cost to the State would be the same in all cases. 
 
 (5) The whole of the costly machinery for the payment of pensions 
 might eventually be got rid of, and a large saving thereby eftected. 
 
 (6) The heartrending cases which now constantly occur of good 
 men dying in harness, without having been able to make any provi- 
 sion for their families, would be largely met. 
 
 Not only would such a scheme enormously promote economy and 
 efficiency, but I feel certain that it would be most acceptable to the 
 civil servants as a body. 
 
 I see no way of dealing satisfactorily with the question of super- 
 annuation short of such a complete change in the system. The pres- 
 ent system is defective throughout. Clerks practically can not be 
 got rid of until they are 60 years of age, however inefficient they may 
 be, except by making a shuffle of the cards, called a ''reorganization 
 of office," and by giving them certificates that they have served with 
 "zeal and fidelity." Even when they are 60, although they can 
 themselves claim to go, there is no statutable power to get rid of them. 
 It is true that the War Office and Admiralty have made office rules on 
 this point, and enforce compulsory retirement at the age of 60, 
 extended m some cases to 65, but their competence to issue such rules 
 is not entirely clear. I regard compulsory age retirement as abso- 
 lutely essential to keep an office in a state of efficiency, whatever the 
 system of superannuation may be. 
 
 I should extend commutation to all pensions. It costs the Gov- 
 ernment nothing, and is a benefit much prized by the service. From 
 my scheme (supra) it will be seen that I attach no importance to the 
 policy of the State securing a yearly provision for its servants in 
 place of compensating them once for all, and leaving them to make 
 their own investments. But if the regulations of the Treasury 
 minute of 28th October, 1882, are maintained, which limit the com- 
 mutation to two-thirds of the pension, or to such less proportion of 
 it as leaves an amount of not less than £80, I can see no reason that 
 
CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 117 
 
 can, from any point of view, be urged against making all pensions 
 commutable. 
 
 Approval of Sir Robert Hamilton's Proposal Expressed by 
 Officers of the Treasury. 
 
 Study of the testimony taken by the commission shows a sur- 
 prising agreement on the part of the witnesses with the suggestion 
 of Sir Robert Hamilton to abolish the pension system and establish 
 instead a savings scheme which would enable the civil servant, on 
 retiring from the service, to take his money in a lump sum or, on 
 dying, to leave it to his representatives; in other words, to commute 
 the pension he would receive if he remained to the pensionable age. 
 Approval of Sir Robert Hamilton's suggestion in the main was 
 expressed by high officials of State, such as Sir Reginald Welby and 
 Sir Herbert E. Maxwell, who constituted the committee on pensions 
 and superannuation at the Treasury, and Sir Thomas Henry Farrer, 
 permanent Secretary of the Board of Trade, as well as by humbler 
 members of the service, such as clerks at the Board of Trade, in the 
 Post-Office, and in the Inland Revenue Office. Others who were 
 not questioned particularly about their view of Sir Robert Hamil- 
 ton's suggestion nevertheless took occasion to praise a contributory 
 system — provided refund of payment was allowed — for two reasons. 
 They thought it superior to the existing system because it enabled 
 the heads of departments to dismiss inefficient clerks without cruelty 
 and it softened the hardship caused to families of clerks who died 
 in harness. The assumption that a pension was ''deferred pay" — 
 that is, that something was virtually being deducted from salaries all 
 along in order that pensions might be granted at the end of the 
 service — seems to have been tacitly accepted by all witnesses. The 
 majority of them argued also for the funding of the contributions. 
 The experience of English railways in retiring their employees seems 
 to have made a generally favorable impression, especially the scheme 
 of the London and Northwestern Railway Company's fund, which 
 was based on contributions of 2J per cent of salary from the em- 
 ployees, with the addition of an equal amount from the company. 
 Compulsory retirement at a given age was unanimously urged, and 
 calculation of the pension on the basis of the mean salary rather 
 than the ultimate salary was approved, by many as less expensive 
 for the State and entirely just to the civil servant. ('^) 
 
 a For evidence in regard to superannuation submitted to the Ridley commission, 
 see Summary of Second Report of the Ridley Commission Appointed to Inquire into 
 the Civil Establishments of the Different Offices of State at Home and Abroad, 1888, 
 p. Ixxiii. Evidence of Sir Reginald Welby, Sir Herbert Maxwell, Sir Algernon West, 
 Sir E. Du Cane, Sir Thomas Farrer, Messrs. Mowatt, Dawson, Whittle and Parkhouse, 
 Jastrzebski and Day, Lushington, Moran, Giffen, Hawkes, Bullock and Barnes, Salin, 
 McCormick, Calcraft, and Blackwood. 
 
118 CIVIL-SEEVICE EETlEEMEiSTT IN GEEAT BEITAIN. 
 
 Assumption that Postponed Chaege is Made by the State to 
 Pay Pensions Accepted by Sir Reginald Welby. 
 
 The testimony of Sir Reginald Eaiie Welby, before the Ridley 
 Commission is particularly interesting and significant, not merely 
 because as permanent Secretary of the Treasury and a member with 
 Sir Herbert Maxwell of the Treasury committee on superannua- 
 tion he was in a position to make important observations on the 
 working of the existing system, but because his testimony shows that 
 in the fifteen years which had elapsed since, as Mr. Welby, principal 
 clerk for financial business of the Treasury, he had testified before the 
 Committee on Civil Expenditures in 1873, his views as to the needs of 
 the service in the matter of superannuation and what could and should 
 be done in the interests of the public had undergone some develop- 
 ment. In 1873, although he stated that the action of Parliament in 
 1857 in abolishing the system of deductions was against the wish of 
 the Treasury and the Government of the day, he seemed disposed to 
 regard the incident as closed. In 1886 he was not by any means so 
 sure that the chapter written in 1859 establishing a universal pension 
 system should be accepted as final. He expressed himself as in 
 favor of the principle of the London and Northwestern Railway 
 pension scheme, namel}^, a contribution by the servant supplemented 
 by a similar contribution from the employer, and said he saw; no 
 reason why this principle should not be introduced in the civil service, 
 although the fact that in the civil service salaries are sometimes 
 largely increased might be an element of difficulty in fornfing a 
 solvent fund. He was very decidedly of the opinion that a bona 
 fide fund should be created, and not merely a paper fund. Said he: 
 
 I think the minds of statesmen, the chancellors of the exchequer, 
 and of the Government, have considerably changed within the last 
 thirty years in that sense. Thirty years ago the idea was to have no 
 funds; to pay everything into the exchequer as it came. The con- 
 sequence was that neither a minister nor head of a department, nor 
 clerk ever watched the workings of any scheme. The evil of not 
 watching the working of a system has come forcibly home of late 
 years, and our tendency now is to favor in any scheme of this kind 
 the creation of a fund. (") 
 
 He was therefore not in favor of a contribution by the clerk simply 
 as so much in aid of the exchequer charge for pensions (the motive 
 that had prompted the Superannuation Act of 1834), but thought 
 the contributions by employer and employee should be "put into 
 the fund and managed on actuaries' calculations, so that the fund be 
 kept solvent." He believed that a personal account should be kept 
 with each subscriber and that the actual contributions of the civil 
 
 "Second Report of Commission on Civil Establishments. 1888. Minutes of 
 Evidence, p. 402. 
 
CIVIL-SEEVICE RETIREMENT IN GREAT BRITAIN. 119 
 
 servant should be returned in case of death or resignation. He stated 
 also that the State had profited by the limited commutation of pen- 
 sions which had been allowed. Asked whether he would rather 
 attempt to keep the existing system with modifications or to set up a 
 fund^ he answered: 
 
 I have always regretted the abolition of the old superannuation 
 deductions, as I think it was a mistake. I think a greater part of the 
 mistake was due to the fact that the Government took no trouble to 
 carry it out fully, or to give back to men that which had been taken 
 out of their pockets, but, if the old deduction had been retained upon 
 a reformed system, I think that would have been very fair. («) 
 
 Confusion in Sir Reginald's Mind as to Amount of Postponed 
 
 Charge. 
 
 While Sir Reginald made no very definite proposals as to the details 
 of a "reformed system," he made it clear that he, like Sir Robert 
 Hamilton, stood for certain definite principles. These were the 
 acknowledgment that the existing system, while on its face a pension 
 scheme pure and simple, was in reality a contributory scheme; the 
 establishment of a system which should be avowedly a contributory 
 system, State and civil servant each contributing to a superannuation 
 fund; this fund to be actuarially administered; and contributions 
 to be returned on withdrawal from the service whether by death or 
 resignation. His ideas as to the amounts which would have to be 
 contributed by the State and by civil servants and the scale of 
 pensions which could be allowed to establish a sound and feasible 
 scheme were hazy, but he was perfectly clear as to the principles 
 involved. Said he : 
 
 We have tliis position. On one side we have a great company which 
 works its noneffective system by taking 2^ per cent from the employee 
 and giving 2^ per cent itself. On the other side we have the State 
 working an extremely liberal scale of pension which involves a post- 
 poned charge of from 12 to 15 per cent, compensations apart. There- 
 fore the question lies, I presume, somewhere between these points. 
 For instance, the State might contribute 1 per cent and the individ- 
 ual 5 per cent. * * * "We might go further. The contributions 
 being prepaid and accumulated, you might work a liberal pension 
 scheme with 8 per cent and 4 per cent, or a proportion of that kind, 
 according as you would find it necessary. My impression is that we 
 shall not get a really permanent settlement of the question on the 
 basis of so small a contribution by the State of 2^ per cent. That is 
 what I want to bring before the commission. C*) 
 
 This is interesting because it shows Sir Reginald's acceptance of 
 the assumption that the State makes a ''postponed charge of from 
 
 a Second Report of Commission on Civil Establishments. 1888. Minutes of evi- 
 dence, p. 404. 
 &Idem, p. 402. 
 
120 CIVIL-SEEVICE EETIREMENT llST GREAT BRITAIN. 
 
 12 to 15 per cent, compensations apart," in order to pay pensions. 
 Including compensations, he figured the postponed charge at 20 per 
 cent, the same assumption made by Sir Robert Hamilton in his 
 memorandum. As this assumption underlies all the agitation that 
 has hung around the words ''deferred pay," and as it is persistent 
 to this day. Sir Reginald's explanation of its origin is important. 
 Said he: 
 
 I came across the other day some evidence which I have not seen 
 anywhere else. It was an attempt made by the then actuary of the 
 Government to estimate what the future normal charge of the present 
 pension system would be. It was not an official paper; it.was a semi- 
 official paper, and the date of it is 1869. He took 10 of the big ordi- 
 nary clerical offices, such as the Customs and the Inland Revenue. 
 I am not quite convinced that his salary list would not be subject to 
 reconsideration and some alteration, but I may say generally that 
 what he arrived at was this. Take the salaries of any offices as they 
 stand, go forward from thirty to thirty-five years, and you will find 
 the normal noneffective charge on the present pension scale will be 
 from 12 to 15 per cent of the salaries of the thirty years previously. 
 That was his estimate of the normal cost to the State of the present 
 pension law — leaving out compensations. (") 
 
 This is a perfectly reasonable conclusion for the actuary to have 
 reached, for there is always a definite relationship between existing 
 pensions and the salaries of a generation ago, since the pensioners of 
 to-day are those who were on the active pay roll thirty years ago. 
 In other words, the effective vote of to-day becomes the noneffective 
 vote of to-morrow, allowance being made on one hand for deaths, 
 resignations, and reduction of the pension by the amount which it 
 is less than the salary, and on the other hand for increases in salary, 
 a total diminution roughly estimated amounting to about 80 per 
 cent. That the ratio of the existing pensions and compensations to 
 past salaries amounted to 20 per cent in 1869 is therefore highly 
 probable. This important statement was not, however, fully under- 
 stood by all who referred to it, as will be seen later on. 
 
 Assumption that Postponed Charge is Made by the State to 
 Pay Pensions Accepted by Sir Herbert Maxwell. 
 
 That Sir Herbert E. Maxwell, Sir Reginald Welby's colleague in 
 the Treasury, had also given the subject of superannuation very care- 
 ful study is evidenced by his testimony. Like Sir Reginald and Sir 
 Robert Hamilton, he thought a complete change in the pension 
 system was desirable. Sir Herbert prepared for the use of the com- 
 mission a memorandum on the origin and development of superannua- 
 tion and retired allowances in the civil service, with an analysis of 
 
 a Second Report of Commission on Civil Establishments. 1888. Minutes of 
 Evidence, p. 402. 
 
CIVIL-SEEVICE RETIREMENT IN GREAT BRITAIN. 121 
 
 'the alternative remedies against the growth of the ineffective vote. 
 Like Sir Reginald, he was clear as to the principles which should be 
 laid down in the solution of the problem but admitted his inability 
 to see how the details could be worked out satisfactorily. He was 
 also pessimistic as to whether or not the most ideal system would 
 be proof against probable assault, on political grounds, from Parlia- 
 ment. Said he: 
 
 If it were possible to provide any guarantee for the permanence 
 of a superannuation fund, it is difficult to see what objection could be 
 raised against it. But in view of the fate which befell the last fund, 
 it is only too probable that the same forces which prevailed against 
 it would prevail again, namely, pressure on and by members of 
 Parliament. (**) 
 
 ■ Questioned by the commission as to his views he declared: 
 
 I have a very strong opinion that the reestablishment of a super- 
 annuation fund would be to the advantage not only of the public, 
 but also of the service. In the first place, the estimates of the 
 year would show the liabilities of the year, and there would not be 
 deferred liabilities, as there are under the present system. * * * 
 They do not show the prospective additions (as well as the retro- 
 spective). * * * They do not show, for example, the liabilities 
 that are incurred by a reorganization. I think Sir Robert Hamilton 
 gives an illustration of that. C') 
 
 Contending that the estimates should bear the whole charge, both 
 effective and noneffective (that is, both salaries and pensions) incurred 
 in that year, he said: 
 
 That would be the result of establishing a superannuation fund. 
 You would pay a servant so much, and you would deduct so much 
 as a contribution to the fund, and that money would be invested 
 for him by the State, and on his leaving the service, either by death 
 or by retirement or by superannuation, would be handed over to 
 himself or his representatives, plus the interest. That seems to me 
 the most direct and the most advantageous plan. It would make 
 pensions what they profess to be now, but are not, literally deferred 
 pay. It is only overshadowed by one great difficulty — parliamentary 
 pressure. 
 
 "You are clearly of the opinion that anything which brings before 
 the public and the taxpayers of the country prominently, the fact 
 that pensions are deferred pay, would be a good thing? " queried the 
 chairman. 
 
 "Yes;" answered Sir Herbert, "because that is the only warrant 
 for pensions now. That is the ground on which they are based." C*) 
 
 He pointed out other advantages of a superannuation fund, as he 
 saw it, such as "a right to compel to retire on the one side, and a 
 right to retire on the other with some sum which represented deferred 
 pay which had been 'earned," and the disappearance of the distinction 
 
 o Second Report of Commission on Civil Establishments. 1888. Appendix, p. 423. 
 b Idem. Minutes of evidence, p. 154. 
 
122 CIVIL-SEEVICE EETIEEMENT IN GREAT BEITAIN. 
 
 between established service and temporary service, a distinction 
 which caused great difficulty in the administration of all departments. 
 From his experience at the Treasury he declared also that he would 
 indorse Sir Robert Hamilton's statement, "I should extend commuta- 
 tion to all pensions. It costs the Government nothing, and is a 
 benefit much prized by the service." 
 
 The practical question of how to proceed to put into practice 
 the principles he felt to be the correct ones that should underlie a 
 proper superannuation system he confessed himself unable to answer. 
 Said he: 
 
 I think the alternative is a triple one, if I may say so, either the 
 abolition of pensions altogether, the employment of men at full pay 
 and washing your hands of all responsibility for their future after 
 they have done their work, or secondly making them contribute to' 
 a superannuation fund by which they should be under an arrange- 
 ment which would entitle them at cessation of service to receive their 
 full amount of contributions, plus interest ; or, thirdly, making them 
 contribute to this fund and receiving a pension as under the present 
 system. It involves such a deal of actuarial calculation that of 
 course I hesitate to offer an opinion as to the requirements of the last 
 two alternatives. C*^) 
 
 A member of the commission hereupon queried: Would the first 
 of the last two alternatives require an actuarial calculation? You 
 would simply pay back the man what he paid in? 
 
 "No, it would not" answered Sir Herbert, "but if you undertake 
 the annuity instead of handing over the lump sum, it would. Of 
 course the first of those two is the simpler, but it is attended with 
 this disadvantage, that when you get down to the lower grades, when 
 you get to artisans and copying clerks and so on, if they leave the 
 service and they receive a certain amount of that money, you have 
 no guarantee that they will invest it properly or that they will not 
 fall into very distressing circumstances and so reflect discredit on 
 their former employers." ('*) 
 
 The chairman then asked Sir Herbert if it was his idea that deduc- 
 tions should be .made from present salaries, or if he agreed with Sir 
 Robert Hamilton in thinking that present salaries should be raised 
 in order to get that fund. To this Sir Herbert replied: 
 
 Of course if you proceed on the assumption that the present 
 salaries are calculated on a lower rate in consequence of the pros- 
 pective advantages, you would have to raise the salaries if you make 
 the people provide their own prospective advantages; but that is a 
 very large question. I should think, as a matter of fact, that in a 
 great many cases the rate is not lower in the Government than 
 outside. C"^) 
 
 o- Second Report of Commission on Civil Establishments. 1888i Minutes of evi- 
 dence, p. 155. 
 
civil-service retirement in great britain. 123 
 
 Confusion in Sir Herbert's Mind as to Amount of Postponed 
 
 Charge. 
 
 It should be noted that, in assuming that pensions were deferred 
 pay, Sir Herbert misinterpreted the statement of the actuary of 1869 
 that the postponed charge of present pensions was from 12 to 15 
 per cent of past salaries. Since his interpretation of that statement 
 seems to have become current, and is referred to in a subsequent 
 inquiry conducted by a royal commission in 1902, it is important to 
 know just what his error was. He said: 
 
 The contribution which would have to be levied from pay and 
 salaries to support a fund for the payment of superannuation on the 
 present scale and conditions, has been variously estimated at from 
 12 J to 16 per cent. There exists a difficulty in calculating the pre- 
 cise deduction necessary, owing to the fluctuating rate of promotion 
 in the departments and the consequent uncertainty as to the rank 
 which may be attained at a given age.(®) 
 
 Asked for his authority for this statement, Sir Herbert said: ''I 
 believe it was an actuarial computation which Sir Reginald Welby 
 obtained." The statement of Sir Herbert is not, however, implied 
 by that of the actuary of 1869, for although the normal cost of exist- 
 ing pensions might be 12 to 15 per cent of past salaries it would take 
 much less deduction of salaries than 12 per cent to pay for the pensions, 
 since the operation of compound interest over a long period of years 
 is a factor which has a very important bearing on the subject, but 
 which Sir Herbert overlooked entirely. 
 
 Disapproval of Sir Robert Hamilton's Proposal Expressed by 
 
 Mr. Mowatt. 
 
 Probably the most conservative opinions in regard to alteration of 
 the existing scheme were held by a witness whose testimony was of 
 importance because of his official position and because certain state- 
 ments made by him were misunderstood and later misquoted. He 
 was Mr. Frank Mowatt, the permanent officer at the Treasury who 
 was principally responsible for the granting of pensions. Mr. Mowatt 
 took the view and expressed it in half a dozen ways, that the civil 
 servant was better off and better satisfied to have his salary "at the 
 full market rate of wages ' ' and to be " left to manage his own pecu- 
 niary concerns" in whatever manner he thought best, than to be 
 given a pension, but that it was impossible practically to carry on 
 the government service in that way without pensions, because when 
 the time for retirement came the Government would be '^ forced to 
 provide him with a pension, not on the equity of the case so much 
 
 « Second Report of Commission on Civil Establishments. 1888. Minutes of evi- 
 dence. Appendix, p. 423. 
 
124 CIVIL-SERVICE BETIEEMENT IN GREAT BRITAIN. 
 
 as because he would appeal so directly to the sentiment of com- 
 passion." In his view, therefore, pensions were necessary, but 
 existed ''not so much for the benefit of the public servant as for the 
 benefit of the public." In another place he said: "I think the best 
 arrangement is to pay the civil servant the full market rate of his 
 wages and leave him to provide for himself on his retirement." 
 
 Although he implied in these statements that the civil servant, 
 because of his pension, was paid less than "the full market rate of 
 wages," Mr. Mo watt was unwilling to admit that pensions were 
 deferred pay. He refused to admit it apparently because the con- 
 clusion it led to was one he did not care to entertain. Said he: 
 
 I think the definition of deferred pay, though convenient, is not 
 exact ; because if it were adopted it would carry with it some conse- 
 quences which are not recognized in our present system. If pension 
 were a deferred pay it would be the absolute property of a civil 
 servant. You must give it to him whenever and for whatever cause 
 he retires, or if he should die in the service it would belong to his 
 estate; again, if it were deferred pay, it must be calculated, not 
 upon the salary upon which he retires, but on the salary which he 
 has received from year to year. («) 
 
 Asked if he saw no advantage in granting the recipient the rights 
 implied in the theory of deferred pay he simply said he would rather 
 not do so, but°gave no reason for his preference. He said that Sir 
 Robert Hamilton's suggestion was practically a proposal to com- 
 mute all pensions, but he did not say why that should in his opinion 
 not be done. He said he would define pension "as a payment made 
 by the State to entitle it to retire the officer, or to discontinue his 
 services whenever the interest of the State requires it." 
 
 He was averse to making changes in the existing system. He 
 thought the scale of pensions very fair, and he held that abolition 
 terms were necessary in order to facilitate reorganization. Asked if 
 he did not think it would be advantageous to have the pension bear 
 some proportion to the amount of years served at each rate of salary, 
 in other words to be calculated on the mean instead of the ultimate 
 salary, he said: 
 
 I see no advantage in the change ; because as I have said, I regard 
 the pension as the sum paid by the State to enable it to get rid of its 
 inefficient officers; and so long as the um is sufficient to induce the 
 controlling authority to act, it is immaterial which way you calculate 
 it.e) 
 
 One reform he did stand for staunchly, and that was compulsory 
 retirement at age sixty-five. He would not even permit the reten- 
 tion in office of exceptional men after they had reached that age. 
 
 a Second Report of Commission on Civil Establishments. 1888. Minutes of evi- 
 dence, p. 156. 
 b Idem, p. 158. 
 
CIVIL-SERVICE EETIREMENT IN GREAT BRITAIN. 125 
 
 He thought the formation of a fund by deductions from salary full 
 of difficulties, owing principally to the pressure on and by members 
 of Parliament and the resistance of members in the service. Stating 
 that he believed the rates of salary in the bulk of the civil service to 
 be slightly in excess of those in commercial houses, and that therefore 
 deductions for a superannuation fund should be effected by stoppage 
 from salary rather than by addition to it, he was led to admit that 
 a scheme which provided for the return of the deductions, with 
 interest, would decrease the difficulty of getting rid of incompetent 
 servants. 
 
 Confusion in Public Mind Regarding Mr. Mowatt's Testimony 
 AS TO Amount of Postponed Charge Actually made by the 
 State. 
 
 The part of Mr. Mowatt's testimony which came to be historic was 
 that which related to the ratio between the effective and noneffective 
 charges. In answer to a question, Mr. Mowatt made the statement 
 that the noneffective charge was from 16 to 20 per cent of the effective, 
 or as it would be expressed in the United States, "the amount paid 
 for pensions was from 16 to 20 per cent of the amount paid for 
 salaries." Attention should be called to the fact that there is no 
 connection between present pensions and present salaries. The 
 relationship lies instead between present pensions and past salaries, 
 or between future pensions and present salaries, since those on the 
 salary roll of one generation are found on the pension roll of the next. 
 It is a question, however, that is often asked by the laity: What per 
 cent of salaries are the pensions? It was asked Mr. Mowatt and he 
 answered: From 16 to 20 per cent. Unfortunately, he had just 
 been asked by another member of the commission a totally different 
 question in regard to what authority Sir Herbert Max\vell had for 
 the statement made by him, and mentioned above, that the amount 
 of deductions from salaries necessary to set up a fund had been 
 "variously estimated at from 12t| to 16 per cent of salary." There 
 was no connection between the two questions and the two answers, 
 as a careful reading of the evidence will show, but based on this 
 testimony, nevertheless, the statement was made in later years that 
 Mr. Mowatt, of the Treasury, had told the Ridley Commission that 
 from 16 to 20 per cent was deducted from the salaries of civil servants 
 to provide pensions. The text of this evidence became of such im- 
 portance in the course of a future inquiry that it is here given in full. 
 
 Mr. Harvey. Supposing this commission should come to the con- 
 clusion that it would be advisable to attempt to set up such a fund, 
 for a moment putting aside your view, are you able to tell us upon 
 what data the estimate was framed to which Sir Herbert Maxwell 
 refers when he says, at the bottom of page seven of his memorandum, 
 
126 CIVIL-SEEVICE RETIREMENT IN GEKA.T BRITAIN. 
 
 that the contributions have been ''variously estimated at from 12^ 
 to 16 per cent?" 
 
 Mr. MowATT. I am aware that there was an actuarial calculation, 
 though professedly incomplete, in a certain number of offices which 
 gave that estimate; but it did not include any calculation touching 
 abolition of office. 
 
 Lord Lingen. If we took as a rough test the proportion of pen- 
 sions to salaries, is it not the general opinion that about 20 per cent 
 of the effective represents the noneffective charge ? 
 
 Mr. MowATT. I have made calculations myself, but they have 
 never been complete, and I could not support them absolutely. But 
 I should say from my experience that you would find the noneffective 
 charge was about an addition of between 16 and 20 per cent. 
 
 The Chairman. Even more than 20 ? I should think it was quite 
 a sixth. I make it out to be between 16 and 18 per cent. 
 
 Mr. Harvey. Do you mean that if a civil servant entering under 
 the ordinary conditions has £100 [$486.65] a year salary, the real 
 charge that the State has to undertake for him under the present 
 system is £118 [$574.25] a year? 
 
 Mr. Mo WATT. I should say at least. («) 
 
 Approval of Sir Robert Hamilton's Proposal Expressed by 
 
 Others. 
 
 Sir Thomas Henry Farrer, for thirty-six years in the Board of 
 Trade, first as Assistant Secretary and finally as permanent sole 
 Secretary, was inclined to look with favor on the change of pension 
 system proposed by Sir Robert Hamilton, because it would prevent 
 posterity from being charged with the expense of the present service. 
 
 (1 ) Would frevent pensions being charged to posterity. 
 
 Sir Thomas said : 
 
 Sir Robert Hamilton gives two principal reasons in favor of his 
 proposed change. The first is that as a matter of principle the Gov- 
 ernment have no right to give anything in the form of charity, there- 
 fore you must look upon the existing pension as deferred pay. Then 
 he says if it is deferred pay the man ought to have it whether he dies 
 in harness or not. I think that is true logically, but it is rather 
 theoretical. If a man joins the service upon the present terms I do 
 not think he can complain if he gets what he has agreed to. Then 
 comes the other reason, which is that by the present system we are 
 charging posterity for present service. That seems to me a very 
 strong reason indeed. The burden of the pension fund is growing, 
 and the facility of charging posterity with it tends to great laxity in 
 granting it. If you could in any way put the burden of the year upon 
 each year and let it appear in the estimates, it would be an immense 
 improvement. Sir Robert Hamilton gives some other reasons. He 
 says that it is a very extravagant plan to make the pension depend 
 
 a Second Report of Commission on Civil Establishments. 1888. Minutes of evi- 
 dence, p. 162. 
 
CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 127 
 
 upon the last three years of the man's salary, and that it ought to 
 depend upon his whole service. I am disposed to agree with him there, 
 but there is no reason why the present scheme should not be altered 
 in that respect. (^) 
 
 Although he made no reference to the memorandum of Sir Robert 
 Hamilton, Sir Algernon Edward West, head of the Inland Revenue 
 Service, gave some testimony which showed him to be in sympathy 
 with the idea of reverting to a contributory plan of superannuation. 
 Asked if he had "any suggestions to make for a reduction of this 
 enormous noneffective charge," he responded: 
 
 I am sorry to say I am old enough to recollect the time when five 
 per cent was deducted from my salary when I entered the service 
 to pay my superannuation fund. In 1857 Lord Naas brought for- 
 ward in Parliament the abolition of that fund. I made up my mind, 
 even then, that if Sir George Lewis had met what I then thought, as 
 a clerk, the just grievances of us clerks, he might have saved that 
 gift of £75,000 [$364,987.50] to the civil service. I recollect we 
 thought that if this five per cent was deducted from our salaries all 
 through our career and we died immediately after forty years' service, 
 and the State got the whole of our deductions, that was an injustice. 
 I should be very much inclined, if you ask my opinion, to say that 
 I think it would be a very fair thing to revert to the five per cent 
 deduction from salaries for pensions, thereby reducing the charge of 
 superannuation on the State, but with the distinct understanding 
 that these deductions should be the absolute property of the person 
 who pays them. 
 
 Do you mean that he should get it at any period before he had 
 earned his pension, or, if he died, that his representatives should get 
 it ? asked the chairman. 
 
 No, not before, but if he died in the service, that his representatives 
 should get that part of it which he had himself subscribed. I do not 
 think it is fair that the State should make a profit out of the deduc- 
 tion ; neither do I think it is fair that the State should profit by what 
 I call ill luck of the man; when a man has served forty years and dies 
 the day he retires, I do not think that the State should profit by that 
 misfortune, and I think the sum which has been deducted from his 
 salary should be returned to his representatives, but if he lives to 
 ninety the pension he has received from year to year till then should 
 have been subscribed to a large extent by himself. C") 
 
 (S) Would facilitate dismissal of inefficient employees. 
 
 On being asked what regulations he would make in the event of 
 desiring to get rid of a man for inefficiency before he had earned his 
 pension, he answered, 
 
 I think it might facilitate that very desirable object of being able 
 to push a man out if you felt that he was not going out to starve. 
 
 a Second Keport of Commission on Civil Establishments. 1888. Minutes of evi- 
 dence, p. 381. 
 b Idem, p. 254. 
 
128 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 
 
 I think that whatever he subscribed himself, if he was not quahfied 
 for a pension from the State, he should have, unless he was absolutely 
 guilty of fraud or misconduct. I do not think the State ought to 
 make money out of these deductions. C*^) 
 
 To the heads of offices generally the possibility that Sir Robert 
 Hamilton's plan might offer a means of getting rid of inefficient 
 employees before they had reached an age at which they could be 
 pensioned without harshness to the individual or expense to the State 
 was very attractive. Most of them made statements showing that 
 this difficulty was one of the most delicate administrative problems 
 which they had to solve. (*) Many of them stated their belief that 
 a system of deductions from salary to be repaid on retirement would 
 facilitate getting rid of inefficient men.(<') The only way in which 
 they had been able, under the law, to rid the office of inefficient clerks 
 was through a reorganization of the force in such a way as to abolish 
 the office of the incapable incumbent. He could then be retired 
 under section 7 of the Act of 1859 on ''abolition terms;" that is, he 
 was dismissed with a compensation allowance calculated on the same 
 scale as if he were qualified for a pension. A reorganization of the 
 office was not always possible, and the practice arose of getting rid 
 of undesirable clerks by grants of gratuities. In awarding them, how- 
 ever, the Treasury was acting ultra vires, as it had no statutory power 
 to do so. While the Ridley Commission was still taking evidence, 
 Parliament enacted a retrospective measure designed ''to whitewash 
 the Treasury" for its drastic efforts to get rid of the incapables. (^) 
 This was the second clause of the Superannuation Act of 1887, a sup- 
 plementary law which made provision for three sets of individuals 
 not provided for in the earlier act: (1) Civil servants whose retire- 
 ment was advantageous to the service because of what one Treasury 
 official euphemistically described as " inculpable inability ;"(^) (2) civil 
 servants injured in the discharge of their duty or their dependents, 
 in case of the death of the injured servant; and (3) hired persons not 
 on the established list but dismissed after more than a year's "tem- 
 porary" duty. 
 
 Not much hope was entertained that this new act would be helpful 
 to administrative officers in their efforts to eliminate the inefficient 
 from the service. It was generally thought to be too severe to be 
 operative, since no man could be retired under that second clause 
 
 « Second Report of Commission on Civil Establishments. 1888. Minutes of evi- 
 dence, p. 254. 
 
 6 Idem, pp. 219, 266, 274, 285, 337. 
 cidem, pp. 78, 254, 266, 274, 339. 
 <^Idem, p. 151. 
 eSee testimony of T. L. Heath, Report of Royal Commission of 1902, par. 58. 
 
CIVIL-SEEVICE RETIREMElsrT IN GEEAT BRITAIN. 129 
 
 unless a minute was laid before Parliament as to the exact cause of 
 his retirement. C*^) 
 
 Mr. Gabriel Moran, superintendent of the registry at the Home 
 Office, said: 
 
 I question whether - heads of departments would like to have a 
 man branded publicly for life as inefficient. It strikes me as dam- 
 aging to that first clause that you have to lay a minute before Parlia- 
 ment saying a man is inefficient. (^) 
 
 The general feeling of high officials in regard to the removal of 
 inefficient subordinates and their ready approval of Sir Robert Ham- 
 ilton's suggestion in this respect is well reflected in the testimony 
 of the Honorable Robert Plenry Meade, Senior Assistant Under Sec- 
 retary of State at the Colonial Office. The chairman said to him: 
 
 Has it occurred to you at the Colonial Office that you some- 
 times have a man who has been eight or ten years in the service, 
 and who is evidently not fit for the service, not a man of bad charac- 
 ter or anything of that sort, but a man whom it would be desirable 
 to remove if possible, and who himself would be desirous to go, if 
 he could take with him, not exactly a pension, but some small gratu- 
 ity or something that he had earned in the nature of deferred pay? ('^) 
 
 To this Mr. Meade answered : 
 
 That of course is a difficulty, and it is one I suppose that all depart- 
 ments have felt from time to time. I think we have been on the 
 whole very fortunate. I think that every department must expect 
 to be weighted with a certain proportion of what I may call lame 
 ducks, and our object must be to keep that percentage down as 
 low as possible. If you were able to make some arrangement such 
 as you suggest, I think it would be a great assistance. At present 
 you can not get rid of a man, because it is practical ruin to him. 
 On the other hand I do not know that the law which was passed 
 last year will help us much; because I do not think that the head 
 of an office would like to gibbet a man before Parliament as incom- 
 petent so that I do not anticipate very much effect from iha.t.C) 
 
 a Clause 2 of the act of 1887 read as follows: 
 
 Where a civil servant is removed from his office on the ground of his inability to 
 discharge efficiently the duties of his office, and a superannuation allowance can not 
 lawfully be granted to him under the superannuation acts of 1834 and 1859, and the 
 Treasm-y think that the special circumstances of the case justify the grant to him 
 such retiring allowance as they think just and proper, but in no case exceeding the 
 amount for which his length of service would qualify him under sections two and 
 four of the Superannuation Act, 1859, without any addition under section seven of 
 that act. 
 
 A minute of the Treasury granting an allowance under this section to any civil 
 servant shall set forth the amount of the allowance granted to him, and the reasons 
 for such allowance, and shall be laid before Parliament: Provided, That the Treasury 
 before making the grant shall consider any representation which the civil servant 
 removed may have submitted to them. 
 
 b Second Report of Commission on Civil Establishments. 1888. Minutes of evi- 
 dence, p. 57. 
 cJdem, p. 78. 
 
 35885— S. Doc. 290, 61-2 9* 
 
130 CIVIL-SEKVICE EETIEEMENT IN GEEAT BEITAIN. 
 
 Sir Thomas Farrer alone was a little skeptical of the claim made 
 for Sir Robert Hamilton's proposed plan that it would facihtate 
 the dismissal of inefficient employees, but he admitted that theo- 
 retically the contention was sound. He said: 
 
 It is no doubt theoretically, perfectly true, but I think it over- 
 looks what is the real difficulty of getting rid of useless men. There 
 is a certain difficulty in the soft-heartedness of heads of departments 
 and of ministers. But there is a very much greater difficulty in the 
 pressure which is put upon them by members of the House of 
 Commons. (") 
 
 Asked if he did not think that the ability to give a man, on leav- 
 ing the service, the money he had contributed would help to get rid 
 of incompetent men, he answered : 
 
 No, I do not think it would, unless the House of Commons passes 
 a self-denying ordinance, and refuses to interfere with the ministers 
 in the management of their departments. 
 
 At all events it would take away a good deal of possible sym- 
 pathy for an incompetent man if it was known that he had received 
 a certain allowance of money? suggested the chairman, and to this 
 Sir Thomas said, '' Certainly." ('*) 
 
 With less reluctance he admitted that the proposed change might 
 have a good effect on the tendency to abolish an office in order to 
 rid it of an undeserving officer by putting him on a pension, a policy 
 that had been found to "make great and most unsatisfactory addi- 
 tions to the pension charge." Said he: 
 
 Yes, 'I think in principle it would be a good thing. Let me say 
 with regard to abolition that I agree most heartily as to what you 
 say of the abuse of abolition terms. I think it is one of the great- 
 est possible abuses that you should be obliged to pay high to get 
 a bad man to go. It is not only the harm that it does in the way 
 of extravagance and expense, but it is such a discouragement to the 
 good men in office. (^) 
 
 Approval of Sir Robert Hamilton's Proposal Expressed by 
 
 Civil Servants. 
 
 The advantage claimed for Sir Robert Hamilton's suggested plan 
 that made the strongest appeal to the civil ' servants themselves 
 was that it would lessen the hardship caused to families of clerks 
 dying in harness if the accumulated deferred pay of a clerk was 
 then turned over to his family. Their interest in this phase of the 
 problem was what might be expected, in view of the arguments 
 and representations made by the committee of civil servants in 1856. 
 It will be remembered that what a large number of them asked for 
 
 "Second Report of Commission on Civil Establishments. 1888. Minutes of evi- 
 dence, p. 382. 
 b Idem, p. 385. 
 
CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 131 
 
 most earnestly at the time the pension plan was established was not 
 that the deduction be abolished, but that half of it be remitted 
 and the other half collected into an insurance fund for the benefit 
 of their dependents. Wliat they had criticised in the old contrib- 
 utory system established by the Act of 1834 was the fact that it 
 made no provision for their widows and orphans and took contribu- 
 tions that might otherwise have bought insurance for them. 
 
 Representing the assistant clerks at the Board of Trade, Mr. S. 
 Bullock and Mr. A. Barnes stated that they considered pensions as 
 deferred pay and were incHned to agree with Sir Robert Hamilton's 
 memorandum. ''It proposes, '^ said Mr. Barnes, ''that a proportion 
 of the salary should be deducted, and that the salary so put aside 
 should be available, in the case of the death of the civil servant, for 
 his representatives. That seems much fairer than the present sys- 
 tem." Asked if he thought that the service would in that case be 
 unpopular with good men, if the salaries were fixed, including the 
 additions, at figures lower than those then paid, Mr. Bullock re- 
 plied: "I believe it would be a great advantage, and that it would be 
 received with great satisfaction." 
 
 Messrs. J. W. Curra, C. G. Hawkes, and C. D. Upham, representing 
 clerks in the Post-Office, said that after carefully reading the state- 
 ment by Sir Robert Hamilton, they, "as lower division clerks, and 
 young men having lately entered," would "very much like to see 
 some scheme such as that proposed in operation rather than the 
 present one." Mr. Hawkes stated that they were in favor of a lump 
 payment in lieu of a pension because under the existing system, 
 "however hard' a man is worked, however much he deserves his pen- 
 sion, if he dies in harness his friends get not a halfpenny." He 
 thought, however, that the deductions for the lump sum on retirement 
 should be paid by the Treasury. Mr. Upham stated that their sal- 
 aries would not permit any deductions toward pension, maintaining 
 that civil servants were not so well paid as men in commercial circles. 
 
 Mr. E. T. A. Kennedy and Mr. T. W. McCormick, representing 
 clerks in the Inland Revenue Office, saw no objection to deductions 
 from salaries being made toward a pension fund if salaries were made 
 sufficiently large to bear it. They were averse to any further deduc- 
 tions, but if a new scheme were adopted by a supplemental provision, 
 such as Sir Robert Hamilton suggested, of 20 per cent in the esti- 
 mates, they thought that a great many of the civil servants would 
 be prepared for a deduction. "At any rate," said Mr. McCormick, 
 "their legal representatives could take that on their death, and that 
 would obviate the great hardships that now exist of the wife being 
 left helpless on a man's death." 
 
 It was not only the low-salaried clerks of the service who main- 
 tained that the existing pension system worked a hardship on their 
 
132 CIVIL-SEEVICE KETIREMENT IN GEEAT BRITAIN, 
 
 families, if they happened to die in office. Sir Algernon West, a 
 high administrative officer, said: 
 
 It is very curious tliat the State is extraordinarily liberal to its 
 servants in every way but one. For instance, with my service, I 
 might have a year's leave. I might have six months on full pay and 
 six months on half-pay if my health was to fail. I call that extraor- 
 dinary liberality. But on the other hand, if in the height of my 
 work I was to die, from that hour my pay would cease; that I do not 
 think liberal, because I always think it is impossible that a man's 
 expenses can cease from the moment of his death, and therefore I 
 have always thought that a little bit of illiberality on the part of the 
 Government. It is the only little bit I know, I am bound to say.(") 
 
 The last witnesses to appear before the commission in regard to the 
 subject of superannuation were Messrs. T. T, S. de Jastrzebski and 
 Henry Day, who represented the general body of the lower division 
 clerks and had been requested by the general committee of that body 
 to present the views of the lower division clerks to the commission. 
 In view of the fact that the superannuation acts of 1859 and 1887 
 provided free and universal pensions on a most liberal scale for all 
 permanent civil servants besides gratuities for many employees not 
 classified as permanent, the earnest request of this large body of 
 clerks that the pension system be abolished and that they be allowed 
 to contribute to their retirement is surely very astonishing. There 
 seems to be no record, on the other hand, that any representative 
 of the public service appeared before the commission to dispute the 
 claim so generally made that the clerks were already practically con- 
 tributing to their pensions. Said Mr, Day: 
 
 There is a very strong feeling, not only in the lower division but 
 throughout the general service, especially when there is anything 
 like a stagnation of promotion, that the Act of 1859 is certainly inad- 
 equate in its provisions. Having searched through many of the rail- 
 way companies and banks, in respect to their pension systems, we 
 come, as lower division clerks specially, to the conclusion that their 
 systems are more liberal and sufficient and much more fitting the 
 needs of their clerks than what the Act of 1859 does for the junior 
 civil servant. 
 
 "Would you be willing to take the London and Northwestern 
 scheme?" he was asked, and made the following answer: 
 
 No, I would offer the best points of all schemes for such a class of 
 men as the junior civil servant, that is, (1) I would ask for optional 
 commutation of all pensions; (2) I would ask for the balance of the 
 unabsorbed deferred pay after a man had been superannuated but 
 had not exhausted his fund; (3) I would ask for the deferred pay of 
 the clerk dying in harness being paid to his representatives; and (4) 
 I would ask for the deferred pay to be made to a man retiring volun- 
 tarily after ten years' service. C*) 
 
 « Second Report of Commission on Civil Establishments. 1888. Minutes of evi- 
 dence, p. 255. 
 &Idem, p. 412. 
 
CIVIL-SEKVICE RETIREMENT IN GREAT BRITAIN. 
 
 133 
 
 Asked what conditions he coupled with that in the way of deduc- 
 tions from salary, Mr. Day said that he thought the lower division 
 clerk would gladly pay his contribution and that he understood 2^ 
 pec^ cent was deemed necessary from the employees in the case of 
 the various railway companies providing half the money. 
 
 Growing Cost of Civil Pensions, 
 
 The cost of superannuation was naturally a question into which 
 the Ridley Commission inquired. Valuable data on this subject were 
 supplied them by Sir Herbert Maxwell and Mr. Mowatt. Sir Her- 
 bert showed the growth of the civil service vote for superannuation 
 from the years 1833-34 to 1868-69 by the following table :(«) 
 
 Year. 
 
 Amount. 
 
 Year. 
 
 Amount. 
 
 Year. 
 
 Amount. 
 
 183a-34 
 
 $272,363 
 286, 432 
 322,250 
 359,659 
 386,079 
 404,951 
 427, 206 
 442,608 
 399,053 
 408, 786 
 395, 646 
 417,546 
 
 1845-46 
 
 $390,780 
 393,213 
 424,359 
 375,694 
 535,884 
 529,319 
 526,580 
 658,725 
 647, 147 
 660,734 
 674, 541 
 713, 122 
 
 1857-58 
 
 $777,871 
 
 1834-35 
 
 1846-47 
 
 1858-59 
 
 792, 699 
 
 1835-36.. 
 
 1847-48 
 
 1859-60 
 
 812, 652 
 
 1836-37 
 
 1848-49 
 
 1860-61 
 
 864, 840 
 
 1837-38 
 
 1849-50 
 
 1861-62 
 
 900, 984 
 
 1838-39 
 
 1850-51 
 
 1862-63 
 
 898,872 
 
 1839-40 
 
 1851-52 
 
 1863-64 
 
 858, 752 
 
 1840-41 
 
 1852-53 
 
 1864-65 
 
 902, 585 
 
 1841-42 
 
 1853-54 
 
 1865-66 
 
 872,963 
 
 1842-43 
 
 1854-55 
 
 1866-67 
 
 904, 624 
 
 1843-44 
 
 1855-56 
 
 1867-68 .*. 
 
 958, 871 
 
 1844-45 
 
 1856-57 
 
 1868-69 
 
 1,337,640 
 
 
 
 
 
 As explained on page 30, the cost of superannuation in the Reve- 
 nue Departments, the Admiralty, the War Office, and the Royal 
 Irish Constabulary was not included in the civil service vote after 
 1832. In 1868-69 a number of noneffective charges were transferred 
 from various effective votes to the superannuation estimate. After 
 1869-70 the appropriation accounts as given by Sir Herbert Max- 
 well were as follows : {"-) 
 
 Year. 
 
 Superan- 
 nuation 
 allowances. 
 
 Compensa- 
 tion 
 allowances. 
 
 Compas- 
 sionate 
 allow- 
 ances. 
 
 Compensa- 
 tion and 
 compas- 
 sionate 
 
 allowances. 
 
 Gratui- 
 ties. 
 
 Total. 
 
 1869 70 
 
 $802,530 
 851, 190 
 912, 177 
 948,724 
 1,014,023 
 1,050,964 
 1,089,449 
 1,106,856 
 1,136,269 
 1,160,140 
 1,178,837 
 1,238,018 
 1,263,450 
 1,262,536 
 1,279,734 
 1,321,269 
 1,356,736 
 
 m 
 
 (6) 
 C) 
 
 m 
 m 
 
 $1,065,150 
 977,402 
 962,599 
 938,904 
 905, 140 
 891,791 
 892,297 
 876, 160 
 851,535 
 
 (6) 
 
 m 
 
 C) 
 
 c) 
 
 $14,264 
 15,349 
 15, 680 
 17,320 
 18, 824 
 18,984 
 19,850 
 19,266 
 17,568 
 
 $818,467 
 
 971,626 
 
 1,062,809 
 
 1,05.5,422 
 
 1,061,826 
 
 1,030,224 
 
 1,002,752 
 
 1,029,425 
 
 1,079,414 
 
 992, 751 
 
 978,279 
 
 956, 224 
 
 923,964 
 
 910,775 
 
 912, 147 
 
 895, 426 
 
 869, 103 
 
 $5,742 
 77,226 
 25, 402 
 28,260 
 18,483 
 
 9,392 
 11,373 
 
 6,346 
 14,132 
 12, 565 
 13,592 
 14,089 
 11,782 
 11,816 
 12,687 
 11,972 
 13,315 
 
 $1,622,798 
 
 1870-71 
 
 1,900,042 
 
 1871-72 
 
 2,000,438 
 
 1872 73 
 
 2,032,406 
 
 1873-74 
 
 2,094,332 
 
 1874 75 
 
 2,090,600 
 
 1875-76 
 
 2, 103, 574 
 
 1870-77 
 
 2,142,627 
 
 1877 78 
 
 2,229,815 
 
 1878-79 
 
 2, 165, 456 
 
 1879-80 
 
 2,171,194 
 
 1880-81 
 
 2,208,330 
 
 1881 82 
 
 2,199,449 
 
 1882 83 
 
 2, 189, 735 
 
 1883 84 
 
 2,204,508 
 
 1884-85 . 
 
 2,228,667 
 
 1885-86 
 
 2,239,155 
 
 
 
 a Second Report of Commission on Civil Establishments. 
 b Not separately reported. 
 
 1888. Appendix, p. 422. 
 
134 CIVIL-SEE VICE EETIREMENT IN GREAT BEITAIN. 
 
 For the year 1887-88 Sir Herbert stated that a vote of £476,082 
 ($2,316,853) was taken in the civil service estimates for super- 
 annuation and. retired allowances, besides £1,412,622 ($6,874,525) 
 provided for superannuation in the estimates of the several depart- 
 ments. Thus the total sum voted for superannuation of public ser- 
 vants (exclusive of military and naval pensions) was £1,888,704 
 ($9,191,378). It is not clear from Sir Herbert's statement whether 
 this sum included allowances to the Royal Irish Constabulary and 
 the Dublin Metropolitan Police or not, but comparison with Mr. 
 Mowatt's statement of the cost of civil pensions for the following 
 year, 1888-89, would seem to indicate that it did. Mr. Mowatt's 
 statement shows that the total sum voted for the superannuation of 
 public officers in that year amounted to £1,907,863 ($9,284,615), 
 including the Royal Irish Constabulary and Dublin Metropolitan 
 Police, and to £1,581,992 ($7,698,764) excluding them. Besides 
 this great sum voted by Parliament for that year, civil pensions to 
 the amount of £345,517 ($1,681,458) were granted out of the con- 
 solidated fund, which would make a total expenditure of £2,253,380 
 ($10,966,073) lor civil pensions. 
 
 Report of the Commission. 
 
 The report made by the Ridley Commission on the subject of 
 superannuation in the civil service, as the result of its investigations, 
 contained recommendations that have not been perpetuated in legis- 
 lative enactments, but the report is nevertheless significant and valu- 
 able to the student as marking the development of certain ideas in 
 England, in regard to the subject of pensions for civil servants, and 
 it is well worthy of study. ('*) 
 
 After first stating that the vote for superannuation and retired 
 allowances in the year 1888-89 amounted to a gross total of £1,581,992 
 ($7,698,764.07), exclusive of £671,388 ($3,267,309.70), paid for pen- 
 sions to the Royal Irish Constabulary, the Dublin Metropolitan 
 Police, and other pensions charged on the Consolidated Fund, the com- 
 missioners reviewed the arguments advanced by the Commissioners 
 of 1857, from the public point of view, against the contention that 
 the only duty of the Government should be to pay adequate salaries, 
 and leave its servants to make proper provision for their own future 
 wants and those of their famihes, and concluded, like their prede- 
 cessors, that, in spite of the heavy charge, public interest would be 
 ''best consulted by maintaining a system of superannuation allow- 
 ances." They then took up the proposal of Sir Robert Hamilton 
 that the pension system be abolished altogether by voting each year 
 the whole additional sum which represents the calculated charge 
 
 o See Report of Ridley Commission on Superannuation, pp. XIX-XXV. 
 
• CIVIL-SERVICE RETIREMENT IK GREAT BRTTAHsT. 135 
 
 entailed by the present pension scale, investing it separately in a 
 government fund, the amount of each member's deferred pay, with 
 compound interest, to be returned to him or his representatives on 
 his separation from the service. 
 
 Rejection of Sir Rohert HaTnilton's proposal. 
 
 To this proposal the commission saw "fatal objections." Said 
 they: 
 
 We can not accept the conclusion that the present pension is 
 deferred pay in any such sense as that, whereas it is now terminable 
 with the pensioner's life, its capitalized equivalent should go to his 
 representatives, and this as a mere addition to the present heavy 
 charge, with no corresponding benefit to the public in the shape of a 
 contribution by a civil servant, or otherwise. 
 
 And whatever might be the proportion fixed between what should 
 be regarded as deferred pay and the actual working salary, the 
 immediate addition to the annual estimates would be very large; 
 and seeing that these estimates now bear the noneffective charges 
 imposed by the action of past generations, it would hardly be tolerated 
 that they should also bear the burdens of the future. 
 
 The payment, moreover, of a lump sum is open to the obvious 
 objection that in the event of improvidence or misfortune in the use 
 of it, the retired public servant may be reduced to circumstances 
 which might lead to his being an applicant for public or private 
 charity. {"') 
 
 Recommendation that deductions he made from salary. 
 
 Recognizing, however, that Sir Robert Hamilton's proposal had the 
 two special advantages so strongly urged by officials and clerks of 
 the service who had appeared before them, namely, that it would 
 assist in the dismissal of the inefficient and afford relief to the families 
 of clerks dying in the harness, they proposed to gain such advantages 
 by deducting five per cent from the salaries of all employees, and 
 returning it with compound interest on the separation of the employee 
 from the service. 
 
 Their recommendation to this effect is thus set forth: 
 
 With a view both of levying some direct contribution from the 
 civil servant towards his pension, and of providing at the same time 
 a sum of money which, in the event of a man's death or retirement 
 without pension, should be available for his representatives or for 
 himself, we recommend a compulsory deduction of 5 per cent from 
 all future salaries. An account should be kept in favor of each clerk, 
 and in the event of his dying or leaving the service voluntarily or 
 otherwise, before becoming entitled to a pension, he, or his repre- 
 sentatives, * * * should receive back the whole of his con- 
 tributions, with the addition of compound interest at the rate 
 allowed by the Post-Office Savings Bank. 
 
 o Second Report of Commission on Civil Establishments. 1888. Report, pp. XX 
 and XXI. 
 
136 CIVIL-SEE VICE RETIREMENT IN GREAT BRITAIN. 
 
 We thinl?: also that, while it would entail a very small extra 
 charge upon the State, it would be fair and reasonable to provide 
 that, in the event of the death of any pensioner before the total 
 amount received as pension has reached the whole of the sum deducted 
 from him during his serivce, his representatives should receive a sum 
 equal to the difference between such total deductions and the amount 
 received as pension. 
 
 It might be provided that the whole salaries should be voted an- 
 nually, and the 5 per cent deductions be placed to a separate fund in 
 the hands of the National Debt Commissioners, the amount due, as 
 above, to each clerk, being secured to him by act of Parliament and 
 being paid to him on the determination of his service. Under such 
 an arrangement the State would, of course, have to receive in some 
 form or other the sum standing to the credit of every person who 
 becomes entitled to a pension. 
 
 On the other hand, it might be decided not to invest these deduc- 
 tions separately or to create any fund. The salaries might be voted 
 annually less the 5 per cent, the estimates of each year receiving the 
 advantage of the deductions and the State being liable (as under the 
 other arrangement) for the amount of them, whenever they became 
 due, or, in the event of a pension being attained, for the amount of 
 such pension, towards which it would have received such deductions 
 in relief. 
 
 If this whole charge, taking into consideration the conditions and 
 regulations which we recommend, be actually calculated, it will be 
 easy to determine the liabilities of each year. These liabilities in 
 respect of new servants will, of course, increase annually, but they 
 will ultimately be very much less than the present noneffective 
 charges. C'^) 
 
 This means that the commission recognized the truth of the state- 
 ment that "pension is deferred pay," but that they repudiated the 
 idea that the deferred pay should be returned to the civil servant in 
 any other way than as a pension. They took the stand that the 
 deferred pay was practically the same as a premium paid to a life 
 insurance company for the purchase of a deferred annuity on the 
 condition that if death occurred prior to the beginning of the annuity 
 the premiums paid would be forfeited to the company. They held 
 that this deferred pay of the civil servants was only sufficient to pro- 
 vide the pension for those who survived to pensionable age and that 
 if a refund of contributions was desired — and they appreciated the 
 advantages of such a refund — an additional contribution would be 
 necessary. In the same way the premium paid to a life insurance 
 company for the purchase of a deferred annuity on the condition that 
 if death occurs prior to the pension age the premiums paid will be 
 returned must be larger than if the annuity is purchased on the con- 
 dition that the premiums will be forfeited to the company in case of 
 death. The commissioners recommended, therefore, that in order 
 
 o Second Report of Commission on Civil Establishments. 1888. Repor*, pp. XXI 
 and XXII. 
 
CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN, 137 
 
 to secure this desirable refund a compulsory deduction of 5 per cent 
 be made from all future salaries. They argued that the compulsory 
 saving of 5 per cent of salaries would not only furnish some assist- 
 ance in the elimination of the inefficient from office and relief of de- 
 ceased employees' families, but it would have the additional advan- 
 tage of lightening to that extent the heavy charge on the State for 
 payrnent of superannuation allowances. The plan they proposed 
 was, in effect, a return to the old contributory plan established by 
 the Act of 1834 and abolished in 1857 with the important difference 
 that provision was made for a refund of contributions in case of death 
 or resignation before the servant reached the pensionable age. The 
 idea of funding the contributions was expressly repudiated, the logic 
 employed by the Commissioners of 1857 in regard to that question 
 being accepted as good. 
 
 Minor recoTnmendations. 
 
 This recommendation constituted the gist of the Ridley Commis- 
 sion's report on the subject of superannuation in the civil service, but 
 other important minor recommendations were also made. "With 
 an eye to the injustice of having the pension system the spoil of the 
 inefficient," they condemned clause 2 in the bill passed the previous 
 year (the Superannuation Act, 1887) which gave power to the Treas- 
 ury to grant retiring allowances to persons removed from office on 
 the ground of their inability to discharge their duties efficiently. 
 They recommended also the immediate repeal of clause 7 in the Act 
 of 1859 which gave a compensation allowance to those retired on the 
 pretext of ''abolition of office." They took the view that any large 
 reorganization of an office or offices should invariably be carried out 
 by means of an act of Parliament, or at least by provisional orders in 
 council approved by Parhament, and that the abolition of a single 
 appointment should be effected by transferring the officer to another 
 department, if possible^ or by attaching other duties to him tempora- 
 rily, or by not filhng the vacancy when it occurred by promotion or 
 otherwise. 
 
 The two reforms so frequently urged — compulsory retirement at a 
 given age and calculation of the pension on the average instead of the 
 final salary received the commission's careful consideration. With 
 the Superannuation Commission of 1857 and the Select Committee 
 of 1873 they agreed that it was absolutely essential to fix an age for 
 compulsory retirement. They suggested 65 as the age. Said they: 
 
 There should be no exception to this rule, except in the case of 
 certain scheduled offices, in which the officer if asked by the Govern- 
 ment to do so, might be allowed to extend his services for a further 
 period never exceeding five years. 
 
138 CIVIL-SEEVICE BETIEEMENT IK GKEAT BRITAIN. 
 
 It should be clearly understood that at the age of 60 a man may be 
 required to retire by the head of his department upon such pension 
 as by his length of service he is qualified to receive. He may, if he 
 pleases, retire voluntarily, at this age, and the State should have the 
 corresponding power of retiring him, if it be for the advantage of the 
 service. C^) 
 
 The proposal to calculate the pension upon the average salary dur- 
 ing the whole period of service instead of upon the average salary of 
 the last three years did not meet the entire approval of the commis- 
 sion, and they recommended that it be calculated instead on the last 
 ten years' service. Said they: 
 
 We have satisfied ourselves that to calculate the amount upon the 
 average salary throughout service would result in a reduction of 
 pensions to an extent that would be altogether inexpedient, and 
 we think, on the whole, that the case will be met by fixing the pension 
 in proportion to the average salary of the last ten years of service. 
 We do not propose any alteration in the existing scale of pensions, 
 viz, for each completed year of service 1/60 of the civil servant's 
 salary, subject to a maximum of 40/60, no pension being in any case 
 awarded for less than ten years' service. (^) 
 
 In this recommendation they were undoubtedly infiuenced by the 
 contention of Sir Reginald Welby, when before them, that to calcu- 
 late pensions on mean salaries instead of salaries ultimately attained 
 to would cause too great a reduction in the pensions and might lead 
 to a movement for increase of salaries, already a very difficult thing 
 to control. He was of the opinion that the case might better be 
 met by an extension of the number of years upon the average salary 
 of which pensions are now calculated, and the commission appears 
 to have shared his views. 
 
 The award of a pension for life after a service of only ten years 
 was justified by the commission as right and politic, since it must at 
 best be small, beginning at one-sixtieth of the salary, and could only 
 be awarded in the case of a real and permanent breakdown of health. 
 The Government is further protected, too, in the matter of disability 
 allowances by requiring candidates for office to pass a strict medical 
 examination. 
 
 The provision enabling a higher pension to be given for professional . 
 offices by adding a number of years to the actual service years was 
 condemned by the Ridley Commission. Said they: 
 
 This was intended to meet the case of men coming into the service 
 at a somewhat advanced age, and with special acquirements. But, 
 in our opinion, such a man is better remunerated by a sufficient salary 
 which, being an immediate charge, is likely to receive greater atten- 
 tion than a prospective addition to pension, and we see no reason 
 why the pension should bear a higher proportion to the salary in these 
 
 a Second Report of Commission on Civil Establislimenta. 1888. Report, p. xxiii. 
 ^Idem, p. xxii. 
 
CIVIL-SEEVICE RETIEEMENT IN GEEAT BEITAIN. 139 
 
 cases than in others. If our proposal, too, is adopted of taking the 
 average of the salary for the last ten years as a basis, an officer who 
 has earned a high and non-progressive salary will get the advantage 
 to which he is entitled. ('*) 
 
 In closing their report on superannuation the commissioners thus 
 summed up the benefits which they believed would follow the adop- 
 tion of their recommendations: 
 
 If the above conditions are enforced, we believe that the pension 
 system so amended will be equitable alike to the State and to the 
 public servant. 
 
 The pension, though less in amount than at present, in consequence 
 of its being calculated on the average salary of the last ten years of 
 service, will yet in our opinion be adequate, and the public servant 
 will have contributed something towards the charge. He will at the 
 same time be secured the return of the whole of his contributions 
 with compound interest in the event of his not coming on to the 
 pension list. , 
 
 The State, on the other hand, will be relieved from the heavy pay- 
 ments under the head of compensation allowances which it now has 
 to bear, it being calculated that if these are omitted the charge for 
 superannuation would be from 12 to 15 instead of 20 per cent, as at 
 present, on working salaries. The State will also not only pay pen- 
 sions at a lower rate, as explained in the preceding paragraph, but 
 will also have received in aid of such reduced pensions a contribution 
 of 5 per cent from the salaries of all those who become entitled to 
 superannuation. {^) 
 
 Criticism, of the commission's chief recommendation. 
 
 While a casual reading of this report of the Ridley Commission 
 gives the impression that a very plausible solution of a difficult prob- 
 lem for a country burdened with a heavy pension charge is here offered, 
 more careful study shows that two important points were entirely 
 overlooked by the commissioners when they made their chief recom- 
 mendation. They neglected to consider, when they contemplated 
 the cost of putting the plan suggested by Sir Robert Hamilton into 
 operation, and condemned it on the score of costliness, the important 
 part played by compound interest in all such calculations. In the 
 second place, they failed to see that their proposal to make a deduc- 
 tion of five per cent of salaries to be refunded, but only in case of 
 death or resignation before reaching pensionable age, coupled with 
 the assumption that pension is deferred pay, was distinctly unfair to 
 the civil servant who lived to pensionable age. 
 
 Sir Robert Hamilton's proposal that for every £100 ($486.65) paid 
 a civil servant £20 ($97.33) should be deposited to his credit in the 
 government savings bank was presumably based on the assumption 
 that the amount of deferred pay was 20 per cent of salary. It has 
 
 a Second Report of Commission on Civil Establishments. 1888 Report, p. xxiii. 
 t> Idem, p. XXV. 
 
140 CIVIL-SEEVICE RETIREMENT IN GREAT BRITAIN. 
 
 been shown that this assumption had its origin in the statement of 
 an actuary in 1869 that the normal cost to the State of existing pen- 
 sions was 20 per cent of past salaries, including compensations, or 12 
 to 15 per cent excluding compensations. 
 
 Sir Robert Hamilton overlooked the fact that much less than 12 or 
 15 per cent of present salsnies— probably not more than from 7 to 10 
 per cent would have to be set aside to pay for future pensions, owing 
 to the fact that interest would be compounding during all the years 
 the sum for the pension was accumulating. Sir Herbert Maxwell 
 made the same error, as has been pointed out, in stating to the com- 
 mission that ''the contributions which would have to be levied from 
 pay and salaries to support a fund for the payment of superannuation 
 on the present scale and conditions, has been variously estimated at 
 from 12^ to 16 per cent." 
 
 It is clear that the establishment of the plan suggested by Sir 
 Robert Hamilton would have meant a temporary increase in the 
 already heavy charges paid for pensions, and on that ground alone 
 the commissioners were unwilling to recommend it. Neglecting to 
 take into consideration the operation of compound interest, they did 
 not perceive the increase in the estimates would have been an increase 
 of from 7 to 10 per cent only instead of from 12 to 20 per cent. This 
 would have amounted virtually to an increase of that much in the 
 general rate of salaries, but would have resulted finally, by the time 
 all employees in the service at the time of the establishment of the 
 plan were dead^ in the complete abolition of the pension system and 
 the full operation of a self-supporting savings scheme. Unfortu- 
 nately for the success of his ideas with the commission. Sir Robert 
 laid down principles merely, worked out no details to show how the 
 principles should be applied, and had no statistics of the existing 
 civil service to demonstrate how the cost of establishing his plan, 
 although large, would be a saving in the long run, since a general 
 increase in salaries of from 7 to 10 per cent must be much less than the 
 total vote for pensions. 
 
 The proposal made by the commission in lieu of Sir Robert's plan 
 was not fair to the employees for this reason: The commission 
 admitted that the employees were already in fact suffering a deduction 
 equal to the value of the pure pension without return of premiums; 
 to withhold an additional five per cent of salaries on the condition 
 that, if the employee entered on the pension which he had already 
 theoretically paid for, the five per cent actually withheld from his 
 salary should go to the State to reduce the cost, and in case of death 
 only such portion of the five per cent accumulations should be 
 refunded which had not been paid to him in pensions, was equivalent 
 to requiring the employee who entered on a pension to pay for a pure 
 
CIVIL-SEEVICE EETIEEMENT IN GREAT BRITAIN. 141 
 
 deferred annuity on the scale provided for by law and then in addition 
 to provide for the purchase of a second annuity (which was never 
 granted him) by contributing five per cent of his salary throughout 
 the whole term of his service. (®) 
 
 SUPEKANNUATION ACT OF 1887. 
 
 The superannuation act which had been passed in 1887 while the 
 Ridley Commission was investigating the civil establishments of the 
 United Kingdom made provision for certain classes of civil servants 
 not provided for by the Act of 1859. Mention has already been 
 made of the provision contained in clause 2 for the retirement of 
 inculpable inefficients and the disapproval of this clause expressed 
 by the Ridley Commission. 
 
 Pensions to civil servants compelled to retire in consequence of an 
 injury sustained in the actual discharge of duty without their own 
 default are granted under clause 1 of the act. Pensions are also 
 awarded under this same section to the widows and children of civil 
 servants killed in the execution of their duty. The scale of pensions 
 is fixed in each case by treasury warrant. This clause constitutes a 
 repeal of section 5 of the Act of 1859, being more liberal in its terms. 
 
 The allowances granted to public servants under this section in 
 case of injury are calculated in the Treasury warrant regulating the 
 
 « To illustrate just what this proposal would mean, take a concrete case, and for sim- 
 plicity of illustration suppose the salary paid in American money. Let the case be 
 that of a person entering the service at 20 years of age, having a salary of $100 a month, 
 and retiring at the age of 60 on a pension of $720 a year. The value of such a pension, 
 payable quarterly, beginning at the age of 60 may be stated as $7,787. Therefore, 
 under the provision proposed by the Ridley Commission that, in addition to the theo- 
 retical deduction which he was already making to provide this $7,787, the employee 
 should also contribute 5 per cent of salary during his period of service, the result 
 would be as follows: 
 
 That he had purchased a deferred annuity, by theoretical deductions, having a 
 value of $7,787, and that he had, by actual deductions of 5 per cent of salary improved 
 by 3J per cent interest during a period of 40 years, purchased another deferred annuity 
 having a value of $5,169, so that in the aggregate, theoretically and actually, he had 
 contributed $12,956 to purchase a pension the value of which under any of the condi- 
 tions laid down was to the employee but $7,787. In case he accepted the pension 
 he would forfeit all of his $5,169 except such excess as might remain at his death over 
 and above the amount of pension which he might have received, or if he resigned the 
 day before the pension began, he would receive a refund of $5,169 and forfe-'< his 
 pension having a value of $7,787, so that under only one condition would he have 
 been fairly treated by the plan proposed by the commission and that would have 
 been in case of death prior to the date of retirement, when his own accumulations 
 with interest would have been returned. The only way then in which the commis- 
 sion's proposal could have been made fair to the civil servant would have been by a 
 general increase of 5 per cent in salaries to correspond to the 5 per cent deduction. 
 If this had been done the practical result, however, would have been the same as 
 under the plan suggested by Sir Robert Hamilton. 
 
142 CIVIL-SEEVICE EETIEEMENT IN GEEAT BEITAIN. 
 
 grants on three different scales. The first apphes to estabhshed 
 officers of prisons or criminal lunatic asylums injured by the violence 
 of a prisoner or lunatic; or established officers of a manufacturing 
 department of the War Office or Admiralty in which the duties are 
 exceptionally dangerous. The second applies to all established 
 civil servants not falling under the above description and all hired 
 persons whose duties are exceptionally dangerous. The third scale 
 applies to all other hired persons employed in a public department. 
 When his capacity to contribute to his support is totally destroyed, 
 a member of the first class receives twenty-four-sixtieths of his 
 salary, a member of the second class twenty-sixtieths. When his 
 capacity to contribute to his support is materially impaired, a member 
 of the first class receives eighteen-sixtieths of his salary, a member of 
 the second class fifteen-sixtieths. When his capacity to contribute 
 to his support is simply impaired, a member of the first class receives 
 twelve-sixtieths of his salary, a member of the second class ten- 
 sixtieths. When his capacity to contribute to his support is but 
 slightly impaired, a member of the first class receives six-sixtieths of 
 his salary, a member of the second class five-sixtieths. This is with 
 the proviso that no award on the first scale, together with the allow- 
 ance for which the injured man would be qualified by length of 
 service, shall exceed the amount of his salary or £300 (SI, 459.95) a 
 year, whichever is less, and that no award on the second scale together 
 with similar allowance shall exceed fifty-sixtieths of his salary, or 
 £300 ($1,459.95) a year, whichever is less. 
 
 For hired persons employed in a public department, constituting 
 the third class affected by this injury warrant. Scale III provides a 
 gratuity of one- third of the employee's salary if his capacity to con- 
 tribute to his support is slightly impaired, two-thirds if it is impaired, 
 and the whole amount of his salary if it is materially impaired, or else 
 £100 ($486.65), whichever is less. Wlien the injured man's capacity 
 to contribute to his support is totally destroyed he receives an annual 
 allowance exceeding by fifteen-sixtieths of his salary and emoluments 
 the rate of retired allowance for which he would have been qualified 
 by length of service if he had been a civil servant, provided that the 
 total award does not exceed forty-five-sixtieths of his salary, or £300 
 ($1,459.95) a year, whichever is less. 
 
 Provision is also made by this Treasury warrant for the widows (or 
 mothers) and children of the men of these three classes who are killed 
 while in the discharge of duty. Widows of men pensioned on the 
 first and second scales receive not more than ten-sixtieths of the 
 husband's salary, and widows of n^en classified under the third scale 
 receive not more than eight-sixtieths. Children of the first class are 
 pensioned until the age of fifteen years. Children of the second and 
 
CIVIL-SERVICE RETIEEMENT IN GREAT BRITAIN. 143 
 
 third classes receive small gratuities, the total gratuity for each fam- 
 ily ranging from £8 to £50 (S38.93 to $243.33). C^) 
 
 A gratuity of £1 (S4.87), or one week's pay for each year of service, 
 is paid under clause 4 of the act, on retirement, to persons not form- 
 ing part of the permanent civil service but engaged temporarily. 
 Those who have the benefit of this provision include a great many 
 hired laborers of the dockyards serving under the War Office. 
 
 LAW UNDER SUPERANNUATION ACTS OF 1834, 1859, 1887. 
 
 A paper prepared for the information of the Ridley Commission in 
 1888 by Sir Reginald Welby gives a complete survey of the pro- 
 visions of the three great superannuation acts in force, the acts of 
 1834, 1859, and 1887. The paper is here reproduced: C) 
 
 1. The grant of superannuation allowances to persons in the per- 
 manent or established civil service of the Crown is regulated by the 
 Acts — 
 
 4 & 5 Will. 4. c. 24. (Superannuation Act of 1834) 
 22 Vict., c. 26. " " " 1859 
 
 50 & 51 Vict., c. 67. " " " 1887 
 
 For practical purposes the two latter statutes only need be con- 
 sidered. The greater portion of the Act of Will. 4. has been repealed, 
 and the sections which are still in force are of an unimportant char- 
 acter. 
 
 2. In order to qualify a civil servant for the grant of superannuation 
 allowance, he must — 
 
 (a) if appointed since the passing of the Act of 1859, have been 
 admitted to the service with a certificate from the civil service com- 
 missioners, or hold an office specially excepted from this requirement; 
 
 (b) have given his whole time to the public service; 
 
 (c) draw the emoluments of his office from public funds exclusively; 
 
 (d) have served for upwards of 10 years; 
 
 (e) if under the age of 60, be certified to be permanently incapable 
 from infirmity of mind or body from discharging his official duties ; or 
 have been removed from his office on the ground of his inability to 
 discharge his duties efficiently. 
 
 (J") be certified to have served with diligence and fidelity to the 
 satisfa(;tion of the head of his department. 
 
 3. The scale of superannuation allowance is, for each completed 
 year of service, 1/60 of the emoluments enjoyed by the civil servant at 
 the date of his retirement, subject to a maximum of 40/60. If the 
 civil servant has not held his office for three years, then the pension is 
 calculated upon the average of his emoluments during the last three 
 years. 
 
 Extra pension is granted to civil servants living in official houses. 
 For the purpose of such pension the value of a house is reckoned at 
 
 ''For warrant regulating the grant of gratuities and allowances under section 1 of 
 the Superannuation Act, 1887, see Appendix IV. 
 
 & Second Report of Commission on Civil Establishments. 1888. Appendix, pp. 
 415 and 416. 
 
144 CIVIL-SEKVICE RETIREMENT IN GREAT BRITAIN. 
 
 one-sixth of the resident's salary, but in order to establish claim to 
 pension in respect of a house it must be shown that income tax has 
 been paid upon the house. 
 
 4. Pensions may be granted at a reduced rate if the misconduct or 
 demerits of the officer appear to the Treasury to justify such a reduc- 
 tion. 
 
 5. Pensions may also be granted in excess of the usual scale — 
 
 (a) if the retiring civil servant has rendered any special services in 
 the course of his career. 
 
 Such awards are of very rare occurrence, and are only made when 
 the special services have been extraordinary in kind, and such as 
 could not be considered as falling within the scope of the officer's 
 ordinary duties. 
 
 (b) if the civil servant is compelled to retire in consequence of an 
 injury sustained in the actual discharge of his duty, without his own 
 default, and specifically attributable to the nature of his duty. The 
 scale of such pensions is prescribed by a warrant made under s. 1. of 
 50 & 51 Vict., c. 67. A special pension can in no case exceed the* 
 amount of the annual emoluments of the office from which the civil 
 servant retires. 
 
 (c) if the civil servant has served in a place which has been de- 
 clared by the Treasury, under 39 & 40 Vict., c. 53, to be an ''unhealthy " 
 place. In such cases two years' service counts as three. 
 
 6. A higher pension than could be obtained by the scale mentioned 
 in par. 3 can also be awarded to the holders of offices requiring pro- 
 fessional or other peculiar qualifications not ordinarily to be acquired 
 in the public service. The amount of the pension in such cases is 
 arrived at by adding to the years of the officer's actual service a num- 
 ber of years varying with the nature of the office and the amount of 
 time which may be expected to be necessary to qualify the holder for 
 the due discharge of its duties. 
 
 7. When a civil servant is compelled by ill health to retire before he 
 has completed ten years' service, he may receive a gratuity of one 
 month's pay for each year of service. 
 
 8. Any pensioner under 60 years of age may, if his health permits 
 it, be required to serve again in any position for which his previous 
 services may render him eligible. 
 
 9. If a civil servant is killed in the execution of his duty, a pension 
 may be awarded to his widow and children, the amount of which is 
 regulated by the warrant referred to under par. 5 (b). 
 
 10. A civil servant whose office is abolished, or who is compul- 
 sorily removed from the service, in order to facilitate arrangements 
 by which greater economy and efficiency may be secured, may receive 
 a compensation allowance, calculated on the same scale as if he were 
 qualified for a pension (see par. 3), but with the addition to his actual 
 service of a number of years varying with the length of such service, 
 as follows: 
 
 Under 5 years' service, addition of 1 year. 
 Above 5 and under 10, addition of 3 years. 
 
 10 and under 15, addition of 5 years. 
 
 15 and under 20, addition of 7 years. 
 
 20, addition of 10 years. 
 
CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 145 
 
 11. Persons not forming part of the permanent civil service, but 
 engaged temporarily, are not entitled to superannuation allowance, 
 but receive on retirement or discharge a gratuity of £1 [$4.87] or one 
 week's pay, for each year of service. 
 
 If, however, such a person is injured or killed in the discharge of 
 his duty, a pension or gratuity may be awarded to him or his rela- 
 tives as provided in the warrant referred to in par. 5 (b). 
 
 12. It should be added that the members of the diplomatic service 
 and the members of the Royal Irish Constabulary are entitled to 
 pensions calculated according to the rates laid down in the Acts 32 
 & 33 Vict., c. 43 and 46 Vict., c. 14, respectively; and that the award 
 of pensions to the holders of certain high political offices is provided 
 for by 32 & 33 Vict., c. 60. Pensions are also granted under special 
 acts, 1865, 1872, and 1887 to colonial governors. 
 
 Note. — The -Act 4 & 5 Will. 4, c. 24 directed that a deduction should 
 be made from the salaries of civil servants who entered the service 
 after the 29th August, 1829, as a contribution towards pension; this 
 deduction amounted to 2§ per cent on salaries under £100 [$486.65], 
 and to 5 per cent on salaries of £100 [$486.65] and more. The deduc- 
 tion was abolished by the Act 20 & 21 Vict., c. 37. 
 
 It will be noted that the first qualification for a pension is the 
 possession of a civil service certificate. That is a document issued 
 by the Civil Service Commissioners certifying to the age, health, char- 
 acter, and education or other personal qualifications of the individual 
 who receives it. A person may be an employee of the Government 
 and not be pensionable, but as soon as he becomes "established," as 
 the phrase is, he becomes pensionable. This occurs on examination 
 or on appointment by the head of the department and the issue of 
 the civil service certificate. In several branches, especially in the 
 dockyards, there are a great many persons regarded as servants who 
 are not established, but who may, after a time, become so. It is 
 interesting to note that before issuing a certificate the Civil Service 
 Commission subjects the candidate to a severe physical examination 
 in order to lessen the chances of his early application for pension. 
 
 There are two exceptions to the rule requiring pensionable mem- 
 bers of the public service to have certificates from the Civil Service 
 Commission. Officers appointed directly by the Crown, as for 
 instance, some commissioners and heads of departments, are ex- 
 empted from the necessity of holding certificates from the Civil 
 Service Commission. Officers appointed for their special professional 
 qualifications are also exempted from the necessity of having certifi- 
 cates from the commission by virtue of Section IV of the act, which 
 says that persons of "professional or other peculiar qualifications" 
 may be entitled to superannuation, though they may not hold their 
 appointments directly from the Crown, and may not have entered 
 the service with a certificate from the Civil Service Commissioners. {"■) 
 
 a See Sec. IV, Act of 1859, Appendix II. 
 35885— S. Doc. 290, 61-2 10* 
 
146 CIVIL-SEEVICE RETIREMENT IN GREAT BRITAIN. 
 
 The qualifications that the pensioner must have given his whole 
 time to the public service and been paid out of public funds do not 
 exclude any persons who would ordinarily be regarded as civil servants. 
 The first excludes, for instance, auxiliary or supernumerary postmen, 
 who may be cobblers or blacksmiths by trade and choose to eke out 
 their incomes by devoting certain hours of the day to the distribu- 
 tion of the mail, having only one or two deliveries. 
 
 If the qualification in regard to the indorsement from the head of 
 the department is not complied with, the full amount of the pension 
 is not granted the civil servant. The Treasury makes a reduction 
 according as the circumstances of the case may seem to warrant. A 
 principal clerk of the Treasury before the Courtney Commission in 1903 
 said: "There are a fair number of cases in which a small deduction 
 is made, say, not more than ten per cent. The cases in which a 
 greater deduction than that is made are rare." 
 
 The fifth qualification as to length of service is very specific. The 
 service must not be less than ten years, unless the holder retires on 
 abolition or reorganization of office. 
 
 The sixth qualification for pension relates to the grounds for 
 retirement from the service. The chief of these is attainment of the 
 age of 60, the age chosen by the framers of the Act of 1859 as the age 
 for voluntary superannuation. For the officer under 60 there were 
 originally two conditions (now three) on which retirement on a 
 pension was possible. They were: (1) in case of physical or mental 
 infirmity, and (2) in case his place had been abolished on reorganiza- 
 tion. 
 
 In case of ill health the officer is able to retire on a pension, pro- 
 vided he has been ten years in the service and the infirmity is cer- 
 tified as likely to be permanent. If he has been less than ten years 
 in the service when he retires on account of ill health, he receives 
 instead of a pension a gratuity of one month's pay for each year of 
 service. If the invalidity pensioner recovers, the pension is not with- 
 drawn except in the event of his declining reemployment in the 
 public service if it is offered him. The power of recalling him to the 
 public service is, however, in practice rarely exercised. He is free to 
 follow whatever pursuits his condition may permit. The number of 
 retirements for ill health short of 60 years of age is numerous. Of 
 14,185 civil servants retired with pensions during the ten years end- 
 ing the 30th of November, 1901, 7,093 were retired for age, 6,585 for 
 ill health, and 507 for abolition of office. 
 
 The Act of 1859 made retirement on a pension voluntary at the 
 age of 60. It is now optional at the age of 60 and compulsory at 
 the age of 65, but the Treasury is permitted to allow a retention in 
 employment up to an age not exceeding 70, if satisfied that an offi- 
 cer's retirement at 65 would be detrimental to the service. This 
 
CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 147 
 
 regulation was established by clause 18 of order in council dated 
 November 29, 1898. 
 
 Power was given to the Treasury by the Superannuation Act of 
 1859 not only to make a deduction from the full award of pension in 
 case of misconduct or demerit, but also to award pensions in excess 
 of the usual scale as a reward for special services, and to holders of 
 professional offices, appointed at an age exceeding that at which 
 public service ordinarily begins. In the case of officers required to 
 possess professional or other special qualifications not ordinarily to be 
 acquired in the public service the law provides that years not exceed- 
 ing twenty may be added to the actual service for the purpose of 
 calculating the pension. In practice an addition of ten years has 
 been the maximum (except in very special cases), and since Decem- 
 ber 20, 1888, when a Treasury minute to that effect was passed, the 
 power to add years has not been exercised in respect of any newly 
 created offices. 
 
 COURTNEY COMLIISSION, 1902. 
 
 The agitation begun by the civil servants soon after the passage of 
 the law of 1859 for a change in the pension system continued down 
 to the present year (1909). Since the present inquiry began, that 
 agitation has resulted in the legislative enactment of September 20, 
 1909, which undertakes to overcome the objection of the civil servants 
 to the forfeiture of their theoretical contributions, in case of premature 
 death, by providing insurance benefits in lieu of a part of the pension. 
 This constitutes in effect, as will be shown, an important modification 
 of the whole theory underlying the pension system. This parliamen- 
 tary action was based on recommendations made by a royal commis- 
 sion, of which the Right Hon. Leonard Henry Courtney was chairman, 
 appointed in 1902, "to inquire whether it is possible so to amend the 
 existing system of superannuation of persons in the civil service of the 
 State as to confer greater and more uniform advantages upon those 
 to whom it applies without increasing the burden which it imposes on 
 the taxpayer." 
 
 Appointment of Commission Due to "Deferred Pay" Com- 
 mittee. 
 
 This commission was appointed in response to a request for its 
 nomination from a body of civil-service clerks organized under the 
 name of the "Deferred Pay Committee." A memorial signed by 
 50,000 of their number (the membership increased soon after this to 
 60,000 or 70,000) was addressed by them to the Treasury asking that, 
 as there was a considerable difference between their view of the 
 existing pension system and the Government's view, the Government 
 
148 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 
 
 would appoint a commission to go thoroughly into the matter from 
 every possible aspect, and obtain figures in connection with the 
 problem to which the Deferred Pay Committee did not have access. 
 This committee was formed originally of a number of civil servants 
 selected from certain government offices. Later, subcommittees 
 (22 in all) were formed in the leading towns of the United Kingdom. 
 The smaller committees met from time to time in the different 
 provincial centers, and large meetings were held at least once a year 
 in London of representatives from all the subcommittees, with 
 representatives from the leading public offices in London and from 
 associations in the civil service, such as the Postal Clerks' Associa- 
 tion, the Telegraph Clerks' Association, the Customs Federation, etc. 
 The first evidence heard by the Courtney Commission was from 
 representatives of the Treasury respecting the existing system. They 
 next gave hearings to members of the Deferred Pay Committee. 
 They summoned also other members of the civil service who could 
 give them information as to voluntary organizations which had been 
 formed in various branches of the service for the purpose of providing 
 benefits for civil servants and their dependents supplemental to the 
 pensions given by the State. In further elucidation of the problem 
 before them they heard witnesses with regard to pension funds and 
 superannuation schemes applicable to the city of Manchester, the 
 London County Council, the Great Eastern Railway Company, the 
 London and Northwestern Railway Company, and the civil services 
 of India and New Zealand. Three eminent actuaries were also 
 summoned before the commission to define and explain the principles 
 that would be involved in any change of policy. 
 
 Growth in Cost of Civil Pensions Since Ridley Commission. 
 
 The first witness to be called by the commission was Mr. T. L. 
 Heath, a principal clerk in the Treasury. He had the following 
 figures worked out to show the amount of the original estimates for 
 pensions during each of the fifteen years that had elapsed since the 
 Ridley Commission reported in 1888. 
 
CIVIL-SEKVICE RETIEEMENT IIST GEEAT BEITAIN. 149 
 
 SUPERANNUATION AND RETIRED ALLOWANCES— ORIGINAL ESTIMATES. 
 
 Vote. 
 
 1888-89. 
 
 1889-90. 
 
 1890-91. 
 
 1891-92. 
 
 1892-93. 
 
 1893-94. 
 
 1894^95. 
 
 1895-96. 
 
 Superannuation al- 
 lowances 
 
 $1,489,568 
 
 756,896 
 9,733 
 
 16,507 
 
 36,499 
 
 $1,533,911 
 
 735, 508 
 9,733 
 
 15,266 
 
 40,392 
 3,407 
 
 $1,543,873 
 
 717,337 
 14,599 
 
 12,852 
 
 43,798 
 3,407 
 
 $1,637,422 
 
 673,767 
 13,626 
 
 10,940 
 
 45,988 
 3,407 
 
 $1,633,971 
 
 640,203 
 9,733 
 
 8,594 
 
 47,692 
 3,406 
 
 $1,793,602 
 
 600,920 
 9,733 
 
 10,040 
 
 33,301 
 3,407 
 
 2,711 
 
 $1,871,797 
 
 553,467 
 9,733 
 
 14,220 
 
 31,613 
 3,406 
 
 2,711 
 
 $1,977,215 
 
 537, 140 
 9,733 
 
 Compensation allow- 
 ances 
 
 Gratuities.. 
 
 Compassionate allow- 
 ances 
 
 14,010 
 
 27,296 
 3,407 
 
 Prison officers com- 
 
 Compassionate fund.. 
 
 Middlesex registry, 
 pensions, etc 
 
 
 2,711 
 
 Mercantile marine, 
 pensions, etc 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Total 
 
 2,309,203 
 867,697 
 
 1,609,838 
 964, 905 
 
 1,138,975 
 854,377 
 
 5,378 
 
 2,338,217 
 864,290 
 
 1,636,117 
 957,854 
 
 1,096,593 
 865,634 
 
 5,377 
 
 2,335,866 
 791,293 
 
 1,609,352 
 972, 531 
 
 1,044,083 
 886,287 
 
 5,378 
 
 2,385,150 
 779, 127 
 
 1,553,387 
 966,078 
 
 1,018,889 
 931,964 
 
 5,377 
 
 2,343,599 
 749, 928 
 
 1,526,621 
 949,094 
 
 1,025,863 
 
 1,013,269 
 
 5,377 
 
 2,453,714 
 759,661 
 
 1,519,321 
 957,956 
 
 1,019,001 
 
 1,066,153 
 
 5,377 
 
 2,486,947 
 801,513 
 
 1,519,321 
 931,380 
 
 1,028,574 
 
 1,117,606 
 
 5,377 
 
 2,571,512 
 
 War office 
 
 824,385 
 1,544,140 
 
 AdTnir.<),tty . , 
 
 Customs 
 
 916, 021 
 
 Inland revenue 
 
 Post-office, etc 
 
 County court officers, 
 Ireland 
 
 1,053,602 
 1,159,633 
 
 5,377 
 
 
 Total 
 
 7,750,373 
 
 7,764,082 
 
 7,644,790 
 
 7,639,972 
 
 7,613,751 
 
 17,781,392 
 
 07,888,008 
 
 "8, 071, 475 
 
 
 
 Vote. 
 
 1896-97. 
 
 1897-98. 
 
 1898-99. 
 
 1899-1900. 
 
 1900-1901. 
 
 1901-2. 
 
 1902-3. 
 
 Superannuation al- 
 lowances 
 
 $2,071,469 
 
 500,558 
 12, 166 
 
 17,821 
 
 23,384 
 3,407 
 
 2,015 
 
 $2,134,345 
 
 459,835 
 12,166 
 
 15,013 
 
 17,729 
 3,407 
 
 1,723 
 
 $2,171,418 
 
 422,909 
 12, 166 
 
 14,755 
 
 13,490 
 3,406 
 
 1,723 
 
 $2,244,771 
 
 395,033 
 12,166 
 
 34,980 
 
 9,402 
 3,407 
 
 1,324 
 
 ^9,186 
 
 $2,263,312 
 
 381,641 
 12, 166 
 
 19,150 
 
 5,631 
 3,406 
 
 1,324 
 
 56,266 
 
 $2,387,057 
 
 354,014 
 12,166 
 
 33,910 
 
 3,849 
 3,407 
 
 1,324 
 
 52, 183 
 
 $2,523,266 
 
 330,061 
 12,166 
 
 34,280 
 
 2,350 
 3,406 
 
 1,324 
 
 49,643 
 
 Compensation allow- 
 ances . 
 
 Gratuities 
 
 Compassionate allow- 
 ances 
 
 Prison officers com- 
 mutations 
 
 Compassionate fund. . 
 Middlesex registry, 
 
 pensions, etc 
 
 Mercantile marine, 
 
 pensions, etc 
 
 
 
 
 
 
 Total 
 
 2,630,820 
 845, 798 
 
 1,578,693 
 896,288 
 
 1,040,112 
 
 1,224,699 
 
 3,105 
 
 2,644,218 
 853,097 
 
 1,593,292 
 900,750 
 
 1,054,892 
 
 1,317,162 
 
 3,105 
 
 2,639,867 
 862,830 
 
 1,593,292 
 908,517 
 
 1,145,224 
 
 1,483,548 
 
 2,760,269 
 893,976 
 
 1,661,910 
 935,249 
 
 1,223,063 
 
 1,717,821 
 
 2,742,896 
 875, 970 
 
 1,671,643 
 941,940 
 
 1,271,018 
 
 1,863,378 
 
 2,847,910 
 917,364 
 
 1,657,530 
 933, 570 
 
 1,271,621 
 
 1,963,876 
 
 2, 956, 496 
 939,234 
 
 1,703,762 
 934,280 
 
 1,310,510 
 
 2,059,065 
 
 1,732 
 
 War office . . 
 
 Admiralty 
 
 Customs 
 
 Inland revenue 
 
 Post-office, etc 
 
 County court officers, 
 Ireland 
 
 
 
 
 
 
 
 Total 
 
 "8,217,499 
 
 8,364,793 
 
 8,631,555 
 
 9,256,983 
 
 9,338,453 
 
 09,538,335 
 
 9, 905, 079 
 
 
 
 o The sum of the items does not equal this total; the figures are, however, the equivalents of those in the 
 original. 
 
 It will be noted that the return for 1902-3 showed that the charge 
 for civil pensions, gratuities, compensation allowances, and all those 
 allowances which came within the scope of the Courtney Commis- 
 sion's inquiry was £2,035,360 ($9,905,079), exclusive of pensions 
 awarded under separate acts to the Royal Irish Constabulary and the 
 Dublin Metropolitan Police which brought the total up to something 
 like two and a half million pounds. It will be observed that the pen- 
 sion charge as shown by the estimates had risen from £1,592,597 
 ($7,750,373) in 1888-9 to £2,035,360 ($9,905,079) in 1902-3. This 
 increase in amount was explained by Mr. Heath to be due in some 
 degree "to the expansion in the numbers of the civil service, but also 
 
150 CIVIL-SERVICE EETIEEMENT IN GREAT BRITAIN. 
 
 to the fact that in the departments which have increased in numbers 
 the pension charge comes more into force." He showed how in the 
 Post-Office, which was growing rapidly, there was nothing Hke the 
 normal number upon the pension vote, while in other departments, 
 where there was little growth in the number of employees, the 
 relative number on the pension roll was much larger. 
 
 Relation Between Cost of Pensions and Salary Charge Con- 
 fused WITH Amount of Postponed Charge made by State to 
 Pay Pensions. 
 
 The members of the commission were desirous of comparing the 
 amounts paid in the effective service (salaries) with the amounts paid 
 in the noneffective (pensions). Mr. Heath pointed out that there 
 was no fixed relation between them. He showed that the proportion 
 of pensions paid for post-office employees to the salaries paid was 
 something like 6 per cent only, whereas in the Customs the proportion 
 of pension charge to salary charge was 30.6, the proportion being 
 bound to decrease where the department was growing fast and in- 
 crease as it stood still or reached an equilibrium. The average pension 
 charge at the time throughout all the service seemed to be about 16 
 or 17 per cent of salaries. He tried to make clear the point which 
 seems to have given rise to so much misunderstanding, as was seen 
 in the investigation of the Ridley Commission, that there is no fixed 
 and necessary relationship between present pensions and present 
 salaries, since present pensions are awarded on the basis of past sal- 
 aries, and are payments to persons who are the residue of a service 
 of prior years, which may have been much smaller or much larger 
 than at present. Said Sir Alexander Henderson: 
 
 "Take 1889, the year that is given here; the £1,600,000 [$7,781,534], 
 the number of the employees, and the salaries paid; then the figure 
 £2,035,000 [$9,893,595] would work out exactly, would it not, as the 
 salaries to one date; they would bear the same proportion as the in- 
 crease in the pension ?" 
 
 "Not necessarily." 
 
 "Why not?" 
 
 "If the growth were continuous, it would be so, would it not?" 
 interposed the chairman. "It depends upon whether the growth 
 is continuous, the £2,035,000 [$9,893,595] now charged may be said 
 to have reference to an average charge of an effective vote of fifteen 
 years ago. The £1,600,000 [$7,781,534], of 1889 might have had 
 reference to an effective charge of fifteen or twenty years before that ; 
 but if the growth during these periods had been continuous, and could 
 be looked forward to being continuous in the future, so the pension 
 charge would increase in proportion, would increase with the vote; 
 it all depends upon the continuity of it?" 
 
 "It all depends upon the continuity of it." 
 
 "But also upon those changes which are constantly happening in 
 the departments?" queried Sir Ralph Knox. 
 
CIVIL-SEKVICE RETIEEMENT IF GREAT BRITAIN. 15 1 
 
 ''Also upon the increase of departments. That would vitiate the 
 calculation of a normal charge. Supposing the numbers remained 
 constant over a series of years, you could get a normal charge." 
 
 ''And the rates of pay continued constant?" 
 
 "And if the rates of pay continued constant, you could get the 
 normal charge. Then I think your comparison would be possible if 
 there were no growth of salaries or numbers." (^) 
 
 This point seemed finally to have been made plain. 
 
 Through the questioning of Sir Ralph Knox the mistake made 
 by Sir Herbert Maxwell and others at the time of the Ridley Commis- 
 sion's inquiry in supposing that the percentage of salary that would 
 have to be deducted to create a superannuation fund that would pay 
 the necessary benefits was the same as the average between the non- 
 effective and effective votes, 12 to 20 per cent at the time of the 
 calculation of 1869, was also made apparent. The fallacy of this 
 view is well brought out in the testimony, and it was evidently 
 fresh in the minds of the commissioners when the members of the 
 Deferred Pay Committee came before them three days later to present 
 their case. 
 
 Said Sir Ralph Knox to Mr. Heath, 
 
 "It has been stated now by you that in a certain class of depart- 
 ments the pension charge amounts to as much as 29 per cent, in 
 another to 32 per cent, in another 4 per cent, in another 5 per cent, 
 and in another 14 per cent, I think?" 
 
 "Yes."^ 
 
 "And it has been stated elsewhere that such a percentage repre- 
 sented the addition that would have to be made to the salaries of the 
 various departments in order to provide a fund for pensions. It has 
 been stated, I think, before the last commission, that a calculated 
 figure of 18 per cent gave the amount which would have to be added 
 to the pay of everybody in order to give them the equivalent of 
 the pensions ?" 
 
 "I do not think that there is any necessary connection between 
 the two things." * * * 
 
 "In fact, as the amount of the pension charge at the present day 
 represents the pensions on establishments of 20 or 30 years ago, 
 they cannot have necessarily any connection?" 
 
 "No." 
 
 "And your view would be that, supposing you wanted to ascertaia 
 what should be added or deducted from the pay of the various officers 
 of the departments in order to provide the pensions, you would have to 
 discount, as I should say, that charge. That is to say, you would 
 calculate the present value of the deferred pension in order to pro- 
 vide the subsequent pension charge?" 
 
 "Yes * * * j^ would mean an actuarial calculation." 
 
 "An actuarial calculation of the sum of money or the annuity to 
 be paid or added to the pay of everybody in order to provide the 
 deferred annuity at the termination of the man's service?" 
 
 o Report of Commission on Superannuation in the Civil Service. 1903. Minutes of 
 evidence, p. 8. 
 
152 CIVIL-SEEVICE EETIREMENT IN GREAT BEITAIN. 
 
 "Yes." 
 
 "And the idea which has got into many people's heads that there 
 is a direct connection between the present charge for pension and the 
 present charge for pay is, at all events to those who have given any 
 consideration to the thing, an exploded idea?" 
 
 "Yes."(«) 
 
 The confusion caused in the minds of many by the testimony 
 which Sir Reginald Welby had given before the Ridley Commission 
 about the actuarial calculation made in 1869 as regards a normal 
 estabhshment was cited. Said Sir Ralph: 
 
 "What Lord Welby roughly calculated was that certain salaries 
 would produce, supposing the thing were constant, a certain constant 
 charge for pensions?" 
 
 "Yes." 
 
 "But the converse, or the reverse, is what I am driving at. What 
 we want to laiow is what addition to a man's pay or deduction from 
 a man's pay would produce the normal charge for pensioning him. 
 That would be it, would it not?" 
 
 "Yes, I am not aware of any actuarial calculation having been 
 made to determine that point." 
 
 "At all events, the notion that was given utterance to in the recent 
 commission is no longer accepted by the Treasury?" 
 
 "Exactly." («) 
 
 The views of the Deferred Pay Committee were presented to the 
 commission by two representatives of the London committee, Mr. 
 Charles R. Moir, a chief examiner, and Mr. Herbert Rolfe, a clerk in 
 the War Office, and by two representatives of provincial committees, 
 Mr. H. Ellis, Collector of Customs at Manchester, and Mr. H. F. Dol- 
 lond West, Collector of Inland Revenue at Hull. 
 
 They stated that the main point they wished to emphasize was 
 that "pensions in the civil service are really deferred pay." Their 
 understanding was that from 16 to 20 per cent of their salaries was 
 being withheld to pay pensions. They said they wanted the com- 
 mission to find out what the real basis of deductions was and then 
 make some rearrangement of the system that would be more equita- 
 ble to different classes of the service. Considering that pensions were 
 paid out of theoretical deductions from the salaries of all the civil 
 servants, they held it inequitable that only those civil servants who 
 reached the pensionable age received any benefit from those deduc- 
 tions. They thought that the amounts deducted from salary should 
 be put into a fund and these amounts, with whatever interest they had 
 earned, returned to the contributor or his representatives on his 
 separation from the service. They held especially that widows and 
 orphans of those who died in harness should have a claim on the de- 
 ferred pay of their deceased relatives. If the imaginary deductions 
 
 a Report of Commission on Superannuation in the Civil Service. 1903. Minutes of 
 evidence, p. 9. 
 
CIVIL-SEEV:CE RETIREMENT IN GREAT BRITAIN. 153 
 
 were more than sufficient to pay the pensions — and they thought 16 
 to 20 per cent of salaries would be — then they believed the difference 
 should go into an insurance fund for the benefit of their dependents. 
 If those deductions were not sufficient for the grant of both pension 
 and insurance then they held that the system should be so revised, 
 even if it did cost a little more, as to make that possible. 
 
 Asked by the chairman of the commission what he meant by saying 
 that pensions are deferred pay, Mr. Moir said: 
 
 We understand that pensions are not mere addenda, charitable 
 contributions, or anything of that kind, added by the Government, 
 but that in fixing salaries and scales of pay the Government has in 
 all cases made some pretty definite deduction from what we might call 
 the market rate, and, having made that deduction, it is really equiva- 
 lent to the Government having given the larger or full market rate 
 of salary, and having asked the civil servant himself to contribute 
 the amount of the deduction. That amount then represents pay 
 deferred. 
 
 In every case when the Government takes on temporary servants 
 and puts them on the establishment they make a reduction in the 
 rates of pay, because a person going on the establishment will ulti- 
 mately be entitled to a pension. For instance, in the War Office, it 
 occurred that certain draughtsmen were brought on from what was 
 then known as the temporary establishment to the permanent estab- 
 lishment. It occurs also in all the dockyards, when the workmen, 
 who are temporary and non-pensionable, are brought on the estab- 
 lishment. In every case the deduction is made. In the Post-Office, 
 also, whenever they bring on from the temporary to the established 
 service, they make a deduction. These are general illustrations of 
 what takes place regularly in the civil service. As you are aware, 
 sir, there are two classes, what are called temporary or unestabHshed 
 civil servants and established civil servants. The temporary civil 
 servant presumably gets the full market rate of wages or pay for the 
 work he does. The established civil servant does not get it, and so 
 when there is a transposition from the one class to the other, a de- 
 duction is made — a definite, absolute deduction — because of the pros- 
 pective pension that comes to the man if he lives to a certain age. C^) 
 
 Arguing that if deductions were generally made, then the system 
 operated unfavorably in the case of those civil servants who did not 
 live to gain a pension, Mr. Rolfe said: 
 
 I am afraid when the present pension act was passed the whole 
 subject of a pension system was not fully considered. That is our 
 own impression, and it was considered sufficient at that time to pro- 
 vide a pension for the persons * * * who remained in the serv- 
 ice of the Crown for the ordinary period of 40 years, but the desira- 
 bility of providing for those who dropped out of service before the 
 natural termination of their service was not considered. (^) 
 
 a Report of Commission on Superannuation in the Civil Service. 1903. Minutes of 
 evidence, p. 12. 
 b Idem, p. 13. 
 
154 CIVIL-SEEVICE EETIEEMENT IN GREAT BRITAIN. 
 
 In further explanation of their contention that the existing system 
 was really "& system of chance" and full of inequities, Mr. Moir said: 
 
 It works badly, in this way, that the man who does not live to gain 
 a pension gains nothing from the proportion which has been deducted, 
 assuming a deduction from his actual pay. One man, for instance — 
 and we could give you many cases — may live to serve the Crown for 
 40 years, and be just about to draw a pension, and may die and get 
 nothing. Another man may have served the Crown for the same or 
 for a longer or shorter period; he may not have served the Crown so 
 well, and yet he may live for 20 years to draw a pension. We think 
 that any system which allows such an inequality in its operation is 
 not satisfactory. {"') 
 
 To this Mr. Rolfe added: 
 
 Of course, we can bring any number of specific instances, if they 
 are desired, to illustrate this. For instance, we could give an instance 
 of a man who previously served the Government in an unestablished 
 capacity at a salary of £365 ($1,776.27) a year, and who was put 
 upon the establishment at a salary of £300 ($1,459.95), and who lived 
 for five years and then deceased, and who consequently lost about 
 £60 ($291.99) a year for a period of five years. (^) 
 
 On the chairman's contending that, if the representatives of men 
 dying in active service should receive the deferred pay which had been 
 deducted from the civil servant's salaries an additional charge would 
 be made on the State, Mr. Ellis said: 
 
 Well, then, even granting that, sir, as I said just now, that does not 
 get rid — putting the case from our point of view — that does not get 
 get rid of the inherent injustice of the present s}^stem. The way you 
 put it is this — that if a man dies on active service, and his money is 
 not returned to his widow, the money goes to swell or to niaintain 
 the pensions of his more fortunate colleagues who live beyond the 
 pensionable age. * * * That does seem to us to be a gross 
 mjusticcC*) 
 
 At another hearing when Sir Ralph Knox, a member of the Com- 
 mission, reminded Mr. Moir that ''only the same charge is to be 
 incurred," whatever the revision, Mr. Moir replied: 
 
 I may say, sir, we came to this commission with a view of trying to 
 
 Eersuade them that the civil servants were entitled to something more 
 ecause of the method upon which the Treasury have framed the scale 
 of salaries on the basis of deduction of something like 16 to 20 per cent. 
 Of course, if that is ruled entirely out of the terms of reference, we 
 find the position is a little more difficult. We can not, of course, press 
 that aspect of the question too much; still, we would like to ask the 
 commissioners to consider it, with a view of making some report in 
 this way, that although it may be very satisfactory for the Govern- 
 ment to revise the pension system without costing anything, it would 
 be very much more favorable from the civil servants' point of view 
 that it should be revised, even though it did cost a little, sir. 
 
 •^ Report of Commission on Superannuation in the Civil Service, 1903. Minutes of 
 evidence, p. 14. 
 &Idem, p. 43. 
 
CIVIL-SEEVICE RETIEEMENT IN GEE AT BRITAIN. 155 
 
 Mr. RoLFE. And not only desirable, but equitable, sir. 
 Mr. Mom. Quite fair. 
 
 Mr. RoLFE. We base our claim for a reconsideration of the pension 
 system to a large extent, upon the inequality of the present system. C^) 
 
 Request of Civil Servants that Theoretical Contributions 
 
 BE Funded. 
 
 The specific request of the deferred pay committee, as voiced by 
 Mr. Rolfe, was that the pension system for the government employees 
 should be "put upon a definite footing similar to schemes * * * 
 which exist outside." They held that the existing pension system 
 was "archaic," "old-fashioned," and less desirable than super- 
 annuation schemes developed since the adoption of the government 
 system in 1859, by organizations like the Bank of England, the Lon- 
 don and Northwestern Railway, the Cunard Steamship Company, 
 and the Liverpool and the Manchester corporations. The charac- 
 teristic features of all these superannuation schemes, as distinguished 
 from the Government's pension system, was that they had a super- 
 annuation fund made up of contributions from the salaries of the 
 employees and contributions from the employing body. The following 
 quotations from the testimony of Messrs. Moir and Rolfe showed the 
 reasons advanced by the civil servants for desiring that their theo- 
 retical deductions be funded in similar manner: 
 
 The whole system hitherto has been so vague, we think it would be 
 very desirable to get it on a definite footing. A fund such as we 
 contemplate would have that advantage, because, practically, a per- 
 sonal account would be kept of every man's own position in relation 
 to the fund. * * * j^ these funds that we know anything of 
 have got definite statements and definite accounts with their em- 
 ployees; an employee knows at any moment what his own title is 
 exactly — how he personally stands. * * * Then, again, sir, 
 the creation of an actual fund would have the advantage which these 
 funds we have referred to have, that from time to time the possi- 
 bilities of the fund might be reviewed. * * * j^ appears in their 
 cases that they are able, as they value and examine their funds, to 
 increase the benefits they can give. * * * q^j. chief view of the 
 advantage of a fund is based on the existing funds of the railways, 
 and so on. They seem to us to be very satisfactory to the recipients 
 as a rule, and it was mainly on that ground we thought it would be 
 desirable that the Government should also establish an actual fund.('') 
 
 The desire of the civil servants that the Government should put 
 their imaginary deductions into a fund which should be invested for 
 their benefit undoubtedly had its origin in the feeling that it was 
 unjust for this "deferred pay" to be withheld from their dependents 
 in case of their not living to receive themselves the pension their con- 
 tributions would have earned. They thought that widows and 
 
 « Report of Commission on Superannuation in the Civil Service. 1903. Minutes of 
 evidence, p. 17. 
 &Idem, p. 16. 
 
156 CIVIL-SEEVICE KETIREMENT IN GREAT BRITAIN. 
 
 orphans would have a claim that could not be denied on a fund to 
 which the deceased civil servant had been a recognized contributor, 
 the amount of his contributions and the accrued interest being defi- 
 nitely known and a matter of record. Mr. Moir stated that the most 
 important thing that they wanted to guard against, in addition to 
 destitution in old age, was "death during service" or "the leaving of 
 widows and orphans." It was pointed out that one of the causes 
 which led originally to the pension system was the fact that "the 
 public would hear with very great regret of civil servants being desti- 
 tute in their old age" and that "the Government should extend that 
 feeling to the widows and orphans of all servants who die by the way." 
 
 Request of Civil Servants for Insurance out of Surplus 
 Theoretical Contributions. 
 
 It was assumed by the representatives of the Deferred Pay Com- 
 mittee that the amount which they believed to be deducted from their 
 salaries was more than sufficient for thepayment of pensions. There is, 
 of course, no mathematical difficulty in calculating a proper deduction 
 from a monthly salary or other salary that will create a fund only 
 sufficient to pay a deferred annuity to the survivors. From an insur- 
 ance point of view, the forfeiture of premiums by those who die pre- 
 maturely is not inequitable, since the premium paid contemplates 
 that forfeiture. Nevertheless, the assumption of the employees 
 shows most conclusively the impracticability of any arrangement, in 
 a general superannuation scheme, which carries with it a forfeiture by 
 an employee. Their assumption was perfectly reasonable, too, in view 
 of their belief that that deduction amounted to from 16 to 20 per cent 
 of salaries. They knew that many of the superannuation funds main- 
 tained by railway systems were financed on a deduction of 2| per cent 
 from salaries and 2^ per cent from the employing body, making a total 
 of only 5 per cent against the reputed deduction of 16 to 20 per cent 
 by the .Government. It was not strange that they should think, 
 allowing even for the more limited pensions of the industrial schemes, 
 that the difference between the amount presumably deducted by the 
 Government and the amount presumably necessary should be suffi- 
 cient to give them the additional insurance benefit. 
 
 "You want a sum at death and a sum on retiring from the service. 
 Well, now, can you expect that in addition to what we have already 
 given?" asked Mr. Bunn, a member of the commission. 
 
 "Yes, we do," was the answer, "the ground of our claim being that 
 the Government have calculated the 'pension to he worth more than it 
 really is, and have fixed the salaries accordingly, and in readjusting 
 that, we want them to readjust it so as to provide funds for widows 
 and orphans. " C*^) 
 
 a Report of Commission on Superannuation in the Civil Service. 1903. Minutes of 
 evidence, p. 25. 
 
CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 157 
 
 After the review of first principles which the commissioners had had, 
 a few days before, with Mr. Heath, of the Treasury, they were, of 
 course, not incHned to accept without question the assumption of the 
 Deferred Pay Committee that from 16 to 20 per cent of the civil serv- 
 ants' salaries was withheld in order to maintain the pension system. 
 They remembered that Mr. Heath had said he knew of no actuarial 
 calculation having been made to determine " what addition to a man's 
 pay or deduction from a man's pay would produce the normal charge 
 for pensioning him." 
 
 "Do you think you can prove, as a matter of history, that there has 
 been a deduction of that kind contemplated?" said the chairman of 
 the commission to the representative of the Deferred Pay Committee. 
 
 "Yes," answered Mr. Moir. "We rely largely upon the evidence 
 given before the Royal Commission on Civil Establishments in 1886 
 * * * by representatives from the Treasury, Sir Francis Mowatt 
 and Lord Welby. * * * Sir Francis Mowatt said, for instance, 
 that when they gave a man £100 [$486.65] a year they practically 
 considered a charge of £118 [$574.25] a year was being undertaken. 
 That, as far as the taxpayer is concerned, so to speak, it was really 
 a charge of £118 [$574.25] a year." 
 
 "Can you tell us what that is founded on?" asked the chairman. 
 
 "That is our difficulty sir," returned Mr. Moir. "Throughout the 
 Ridley Commission we find statements of that kind, varying in places 
 from time to time, and with different speakers, but, as far as we can 
 gather, the Treasury mind is that there is some deduction or that the 
 proportionate value of the pension is 16 to 20 per cent. The state- 
 ments varied in different places, but as far as we can get them together 
 they form somewhat of a general statement to that efi^ect. Undoubt- 
 edly the Treasury mind was apparently a little vague as to the exact 
 proportion." 
 
 "You can not suggest upon what basis those figures are given?" 
 
 ''We are not in an absolute position to say that," said Mr. Rolfe, 
 ' ' but we are in a position to say that Lord Welby stated that he had 
 had a calculation made, and that his statement as to the proportion of 
 deferred pay to actual salary was based upon that calculation. Of 
 course we are not aware of the details of that. 
 
 "There is also a Treasury letter," added Mr. Moir, "written on 
 the 1st of July, 1891, to the Board of Trade, where this passage 
 occurred. * * * 'The conversion of temporary into permanent 
 appointments, without any alteration of salary, involves an addition 
 of 15 to 20 per cent to the charge.' " * * * 
 
 "You have no knowledge on what that is founded? 
 
 "No, no actual knowledge." 
 
 "Have you any opinion yourself upon that? 
 
 "Well, my impression, sir, for what it is worth, is that it is founded 
 on the relation between noneffective and effective charges for the 
 year. 
 
 "You think that it is a just method? 
 
 "No, I do not, but if the Treasury have allowed it to operate, I 
 think we are entitled to rely upon the fact that that is what has been 
 actually taking place. 
 
158 CIVIL-SEKVICE RETIKEMENT IN GEEAT BRITAIN. 
 
 "What do you mean by the Treasury having allowed it to operate? 
 
 ''Well, if in fixing any scale of salaries they have considered that 
 the noneffective charge or part of the charge was 15 or 20 per cent, 
 they have no doubt reduced the market rate of pay given to any 
 particular class by that amount." C*^) 
 
 The point of this is that Mr. Moir at least, and presumably other 
 civil servants, too, had perceived the confusion of ideas which had 
 arisen as a result of testimony before the Ridley Commission in 
 regard to pension charges and the amount of deductions required for 
 maintaining a fund, but thought that, whatever the basis on which 
 the Treasury made deductions, the fact that they made them, regard- 
 less of the percentage of deduction or the scientific or unscientific 
 basis for such deductions, was sufficient to justify the theory of 
 pensions as deferred pay and the demand of the clerks for a more 
 equitable distribution of the contributions. Said he: 
 
 What I meant was that even though the Treasury may have acted 
 on a wrong basis, it does not follow that the civil servant should 
 suffer because of that. It is not for us to justify the ground on which 
 the Treasury or whoever fixed the rates of pay may have arrived 
 at the proportion. What I mean, if I can make myself quite clear, 
 is this: that it is quite possible that the relation between the non- 
 effective and the effective charges does not bear the same proportion 
 as the value of the deferment, as we call it, does to the pay of any 
 individual civil servant. For instance, we are advised by our actuary 
 that in a few years, say ten or more years, the relation or proportion 
 between the noneffective and the effective charges will probably rise 
 to something like 25 per cent, whilst at the time the Treasury were 
 dealing with these matters the relation was something like 16 to 20 
 per cent, so that the proportion may be a varying amount, but the 
 value of a civil servant's pension bears a constant relation to his 
 pay.e) 
 
 Discussing the matter in detail, the representative of the Deferred 
 Pay Committee and the chairman of the commission agreed that in 
 calculating the pension charge it was important that the element of 
 interest should not be forgotten and that the actual deduction would 
 probably be much less than the ratio of the noneffective to the effective 
 vote. How much less would depend on the rate of interest. 
 
 The Fact of Postponed Charge Established but Amount not 
 
 Determined. 
 
 Sir Francis Mowatt, the permanent administrative Secretary to 
 the Treasury — formerly Mr, Mowatt — was later called before the 
 commission and questioned as to what he had meant in 1888 when he 
 told the Ridley Commission that the real charge that the State had 
 to undertake for a civil servant on £100 (.1486.65) a year salary was 
 
 o Report of Commission on Superannuation in the Civil Service. 1903. Minutes of 
 evidence, p. 12. 
 b Idem, p. 13, 
 
CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 159 
 
 £118 ($574.25) a year. "That has no reference to deduction," 
 said he. ''I meant no more than this: That the pension charge of 
 an -officer might be taken roughly at 16 to 18 per cent in addition 
 to his salary." While it seems clear that he was thinking not of 
 individual charges but of the charge of the whole service, grouping all 
 cases together, since all individuals do not live to pensionable age, 
 it is equally plain that his statement was a little misleading. It is 
 not strange that the civil servants generally should have thought 
 they had high authority for the contention that about 18 per cent of 
 their salaries was being held back by the Treasury. 
 
 The origin and fallacy of the theory of a 16 to 20 per cent deduc- 
 tion was thus abundantly shown and admitted, but the theory of 
 pensions being deferred pay remained substantially unshaken, 
 although Sir Francis Mowatt declared that he had never heard of a 
 public servant being reduced in salary on being transferred from a 
 nonestablished to an established post. Members of the Deferred 
 Pay Committee had told, the commission that such was the common 
 practice. When given the facts in a definite case, which had been 
 cited to the commissioner. Sir Francis Mowatt said: 
 
 I could not answer without looking fully into the case, but I should 
 say that under no circumstances would a man without some express 
 explanation suffer a reduction of 15 per cent on being transferred 
 from a nonestablished to an established post.(") 
 
 Mr. Heath, also an official of the Treasury, admitted, however, 
 that deductions of about 5 per cent of salary were made on trans- 
 ferring workmen from the unestablished to the established service, 
 Mr. Morton, a member of the commission, said to him: 
 
 ''You were talking just now of two different classes of laborers in 
 dock yards. You gave us an instance some time ago. It is well 
 known that there are hired laborers and established laborers, and 
 we are aware that the hired laborers receive a higher rate of pay 
 than the established laborers." 
 
 "Yes," answered Mr. Heath, "the difference being that the estab- 
 lished laborer receives about 5 per cent less." 
 
 "Yes, in point of fact, that is a species of contribution that he 
 makes toward his future pension?" 
 
 "No, I should not put it that way." 
 
 "I should be glad to hear what your view is." 
 
 "It might be regarded as a contribution toward the cost of giving 
 him pension rights, but of course it is not put aside ; it is not accu- 
 mulated. It has no relation to a system under which a fund is 
 established?" 
 
 "Oh no, I am quite aware of that. It is a small contribution 
 toward the cost of making a man pensionable." 
 
 "He receives less pay in consideration of pension, in point of fact?" 
 
 "It is by way of a set-off against the pension charge." Q*) 
 
 a Report of Commission on Superannuation in the Civil Service. 1903. Minutes 
 of evidence, p. 153. 
 b Idem, p. 9. 
 
160 OIVII.-SMIiVK'I'l lil'/l'llfl'lMKN'r IN (iRKAT (IKITAIN. 
 
 Request of (!ivil Servants that Amount of Postponkd (Charge 
 
 HK Determined. 
 
 Tho mombcrH of Uw. cornrniH.sion and rcpro.sontativos of tho civil 
 service Jiaviii}^ aj^nuul ihnt tlicrci was-a deduction from salary but 
 that it was less than 16 to 20 [)cr c(>,nt, Mr. Rolfe defined the position 
 of the civil H(u-vants thus: 
 
 We should like it to be established in tho first instance, if possible, 
 wlntt is th(t lU'tiiiiJ deduction, if .such dcductioriH exist, which the civil 
 scrvjints iit pcescnt suifcr, juul wc feci tluit thci 'l'rea.suj'y oiUy is in a 
 j)o,Mition to hii,V(i the necessary calculations made- to est!d)lish that 
 I'nct, if that fii,ct can be estjiblished. It would tlu^n be se(>,n whether 
 the d(^d uctions jit pres(^n.t nuide are sndicient in themselves to form a 
 supcwiuuuiiition fund which would ^^'wci benefits to survivors, and 
 jilso to thos(^ who decciisc^ premiiturely, but until (hut is definitely 
 asceitiiined tlu^ position of the civil sc^rvsuit is that the deduction at 
 
 1>r(^sent sulfered is sullici(^nt to provide the benefits for which we ask 
 >y tho formation of a 8Ui)erannuation fund. (") 
 
 The chiiirman aro;u(Ml that the result of mn,l<inpj payments to those 
 who do not now i-ec-eive payments, na,m(dy, widows and oi'phans, 
 must mean smaller payments to pensioners unless tho total pay to 
 the civil servant, was increased. '^Phe civil servants a,rp;u(Hl, on the 
 otluu" hand, thid, soinc^thin^^ additional would be available, if the 
 funds were set aside, beaiinfij interest. Pressed for an answer whether 
 the civil service was pfi^pared (,o take less payment to the ])ensioner, 
 Mr. Moir said that Ik^ thought a, rc^Iuction of pensions, if combined 
 with insurance benefits, would probably be acceptable to them. 
 Mr. Ellis also held that a small diminution of pension, would be 
 a.cc,ept(Hl by tlie service to insure provision for (h^pendent I'elatives. 
 
 The sessions between tho commissioners and tho representatives 
 of the civil service resulted, therefore, in a helpful clarification, of 
 ideas. It seemed to be coJiceded, on the onv, Inind, that th(>j-(^ was 
 reason for thinkhifj; that pensions were, to some extent at least, 
 deferments of ])ay and it was admitted, on the other hand, that there 
 was no sound basis for the contention that the amoujits deferred 
 were as much as 16 to 20 per cent of salary. The civil servants' 
 repr(^senta,tives admitted reluctantly, also, that if it was impossible 
 to increase the total (diar<j;e, the only way to secure the insui-auce 
 beneiits desired might be by roductioi\ of pensions. Th(>y ho])ed, 
 however, that the creation and investment of a fund mi<;;ht obviate 
 that necessity. 
 
 The actuary whom tho l)el'err(^d Pay Committee had consulted, 
 Mr. Philip Lewhi Newman, was later called before tlu^ commissicm 
 and his testimony served to emphasize this clarilicaXion of ideas. 
 He stated that they had wished to have certain benefits upon death 
 
 " lleport of CommiBBion on Suporannuatiou in the Civil Service. 1903. Minutea 
 of ovidciico, p. 14. 
 
CIVIL-SICKVICE KETIKEMENT IN GKEAT BKITAIN. 161 
 
 before superannuation or upon death after superannuation, but 
 before the amounts assumed to \)o, paid in eontribtition, would equal 
 the pension paid in addition to the present pension, and, that he had 
 estimated for th(!m wiiat the additional eost would be for providing 
 beneiits on. death })efor(i superannuation. He did not take into 
 consid(;ration that the charge was to remain th(5 same and said that, 
 if that had been a condition of his investigation, the only way in 
 whicli he could hav(5 given them any plan by which they could secure 
 payment on death before superannuation would liave })een by reduc- 
 ing the pensions or by requiring them to make a contribution. Such 
 beneiits could be secured only at the cost of the superannuation 
 allowance or the cost of some contribution from the civil servant, 
 such as a revision of the scale of salary; in other words, hy either 
 reduced pension or reduced pay. On being asked if he had advised 
 the ])eferred ]^ay Committee that they could get greater benefits by 
 the institution of a pension fund instead of the maintenance of the 
 existing system which charged the actual cost of the pensions each 
 year to the annual estimates, he explain(;d that he had done so, but 
 only on the assumption urged by them that they were already suffer- 
 ing a deduction from their salaries of a larger amount than was neces- 
 sary to give them the pension provided. Having no data to go on, 
 he said he had not been in a position to decide on the truth of their 
 assumption. 
 
 Voluntary Insukance OuoANJZArioNs Maintainjou by (Jivil 
 
 Servants. 
 
 Evidence given the commission by members of the civil service 
 regarding the vohmtary insurance organizations maintained by them 
 to provide against that calamity most dreaded by them— ''death 
 during service" — showed that there was a commendably high aver- 
 age of foresight and prudence in the sei-vice. They lV)unrl that the 
 largest of these organizations was the Civil wService Insurance Society. 
 This society, which was then about twelve years old, was enabled by 
 a special arrangement with an insurance company to effect insurance 
 for civil servants on very favorable terms, the })remiun)s being de- 
 ducted quarterly from the salaries of the policy holders. They found 
 that over 20,000 policies had been taken out iVn- an aggregate sum 
 assured of over £5,000,000 ($24,.':;32,500). The Civil Service In- 
 surance Society also deals in annuities both immediate and deferred, 
 and it had recently estal^lished in connection with its general business 
 a widows' and orphans' annuity fund. The commission heard evi- 
 dence also in regard to two old-established and prosperous depart- 
 mental organizations known as the Customs Annuity and Benevo- 
 lent Fund and the Inland Revenue Benevolent Fund. They found 
 that the former was mainly a life assurance society and that the latter 
 .35885— S. Doc. 290, 61-2 11* 
 
162 CIVIL-SEKVICE EBTIKEMENT IN GREAT BRITAIN. 
 
 undertook the provision of widows' annuities in return for the sur- 
 render of bonuses on policies of insurance. They found two similar 
 organizations in the Postmen's Mutual Benefit Society and the Post- 
 Ofiice Insurance Society. The former had a membership of about 
 12,000 and provided a benefit averaging £25 ($121.66) which was 
 payable on death or on retirement by reason of ill health, and, in 
 some cases, on dismissal or on voluntary resignation of employment. 
 To the Post-Office Insurance Society all grades of the established 
 postal service are eligible for membership. The members numbered 
 then about 20,000 and the amount of the benefit varied from £50 to 
 £100 ($243.33 to $486.65). A similar institution had been in ex- 
 istence for fourteen years among the Board of Trade surveyors under 
 the name of the Board of Trade Surveyors' Mutual Trust. During 
 that time the total sum paid out was nearly £5,000 ($24,332.50), or 
 an average benefit of about £165 ($802.97) . Another institution that 
 the commission found very meritorious was the Civil Service Benevofr 
 lent Fund, which had been established in 1885, was supported by the 
 voluntary subscriptions and donations of civil servants, and applied 
 itself to relieving the necessities of the widows and orphans of those 
 who died either in the service or shortly after retiring on pension. 
 The annual income from subscription was about £1,600 ($7,786.40), 
 the number of cases dealt with since 1885 numbering nearly 1,200.. 
 Though the amount of relief given in individual cases was not large, 
 the fund accomplished a very useful work. 
 
 Per Cent of Salaries Paid for Life Insurance by Civil 
 
 Servants. 
 
 An interesting statement was made by the commission in their 
 report showing the per cent of salaries devoted to insurance by the 
 clerks of various grades : 
 
 In some respects, the considerations which affect the civil servants 
 whose salaries exceed £160 ($779), and who may be distinguished 
 as the income tax-paying body of the service, are not precisely the 
 same as those which affect the wage-earning body. We have 
 obtained, by the courtesy of the heads of departments, a return 
 showing that the total number of officers receiving a salary above 
 £160 ($779) is 14,754, of whom (a) 11,827 or 80 per cent have sala- 
 ries not exceeding £400 ($1,947); (b) 1,075, or 7^ per cent have 
 salaries exceeding £400 ($1,947) and not exceeding £500 ($2,433); 
 (c) 1,104 or 7i per cent have salaries exceeding £500 ($2,433) and 
 not exceeding £700 ($3,407), and (d) 748 or 5 per cent have salaries 
 exceeding £700 ($3,407). Of the (a) class 26 per cent, of the (b) 22 
 per cent, of the (c) 27 per cent, and of the (d) 34 per cent do not 
 claim any deduction of income-tax in respect of insurance premiums. 
 The remainder in the (a) class pay in premiums on the average 4.6 
 per cent of their salaries, the (b) 5.5 per cent, the (c) 5.9 per cent; 
 and the (d) 6.9 per cent. In other words, each member of the (a) 
 class, on an average salary of £247 ($1,202), pays away £11 6s. 
 
CIVIL-SERVICE EETIEEMENT IN GREAT BRITAIN. 
 
 163 
 
 ($54.99) a year in life assurance premiums; the (b) class, on an 
 average salary of £436 ($2,122), pays away £25 4s. ($122.64); the 
 (c) class, out of £597 ($2,905) pays away £35 2s. ($170.81); and 
 the (d) class, on an average salary of £950 ($4,623), pays away 
 £65 10s. ($318.76). From'this it results that the larger a man's 
 salary is, the more, not only in actual money, but also in proportion 
 to his salary, he devotes to life insurance. The general average for 
 the whole 14,754 officers is that 3,842, or 26 per cent, do not claim 
 any return of income-tax in respect of insurance, and that the remain- 
 der, on an average salary of £321 ($1,562), pay away £16 12s. ($80.78) 
 each, or 5.2 per cent, in premiums. No similar statistics are obtain- 
 able with regard to civil servants having an income not exceeding 
 £160 ($779). >) 
 
 The return on which the foregoing statement was based is as 
 follows: C") 
 
 SUMMARY OF A RETURN FOR THE FINANCIAL YEAR ENDING MARCH 31, 1902, FROM 
 THE SEVERAL DEPARTMENTS AS TO THE INSURANCE OF OFFICERS ON THE 
 ESTABLISHMENT RECEIVING SALARIES EXCEEDING £160 (.$778.64) AND CLAIMING 
 REDUCTIONS OF INCOME TAX FROM THEIR DEPARTMENTS IN RESPECT OF THEIR 
 INSURANCE PREMIUMS. 
 
 Classified salaries. 
 
 Officers 
 receiving 
 salaries. 
 
 Amount of 
 salaries 
 received. 
 
 Officers 
 not claim- 
 ing re- 
 duction. 
 
 Officers 
 claiming 
 reduc- 
 tion. 
 
 Amount of 
 salaries re- 
 ceived by 
 officers' 
 claiming 
 reduction. 
 
 Amount 
 of insur- 
 ance 
 premiums 
 paid. 
 
 $3,406.55 and over 
 
 748 
 410 
 694 
 
 $3,530,724 
 1,313,089 
 1,888,460 
 2,371,299 
 
 14,040,870 
 
 256 
 112 
 188 
 232 
 3,054 
 
 486 
 296 
 504 
 835 
 8,682 
 
 $2,248,080 
 
 943, 940 
 
 1,382,130 
 
 1,869,364 
 
 10, 440, 414 
 
 $155,071 
 55,230 
 
 82,919.90 and under 83,406.55 
 
 $2,433.25 and under $2,919.90 
 
 81 285 
 
 $1,946.60 and under $2,433.25 
 
 $778.64 and under $1,946.60 
 
 1,075 
 11,827 
 
 102, 518 
 479, 053 
 
 
 
 Total 
 
 a. 14, 754 
 
 23, 144, 442 
 
 3,842 
 
 10,803 
 
 16,883,928 
 
 873, 157 
 
 
 
 a Including 109 officers witii regard to whom no official information was available as to whether they 
 claimed reduction or not. 
 
 Testimony of Commission's Actuary, Showing Necessity of 
 Provision for Refund of Contributions. 
 
 The last witness called by the commission was Mr. Henry W. 
 Manly, actuary and secretary of the Equitable Life Assurance 
 Society of London and ex-president of the Institute of Actuaries. 
 As Mr. Manly had only a short time before published a paper on the 
 ''Valuation of staff pension funds" which had drawn particular at- 
 tention to his skill in handling problems connected with such funds 
 the commission called on him for assistance. The problem they set 
 before him was a very definite one — to tell them ''what advantages 
 could be conferred in exchange for the reduction of a quarter of a 
 pension." They stated that there was objection to the existing 
 system on the ground that it provided benefits for those who sur- 
 vived, while those who died in the service, or their representatives, 
 received no benefits under it — a fact he had commented upon in his 
 paper — and they had reason to believe from what witnesses had said 
 
 « Report of Commission on Superannuation in the Civil Service, 
 pp. viii and ix. 
 
 6 Idem., Appendix, p. 218. 
 
 1903. Report, 
 
164 CIVIL-SEEVICE EETIREMENT IN GREAT BRITAIN. 
 
 that the pension might be reduced by a quarter without diminishing 
 the hold that the system had over the servants, or the power of 
 dismissing them, or even the attractiveness of the service. They asked 
 for no general criticism of the existing system, but wanted to know 
 how it could be modified, in the suggested way, so as to be actuarially 
 sound and at the same time be no additional tax on the country. 
 
 In the course of his testimony Mr. Manly was asked if he had any 
 knowledge of similar organizations of pension funds that could 
 throw light upon the commission's labors. He replied that he had 
 knowledge of a great many pension funds, but they were all more or 
 less different from the government scale. He went on to make 
 some remarks about the characteristic features of prevailing funds 
 that show well why it was not strange that so many civil servants of 
 England were dissatisfied with the existing pension system. Said he : 
 
 Where there are funds and the men contribute a portion to those 
 funds they always endeavor to get certain rules in by which they 
 will get their money back somehow. * * * Or some portion of 
 it, and although that diminishes — sometimes very largely dimin- 
 ishes — the retiring allowance, they do not seem to mind that so much 
 as the getting their money back. For instance, it is a very common 
 rule now that if a man withdraws, resigns, or is dismissed from the 
 service, he shall have his own contributions back. That diminishes 
 the power of the fund to give pensions at the end. * * * (The 
 added sum from the employer) he does not get back if he withdraws, 
 resigns, or is dismissed. * * * If he dies in the service — this is 
 a very common rule — if he dies in the service his relatives shall 
 receive what he has contributed, and what the firm has contributed. 
 Sometimes they try to get in compound interest as well. * * * Now, 
 the trouble with these funds is the desire of the members, the con- 
 tributors, at any rate, to get their money back with interest if they 
 can. And they are getting now very generally in these funds a con- 
 dition that if after attaining the pensionable age, after entering upon 
 the pension, the amounts which they receive in pension do not amount 
 to their contributions, that the difference shall be paid to the rela- 
 tives, all of which, of course — all these additional benefits — reduce 
 the pension which they are able to get when they retire, ("') 
 
 Asked if old age annuities were increasing, Mr. Manly said: 
 
 No; that is what we call deferred annuities; annuities to commence 
 at a certain age. * * * There is something very peculiar in that, 
 that nobody, or very few people think it is worth while to make pro- 
 vision for their old age by the way of purchasing old age annuities. 
 They would much sooner see their money — and that brings us back 
 to the old point. They want to see their money. They will invest 
 their money for that purpose, invest it sometimes rather badly, I am 
 afraid, but still if they invest their money they know it is there and 
 they can leave it, but they do not like sinldng as they call it, sink- 
 ing the money on the chance of getting it back, even in double or 
 quadruple sums hereafter. * * * They will provide for every- 
 
 a Report of Commission on Superannuation in the Civil Service.. 1903. Minutes 
 of evidence, pp. 179 and 180. 
 
CIVIL-SERVICE RETlREMEN-t IlST GREAT BRITAIN. 165 
 
 thing except old age; provide for sickness, provide for strikes, pro- 
 vide for anything — anything except old age; and — well, the largest 
 industrial company, the "Prudential" devised a scheme — an exceed- 
 ingly good scheme it was — by which for a certain fixed contribution 
 of 2d. [4 centsl a week commencing under the age of 20 or so, they 
 would provide on death the equivalent of Id. [2 cents] a week, and 
 that the other penny should be accumulated to provide an old age 
 pension at the age of 65, which worked out very favorably, indeed, I 
 think — very well indeed; but the number of those policies which they 
 issued was very small compared with the total. Of course, if you 
 mention the figure by itself, it looks large, but compared to the 
 8,000,000 of policies which they have, it is exceedingly small indeed, 
 and I do not think that anything more favorable has ever been 
 offered. («) 
 
 Report of Commission. 
 
 The results of Mr. Manly's calculations were embodied by the com- 
 mission in their report and formed the basis of their recommendation. 
 That report is the last of the series of important reports made by the 
 various commissions appointed in England to inquire into the sub- 
 ject of granting superannuation allowances to persons in the estab- 
 lished civil service, and marks a step in the development of the 
 English pension system. After noting briefly the conditions under 
 which pensions are granted, the commissioners say: 
 
 The simplest and most exact statement of the relations thus 
 created between the State and its established servants is that each 
 servant is assured of payment of a definite salary or wage during the 
 continuity of his service and of provision of a pension for the remain- 
 der of his life upon his retirement from the service, either upon 
 reaching a certain age or through inability, due to medical disquali- 
 fication or infirmity, to continue at work. But it has been contended 
 before us that the pension thus secured, though deferred, is as much 
 remuneration for the present services as a salary or wage immediately 
 paid, that this salary or wage is less than what would have been paid 
 had there been no pension, and that the difference thus deducted from 
 the natural or market rate of remuneration is more than is necessary 
 to provide for the deferred pension; and upon these premises a claim 
 has been urged as of right, to further payments to civil servants and 
 their representatives on retirement 'or death. (^) 
 
 Pensions acknowledged to he deferred pay. 
 
 The first question in dispute, as to whether pensions are deferred 
 pay, was answered by the commissioners in the affirmative, but with 
 an important qualification. They held that a deferred pension is 
 remuneration for services, as much as an immediate money payment, 
 but that it is, in part at least, remuneration for continuity of service 
 contingently payable on the continuity being maintained during a 
 defined period and not accruing from year to year. 
 
 o Report of Commission on Superannuation in tlie Civil Service 1903. Minutes 
 of evidence, p. 180. 
 6 Idem. Report, p. vi. 
 
166 CIVIL-SEE VICE RETIREMENT IN GREAT BRITAIN. 
 
 TJieoretical deductions from salary lield to he only sufficient for pension. 
 
 The second question in dispute, as to whether the deductions made 
 from salaries were more than sufficient, even if a fund were created, 
 to provide the pensions, was answered by the commissioners in the 
 negative. It will be noted, however, that they failed to prove their 
 point by any mathematical demonstration as to the amount required 
 for pensions and the amount actually deducted from salaries for that 
 purpose. They merely entered a general denial. Said they: 
 
 The allegation that the salary of the civil servant is diminished by 
 more than is necessary to provide for his contingent pension is en- 
 tirely fallacious. It must be remarked that no sum is in fact set 
 aside so as to provide for this pension, the pensions being paid as they 
 fall due and included as noneffective pay in the yearly estimates sub- 
 mitted to Parliament so that the State discharges its contractual 
 obligations to its servants by appropriations of the precise sums as 
 and when they become due. Nor would the condition of things be 
 changed if a pension fund were created by setting aside annual 
 amounts which, with accumulations, would be adequate to meet the 
 ultimate charges. The amounts so set aside would have to be ascer- 
 tained by strict calculation, so as to be enough to meet these charges, 
 and hence they could not be more than sufficient for this purpose, 
 unless in making the calculations, discounting the future, we pro- 
 ceeded upon one rate of interest and then assume a higher rate of 
 interest possible during the process of accumulation. (") 
 
 Funding of theoretical contributions held to he not justified. 
 
 Admitting that much might be said in favor of the creation and 
 accumulation of a fund as a matter of accounts and as a means for 
 charging each year as nearly as possible with the cost of administra- 
 tion of that year, the commissioners nevertheless held that the estab- 
 lishment of such a fund would necessitate the creation of a new office 
 with new labors and new expenses and could hardly be justified. 
 Their conclusion, therefore, was that the remuneration must be con- 
 sidered as pay plus pension, and as such is offered to and accepted 
 by those who enter the service, and ''the theoretical contingent addi- 
 tion to the pay is neither more nor less than the theoretically dis- 
 counted value of the pension." 
 
 RecoTTiTnendation that pensions he reduced one-quarter and difference 
 given in insurance and cash. 
 
 While thus arbitrarily denying that a larger per cent of salary was 
 deducted than was necessary to pay pensions, the commissioners never- 
 theless conceded that the terms of service might be modified without 
 detriment to the service so as to secure a wider distribution of bene- 
 fits among all the members of the service, and quoted Mr. Manly as 
 
 « Report of Commission on Superannuation in the Civil Service. 1903. Report, 
 pp. vi and vii. 
 
CIVIL-SERVICE RETIEEMENT IN GREAT BRITAIN. 167 
 
 authority for their recommendation that pensions be reduced from 
 one-sixtieth to one-eightieth of salary for each year of service, and 
 the amount thus saved be expended for assurance benefits. 
 As set forth in the report of the commissioners: 
 
 Mr. Manly based his calculations upon a division of civil servants 
 into three classes — wage earners, lower division clerks, and higher 
 staff officers, crediting each class with an approximately normal scale 
 of pay and increments of pay, and he took as approximately repre- 
 senting the ratio of numbers in each class the figures 83, 15, and 2. 
 He used the Life Office tables known as OM, supplemented by some 
 facts of experience in the civil service, and he proceeded upon an 
 assumed rate of interest of 3 per cent. 
 
 Upon the data thus described Mr. Manly proceeded to ascertain 
 the value which would be withdrawn from the remuneration of civil 
 servants by reduction of one-quarter of their prospective pensions, 
 and then went on to calculate the results of various proposals for 
 redistributing this withdrawn quarter amongst members of the 
 service. His work was directed towards ascertaining in terms of a 
 year's pay, what might be given to the representatives of a civil 
 servant dying in the service, or what might be paid in addition to his 
 pension to a person retiring, whether on reaching the full limit of his 
 possible service or prematurely through incapacity to discharge the 
 duties of his position. 
 
 The results communicated to the commission were as follows : 
 
 (1) If the proceeds of this reduction of pension were to be given 
 back wholly to the representatives of those who died in the service, 
 it would enable the State to give to their representatives nearly two 
 years' pay at the time of death. 
 
 (2) If the proceeds of this reduction of pension were to be shared 
 by those -who retired from the service as well as by the representatives 
 of those who died in it, one year's pay could be allowed to those who 
 retired through old age and to the representatives of those who died 
 and as many fortieths of one year's pay to those who retired pre- 
 maturely from ill health as corresponded to their completed years of 
 service. 
 
 These benefits will still leave a slight margin of undistributed value 
 which would be just exhausted if, in the case of servants retiring pre- 
 maturely, it was provided that in the event of death before the sum 
 allowed at retirement plus pension subsequently received amounted 
 to one year's salary, the deficient balance should be paid to their 
 representatives. On the other hand, the margin would be slightly 
 overpassed if one year's pay were given to the retiring servant in 
 addition to the pension. C*) 
 
 Having considered these two alternatives, the commission recom- 
 mended the latter, saying : 
 
 We arrive at the following conclusion, that in lieu of the present 
 system there should be secured pensions on the same conditions, 
 except that they should be calculated on the base of one-eightieth 
 instead of one-sixtieth for every year of service; plus a year's pay to 
 
 o Report of Commission on Superannuation in the Civil Service. 1903. Report, 
 p. xi. 
 
168 CIVIL-SERVICE EETIREMENT IIST GREAT BRITAIN. 
 
 the representatives of the civil servant dying at any time in the 
 service, and to a civil servant retiring after 40 years of service; and 
 to a civil servant retiring by reason of ill health with less than 40 years' 
 service as many fortieths of a year's pay as years he has served, 
 coupled with a provision that if he should die before this payment 
 and the pension subsequently received amounted to one year's pay, 
 the deficiency should be paid to his representatives. 
 
 The commission recommended further that the new system, if 
 Adopted, should be extended to all classes of pensionable servants, 
 both wage-earning and salaried. They were of opinion that "the 
 advantages of a money payment being secured in case of death with- 
 out the pressure of periodic demands for the payment of premiums 
 would be generally appreciated," especially by the wage-earners, and 
 thought that ''the risk that the habit of prudence would be endan- 
 gered by such a provision would not be realized in practice." Said 
 they: 
 
 We attach great weight to the principle of similarity of treatment of 
 all classes of pensionable servants so that all may feel that they are 
 working under a common system, and that in the not unknown cases 
 of a servant passing from one class into another no embarrassment 
 may arise from the fact that his vested interests are undergoing a 
 change which must be taken into account. (") 
 
 Minority rejjort of commission adverse to any change. 
 
 The Courtney Commission was not unanimous in its findings. Two 
 of its commissioners, Sir Ralph H. Knox and Mr. E. W. Brabrook, 
 dissented from the views of their colleagues, and presented a minority 
 report. They held that it was impossible, without increasing the 
 burden of the taxpayer, to confer on civil servants greater and more 
 uniform advantages than those granted by the existing system. 
 They did not consider the plan recommended by the majority of the 
 commission as more advantageous or more uniform than the existing 
 one. They thought it wise, therefore, to let well enough alone. Said 
 they: 
 
 What is called a pension in the civil service is merely the con- 
 tinuance, during the later years of life, of pay promised for a whole 
 life service, during a period when services, if rendered, would prob- 
 ably be useless, and, in many cases, worse than useless. The pay- 
 ments made for the 61st or 66th years of life are no more deferred pay 
 than those made for the 60th or 65th. 
 
 This is the present excellent charter of the civil service, and it is 
 not only under this system, but because of it that the English civil 
 service has earned its high reputation for fidelity, zeal, and inde- 
 pendence. The advantages of this life provision are given wholly at 
 the charge of the State, and in their present form they have attained 
 
 « Report of Commission on Superannuation in the Civil Service. 1903. Report, 
 p. xii. 
 
CIVIL-SEEVICE RETIREMENT IN GREAT BRITAIN. 169 
 
 the objects in view. The same system has been introduced into very 
 many estabhshments of the highest standing in the country, where 
 continuous, zealous, and thoroughly honest service are the main 
 requirements. C*^) 
 
 The commissioners who signed the minority report dissented 
 particularly from the view of their colleagues that a cash payment 
 should be made the representatives of the civil servant in case of 
 death; in other words, that life insurance should be furnished him 
 out of his pension. They contended that it were better that it be 
 furnished out of his pay. Reduced pension or reduced pay were 
 clearly the only alternatives. Reduced pension meant a change 
 of law; reduced pay meant continuance of the existing system, 
 since the great majority of the civil servants were doing that very 
 thing, buying insurance for their families and paying for it out of 
 their salaries. The argument of the minority was as follows: 
 
 The provision most desired by the great mass of the service is 
 the payment in case of death of as large an amount as possible, 
 approximating at least to the maximum rate of pay which a clerk 
 may reasonably hope to reach, and not a sum governed by the 
 creeping salary of the year in which he may prematurely die. 
 
 The best, indeed the only method of obtaining this, is the system 
 of life insurance, for which it is far better that the civil servant 
 should provide from his pay than from his pension. It needs but a 
 little self-denial in the early years of life on the rates of pay now 
 current to make some provision, and the Government having sanc- 
 tioned the deduction of premium from monthly and quarterly 
 salaries before the salary is paid, the best security is obtained for 
 regularity of payment with the least possible sense of burden on the 
 part of the insurer. The scheme now proposed, however, seems to 
 offer a premium on improvidence. A man is encouraged to sacrifice 
 the provision made for his old age, though but sufficient to maintain 
 him in decent comfort, in order that he may avoid the stress of 
 making a present payment, all the prevailing influences towards 
 thrift being thus inverted. * * * 
 
 That this view is sound is shown by the remarkable statistics of 
 insurance referred to by our colleagues as regards civil servants 
 whose incomes are in excess of £160 [S778.64] a year. That it also 
 applies largely to men whose income is small is evidenced by the 
 numerous insurances effected in the postal service, and also may 
 be inferred from excellent movements which have lately been made 
 in connection with two great friendly societies for insurances for 
 their members up to £200 [$973.30]. * * * 
 
 The scheme of our colleagues disturbs the present excellent system 
 in order to substitute a benefit which the vast majority of those 
 who require it can and do already provide for themselves, and which 
 is of no value to those who do not, because they need not provide it. (^) 
 
 a Report of rommission on Superannuation in the Civil Service. 1903. Report, 
 
 p. XV. 
 
 &Idem, pp. xvii and xviii. 
 
170 CIVIL-SERVICE EETIREMEKT IK GREAT BRITAIN. 
 
 Colloquies which took place between Mr. Manly and the minority 
 commissioners at the hearings suggest that the latter may have felt 
 that their views would not be questioned by expert authorities. 
 Said Mr. Brabrook to Mr. Manly: 
 
 "The existing contract is the compulsory insurance of a deferred 
 annuity on nonreturnable premium; and taking off one-fourth of 
 that gives an equivalent compulsory endowment insurance of one 
 year's salary?" 
 
 ''Yes." 
 
 "That would apply to all civil servants whether male or female, 
 or whether bachelors or otherwise, would not it?" 
 
 "1 presume I would make it apply to all." 
 
 "If it be the fact that from one-fifth to one-third of the civil 
 servants are better otherwise provided for, is not it a little hard to 
 make them all accept this compulsory insurance which they do not 
 want?" 
 
 "Well—" 
 
 "I have reason, to think that the general body of civil servants, 
 having salaries above £160 [$778.64] a year, do now insure their lives 
 for the benefit of their families to the extent of two or three years' 
 income. Is there any necessity for making compulsory insurance of 
 any further sum?" 
 
 "I can not say that there is any necessity for it." 
 
 "You are giving them by the deferred annuity a benefit whicli 
 they certainly would not insure voluntarily for themselves." 
 
 "Quite so." 
 
 "And you are now proposing to deprive them of a portion of that 
 benefit for the purpose of being applied to an insurance which they 
 do provide for themselves?" 
 
 "Yes; but so far as I understand the question we have before us, it 
 has rather been raised by the civil service themselves, has it not?" 
 
 "By a portion of the civil service?" 
 
 "By a portion of the civil service." 
 
 "And my own impression is that is not shared by the more well- 
 informed portion of the service?" 
 
 "I have no Imowledge, of course, of that." (") 
 
 Toward the close of Mr. Manly's testimony, after he had explained 
 the way in which he had made his calculations, Sir Ralph Knox said : 
 
 "The scheme as sketched by you I think is very ingenious, and has 
 its attractions. There is a persuasiveness in the direction of trying 
 to make a man believe that he is not losing anything. The way in 
 which you give ingeniously these sums back, the six years' purchase 
 at 60 years of age, and so forth, makes up his old age pension to him 
 at that period, and you try to persuade him therefore, that ho is not 
 losing anything at all, and I think that is the ingenuity of the scheme, 
 but still the fact is none the less that he does gives up upon his maxi- 
 mum pay twenty-five per cent of the ultimate pension?" 
 
 "On, yes; what he gives up is the equivalent of what you are 
 going to pay to the families or the relatives of those who die." 
 
 « Report of Commission on Superannuation in the Civil Service. 1903. Minutes of 
 evidence, p. 181. 
 
CIVIL-SEEVICE RETIEEMENT IN GREAT BRITAIN. 171 
 
 "You say you think it would be attractive, but as compared with 
 the system of insurance in which a man in these higher classes can 
 secure £300 or £400 [$1,459.95 or $1,946.60] from the time that he 
 enters the service by a very small payment at 20 years of age, as com- 
 pared with that, do you think that this is distinctly an advantage, 
 so as to present an attraction?" 
 
 "You must not ask me to say that anything can be substituted 
 for life insurance." 
 
 "I am quite satisfied with that answer." 
 
 "We say it is the best thing a man can do to insure his life." (") 
 
 Sir Ralph and Mr. Brabrook not only disagreed with their col- 
 leagues, but predicted that the proposed changes in the law would 
 not be acceptable to the members of the civil service. In concluding 
 their report they said: 
 
 If the present civil servants who are in good health were given the 
 option or accepting these changes, we should be surprised if many of 
 them should decide to do so, and we are unable to join in the recom- 
 mendation of these changes for future entrants, inasmuch as they 
 involve a reduction and redistribution of the present pensions which 
 to us seem most inexpedient, and would be unequal in their effect. (^) 
 
 WORKMEN'S COMPENSATION ACT OF 19C6. 
 
 The Workmen's Compensation Act was passed in 1906. With that 
 exception there was no more legislation relating to the pensioning of 
 civil servants, after the passage of the Superannuation Act of 1887, 
 until the present year (1909). Persons engaged in manual labor and 
 other employees whose annual earnings do not exceed £250 ($1,216.63), 
 including civil servants, are entitled, under the terms of the Work- 
 men's Compensation Act or one of the schemes under and in sub- 
 stitution of that act, to compensation for injuries suffered in the 
 course of their employment. Members of the civil service not en- 
 titled to compensation for injury under the ordinary law (Workmen's 
 Compensation Act) are pensioned under the old law (the Superannu- 
 ation Act, 1887), and the Treasury warrant under it. The warrant 
 no longer applies to persons entitled to compensation under the 
 Workmen's Compensation Act. 
 
 The employees of the Admiralty and War Office have almost uni- 
 versally accepted the terms of the Scheme of Compensation (No. 116), 
 in case of injury to workmen in government establishments, which 
 was established in May, 1903, and revised December, 1907. This is 
 accepted by them in lieu of the provisions of the act itself. These 
 schemes have to be approved by the Chief Registrar of Friendly Soci- 
 eties. This particular scheme for workmen in government establish- 
 
 « Report of Commission on Superannuation in the Civil Service. 1903. Minutes of 
 evidence, p. 185. 
 
 ^Idem. Report, p. xviii. 
 
172 CIVIL-SERVICE EETIREMENT IN GBEAT BRITAIN, 
 
 ments was certified by the Chief Registrar of Friendly Societies under 
 date of December 16, 1907, as providing scales of compensation not 
 less favorable to the workmen and their dependents than the corre- 
 sponding scales in the Workmen's Compensation Act, 1906. 
 
 The main features of this scheme are as follows: When a govern- 
 ment workman dies from injury received in his work his dependents, 
 in case they are wholly dependent on him, receive a sum equal to his 
 earnings during the three years next preceding the injury, or the sum 
 of £150 ($729.98), whichever is the larger, but not exceeding in any 
 case £300 ($1,459.95), and half that sum in case they are only par- 
 tially dependent on him, minus in either case the amounts of weekly 
 payments that may have been paid in the interval between the time 
 of his injury and the time of his death. If the period of his employ- 
 ment has been less than three years, the amount of his earnings dur- 
 ing the three years is deemed to be 156 times his average weekly 
 earnings during the period of his actual employment by the Govern- 
 ment. In any case in which the authorities of a department consider 
 that the interests of a workman's dependents would be better served 
 by a pension to the widow or mother (where there is no widow) than 
 by a lump sum, the Treasury may deduct a portion for the dependent 
 child or children, if any (this portion must not be more than one-half 
 of the entire amount if there is only one child or two-thirds if there 
 are more than one), and grant a pension to the widow or mother 
 equal to the annuity which the remainder of the lump sum would 
 purchase, according to the post-office tables for the purchase of 
 immediate annuities. On the death of a workman leaving no depend- 
 ents a payment of not more than £10 ($48.67) is made to cover the 
 reasonable expenses of his medical attendance and burial. 
 
 When incapacity for work results from the injury, the injured 
 workman receives, for the period he is on the "Hurt List" on account 
 of the injury, half his average weekly earnings during the previous 
 twelve months or for any less period during which he has been 
 employed by the Government. In addition, he receives free treat- 
 ment in a hospital or free medical attendance at home. If incapac- 
 ity for work continues beyond the period for which the workman 
 receives "hurt pay," an allowance is paid him. This is twenty-four 
 sixtieths of his average weekly earnings during the previous twelve 
 months or during any less period of employment in case his capacity 
 to contribute to his own support has been totally destroyed, eighteen 
 sixtieths when it has been materiaUy impaired, twelve sixtieths when 
 it has been impaired, and six sixtieths when it has been but slightly 
 impaired. Allowances by way of compensation for injury continue 
 only during the continuance of the incapacity, and in cases of doubt 
 
CIVIL-SEEVICE EETIEEMENT IN GEEAT BEITAIN. 1Y3 
 
 they are granted in the first instance for a Hmited period^ renewable 
 only upon a further medical certificate. (^) 
 
 One or two minor departments have introduced regulations com- 
 pelling their employees to purchase life insurance from some private 
 company, but such regulations are applicable only to employees not 
 entitled to superannuation privileges. The arrangement is at present 
 experimental and only upon a very small scale. It is not encouraged 
 by the Treasury. Life insurance can be effected and immediate or 
 deferred annuities can be purchased either from the National Debt 
 Commissioners or through the Post-Office. 
 
 SUPERANNUATION ACT, 1909. 
 
 The general scheme of providing life insurance in substitution of 
 part of the pension recommended by the Courtney Commission was 
 enacted into law on September 20, 1909, six years after the com- 
 mission had submitted its report. In the interval, a nonofficial 
 ballot was taken which showed that, contrary to the predictions of 
 the minority members of the Courtney Commission, the proposed 
 change was favored by a large majority of civil employees. 
 
 Main Features of the Present Law. 
 
 The scheme finally embodied in a bill and presented to Parliament 
 differs somewhat from that presented by the Courtney Commission, 
 "The changes were made in accordance with the recommendations of 
 a committee of actuaries appointed by the Treasury to review the 
 work of the commission. They reported that a more liberal life- 
 insurance provision could safely be given by reduction of the pension 
 one-quarter than that suggested by the commission. Provision was 
 accordingly made that for male civil employees entering the service 
 after the passage of the act the superannuation allowance should be 
 one-eightieth instead of one-sixtieth of the annual salary for each 
 year of service, as was the case under the Act of 1859. Authority 
 was then given the Treasury to grant to a retiring civil employee 
 
 o Regulations with regard to the payment of salary and wages during sick leave 
 are charged throughout the civil service to the effective vote, and do not form part of 
 the superannuation scheme. Sick leave on account of injury is granted under depart- 
 mental regulations, as in the case of ordinary illness. The regulations vary in differ- 
 ent departments. In some cases the ordinary sick leave regulations apply, while in 
 others sick leave is allowed at a higher rate of salary for a longer period in cases where 
 the illness is due to an accident arising out of the officers' official duties than in cases 
 of ordinary illness. In cases of ordinary illness an established civil servant may be 
 allowed (if necessary) six months' sick lea-?e on full pay, followed by six months' 
 sick leave on half pay. If any further leave is required, and there is a reasonable 
 probability of the officer's recovery, he may receive for any such further period of 
 sick leave the same rate of pay as if he had been retired on pension. 
 
174 CIVIL-SEE VICE EETIREMENT IN GEEAT BRITAIN. 
 
 who had served not less than two years, in addition to the super- 
 annuation allowance (if any) or the gratuity (if any) available under 
 section 6 of the Superannuation Act of 1859, a lump sum equal to 
 one-thirtieth (instead of one-fortieth, as recommended by the Court- 
 ney Commission) of the annual salary multiplied by the number of 
 years of service, provided that the additional allowance should in no 
 case exceed one and one-half times the amount of the annual salary 
 and emoluments. To discourage continuance in office after the age 
 of 65, provision is made that this additional allowance shall be 
 reduced one-twentieth for every completed year served after attaining 
 that age. By order in council dated November 29, 1898, all persons 
 in the established civil service are liable to compulsory retirement at 
 the age of 65. The power of retention, in special circumstances, for a 
 period not exceeding five years, is, however, lodged with the Treasury. 
 This provision in the Act of 1909 for further reducing the pension in 
 case of such retention is evidently intended to discourage the exercise 
 of such power, and to force practically everybody out of the service 
 at the age of 65. In the case of an employee dying after five years' 
 service, while still employed in the service, his legal representatives 
 receive a gratuity equal to the annual salary of his office and emolu- 
 ments. If, however, he is over 65 years of age when he dies the 
 amount received by his representatives is reduced by one-twentieth 
 for each year of service rendered after he has attained that age, 
 another discouragement to remaining in office after the age of 65. 
 In the case of an employee dying soon after retirement and before 
 the sums actually received by him at the time of his death on account 
 of superannuation allowance, together with the sum received by him 
 by way of additional allowance, equal the amount of his annual 
 salary and emoluments, a gratuity equal to the deficiency is granted 
 to his personal representatives. While the act applies only to future 
 entrants into the service, the option is given male employees under 
 60 years of age of accepting its provisions. In that case, the addi- 
 tional allowance payable on retirement is increased by a bonus of 
 one-half of one per cent for each year served before the passage of 
 the act. With these modifications, the provisions of the various 
 superannuation acts will still apply with respect to the qualifications 
 for obtaining superannuation allowances and gratuities, to the man- 
 ner of reckoning years of service and amount of annual salary and 
 emoluments, to the diminution of superannuation allowances, and 
 to the determination of questions by the Treasury. 
 
 A bill along these lines ''to amend the Superannuation Acts, 
 1834 to 1892," was introduced in the House of Commons on May 19, 
 1909. It was referred to a standing committee which considered it on 
 July 16, and made some slight verbal changes. The amended bill 
 was then sent to the House of Lords on August 30, where section 6 
 was amended, and on September 20 it became a law. 
 
civil-service retirement in great britain. 175 
 
 Discussion of the Act in Parliament. 
 
 The passage of this important bill through Parliament was marked 
 by no notable discussion. On the second reading of the bill in the 
 House of Commons slight objection was made to it by certain mem- 
 bers, because its benefits were not extended to unestablished as well 
 as to established members of the civil service, because employees 
 over 60 years of age did not come within the purview of the bill, and 
 because the compensation to be paid on abolition of office was limited 
 to the amount paid on retirement by reason of ill-health. In answer 
 to these criticisms, Mr. Hobhouse, financial secretary to the Treasury, 
 explained the intent and purpose of the bill, reviewing briefly the 
 history of the movement which had led to its introduction, defending 
 the points attacked, and laying emphasis on the fact that the bill 
 made much more liberal provision for the civil servants than they 
 had ever hoped to obtain. As his statement shows the Government's 
 attitude toward the measure, the greater part of it is here given. 
 Said Mr. Hobhouse :(«) 
 
 I think the reception wliicli the bill has had at the hands of hon. 
 gentlemen who have addressed the House has shown not merely that 
 the bill itself was desired by the civil servants, but that the provisions 
 of the bill, now that they have been examined by the civil servants, 
 have proved eminently satisfactory to those servants. I may per- 
 haps remind the House in what circumstances this bill has come 
 into being. Throughout the four or five years between 1898 and 
 1903 there was considerable movement on the part of the civil 
 servants in regard to the terms of superannuation, which, owing, I 
 think, entirely to a misconception on their part, they thought involved 
 a very considerable reduction in their pay, and also resulted in a 
 comparatively small number of those who contributed to the pension 
 fund ever receiving any return from that fund. Owing to that 
 feeling on their part, a movement was started by the civil servants 
 asking that the whole terms of superannuation should be recon- 
 sidered and altered, and so strong was that feeling that a commission 
 was appointed under the presidency of Lord Courtney, to go into 
 the whole terms or the superannuation of civil servants, and that 
 commission made certain definite recommendations which perhaps 
 the House will allow me to recall to their recollection. Before I do 
 that, however, I should like to point out that the original demand of 
 the civil servants was a very limited one; it was then confined to 
 asking that there should be a refund of accumulated deductions 
 from pay in case of any civil servant who died while still in the 
 service of the State. It was a very limited demand, confined strictly 
 to that request. The Courtney Commission made certain definite 
 recommendations. They suggested the alteration of the scale of 
 pensions from one-sixtieth of the pay for every year's service to one- 
 eightieth of pay for every year's service, and they also suggested a 
 gratuity of a year's pay in the case of a civil servant dying in the 
 service, or upon his retiring after forty years service. They also 
 
 a Parliamentary Debates, House of Commons, Vol. 7, No. 88, p. 766. 
 
176 CIVIL-SEKVICE EETIEEMENT IN GREAT BEITAIN. 
 
 suggested that in the case of a civil servant who retired with less 
 than forty years' service, he should get a gratuity of one-fortieth 
 of a year's pay for each year's service. 
 
 These recommendations of the Courtney Commission were submit- 
 ted to a plebiscite of the whole of the civil service, or so much of the 
 civil service as can be reached by the arrangements of the Deferred 
 Pay Committee. I need not go into the whole history of the plebis- 
 cites — there were two such plebiscites, and the last was taken on the 
 simple issue whether they preferred the Courtney recommendations 
 or whether they preferred the terms of the existing civil service super- 
 annuation, and the result was an overwhelming declaration — over- 
 whelming in strength from those civil servants who were consulted — 
 80 per cent in favor of the terms recommended by the Courtney Com- 
 mission. When that plebiscite had been taken it was quite clear that 
 some alteration in the terms of the existing superannuation scheme 
 must be made in order to meet the wishes of the service as a whole. 
 There were two distinct defects about the Courtney scheme, and I 
 think in that the hon. gentleman will entirely agree with me; namely, 
 the hardships inflicted upon those civil servants who died in the 
 service were met entirely at the expense of the potential pensioner, 
 and the next defect was that there was no provision made for those 
 who retired from the civil service before they had completed ten 
 years' service, and thus became pensionable, except that gratuity of 
 a month's pay for every year, which really was quite inadequate. 
 When it was clear that the civil service wanted a reconsideration of 
 the terms of superannuation it was quite clear that the pensionable 
 treatment which would have to be given — which could be given — 
 would have to be considered very carefully from the actuarial point 
 of view, and I have had the services of three eminent actuaries who 
 went very closely into the whole of the calculations necessary to 
 evolve a scheme, and tliis bill is the outcome of that consideration. 
 By it a pension of one-eightieth is substituted for the pension of one- 
 sixtieth for each year's service given, and as the pension is confined 
 to the earnable period, is confined to the maximum of forty years, it 
 is clear that the pension is reduced from a pension of two-thirds to a 
 pension of one-half. 
 
 In order to make up to the servants the reduction in pension, the 
 following proposals are made, and the first of these deals with the 
 hardship resulting to the civil servant who retires before he has com- 
 pleted ten years' service. Any civil servant who retires after two 
 years' service gets in addition to the gratuity wliich he now earns an 
 additional allowance of one-thirtieth for every year's service ren- 
 dered. That is coupled with a deduction from his earnable allow- 
 ance, if he serves to 65 years of age. Practically all civil servants 
 have to retire at 65 years of age, with the exception of one or two 
 favored individuals, who may serve for a year or two more, and also 
 with the exception of a certain number of officers who are employed 
 in and about the law courts, who may serve on for practically an 
 indefinite period. * * * Next, any civil servant dying after five 
 years' service gets a gratuity of a year's pay, and if a civil servant 
 dies after he has retired from the service, but before he has drawn a 
 whole year's pay, the State makes up to him the equivalent of a 
 year's pay, whether by way of additional allowance or by making up 
 ithe deficiency of the year's pay. These very favorable conditions, 
 far exceeding anything that the civil servants expected^ are dependent 
 
CIVIL-SEKVICE KETIREMEISTT IN GEEAT BRITAIN. 177 
 
 upon two conditiojis, one that the option must be made within twelve 
 months, and the other that the personnel of the service must be in a 
 sound state of health. These are actuarial conditions laid down, upon 
 which the whole scheme depends, and from which the Treasury would 
 be quite unable to depart. 
 
 Then I come to the provisions by which only those officers who 
 were under the age of 60 were allowed to opt. The age of 60 is 
 the age at which the head of a department has no power any longer 
 to retain the services of an officer. An officer can go, if he wishes, 
 the moment he reaches 60, and draw his pension. It would be quite 
 impossible, having regard to the actuarial calculations on which the 
 scheme is based, to permit an officer who attains the age of 60 to 
 take advantage of the new scheme and leave the service, carrying off, 
 perhaps £1,000 [$4,866.50]. The possibihtyof doing that would clearly 
 upset any actuarial calculations whatever. These proposals are to be 
 made applicable to all future entrants and they can only be made 
 applicable to existing servants if the actuarial calculations on which 
 the scheme is based are observed. The whole of these proposals are 
 based upon this, that no amount of money shall be taken away from 
 the aggregate body of civil servants, and that in maldng these pro- 
 posals no additional expenditure shall be incurred by the State. We 
 have a block sum wliicli we do not intend to increase or to diminish, 
 but within the capacity of that block sum we have redistributed the 
 conditions under which the pension is payable. If the wishes of the 
 hon. member for Exeter (Sir G. Kekewich) were accepted the other 
 resulting benefits of the scheme would have to be reduced in order to 
 comply with his wishes. I think it is very much better to give what 
 you can to the great majority of civil servants rather than to give an 
 advantage to a small class of officials, none of whom will probably be 
 in the service for more than two or three years longer. 
 
 A further advantage is given, namely, that all the existing civil 
 servants who adopt and take advantage of the scheme are to get 
 § per cent bonus for each year served before the passing of the Act. 
 That would be a substantial advantage to the civil servants, and it 
 can only be done because in their case the State will escape the lia- 
 bility of life assurance which is receivable by all future civil servants 
 and all those who accept the scheme — a liability which may press 
 heavily upon the State in their case. The scheme does not apply to 
 women, because so many of the women who voted were against the 
 application of the scheme to them, and although I should be pre- 
 pared, if there were any evidence of a desire on the part of a large 
 section of the existing women in the civil service to have the scheme 
 applied to them to permit such an option, at the same time I have 
 seen no indication of any desire on their part to have the scheme made 
 optional. 
 
 The proposal to substitute hfe insurance in lieu of a part of the 
 pension naturally suggested questions as to the medical fitness of the 
 Government clerks as a body. On August 17, Mr. MitcheU-Thomson, 
 a member of the House of Commons asked the Secretary to the Treas- 
 ury whether the new scheme of the superannuation biU was based 
 on any actuarial calculation as to the average expectation of life of 
 such existing civil servants as elect to come under the scheme, and if 
 35885— S. Doc. 290, 61-2 12* 
 
178 CIVIL-SERVICE EETIEEMENT IN GEEAT BEITAIN. 
 
 the calculation was based on such an estimated average life, what 
 necessity there was for a medical test of each candidate for admis- 
 sion to the scheme; and whether it was intended to refuse admission 
 to candidates whose lives were not good lives from an insurance point 
 of view. There ensued the following : 
 
 .Mr. HoBHOUSE. The proposals as regards existing civil servants 
 are based on the assumption that those electing to adopt the new 
 scheme are in average good health. 
 
 Mr. Mitchell-Thomson. Will the right hon. gentleman reply to 
 the last part of the question? 
 
 Mr. HoBHOUsE. Yes, it is intended to exclude those who can not 
 pass a reasonable test. 
 
 Mr. Mitchell-Thomson. Is this scheme based upon actuarial cal- 
 culations, and, if so, how does he defend it from the point of view of 
 justice in excluding these people ? 
 
 Mr. Speaker. That is a matter of debate. 
 
 Mr. Snowden. Is it intended that they should submit to an 
 examination ? 
 
 Mr. HoBHOUSE. Certificates will be required from the heads of 
 departments. In accordance with the draft regulations before the 
 House, which to some extent I mean to modify, all persons will have 
 to submit a statement from the head of their department who are 
 beyond a certain age. 
 
 On the second reading of the bill in the House of Lords, on Septem- 
 ber 13, a few explanatory remarks were made by Lord Denman in 
 regard to the origin of the bill, including the statement that a com- 
 mittee of actuaries appointed by the Treasury had ''reported that 
 they were able to recommend certain improvements in the scheme 
 which would give better results for the men themselves than the 
 recommendations of Lord Courtney's commission. This bill was 
 regarded as a noncontentious bill," said Lord Denman. "Really all 
 it does, or seeks to do, is to distribute in a slightly different way cer- 
 tain charges which appear annually on the votes; and therefore I 
 trust it may have a smooth and a rapid passage through this House." 
 
 An amendment was brought up, however, by the Marquis of Lans- 
 downe, who objected to section 6 of the bill which limited compen- 
 sation for abolition of office to the amount allowed on retirement be- 
 cause of ill-health and repealed section 7 of the Superannuation Act 
 of 1859, the section which gave the Treasury power to grant abolition 
 allowances. Said he: 
 
 Now, my lords, I must say that prima facie there seems to me to be 
 all the difference in the world between the case of a man who, owing to 
 his own misfortune, is obliged to retire from the service, and the case 
 of another man whose retirement is imposed upon him by the action 
 of the Government of the day. The second case is one certainly of 
 exceptional hardship, and I am surprised that it should have been 
 thought proper to deprive those civil servants who are the sufferers 
 from events of that kind of the special consideration which certainly 
 in the time when I knew anything about these matters they used to 
 receive. 
 
CIVIL-SEEVICE RETIREMENT IN GREAT BRITAIN. 179 
 
 Lord Denman explained that section 6 simply legalized what had 
 been the practice of the Treasury, with certain exceptions, for over 
 twenty years, since no abolition terms had been granted for that 
 length of time. Said heiC*^) 
 
 Perhaps I may be allowed for one or two minutes to go into the his- 
 tory of the matter, because this clause has really rather a lengthy 
 history, I understand that in 1888 a royal commission presided over 
 by the late Lord Ridley, inquired into this matter. They found that 
 these abolition terms had given rise to very great abuses and had been 
 too often used to get rid of inefficient men. I think in the following 
 year there was a debate in the House of Commons on this point, and 
 a resolution was proposed protesting against the useless burdens 
 which were placed upon the country by these abolition terms. An 
 amendment was moved by the Government of the day, and the Gov- 
 ernment were defeated on this point, possibly as a result of that de- 
 bate. Mr. Goschen — as he was then — in August, 1889, said that for 
 some time past these abolition terms had not been allowed; and Mr. 
 W. H._ Smith said— 
 
 'Tt is our deliberate intention to legislate on this question at the 
 earliest possible period next year." 
 
 Then there was a question put by my noble friend. Lord Wolver- 
 hampton, on March 17, 1892. He asked whether it was the intention 
 of the Government to introduce a measure relating to the superannua- 
 tion of civil servants in accordance with the report of the royal com- 
 missioners on civil establishments. Mr. Goschen, in reply, said that 
 in view of possible delay before a new superannuation bill could be- 
 come law, the Government had taken steps whereby effect had al- 
 ready been given to the main recommendations of the royal commis- 
 sion on the subject of civil superannuation. He went on to say that 
 abolition of office no longer entitled the retiring officer to a special 
 rate of pension. 
 
 I believe it was formerly the practice of departments to organize 
 and retrench on a very much larger scale than has been the case lat- 
 terly, and no doubt abolition terms were much more useful in those 
 days than they have since become. Nowadays it is very rarely that 
 reductions of this kind are made in departments, and when a reduction 
 takes place, if a man is an efficient civil servant a place for him is found 
 in some other department. In the case of an inefficient man there is 
 no hardship if the reduction takes place on the same terms as in the 
 case of a person who is retired on the ground of ill-health. This clause 
 really legalizes what has been the practice of the Treasury, with cer- 
 tain exceptions, for over twenty years. 
 
 Despite Lord Denman' s explanation, the lords amended section 6 
 so as to make it apply ' ' only to persons entering the service after the 
 date of the passing of this act," thus leaving those already in the 
 service undisturbed in any of the privileges conferred on them by the 
 Act of 1859. 
 
 Immediately after the bill became a law regulations were made by 
 the Treasury with reference to the conditions under which existing 
 civil servants might be allowed to adopt the provisions of the act. 
 
 o Parliamentary Debates, House of Lords, 14 Sep., 1909, Vol. 2, No. 59, p. 1184. 
 
180 CIVIL-SEEVICE EETIEEMENT IN GEEAT BEITAIN. 
 
 These stated that apphcation must be made through the head of the 
 department, and must reach him on or before December 31, 1909. 
 Application must be made on the following form: 
 
 Application to adopt the provisions of the act under the terms of 
 section 3 (1) and the treasury regulations of September, 1909. 
 
 (1) Full name of apphcant. 
 
 (2) Department and situation. 
 
 (3) Age. (Give date of birtli.) 
 
 (4) Are you in a good state of health and, so far as you loiow, free 
 from any disorder or disease tending to sliorten life? 
 
 (5) Have you had any illness during last 10 years necessitating 
 your absence from duty for more than 15 consecutive days? If so, 
 state the nature of such ihness. 
 
 (6) Are you now and have you always been of sober and temperate 
 habits? 
 
 (7) State the number of days in the under-mentioned years on 
 which you have been absent from duty on account of sickness, and 
 the cause in each case: 
 
 Calendar year. 
 
 Number of 
 days. 
 
 Cause of absence. 
 
 1905. 
 
 
 
 1906 
 
 
 
 1907 
 
 
 
 1908 
 
 
 
 1909 
 
 
 
 
 
 
 (8) Declaration to be signed by the applicant: 
 
 I hereby apply to be allowed to adopt the provisions of the Super- 
 annuation Act, 1909, and I declare that the above statement of par- 
 ticulars is true to the best of my knowledge and belief. 
 
 Signature of applicant. 
 Date. 
 
 To bejilled in hy the AjJj^licanfs DejMrtment. 
 
 State whether the foregoing particulars correspond with the official 
 records relating to the applicant so far as they can be verified, espe- 
 cially under the Heads (3), (4), (6), and (7). 
 
 Give the date of the applicant's first Civil Service Certificate. 
 The applicant is employed in a pensionable capacity, and his case 
 is recommended for the favorable consideration of the Treasury. 
 Signature of the head of the department 
 
 or of other authorized officer. 
 
 Date. 
 
 In the case of a civil servant above 55 years of age at the date of 
 the passing of the act, the application must be accompanied by 
 certificate in the following form, signed by the medical officer of his 
 department, or, where this is not practicable, by his regular medical 
 attendant : 
 
 1. Are you the medical oflicer of the applicant's department, or his 
 private medical attendant ? 
 
 2. How long have you known him? 
 
CIVIL-SEEVICE RETIREMENT IN GREAT BRITAIN. 181 
 
 3. Does he appear to be now in good health, and free from any 
 disease or disorder tending to shorten hf e ? 
 
 4. Do you beheve him to be and to have been sober and temperate? 
 
 5. Do you consider him to be a person whom you could recommend 
 to an assurance society for life assurance at the ordinary rate of 
 premium ? 
 
 If not, do you consider him as — 
 
 (a) insurable at an addition to his actual age; or 
 
 (b) uninsurable. 
 
 Signature. 
 Date. 
 
 The Treasury may call for further medical evidence as to the con- 
 dition of the applicant's health in any case in which they consider it 
 desirable. Should the statements made by the applicant be found to 
 be untrue or inaccurate in any particular within the knowledge of the 
 applicant, the Treasury may cancel the allowance of the application. 
 
 CONCLUSIONS. 
 
 The conclusions to be drawn from Great Britain's century of expe- 
 rience in pensioning its civil employees are very definite. That 
 experience shows that pensions paid out of the public treasury as pure 
 gratuities are certain to be taken into account in fixing salaries, and a 
 pension system thus becomes, in effect, a contributory system. As 
 soon as the employees realize that they are contributing to their own 
 pension, they at once demand that, on separation from the service for 
 any cause whatever, the value of their contributions shall be returned 
 to them in some form. It is in recognition of the reluctance of human 
 nature to give something for nothing — shown first by the officers of 
 the Government in taking the pension into account in fixing salaries, 
 and next by the employees in their unwillingness to forfeit their con- 
 tributions under any circumstance — that the pension system of 
 England was modified by the Act of September 20, 1909. 
 
 The full significance of the final action of Parliament in amending 
 the various superannuation acts, especially the Act of 1859, by the 
 Act of 1909, is not brought out in the Parliamentary debates. It is 
 really more than ''merely a redistribution scheme," as characterized 
 by Mr. Hobhouse in the House of Commons, for it concedes the right 
 of employees to the return of theoretical contributions. Actual 
 deductions from salaries of employees were not contemplated by the 
 former law. In the recognition by the Government of the fact that 
 contributions are virtually exacted from employees through the 
 practice of taking pensions into account in fixing salaries, lies the 
 significance of this last legislation. In this last act the Government 
 puts a legal stamp on the superannuation scheme of England as a 
 contributory plan and not a pension system at all in the strictest 
 
182 CIVIL-SEEVICE EETIREMENT IN GREAT BRITAIN. 
 
 dictionary meaning of the term pension as ' ' a regular stipend paid by 
 a government," that is, paid out of a conamon treasury. 
 
 The general impression among people of the United States is that 
 Great Britain had first a contributory plan of retirement which was 
 found unsatisfactory and which was abandoned in 1859 for a straight 
 pension that has proved eminently satisfactory. The well-known 
 excellence of the British civil service is cited as sufficient proof of the 
 merit of the British pension system and the failure of the contributory 
 system which preceded it is taken by many to be conclusive evidence 
 of the superiority of a straight pension over any plan which contem- 
 plates contributions by the beneficiaries. It should be pointed out, 
 however, that the excellence of the British civil service may logically 
 be due, in part, to other causes than the pension system. The Civil 
 Service Commission was established in England in 1855, just before 
 the pension system, and it is safe to say that the appointment to office 
 and promotion in office on the basis of merit would have had good 
 results in the last half century even had the contributory plan of 
 granting retiring allowances not been superseded by the system of 
 free and universal pensions. 
 
 Investigation has revealed the fact that very little objection was 
 expressed by the employees to the contributory system of 1834 as 
 such. It has also been shown that various people of wide official 
 experience and consequence have, in recent years, expressed their 
 regret that the exaction of definite contributions was ever abandoned. 
 The objections to the contributory system were based on the inade- 
 quacy of salaries to bear deductions, and the faults in the details of 
 the scheme, particularly the lack of provision for returning contribu- 
 tions in case of death or resignation and the failure to fund the con- 
 tributions and keep the employees' account with the Government 
 separate from all others. 
 
 It seems reasonable to suppose that the pension system which 
 succeeded this contributory plan would have been popular with the 
 employees themselves, if not with the country. Doubtless it was for 
 a short time in the beginning. The evidence shows, however, that 
 the employees soon ceased to regard the pension as a pure gratuity 
 and came to consider it as a benefit paid for by themselves out of 
 reductions in salary, and subject to large chances of forfeiture through 
 death or resignation, since statistics showed that not more than one 
 out of seven entrants into the service remained to the pensionable 
 age. Of about 100,000 individuals in the service in 1902, approxi- 
 mately 70,000 were members of the Deferred Pay Committee, and 
 claimed that pensions were deferred pay. 
 
 This large body of employees held, in the second place, that the 
 amount withheld from their salaries for the payment of pensions was 
 more than necessary for the purpose. The Courtnev Commission 
 
CIVIL-SERVICE EETIEEMENT IIST GEEAT BEITAIN. 183 
 
 sustained them in their first contention but refused to admit the sec- 
 ond. Without an actuarial investigation, which they were apparently 
 unwilling to undertake, it was not possible for the commissioners 
 to disprove mathematically the claim of the employees that the amount 
 withheld from salaries was excessive, and their denial of the claim 
 must, therefore, be regarded as more or less arbitrary. Holding that 
 the amounts withheld from salaries were entirely consumed in the 
 payment of pensions, they were forced logically to refuse the request 
 of the civil servants for a refund of the supposed excess in the form 
 of free life insurance. They held, therefore, that the insurance 
 could only be secured through a reduction of the pension. 
 
 The important point to note is that the commission conceded that 
 something was deducted from the employee's pay for the purpose 
 of pensioning him at the end of his period of service. The English 
 pension system is, therefore, not a free and absolute system of gratui- 
 ties at all but a system of theoretical contributions from the employ- 
 ees' salaries, more or less adequate to pay the benefits given. What- 
 ever it may have been in the beginning, that is what it has become 
 through the policy — a policy sure to develop under a system of gratui- 
 ties, human nature being what it is — of taking the pension into con- 
 sideration in fixing salaries. 
 
 The English superannuation system having become avowedly a 
 contributory system, the question to be investigated then is this: 
 Is it a satisfactory form of contributory plan? It is undoubtedly 
 more satisfactory to the employees, and justly so, since amended by 
 the Act of 1909, than it was formerly under the Act of 1859. The 
 problem of devising a satisfactory superannuation scheme for any 
 service is one in which human nature is an element as well as arith- 
 metic, and the fact should not be ignored that human nature is such 
 that no system can be satisfactory to employees unless provision is 
 made for the return, in some form, on separation from the service 
 of their actual or theoretical contributions. This is abundantly 
 shown by the testimony of Mr. Manly, the actuary, in regard to the 
 experience of industrial schemes as well as by the British Govern- 
 ment's own experience. The Act of 1909 takes cognizance of this 
 fact. While the refund of imaginary contributions is accomplished 
 by means of a reduction in the pension, this disadvantage is offset 
 by the fact that all those in the service will become beneficiaries 
 under the scheme and not merely those who live to reach pensionable 
 age. 
 
 The amended scheme is undoubtedly more satisfactory, too, than 
 the old contributory scheme of 1834 discarded for the pension system 
 of 1859. It is more satisfactory because the scheme of 1834 required 
 the forfeiture of the contributions — in that case, actual contribu- 
 
184 CIVIL-SEKVICE EETIREMEISTT IN GREAT BEITAIN. 
 
 tions — on death or resignation, and because, like the pension system, 
 it benefited only those who remained in the service and reached 
 pensionable age. 
 
 The question whether the present improved system is absolutely 
 equitable as between individuals is difficult of satisfactory answer. 
 It has been shown that it is more equitable than the old systems, but 
 it can not be shown whether the amounts received by the employee in 
 the form of pension, insurance, and cash-surrender values correspond 
 with the amounts contributed by him, since it has not been ascer- 
 tained what percentage of salary is withheld as a contribution. The 
 Courtney Commission maintained that the theoretically contributed 
 sum is no more, in the aggregate, than the amount required for pen- 
 sions, but this does not prove that the sum contributed by any indi- 
 vidual may not be more or less than what he should equitably con- 
 tribute. A deduction of a given percentage of salary may be entirely 
 adequate to furnish given benefits for a young man, while a deduction 
 of the same percentage of salary will be quite inadequate to provide 
 the same benefits for an older man. The failure of the Courtney Com- 
 mission to gratify the request of the employees for a full investiga- 
 tion into the subject so that the amounts actually withheld might 
 be definitely determined makes any redistribution of benefits merely 
 a guess rather than an exact calculation. In the absence of the 
 necessary data, it is therefore impossible to answer the question: Is 
 the present system absolutely equitable as between individuals ? 
 
 While it is to be assumed that the calculations made by the actu- 
 aries are unimpeachable, it is to be noted that those calculations were 
 limited in scope and undertaken merely to ascertain what benefits 
 could be given by reducing the pension one-quarter. The problem 
 of the actuaries was to distribute equitably a definite sum. They 
 were not asked to go farther back and devise a contributory scheme 
 that would be just as between the State and the individual or equi- 
 table as between different classes of individuals. The amended sys- 
 tem is held to be merely a scheme of redistribution, but it should not 
 be forgotten that only one-quarter of the amount to be distributed 
 has been subject to actuarial calculation. Whether the other three- 
 quarters have been equitably distributed can not be stated. 
 
 One thing, however, can be definitely stated regarding the present 
 system in comparison with a system where the contributions are 
 actually instead of only theoretically paid, and where they are funded 
 and invested at interest. It is less economical. Under the exist- 
 ing system, the necessary sum is appropriated each year out of 
 the Treasury for the payment of pensions. This sum amounts 
 to from 16 to 20 per cent, in the various departments, of the 
 sums paid for salaries. Under a contributory system, the neces- 
 
CIVIL-SERVICE RETliREMENT IN GREAT BRlTAiiST. 185 
 
 sary sum would be accumulated gradually from many contribu- 
 tions invested at interest. By reason of the fact that with the 
 help of compound interest at the rate of 3 per cent per annum, 
 the sum of a given contribution per annum will double itself in 
 the course of a service of 42 years, and at 3^ per cent in 36 years, 
 and at 4 per cent in 31 years, it follows that the total contri- 
 butions of an employee who serves 40 years need be less than half 
 the amount required by direct appropriation from the Treasury to 
 give the same pension. The question naturally suggests itself then: 
 Why would it not be a wiser distribution of funds, if the British Gov- 
 ernment in appropriating a sum for the maintenance of civil estab- 
 lishments (including an amount for salaries and another amount for 
 pensions) should increase the salaries by the amount of the sum 
 spent for pensions but require employees to pay out of their salaries 
 a contribution sufficient to meet the cost of pensions? The net 
 result of thus preferring a scheme of actual contributions to one of 
 theoretical contributions would be a general increase in salaries 
 without increasing the appropriation for either salaries or pensions, 
 thus effecting a saving of money to the employees that, under present 
 conditions, is lost. 
 
 The first lesson for other countries seeking light from the history 
 of English superannuation schemes is, therefore, this : 
 
 The logical plan to adopt is a contributory plan, since a pension 
 system is certain to be treated as a contributory system, and since 
 a pension system is far more costly. It is better, then, to adopt a 
 contributory plan in the beginning, worked out on scientific lines, 
 with a definite relationship between contributions and benefits to 
 make it equitable as between all classes of employees rather than a 
 pension in the beginning and finally a patched-up arrangement, the 
 fairness of which is open to question. Had the Commissioners of 
 1857 modified the contributory plan then in force in accordance with 
 actuarial principles, the result would have been a more scientific and 
 probably a more equitable arrangement than that which has just 
 been arrived at after a half century of discontent and agitation. 
 Had the Commissioners of 1857 arranged for the Government to 
 assume the cost of all pensions on services rendered up to that time, 
 and also increased the salaries of the employees sufficiently to pro- 
 vide for the deductions necessary in the individual cases to create 
 the pensions called for under a proper scale, together with a refund 
 of accumulations in case of separation from the service and such 
 insurance as was asked for, the scheme to-day would be self-supporting 
 at a cost to the Government through the increase of salaries of about 
 one-half of the amount which is now paid out in pensions. 
 
 Other valuable lessons may be learned from Great Britain's 
 experience in retiring civil employees. It has been shown that 
 
186 CIVIL-SERVICE RETIREMENT IN GREAT BRITAIN. 
 
 not all contributory plans are good. To be satisfactory, a contribu- 
 tory plan must be based on certain fundamental principles: 
 
 The contributions should be placed in a fund and invested at 
 interest under guarantee of the Government, a separate account 
 being kept with each contributor. Failure to fund the contributions 
 of the employees under the plan of 1834 led to unnecessary misap- 
 prehension and discontent. No account having been kept of the 
 amounts received by the Government in contributions from the 
 employees and the amounts returned to them in pensions, it was 
 not known whether the Government had gained or lost by the 
 transaction. Nursing the belief that they had paid in more than 
 was ever returned to the service, the employees harbored resentment 
 against the Government. Failure to fund the contributions resulted 
 also in the loss to the employees of the interest which they would 
 have received had the contributions been invested. 
 
 The amount of contributions should be determined by the amount 
 of the annuity to be granted under the pension scale adopted. The 
 annuity should be based on the amount of salary and the length of 
 service which latter, in turn, depends largely on the age at entrance 
 into the service. The percentage of deduction from salaries should 
 vary, then, with the entrance age. This was not the case in the 
 English contributory scheme of 1834, which was based on a flat-rate 
 assessment for all ages of 2^ per cent on salaries not exceeding £100 
 ($487) and 5 per cent on salaries exceeding that amount. The result 
 was inequitable as between individuals of different ages and different 
 salaries, the assessment being smaller than necessary for the older 
 ages and in some cases a trifle larger than that required for the 
 younger ages. As Doctor Farr pointed out, there was no direct con- 
 nection between what was given and what was received. 
 
 There must be sharp differentiation between accrued liabilities and 
 future liabilities. The contributions made by present employees 
 should be held in reserve to pay future pensions, and not consumed 
 in paying pensions for past services. The accrued liabilities must 
 be paid by the State or the contributed fund will become insolvent. 
 To use the current contributions for the payment of pensions on 
 -back services is doubly destructive to any scheme because it not 
 only takes the contributions that were paid in to meet future obliga- 
 tions, but it cuts off the accumulation of interest. This disastrous 
 course was followed under the contributory plan of 1834, as usually 
 happens where there is a commingling of assets. The investigation 
 made by Messrs. Ansell and Morgan, the actuaries, in 1857, showed 
 that had the contributions been funded, the fund would by that 
 time have been insolvent. The five per cent deduction from salaries 
 was inadequate, not only because there were many employees whose 
 age was such as to make a larger deduction than five per cent of 
 
CIVIL-SERVICE RETIEEMENT IN GREAT BRITAIN. 187 
 
 salary necessary, but because the deductions of the young employees 
 were consumed in paying pensions to old employees. 
 
 Provision should be made for the refund of contributions in case 
 of separation from the service, whatever the cause. The lack of 
 this provision in the Act of 1834 was felt to be a hardship and an 
 injustice. The forfeiture of contributions was especially resented 
 when employees died while in the service. 
 
 Under either a contributory or a pension system, the experience 
 of Great Britain points to several other fundamental principles: 
 
 Retirement from the service should be made compulsory at some 
 given age. If it is merely optional, the purpose of the system is 
 likely to be defeated by the continuance of aged people in the service. 
 The need of compulsion was felt for years in England before action 
 was taken in the matter. Although this phase of the subject was 
 clearly brought out in the investigations of the Select Committee of 
 1873 and in the inquiry of the Ridley Commission in 1886, and both 
 bodies recommended that retirement be made compulsory at the 
 age of 65, it was not until 1898 that the recommendation was carried 
 out by means of an order in council. The importance of the principle 
 is recognized in the most recent legislation on superannuation. The 
 Act of 1909 provides for reduction in the superannuation allowance 
 in the case of every employee who remains in the service, by favor 
 of the Treasury, after reaching the age of 65 years. 
 
 The amount of the retiring allowance should be calculated on the 
 basis of the average rather than the final salary. The English 
 pension is calculated on the basis of the salary received during the 
 last three years of service, but there has been much discussion of this 
 provision before the various commissions. Recognizing the fact that 
 such a method of calculation is unsatisfactory, since it necessitates the 
 use of a salary scale, which is always more or less unreliable, but 
 evidently loath to make any great change because of the reduction in 
 pension which it would cause, the Ridley Commission recommended 
 an extension of the period used as a basis for calculation from three to 
 ten years. The calculation of pensions on the ultimate rather than 
 the mean salary is also open to special objection on the ground that it 
 gives heads of departments and bureaus an incentive to show favor- 
 itism in the matter of promotions and demotions in the final years of 
 service. 
 
 A provision for life insurance is a desirable adjunct to a retirement 
 measure and one that is greatly appreciated by the employees. 
 Such a provision has been urged by the British civil employees for 
 over half a century. Life insurance benefits are less necessary, 
 however, under a proper contributory plan than they have been 
 under the contributory and pension plans of England, which made no 
 refund of contributions in case of death. Under a plan which turns 
 
188 CIVIL-SEEVICE BETIREMENT IN GREAT BRITAIN. 
 
 over the deductions from salary with interest to the representatives 
 of the employee dying in the service, the need of insurance is only 
 acutely felt in the earlier years before the accumulations of the 
 employee amount to a considerable sum. During that period, term 
 insurance, which can be bought at a very low premium, will provide 
 protection. It should be noted that the medical selection exercised 
 in carrying out the insurance provisions of the Superannuation Act of 
 1909, will necessarily result in improving the already high standard 
 of excellence of the British civil service. 
 
 Appendix I. 
 SUPERANNUATION ACT OF 1834. 
 
 ANNO QUARTO & QUINTO GULIELMI lY. REGIS. 
 
 [Cap. XXIV.] 
 
 AN ACT To alter, amend, and consolidate the laws for regulating the pensions, compensations, and allow- 
 ances to be made to persons in respect of their having held civil ofRces in His Majesty's service. [25th 
 July 1834.] 
 
 Whereas by an act passed in the fifty-seventh year of the reign of His late Majesty 
 King George the Third, to enable His Majesty to recompense the services of persons 
 holding or who have held certain high and efficient civil offices, His Majesty is em- 
 powered to grant pensions, as therein provided, to persons who shall have served His 
 Majesty, his heirs or successors, in the offices therein mentioned: 
 
 And whereas by an act passed in the sixth year of the reign of His late Majesty King 
 George the Fourth, for amending the said recited act, it is enacted, that the several 
 other offices therein particularly described shall be deemed to be comprised in the 
 several classes of offices in the said recited act respectively specified: 
 
 And whereas it is expedient that the amount of the pensions by the said two acts 
 authorized to be granted should as to future pensions be reduced, and the conditions 
 under which the same shall be granted be altered and regulated: 
 
 Be it therefore enacted by the King's Most Excellent Majesty, by and loith the advice and 
 consent of the Lords spiritual and temporal, and Commons in this present Parliament 
 assembled, and by the authority of the same. That from and after the passing of this act 
 no pension to be granted to any person in respect of his having served in any one or 
 more of the offices of first lord of the treasury, or of one of His Majesty's principal 
 secretaries of state, or chancellor of the exchequer, or first lord of the Admiralty, or 
 president of the board of commissioners for the affairs of India, or president of the 
 committee of council appointed for the consideration of matters relating to trade and 
 foreign plantations, shall exceed the sum of two thousand pounds per annum; nor 
 shall any such pension be granted to any person unless he shall have held one or more 
 of the said offices for a period of not less than two years in the whole, either uninter- 
 ruptedly or at different times; nor shall any more or greater number than four such 
 pensions hereafter to be granted, be existing or in force at the same time. 
 
 II. And be it further enacted. That from and after the passing of this act no pension 
 to be granted to any person in respect of his having served in either or both of the 
 offices of chief secretary for Ireland or secretary at war shall exceed the sum of one 
 thousand four hundred pounds per annum, nor shall any such pension be granted to 
 any person unless he shall have held one or both of the said offices for a period of not 
 less than five years in the whole, either uninterruptedly or at different times; nor 
 shall any more or greater number than two such last-mentioned pensions be existing 
 or in force at the same time. 
 
 III. And be it further enacted, That from and after the passing of this act no pension 
 to be granted to any person in respect of his having served in any one or more of the 
 offices of one of the joint secretaries of the treasury, or first secretary of the Admiralty, 
 or vice president of the committee of commissioners appointed for the consideration 
 of matters relating to trade and foreign plantations, shall exceed the sum of twelve 
 hundred pounds per annum; nor shall any such pension be granted to any person 
 unless he shall have held one or more of the said offices for a period of not less than five 
 
CIVIL-SEKVICE RETIREMENT IN GREAT BRITAIN. 189 
 
 years in the whole, either uninterruptedly or at different times; nor shall any more or 
 greater number than four such last-mentioned pensions be existing or in force at the 
 same time. 
 
 IV. And be it further enacted, That from and after the passing of this act the pension, 
 not exceeding one thousand pounds, authorized by the said recited act to be granted 
 to any person in respect of his having served in any one or more of the offices of one of 
 the under secretaries of state, or clerk of the ordnance, or second secretary of the 
 Admiralty, or one of the secretaries of the board of commissioners for the affairs of 
 India, shall not be granted to any such person unless he shall have held one or more of 
 the said offices for a period of not less than ten years in the whole, either uninter- 
 ruptedly or at different times; nor shall any more or greater number than six such 
 last-mentioned pensions be existing or in force at the same time. 
 
 V. Provided always, and be it enacted, That in case it shall happen that any person 
 shall have served His Majesty, his heirs or successors, in more than one class of offices 
 herein-before specified, in respect whereof any pension less than two thousand pounds 
 may be granted, it shall be lawful to grant, under the regulations aforesaid, to such 
 person any pension annexed to the highest class of office in which such person may 
 have been employed, whenever the whole period of the service of such person in the 
 several offices in which he shall have been employed shall amount to ten years, 
 although the period of the service of such person in such highest class shall not have 
 extended to the period of five years; Provided always, That such person shall have 
 served in such highest class for the period of not less than three years; and in cases in 
 which the service of any such person in any class of those offices shall not be sufficient 
 to entitle him to the pension of that class, it shall be lawful to grant him a pension 
 not exceeding one thousand pounds, provided the period of his aggregate services in 
 that and any inferior class or classes or. department of the public service shall 
 amount to ten years: Provided also. That there shall not be more than the aforesaid 
 number of pensions to that amount existing at the same time. 
 
 VI. And whereas the principle of the regulations for granting allowances of this 
 nature is and ought to be founded on a consideration, not only of the services performed 
 by the individual to the state, but of the inadequacy of his private fortune to main- 
 tain his station in life; 
 
 Be it therefore enacted, That from and after the passing of this act, whenever any 
 person shall seek to obtain any one of the pensions before mentioned, his application 
 for that purpose shall be made in writing to the commissioners of His Majesty's treas- 
 ury, to which he shall subscribe his name, and which shall contain, not only a state- 
 ment of the services performed by him, and the grounds on which such pension is 
 claimed, but a specific declaration that the amount of his income from other sources 
 is so limited as to bring him within the intent and meaning of this act and the prin- 
 ciple herein-above declared, and without such declaration no pension as herein- 
 before provided or authorized shall be granted. 
 
 VII. Provided always, and be it further enacted. That the several regulations with 
 respect to the granting of any of the before-mentioned pensions, and to the receipt 
 thereof by the persons to whom such grants may be made, which are contained in 
 the said recited act of the fifty-seventh years of King George the Third and the sixth 
 year of King George the Fourth, shall continue in full force and effect, and be appli- 
 cable to pensions to be granted under the authority of this act, except so far as any 
 such regulations are altered or repealed by the enactments contained in this act. 
 
 VIII. And be it further enacted, That from and after the passing of this act an act 
 made in the fiftieth year of the reign of His late Majesty King George the Third, to 
 direct that accounts of increase and diminution of public salaries, pensions, and allow- 
 ances shall be annually laid before Parliament, and to regulate and control the grant- 
 ing and payment of such salaries, pensions, and allowances; and two several acts 
 passed in the fifty-first year of the reign of His said late Majesty and in the third year 
 of His late Majesty King George the Fourth, severally to amend the said act of the 
 fiftieth year of the reign of King George the Third; and also an act passed in the 
 fifth year of the reign of His said late Majesty King George the Fourth, to amend 
 the said act of the third year of His said Majesty's reign; and so much of an act passed 
 in the sixth year of the reign of His said late Majesty, to regulate the payment of 
 salaries and allowances to British consuls, as respects the allowance to be made to 
 such consuls in the nature of superannuation or reward for meritorious public services; 
 shall be and the same are hereby repealed, except so far as relates to any matter or 
 thing already done under the said acts or either of them. 
 
 IX. And be it further enacted, That from and after the passing of this act the super- 
 annuation allowances to be granted to such officers and clerks who shall have entered 
 the public service prior to the fifth* day of August, one thousand eight hundred and 
 
190 CIVIL-SERVICE BETIEEMENT IN GREAT BRITAIN. 
 
 twenty-nine (except only as herein-after is authorized), shall not exceed the follow- 
 ing proportions with reference to the amount of their salaries and the periods of their 
 services respectively (videlicet): 
 
 To an officer, clerk, or person who shall have served ten years and upwards, and 
 imder fifteen years, any annual allowance not exceeding in amount four-twelfths of 
 the annual salary and emoluments of his office ; 
 
 For fifteen years and upwards, and under twenty years, not exceeding five-twelfths 
 of such salary and emoluments; 
 
 For twenty years and upwards, and under twenty-five years, not exceeding six- 
 twelfths of such salary and emoluments; 
 
 For twenty-five years and upwards, and under thirty years, not exceeding seven- 
 twelfths of such salary and emoluments; 
 
 For thirty years and upwards, and under thirty-five years, not exceeding eight- 
 twelfths of such salary and emoluments; 
 
 For thirty-five years and upwards, and under forty years, not exceeding nine- 
 twelfths of such salary and emoluments; 
 
 For forty years and upwards, and under forty-five years, not exceeding ten-twelfths 
 of such salary and emoluments; 
 
 For forty-five years and upwards, and under fifty years, not exceeding eleven- 
 twelfths of such salary and emoluments; 
 
 And for fifty years or upwards, any annual allowance not exceeding the net amount 
 of the salary and emoluments of his office. 
 
 X. And be it further enacted, That from and after the passing of this act it shall not 
 be lawful to grant to any officer or clerk who shall have entered the public service 
 subsequent to the fourth day of August, one thousand eight hundred and twenty- 
 nine, except as hereinafter authorized, any superannuation or allowance exceeding 
 the following proportions, with reference to the amount of their salaries and the periods 
 of their services respectively (videlicet) : 
 
 To an officer, clerk, or person who shall have served ten years and upwards, and 
 under seventeen years, any annual allowance not exceeding in amount three-twelfths 
 of the salary and emoluments of his office; , 
 
 For seventeen years' service and upwards, and under twenty-four years, not exceed- 
 ing four-twelfths of such salary and emoluments; 
 
 For twenty-four years' service and upwards, and under thirty-one years, not exceed- 
 ing five-twelfths of such salary and emoluments; 
 
 For thirty-one years and upwards, and under thirty-eight years, not exceeding six- 
 twelfths of such salary and emoluments; 
 
 For thirty-eight years and upwards, and under forty-five years, not exceeding 
 seven-twelfths of such salary and emoluments: 
 
 And for forty-five years and upwards, not exceeding eight-twelfths of such salary 
 and emoluments: 
 
 And in no case, except as herein-after is especially provided, shall any superannua- 
 tion or allowance exceeding two-thirds of the salary and emoluments of any such 
 officer, clerk, or person, be granted. 
 
 XI. And be it further enacted, That from and after the passing of this act it shall 
 not be lawful to grant any superannuation allowance to any officer or clerk who shall 
 be under sixty-five years of age, unless upon certificates from the heads of the depart- 
 ment to which such officer or clerk shall belong, and from two medical practitioners, 
 that he is incapable, from infirmity of mind or body, to discharge the duties of his 
 situation, nor unless he shall have discharged those duties with diligence and fidelity, 
 to the satisfaction of the head officer or officers of his department, which shall be cer- 
 tified by any two of such head officers if there shall be more than one, or by such 
 head officer if there shall be but one; and in case the person claiming such superan- 
 nuation allowance shall himself be the head officer, or one of the head officers, then 
 such superannuation allowance shall not be granted unless he shall have discharged 
 the duties of his situation with diligence and fidelity, to the satisfaction of the com- 
 missioners of the Admiralty, if such head officer shall hold any office or situation under 
 the control of that department, and in all other cases to the satisfaction of the com- 
 missioners of the treasury; and the said commissioners of the Admiralty and treasury 
 respectively shall express such satisfaction in their minute recommending or author- 
 izing the grant of any such superannuation allowance. 
 
 XII. Provided always, and be it further enacted, That the superannuation allowance 
 to be granted to any officer or person after the passing of this act shall not be computed 
 upon the amount of the salary enjoyed by him at the time of his retirement, unless 
 he shall have been in the receipt of the same, or in the class from which he retires, 
 for a period of at least three years immediately before the granting of such superannua- 
 tion allowance; and in case he shall not have enjoyed his then existing salary, or 
 
CIVIL-SEKVICE EETIKEMENT IN GREAT BRITAIN, 191 
 
 have been in such class for that period, such superannuation allowance shall be cal- 
 culated upon the average amount of salary received by such person for three years 
 next preceding the commencement of such allowance. 
 
 XIII. And be it further enacted. That all compensations and allowances granted, 
 or hereafter under this act to be granted, as pensions or superannuations, shallbe paid 
 to the persons entitled to receive the same without any abatement or deduction in 
 respect of any taxes or duties whatever at present existing. 
 
 XIV. And he it further enacted, That the superannuation allowances authorized 
 by this act shall extend to all such civil offices and departments as are set forth and 
 enumerated in the schedule to this act, with such exceptions as are specified in the 
 said schedule: Provided always, That it shall be lawful for the commissioners of His 
 Majesty's treasury, by any order on warrant under the hands of any three or more of 
 them, to add to the list of offices and departments enumerated in the said schedule 
 any other offices or departments which now exist or may hereafter be created or estab- 
 lished, and to place the same, and the officers and persons employed therein, under 
 the provisions of this act; in' every which order or warrant the reasons for adding 
 any such office or department shall be stated, and a copy of every such order or warrant 
 shall be laid before Parliament within one month after the making thereof, if Parlia- 
 ment shall be then sitting, and if not, then within one month after the then next 
 sitting of Parliament; and all the provisions of this act, and all the powers, authorities, 
 regulations, restrictions, and clauses therein contained, shall in every such case apply 
 and be put in force with respect to every office or department which shall be so added 
 as aforesaid as fully and effectually, to all intents and purposes, as if they had been 
 originally specified and enumerated in the said schedule. 
 
 XV. Provided always, and be it further enacted, That nothing in this act contained 
 shall extend or be construed to extend to or authorize the adding to such list any 
 offices held under military or naval commissions, entitling the holders of the same 
 to half pay, or any military or naval allowance in lieu of or in addition to half pay, 
 allowed under the regulation of any order of Ilis Majesty in council to any persons 
 for services in His Majesty's army, navy, or ordnance, or any offices in any of His 
 Majesty's courts at Westminster or Dublin, orany other of His Majesty's courts of justice 
 elsewhere, or the comptroller of His Majesty's exchequer, or any offices in relation to 
 which the granting of any allowances for past services has been specially regulated 
 by any act, or any offices held as sinecures, or executed principally by deputy. 
 
 XVI. And be it further enacted. That no compensation hereafter to be made or 
 superannuation allowance to be granted in respect of civil services to any person 
 entitled to half pay in the army, ordnance, navy, or marines, who shall have been 
 appointed to the civil service subsequently to the fourth day of August, one thousand 
 eight hundred and twenty-nine, shall in any case, except as in this act is specially 
 provided, exceed in the whole (computing his half pay in such compensation or 
 allowance) the amount of two-thirds of the salary and emoluments of the office relin- 
 quished by him: Provided always, That nothing in this act contained shall extend 
 or be construed to extend to entitle any superintendent of a dock yard or other estab- 
 lishment in the civil department of the navy, who shall have held any civil appoint- 
 ment prior to the fifth day of August, one thousand eight hundred and twenty-nine, 
 to any superannuation allowance under this act beyond the amount stipulated by 
 the terms on which he shall have accepted the office of superintendent, or the amount 
 established by any order of His Majesty in council concerning superintendents. 
 
 XVII. Provided always, and he it further enacted, That in any case in which it shall 
 appear to the commissioners of His Majesty's treasury that any special circumstances 
 afford to any officer or clerk in the several offices or departments mentioned in the 
 schedule to this act, or in the addition authorized to be made thereto, who is not within 
 the exceptions therein contained, a just claim to an amount of superannuation allow- 
 ance not authorized by this act, or exceeding the amount therein specified with 
 reference to the length of his service, it shall be lawful for the commissioners of His 
 Majesty's treasury to grant, or give authority for granting, any special superannuation 
 which such officer or clerk shall appear to them to deserve; but in every such case the 
 grounds on which such special superannuation shall be granted or authorized shall 
 be stated in the grant thereof, or in the authority for granting the same, and also 
 entered in the minutes of the treasury, and shall likewise be laid before Parliament 
 within one month after the fifth day of January in each year, if Parliament be sitting 
 during that period, or if not, then within one month after the ensuing meeting of 
 Parliament. 
 
 XVIII. And be it further enacted. That no compensation for any office abolished, 
 nor any special allowance or remuneration for good services to any person holding or 
 having held any civil office in any public department, shall be charged upon the 
 incidents or any other fund of any such department; and that no such compensation, 
 
192 CIVIL-SERVICE RETIEEMENT IN GREAT BRITAIN. 
 
 nor any allowance or compensation in the nature of superannuation or retired allow- 
 ance or reward to any such person in respect of his having held any public office or 
 employment, or having been engaged in any public service, shall be granted, allowed, 
 or paid, other than under the authority of an order of His Majesty in council, or by 
 the commissioners of His Majesty's treasury, or any three or more of them. 
 
 XIX. And be it further enacted and provided, That every person to whom any com- 
 pensation or allowance, in consequence of the abolition or reduction of office, shall 
 hereafter be granted shall at all times, when called upon, be liable to fill, in any part 
 of His Majesty's dominions in which he shall have already served, any public office 
 or situation under the Crown for which his previous public services may render him 
 eligible; and that if he shall decline, when called upon so to do, to take upon himself 
 such office or situation, and execute the duties thereof satisfactorily, being in a com- 
 petent state of health, he shall forfeit his right to any compensation or allowance 
 which may have been granted to him in respect of any former services. 
 
 XX. Provided always, and be it further enacted. That in case any person enjoying any 
 superannuation allowance, in consequence of retiring from office on account of age, 
 infirmity, or any other cause, or enjoying any compensation for past services upon 
 the abolition or reduction of office, shall be appointed to fill any office in any public 
 department, every such allowance or compensation shall cease to be paid for any 
 period subsequent to such appointment, if the annual amount of the profits of the 
 office to which he shall be appointed shall be equal to those of the office formerly 
 held by him, and in case they shall not be equal to those of his former office, then 
 no more of such superannuation allowance or compensation shall be paid to him than 
 what with the salary of his new appointment shall be equal to that of his former office, 
 
 XXI. Provided always, and be it further enacted. That nothing herein contained 
 with respect to compensation, superannuation, or allowance for civil services, shall 
 extend or be construed to extend to any military or naval half pay, or allowance in 
 lieu of half pay, or to any military or naval allowance or pensions granted or to be 
 granted, uncler the regulations of any order of His Majesty in council, in any of the 
 respective departments of the commissioners of the Admiralty, the secretary at war, 
 and the master general of the ordnance, except as herein-after is provided with respect 
 to the same. 
 
 XXII. And be it further enacted, That between the first day of February and the 
 twenty-fifth day of March in every year, or if Parliament shall not be sitting during 
 any part of that period, then within twenty days after the next meeting of Parliament, 
 there shall be laid before both Houses of Parliament an account of every increase and 
 diminution which shall have taken place within the preceding year, ending on the 
 thirty-first day of December, in the number of persons employed in all public offices 
 or dej^artments under the Crown, and in the salaries, emoluments, allowances, and 
 expences which shall have taken place or been paid, granted, received, or incurred 
 for and in respect of all officers and persons belonging to or employed in all such 
 public offices or departments, specifying the amount and nature thereof, and dis- 
 tinguishing every increase and diminution in the amount of all allowances or com- 
 pensations granted as retired allowances or superannuations to any person having 
 held any office, place, or employment in any such public office or department, and 
 also the time and length of service of every such person, and the amount of the salary 
 and emoluments received by such person immediately preceding his superannuation 
 or retirement, and the nature of his services, and the grounds upon which such 
 increase or diminution in the establishment of every such public office or department, 
 or of any such salary, emolument, allowance, compensation, or superannuation, shall 
 have been granted or made; and also specifying the name of every person receiving 
 such allowance or compensation who may have died in the course of the year, together 
 with the amount of the annual allowance payable to such person. 
 
 XXIII. Provided always, and be it further enacted. That accounts of all compensa- 
 tions for offices abolished, and of all allowances in the nature of superannuation or 
 retired allowances to all other persons in respect of their having held any public 
 office or employment under the Crown, shall annually, at the period lastly provided, 
 be laid before the Commons House of Parliament. 
 
 XXIV. And whereas the scale of allowance under this act specifies the highest 
 rate which a superannuated officer can receive unless his case be specially laid before 
 Parliament: 
 
 And whereas it is expedient that the Lords of His Majesty's Treasury and the Lords 
 of the Admiralty for the time being, respectively, should consider the health, age, 
 meritorious conduct, and other circumstances of each party applying for a superan- 
 nuation allowance, in order to exercise their discretion in fixing the amount of such 
 allowance, subject always to the limitation prescribed by this act: 
 
 And whereas it is expedient that Parliament should be made acquainted with the 
 manner in which such discretion shall be exercised; 
 
CIVIL-SERVICE RETIEEMENT IN GREAT BRITAHST. 193 
 
 Be it therefore enacted, That all orders of His Majesty in council, and minutes of the 
 lords of the treasury, which shall at any time be framed or passed laying down any 
 general rule or regulation respecting the granting of superannuation allowances, shall 
 within one month of the date thereof, if Parliament should be then sitting, or if not, 
 then within one month after the commencement of the next ensuing session of Par- 
 liament, be laid before the two houses of Parliament, respectively. 
 
 XXV. Provided always, and he it further enacted, That all half pay and allowances 
 in lieu of half pay in the several departments of the army, ordnance, navy, and 
 marines, and all military and naval allowances or pensions granted or which shall be 
 granted in any of such departments under the authority of any order in council, 
 shall be annually laid before the Commons House of Parliament in separate estimates, 
 at the same time with the ordinary estimates of those respective departments, and" 
 shall be kept distinct from all pensions, compensations, superannuation and retired 
 allowances in any of the civil offices of those departments, respectively. 
 
 XXVI. And he it further enacted, That the compensations, superannuations, and 
 allowances authorized as well by this as any former act or acts shall, when not specially 
 provided for by Parliament, be charged upon and paid and payable by the respective 
 departments or offices in which the persons receiving such allowances shall have 
 served. 
 
 XXVII. And whereas the commissioners of the treasury did, by a minute dated 
 the fourth day of August, one thousand eight hundred and twenty-nine, record their 
 intention to adopt certain regulations with a view to reduce prospectively the charge 
 incurred in providing for superannuation allowances, of which notice was given in the 
 several public departments, for the information of those who should thereafter enter the 
 public service: And whereas, in pursuance of the said minute, an annual abatement 
 hath been made from the salaries and emoluments of the several persons who have 
 entered the public service subsequent to the date thereof; and whereas it is expedient 
 to continue such abatement in those cases, and to extend it to others, as hereinafter 
 provided: Beit therefore further enacted. That from and after the passing of this act 
 there shall be an annual abatement made, in quarterly proportions, by the proper 
 officer in each respective department, from the salaries and emoluments of the several 
 officers and persons employed in the several civil offices and departments specified 
 in the schedule to this act, or to be specified in the addition authorized to be made 
 thereto, and not within the exceptions thereof, who have since the date of the said 
 minute entered or shall hereafter enter the public service, in such manner and under 
 such directions as shall from time to time be given in this respect by the commissioners 
 of the treasury or of the Admiralty, as the case may be; the amount of which abate- 
 ment shall be according to the respective rates following, that is to say: 
 
 From salaries and emoluments not exceeding the annual sum of one hundred 
 pounds, an abatement after the rate of two pounds ten shillings per centum; 
 
 And from salaries and emoluments exceeding one hundred pounds, five pounds per 
 centum; . 
 
 And in the cases of all persons whomsoever at present holdmg officeand entitled 
 to superannuation allowance under this act, who shall have been appointed to such 
 office subsequently to the issue of the minute of the lords commissioners of His 
 Majesty's treasury, bearing date the fourth day of August, one thousand eight hundred 
 and twenty-nine, for the future regulation of the several civil departments of the 
 public service, and who shall hereafter, upon promotion, obtain any increase_ of 
 salary or allowances in respect of their offices, an annual abatement, after the like 
 rates, respectively, shall be made from the amount of such increase from time to time, 
 commencing from the period when the same shall take place. 
 
 XXVIII. And he it further enacted, That it shall be lawful for the person or persons 
 at the head of any department in which any fees or other sources of profit may form 
 part of the emoluments of any office in such department, to fix, with the approbation 
 of the commissioners of His Majesty's treasiu-y , or for the commissioners of the Admii-alty 
 if the office shall be in that department, an average sum upon which the compensation 
 or superannuation allowance shall be granted, as well as the sum to be annually 
 abated, as hereinbefore provided, from such person's salary in respect of such emolu- 
 ments, which sum so to be fixed shall not exceed the average amount of such emolu- 
 ments for the three last preceding years. j i n ^ n 
 
 XXIX. And he it further enacted. That the vice-treasurer of Ireland shall at all 
 times, when required so to do by the commissioners of His Majesty's treasury,transmit 
 to the said commissioners accounts of the execution of this act, and of all matters and 
 things relating thereto, in his execution of the powers thereof, in such manner and 
 form, and containing such particulars as he shall in that behalf be from time to time 
 directed. 
 
 35885— S. Doc. 290, 61—2 13* 
 
194 
 
 CIVIL-SEEVICE RETIREMENT IN GREAT BRITAHsT. 
 
 XXX. Provided always, and be it further enacted, That nothing in this act contained 
 shall extend or be construed to extend to give any person an absolute right to com- 
 pensation for past services, or to any superannuation or retiring allowance under this 
 act, or to deprive the commissioners of His Majesty's treasury, and the heads or prin- 
 cipal officers of the respective departments, of their power and authority to dismiss 
 any person from the public serAdce without compensation. 
 
 XXXI. And be it further enacted, That this act may be amended, altered, or repealed 
 by any act or acts to be passed in this present session of Parliament. 
 
 Schedule referred to in the aforegoing act. 
 
 Offices or departments. 
 
 Exceptions. 
 
 Treasury 
 
 OflBce of vice-treasurer in Ireland. 
 Office of privy council. Great Britain 
 and Ireland. 
 
 Office of committee for trade 
 
 Offices of secretaries of state 
 
 Office of secretary for Ireland 
 
 Alien office. 
 
 Consuls-general and consuls restricted 
 from being engaged in trade. 
 
 State paper office. 
 
 Office of registrar of slaves. 
 
 Police offices in London and Middle- 
 sex and borough of South wark. 
 
 Commander of the forces office, 
 England and Ireland. 
 
 Quartermaster-general's office, ditto.. 
 
 Adjutant-general's office, ditto 
 
 War office 
 
 Army medical board. 
 
 Board of general officers 
 
 Chaplain-general's office. 
 
 Judge-ad vocate-general's office 
 
 Army pay office 
 
 Ordnance office 
 
 Chelsea and Kilmainham hospitals. 
 
 Royal Military College 
 
 Royal Military Asylum 
 
 Admiralty and naval establishments 
 at home and abroad. 
 
 Navy pay office 
 
 Tax office and stamp office. 
 
 Customs. 
 
 Excise. 
 
 Post-office 
 
 Royal mint 
 
 Audit office. 
 
 Comptrollers of army accounts 
 
 Lords of the treasury and joint secretaries. 
 
 President of the council. 
 
 President and vice-president. ' 
 Secretaries and under secretaries. 
 Chief secretary, the parliamentary counsel for 
 Irish affairs. 
 
 [Commander in chief and his secretary, and 
 I officers acting under military commissions. 
 
 Secretary at war. 
 
 Officers acting under military commissions. 
 
 Judge-advocate-general . 
 
 Paymaster-general. 
 
 Master-general. 
 
 Clerk of the ordnance. 
 
 Surveyor-general. 
 
 Principal storekeeper. 
 
 Secretary to master-general, and all persons 
 holding their situations by military commis- 
 sion. 
 
 Treasurer of the ordnance. 
 
 Persons who, being military officers, may be 
 entitled to full or half pay as siich, subject,, 
 however, to the provisions of this act. 
 
 Lords of the admiralty and secretaries. 
 
 Superintendents of dock yards and victualling 
 yards, and naval medical establishments or 
 hospitals, not having been employed in the 
 civil service of the navy prior to the fifth day 
 of August, One thousand eight hundred and 
 twenty-nine, and officers acting by virtue of 
 naval or military commissions or warrants, 
 and entitled to half pay. 
 
 The treasurer. 
 
 The postmaster-general. 
 The master of the mint. 
 
CIVIL-SERVICE EETIEEMENT IN GEEAT BEITAIK. 
 Schedule referred to in the aforegoing act — Continued. 
 
 195 
 
 Offices or departments. 
 
 Exceptions. 
 
 National debt office. 
 
 Office of comptroller of the exchequer. 
 
 Exchequer bill office. 
 
 Stationery office. 
 
 Office of woods, forests, works, etc . . . 
 
 King's remembrancer's office in the 
 exchequer of Scotland. 
 
 Office of auditor of the exchequer of 
 Scotland. 
 
 Signet and privy seal offices, Scot- 
 land. 
 
 British and Irish fishery. 
 
 The comptroller-general. 
 First commissioner. 
 Auditor. 
 
 IRELAND. 
 
 Office of teller of the exchequer 
 
 The teller. 
 
 nommiRRa,riq,t 
 
 Persons holding aommissions entitling them to 
 half pay, subject, however, to the provisions 
 
 
 
 of this act. 
 
 Hibernian school for soldiers' chil- 
 
 
 dren. 
 
 
 Board of education. 
 
 
 Privy seal office. 
 
 
 Board of charitable donations and 
 
 
 bequests. 
 
 
 Registrar of deeds. 
 
 
 Appendix II. 
 SUPERANNUATION ACT, 1859. 
 
 [22 Vict., Chapter 26.] 
 
 AN ACT To amend the laws concerning superannuations and other allowances to persons having held 
 civil offices in the public service. [19th April, 1859.] 
 
 Whereas an act was passed in the session holden in the fourth and fifth years of 
 King William the Fourth, chapter twenty -four, "to alter, amend, and consolidate the 
 laws for regulating the pensions, compensations, and allowances to be made to persons 
 in respect of their having held civil offices in His Majesty's service; " 
 
 And whereas by an act of the session holden in the twentieth and twenty-first years 
 of Her Majesty, chapter thirty-seven, section twenty-seven of the first-recited act, 
 by which an abatement was du-ected to be made from the salaries of civil servants 
 entitled to superannuation allowance, was repealed ; 
 
 And whereas it is desirable further to amend the said act as hereinafter mentioned : 
 
 Be it therefore enacted by the Queen's Most Excellent Majesty, by and with the advice and 
 consent of the Lords, spiritual and temporal, and Commons, in this present Parliament 
 assembled, and by the authority of the same, as follows: 
 
 I. Sections ten," eleven, thirteen, fourteen, fifteen, seventeen, nineteen, and 
 twenty-four of the said act of the fourth and fifth years of King William the Fourth 
 are hereby repealed, but such repeal shall not affect any pension, compensation, or 
 superannuation allowance granted or act done before the passing of this act. 
 
 II. Subject to the exceptions and provisions hereinafter contained, the superan- 
 nuation allowance to be granted after the commencement of this act to persons who 
 shall have served in an established capacity in the permanent civil service of the 
 state, whether their remuneration be computed by day pay, weekly wages, or annual 
 salary, and for whom provision shall not otherwise have been made by act of Parlia- 
 ment, or who may not be specially excepted by the authority of Parliament, shall 
 be as follows (that is to say) : 
 
196 CIVIL-SERVICE EETIREMENT IN GREAT BRITAIN. 
 
 To any person who shall have served ten years and upwards, and under eleven 
 years, an annual allowance of ten-sixtieths of the annual salary and emoluments of 
 his office; 
 
 For eleven years, and under twelve years, an annual allowance of eleven-sixtieths 
 of such salary and emoluments; 
 
 And in like manner a further addition to the annual allowance of one-sixtieth in 
 respect of each additional year of such service, until the completion of a period of 
 service of forty years, when the annual allowance of forty-sixtieths may be granted; 
 and no addition shall be made in respect of any service beyond forty years: 
 
 Provided always, That if any question should arise in any department of the public 
 service as to the claim of any person or class of persons for superannuation under this 
 clause, it shall be referred to the commissioners of the treasury, whose decision shall 
 be final. 
 
 III. Nothing herein contained shall interfere with the grant, to the officers and 
 clerks who entered the public service prior to the fifth day of August, one thousand 
 eight hundred and twenty-nine, of such superannuation allowances as might hereafter 
 have been granted to them under section nine of the said act of the fourth and fifth 
 years of King William the Fourth, or shall prevent, restrict, or diminish any other 
 superannuation allowance, pension, gratuity, or compensation which, if this act had 
 not been passed, might hereafter have been granted to any person who shall have 
 entered the public service before the passing of this act, but, except as aforesaid, the 
 provisions hereinafter contained shall apply as well to persons who have already 
 entered the public service, whether before or after the said fifth day of August, one 
 thousand eight hundred and twenty-nine, as to those who may hereafter enter the 
 public service. 
 
 IV. It shall be lawful for the commissioners of the treasury from time to time, by 
 any order or warrant, to declare that for the due and efficient discharge of the duties 
 of any office or class of offices to be specified in such order or warrant, professional or 
 other peculiar qualifications, not ordinarily to be acquired in the public service, are 
 required, and that it is for the interest of the public that persons should be appointed 
 thereto at an age exceeding that at which public service ordinarily begins; and by 
 the same or any other order or warrant to direct that when any person now holding 
 or who may hereafter be appointed to such office or any of such class of offices shall 
 retire from the public service, a number of years not exceeding twenty, to be specified 
 in the said order or warrant, shall, in computing the amount of superannuation allow- 
 ance which may be granted to him under the foregoing section of this act, be added 
 to the number of years during which he may have actually served, and also to direct 
 that in respect of such office or class of offices the period of service required to entitle 
 the holders to superannuation may be a period less than ten years, to be specified in 
 the order or warrant; and also to direct that, in respect of such office or class of offices, 
 the holder may be entitled to superannuation, though he may not hold his appoint- 
 ment directly from the Crown, and may not have entered the service with a certificate 
 from the civil service commissioners: Provided ahoays, That every order or warrant 
 made under this enactment shall be laid before Parliament. 
 
 V. It shall be lawful for the commissioners of the treasury to grant to any person 
 who, being the holder of an office in respect of which a superannuation allowance may 
 be granted, but not having completed the period which would have entitled him 
 to a superannuation allowance, is compelled to quit the public service by reason of 
 severe bodily injury, occasioned, without his own default, in the discharge of his 
 public duty, a gratuity not exceeding three months' pay for every two years of service, 
 or a superannuation allowance not exceeding ten-sixtieths of the annual salary and 
 emoluments of his office. 
 
 VI. It shall be lawful for the commissioners of the treasury to grant to any person 
 who, being the holder of an office in respect of which a superannuation allowance may 
 be granted, is constrained, from infirmity of mind or body, to leave the public service 
 before the completion of the period which would entitle him to a superannuation 
 allowance, euch sum of money by way of gratuity as the said commissioners may 
 think proper, but so as that no such gratuity shall exceed the amount of one month's 
 pay for each year of service. 
 
 VII. It shall be lawful for the commissioners of the treasury to grant to any person 
 retiring or removed from the public service in consequence of the abolition of his 
 office, or for the purpose of facilitating improvements in the organization of the depart- 
 ment to which he belongs, by which greater efficiency and economy can be effected, 
 such special annual allowance by way of compensation as on a full consideration of the 
 circumstances of the case may seem to the said commissioners to be a reasonable and 
 just compensation for the loss of office; and if the compensation shall exceed the 
 amount to which such person would have been entitled under the scale of superannu- 
 
CIVIL-SEEVICE RETIREMENT IN" GREAT BRITAIK. 107 
 
 ation provided by this act if ten years were added to the number of years which he 
 may have actually served, such allowance shall be granted by special minute, stating 
 the special grounds for granting such allowance, which minute shall be laid before 
 parliament, and no such allowance shall exceed two-thirds of the salary and emolu- 
 ments of the office. 
 
 VIII. It shall not be lawful for the commissioners of the treasury to grant the full 
 amount of superannuation allowance which can be granted under this act to any 
 person not being the head officer or one of the head officers of a department, unless 
 upon produx;tion of a certificate (signed by the head officer of the department, or by 
 two head officers, if there be more than one) that he has served with diligence and 
 fidelity to the satisfaction of such head officer or officers; and in every case in which 
 any superannuation allowance is granted, after the refusal of such certificate, the 
 minute granting it shall state such refusal and the grounds on which the allowance is 
 granted. 
 
 IX. Provided, That it shall be lawful for the commissioners of the treasury to grant 
 to any person any superannuation, compensation, gratuity, or other allowance of 
 greater amount than the amount which might be awarded to him under the foregoing 
 provisions, when special services rendered by such person, and requiring special 
 reward, shall appear to them to justify such increase, but so that such allowance shall 
 in no case exceed the salary and emoluments enjoyed by the grantee at the time of 
 retirement, and the grounds of every such increase shall be stated in a minute of the 
 treasury, which shall be laid before parliament; and it shall be lawful for the said com- 
 missioners to grant to any person any such allowance of less amount than otherwise 
 would have been awarded to him where his defaults or demerit in relation to the public 
 service appear to them to justify such diminution. 
 
 X. It shall not be lawful to grant any superannuation allowance under the provisions 
 of this act to any person who shall be under sixty years, unless upon medical certifi- 
 cate to the satisfaction of the commissioners of the treasury that he is incapable, from 
 infirmity of mind or body, to discharge the duties of his situation, and that such 
 infirmity is likely to be permanent. 
 
 XI. Every person to whom a superannuation or compensation allowance shall have 
 been granted before he shall have attained the age of sixty years shall, until he has 
 attained that age, be liable to be called upon to fill, in any part of Her Majesty's do- 
 minions in which he shall before have served, any public office or situation under the 
 Crown for which his previous public services may render him eligible; and if he shall 
 decline, when called upon to do so, to take upon him such office or situation, or shall 
 decline or neglect to execute the duties thereof satisfactorily, being in a competent 
 state of health, he shall forfeit his right to the compensation or superannuation allow- 
 ance which had been granted to him. 
 
 XII. And whereas it will be for the advantage of the public service that officers 
 holding employments entitling them to superannuation allowances under this or other 
 acts shall be eligible for other public employments at home and abroad, without for- 
 feiting their claims to such allowances. 
 
 Every officer already or hereafter to be transferred from employment entitling him 
 to superannuation allowance to public employment under the Crown not so entitling 
 him shall be entitled, on his ultimate retirement from the public service, to the same 
 allowance as if he had continued to hold the vacated appointment and at the same 
 rate of salary as when the same was vacated, subject nevertheless to the conditions 
 which would in that case have been applicable with respect to the grant of such allow- 
 ance; provided that it shall be lawful for the commissioners of the treasury, in the 
 case of officers transferred to governorships and lieutenant-governorships of colonies, 
 and other high offices abroad, conferred for a limited period, to grant such super- 
 annuation allowance to such officers on the expiration of such term of service without 
 a renewal of public employment; but any officer to whom such grant is made while 
 under the age of sixty years shall be subject to the same liability to be called upon to 
 fill office under the Crown, as herein provided concerning other persons under that 
 age to whom like allowances are granted . 
 
 XIII. All orders, warrants, and minutes by this act directed to be laid before 
 Parliament shall be laid before both Houses of Parliament within fourteen days after 
 the making thereof if Parliament be sitting, and if Parliament be not sitting, then 
 within fourteen days after the next meeting thereof. 
 
 XIV. No pension shall be granted under the provisions of section six of the act of 
 the fifty-seventh year of King George the Third, chapter sixty-five, to any person 
 who shall not have had a seat in one of the Houses of Parliament during the period 
 or one-half of the period for which he has held oflBce, aa in the said section is men- 
 tioned. 
 
198 CIVIL-SEEVICE EETIREMENT IN GREAT BRITAIN. 
 
 XV. The several sections mentioned in the schedule hereto of the several acts of 
 Parliament, also therein mentioned, shall be construed as if this act, instead of the 
 said act of the fourth and fifth years of the reign of King William the Fourth, had 
 been referred to in the said sections; and such other enactments as refer to the scale 
 of superannuation allowance established by the provisions hereby repealed of the 
 said act of King William the Fourth shall be construed as if the scale established by 
 this act had been referred to. 
 
 XVI. All superannuations, compensations, gratuities, and other allowances granted 
 or hereafter under this act to be granted shall be paid to the persons entitled to receive 
 the same without any abatement or deduction in respect of any taxes or duties what- 
 ever at present existing, except the tax upon pi'operty or income. 
 
 XVII. For the purposes of this act, no person hereafter to be appointed shall be 
 deemed to have served in the permanent civil service of the State unless such person 
 holds his appointment directly from the Crown, or has been admitted into the civil 
 service with a certificate from the civil service commissioners; nor shall any person, 
 already appointed to any office, be held to have served in the permanent civil service 
 as aforesaid, unless such person belong to a class which is already entitled to super- 
 annuation allowance, or to a class in which, if he had been appointed thereto subse- 
 quently to the passing of this act, he would, as holding his appointment directly 
 from the Crown, or as having been admitted into the civil service with such certificate 
 as aforesaid, have become entitled to such allowance; and no person shall be entitled 
 to any superannuation allowance under this act, unless his salary or remuneration 
 has been provided out of the consolidated fund of the United Kingdom of Great 
 Britain and Ireland, or out of monies voted by Parliament. 
 
 XVIII. So much of the said act of the fourth and fifth years of King William the 
 Foiu-th, chapter twenty-four, as is now in force and not hereby repealed, and this 
 act, shall be construed together as one act. 
 
 XIX. It shall be sufficient, in citing this act, to use the expression "The super- 
 annuation act, 1859." 
 
 5& 6 W. 4. c. 42. s. 
 
 7 W. 4. & 1 Vict. c. 
 
 8 & 9 Vict. c. 100. s 
 13 & 14 Vict. c. 89. 
 
 SUPERANNUATION ACT, 1887. 
 
 [50 & 51 Vict., Chapter 67.] 
 AN ACT To amend the superannuation acts, 1834 and 1859, and for other purposes. [16th September 1887.] 
 
 Be it enacted by the Queen's Most Excellent Majesty, by and with the advice and consent 
 of the Lords spiritual and temporal, and Commons, in this present Parliament assembled, 
 and by the authority of the same, as follows: 
 
 1. (1) Where a person employed in the civil service of the state is injured — 
 (a) in the actual discharge of his duty; and 
 
 (6) without his own default; and 
 
 (c) by some injury specifically attributable to the nature of his duty, 
 the treasury may grant to him, or, if he dies from the injury, to his widow, his mother, 
 if wholly dependent on him at the time of his death, and to his children, or to any of 
 them, such gratuity or annual allowance as the treasury may consider reasonable, and 
 as may be permitted by the terms of a warrant under this section. 
 
 (2) The treasury shall forthwith after the passing of this act frame a warrant regu- 
 lating the grant of gratuities and annual allowances under this section, and the war- 
 rant so framed shall be laid before Parliament. 
 
 (3) Provided, That a gratuity under this section shall not exceed one year's salary 
 of the person injured, and an allowance under this section shall not, together with any 
 superannuation allowance to which he is otherwise entitled, exceed the salary of the 
 person injured, or three hundred pounds a year, whichever is less. 
 
 2. (1) Where a civil servant is removed from his office on the ground of his inability 
 to discharge efficiently the duties of his office, and a superannuation allowance can 
 not lawfully be granted to him under the superannuation acts, 1834 and 1859, and the 
 
 Schedule 
 
 1. 
 
 30. s. 21. 
 5. 5. 10. 
 s. 39. 
 
 A. 
 III. 
 
 15 & 16 Vict. 
 15 & 16 Vict. 
 17 & 18 Vict. 
 19 & 20 Vict. 
 
 c. 
 c. 
 c. 
 c. 
 
 73. s. 15 
 87. s. 46, 
 78. s. 22, 
 110. s. 9, 
 
 Appendix 
 
 
CIVIL-SERVICE EETIEEMBNT IN GREAT BRITAIN. 199 
 
 treasury think that the special circumstances of the case justify the grant to him of a 
 retiring allowance, they may grant to him such retiring allowance as they think just 
 and proper, but in no case exceeding the amount for which his length of service would 
 qualify him under sections two and four of the superannuation act, 1859, without any 
 addition under section seven of that act. 
 
 (2) A minute of the treasury granting an allowance under this section to any civil 
 servant shall set forth the amount of the allowance granted to him, and the reasons 
 for such allowance, and shall be laid before Parliament: Provided, That the treasury 
 before making the grant shall consider any representation which the civil servant 
 removed may have submitted to them. 
 
 3. Where a person at the time he becomes a civil servant within the meaning of this 
 act is serving the state in a temporary capacity, the treasury may, if in their opinion 
 any special circumstances of the case warrant such a course, direct that his service in 
 that capacity may be reckoned for the purposes of the superannuation acts, 1834 and 
 1859, and this act, as service in the capacity of a civil servant, and it shall be so reck- 
 oned accordingly. 
 
 4. If a person employed in any public department in a capacity in respect of which 
 a superannuation allowance can not be granted under the superannuation act, 1859, 
 retires, or is removed from his employment, and 
 
 (a) the employment is one to which he was required to devote his whole time, and 
 (6) the remuneration for the employment was paid entirely out of moneys provided 
 by Parliament, and 
 
 (c) he has served in the employment for not less than seven years, if he is removed 
 in consequence of the abolition of his employment, or for the purpose of facilitating 
 improvements in the organisation of the department by which economy can be 
 effected, or for not less than fifteen years if his retirement is caused from infirmity of 
 mind or body, permanently incapacitating him from the duties of his employment, 
 the treasury may, if they think fit, grant to him a compassionate gratuity not exceed- 
 ing one pound or one week's pay, whichever is the greater, for each year of his service 
 in his employment. 
 
 5. A person shall not be entitled to reckon the same period of time both for the pur- 
 pose of a superannuation allowance under the superannuation acts, 1834 and 1859, and 
 this act, and also for the purpose of naval or military noneffective pay. 
 
 6. (1) The treasury may, within one month after the passing of this act, frame rules 
 as to the conditions on which any civil employment of profit under any public depart- 
 ment as defined by this act, or any employment of profit under the government of any 
 British possession, or any employment under the government of any foreign state may 
 be accepted or held by any persons who is in receipt of or has received any sum granted 
 by Parliament for the pay, half-pay, or retired pay of officers of Her Majesty's naval 
 or land forces, or otherwise for payment for past service in either of such forces, or who 
 has commuted the right to receive the same, and as to the effect of such acceptance or 
 holding on the said pay or sum, and the treasury may in such rules provide for the 
 enforcement thereof by the forfeiture, suspension, or reduction of any such pay or 
 sum as aforesaid, or of any commutation money or remuneration for such employment. 
 
 (2) Such rules shall also provide for the returns to be laid before Parliament of such 
 officers accepting employment as are affected by the rules, and shall come into opera- 
 tion at the date of the passing of this act. 
 
 (3) The rules shall be laid before both houses of Parliament forthwith. 
 
 (4) For the purposes of this section "British possession" means any part of Her 
 Majesty's dominions out of the United Kingdom, and this section shall apply to Cyprus 
 as if it were a British possession. 
 
 7. (1) Where any sum in respect of pay, pension, superannuation, or other allow- 
 ance or annuity is due in respect either of service as a civil servant, or of military or 
 naval service, to a person who is a lunatic, whether so found by inquisition or not, 
 such sum may be from time to time applied for his benefit by the prescribed public 
 department in such manner as the department think expedient. 
 
 (2) Where any annuity, whether pension, superannuation, or other allowance, is 
 payable out of moneys provided by Parliament to a person in respect either of service 
 as a civil servant or of military or naval service, and such person is or becomes a 
 lunatic toward whose maintenance a contribution is made out of money provided 
 by Parliament, then as long as the contribution is made his annuity shall be reduced 
 by an amount equal to that contribution, and if the amount of the contribution exceeds 
 the amount of the annuity, the annuity shall cease to be payable. 
 
 8. On the death of a person to whom any sum not exceeding one hundred pounds is 
 due from a public department in respect of any civil pay, superannuation, or other 
 allowance, annuity or gratuity, then, if the prescribed public department so direct, 
 but subject to the regulations (if any) made by the treasury, probate or other proof 
 
200 
 
 CIVIL-SEEVICE RETIREMENT IN GREAT BRITAIN. 
 
 of the title of the personal representative of the deceased person may be dispensed 
 with, and the said sum may be paid or distributed to or among the persons appearing 
 to the public department to be beneficially entitled to the personal _ estate of the 
 deceased person, or to or among any one or more of those persons, or in case of the 
 illegitimacy of the deceased person or his children, to or among such persons as the 
 department may think fit, and the departnient shall be discharged from all liability 
 in respect of any such payment or distribution. 
 
 9. The decision of the treasury on any question which arises as to the application 
 of any section of this act to any person, or as to the amount of any allowance or gratuity 
 under this act, or as to the reckoning of any service for such allowance or gratuity, 
 shall be final. 
 
 10. Nothing in this act shall be construed so as in any way to interfere with the 
 rights existing at the passing of this act of any civil servant then holding ofiice. 
 
 11. Every warrant and minute under this act which is required to be laid before 
 Parliament shall be laid before both houses of Parliament in manner provided by 
 section thirteen of the superannuation act, 1859. 
 
 12. In this act, unless the context otherwise requires — ■ 
 
 The expression "civil servant" means a person who has served in an established 
 capacity in the permanent civil service of the state within the meaning of section 
 seventeen of the superannuation act, 1859; 
 
 The expression "treasury" means the commissioners of Her Majesty's treasury; 
 
 The expression "public department" means the treasiu-y, the commissioners for 
 executing the office of Lord High Admiral, and any of Her Majesty's principal secre- 
 taries of state, and any other public department of the government; and the expression 
 "prescribed public department" means, as respects any matter, the department pre- 
 scribed for the purpose of that matter by the treasury. 
 
 13. The act of the session of the fourth and fifth years of the reign of King William 
 the Fourth, chapter twenty-four, intituled "An act to alter, amend, and consolidate 
 the laws for regulating the pensions, compensations, and allowances to be made to 
 persons in respect of their having held civil offices in His Majesty's service," is in 
 this act referred to and may be cited as the superannuation act, 1834, and that act 
 and the superannuation act, 1859, are together in this act referred to as the super- 
 annuation acts, 1834 and 1859. 
 
 The said acts and this act may be cited together as the superannuation acts, 1834 
 to 1887, and this act may be cited separately as the superannuation act, 1887. 
 
 14. The acts set forth in the schedule to this act are hereby repealed to the extent 
 in the third column of that schedule mentioned as from the passing of this act, without 
 prejudice to anything previously done or suffered in pursuance of the enactments 
 hereby repealed. 
 
 Schedule. 
 
 ACTS REPEALED. 
 
 Session and chapter. 
 
 Title or short title. 
 
 Extent of repeal. 
 
 4&5Will.4c.24... 
 
 6& 7 Will. 4c. 13... 
 
 7 Will. 4 & 1 Vict. 
 c. 25. 
 
 2&3 Vict. c. 47.... 
 
 2&3 Vict. c. 93.... 
 
 22 Vict. c. 26 
 
 22 & 23 Vict. c. 32. 
 
 An act to alter, amend, and consolidate 
 the laws for regulating pensions, com- 
 pensations, and allowances to be 
 made to persons in respect of their 
 having held civil offices in His Maj- 
 esty's service. 
 
 An act to consolidate the laws relating 
 to the constabulary force in Ireland. 
 
 An act to make more effectual provi- 
 sions relating to the police in the dis- 
 trict of Dublin metropolis. 
 
 An act for further improving the police 
 in and near the metropolis. 
 
 An act for the establishment of county 
 and district constables by the author- 
 ity of justices of the peace. 
 
 The superannuation act, 1859 
 
 An act to amend the law concerning 
 the police in counties and boroughs 
 in England and Wales. 
 
 Section sixteen. 
 
 Section thirty. 
 Section nineteen. 
 
 Section nineteen. 
 Section eleven. 
 
 Section five. 
 Section twenty- 
 seven. 
 
CIVIL-SEKVICE RETIKEMENT IN GREAT BRITAIN. 
 
 ^01 
 
 Schedule — Continued. 
 ACTS REPEALED— Continued. 
 
 Session and chapter. 
 
 Title or sliort title. 
 
 Extent of repeal. 
 
 31 & 32 Vict. c. 90... 
 
 An act to empower certain public de- 
 partments to pay otherwise than to 
 executors or administrators small 
 sums due on account of pay or allow- 
 ances to persons deceased. 
 
 The whole act. 
 
 33&34Vict. c. 96... 
 
 An act to apply a sum out of the con- 
 
 Subsections four. 
 
 
 solidated fund to the service .of the 
 
 five, and six of 
 
 
 year ending the thirty-first day of 
 
 section six. 
 
 
 March one thousand eight hundred 
 
 
 
 and seventy-one, and to appropriate 
 
 
 
 the supplies granted in this session of 
 
 
 
 Parliament. 
 
 
 35 & 36 Vict. c. 12... 
 
 The superannuation act, 1872 
 
 The whole act. 
 
 
 
 
 Appendix IV. 
 
 WARRANT REGULATING THE GRANT OF GRATUITIES AND ALLOW- 
 ANCES UNDER SECTION 1 OF THE SUPERANNUATION ACT, 1887. 
 
 In conformity with the provisions of the 1st section of the superannuation act, 1887, 
 we, being two of the lords commissioners of Her Majesty's treasury, do hereby direct 
 that any award of a gratuity or annual allowance made under the said section shall be 
 subject to the following conditions, viz: 
 
 The award shall be calculated upon one or other of the following scales, which shall 
 respectively apply to — 
 
 I. Established officers of prisons or criminal lunatic asylums injured by the violence 
 of a prisoner or lunatic; or established officers of a manufacturing department of the 
 war office or Admiralty, in which the duties are exceptionally dangerous. 
 
 II. All civil servants not falling under the above description, and also all hired 
 person employed in a manufacturing department of the war office or Admiralty in 
 which the duties are exceptionally dangerous. 
 
 III. All other hired persons employed in a public department. 
 
 Scales I and II. 
 
 To the retired allowance for which the injured man would be qualified by length of 
 service, shall be added an allowance not exceeding the under-mentioned portion of 
 his salary and emoluments at the date of the injury, viz: 
 
 When his capacity to contribute to his support is — 
 
 
 Scale I. 
 
 Scale II. 
 
 Sliffhtlv imDaired 
 
 Six-sixtieths 
 
 Five-sixtieths. 
 
 Impaired 
 
 Twelve-sixtieths 
 
 Eighteen-sixtieths 
 
 Twenty-four-sixtieths . . 
 
 Ten-sixtieths. 
 
 Materially impaired 
 
 Fifteen-sixtieths. 
 
 Totally destroyed 
 
 Twenty-sixtieths. 
 
 Provided that no award on Scale I shall, together -with any retired allowance for 
 which the injured man would be qualified by length of service, exceed the amount 
 of his salary and emoluments at the date of the injury, or £300 a year, whichever is 
 less; and that no award on Scale II shall, together vfith any retired allowance for which 
 he would be qualified by length of service, exceed fifty-sixtieths of his salary and emolu- 
 ments at the date of the injury, or £300 a year, whichever is less. 
 
202 CIVIL-SEKVICE KETIKEMEHT m GREAT BRITAIN. 
 
 Scale III. 
 
 (a) A gratuity not exceeding tlie under-mentioned portion of the salary and emolu- 
 ments of the injured man at the date of the injury, or £100, whichever is less, viz: 
 
 When his capacity to contribute to his support is — 
 Slightly impaired, one- third. 
 Impaired, two-thirds. 
 Materially impaired, the whole. 
 
 (6) When his capacity to contribute to his support is totally destroyed , he shall receive 
 an annual allowance exceediing by fifteen-sixtieths of his salary and emoluments the 
 rate of retired allowance for which he would have been qualified by length of service 
 if he had been a civil servant, provided that the total award shall not exceed forty-five- 
 sixtieths of his salary and emoluments at the date of the injury, or £300 a year, which- 
 ever is less. 
 
 An award under any of the* above scales shall be so much less than the usual amount 
 as the treasury shall think reasonable, in case — 
 
 (a) The usual amount exceeds by not less than £100 a year the rate of retired allow- 
 ance for which the length of the injured man's service would entitle him; or 
 
 (6) The injured man has continued to serve for not less than one year after the 
 injury in respect of which he retires; or 
 
 (c) The injured man is 55 years of age or upwards at the date of the injury; or 
 
 (d) The injury is not the sole cause of retirement, i. e., the retirement is caused 
 partly by age or infirmity. 
 
 WIDOWS AND CHILDREN OP MEN KILLED WHILE IN THE DISCHARGE OP DUTY. 
 
 An award shall be on one or other of the following scales, according as the deceased 
 had been — 
 
 I. An established officer of a prison or of a criminal lunatic asylum killed by a 
 prisoner or lunatic; or an established officer of a manufacturing department of the war 
 office or Admiralty, of which the duties are exceptionally dangerous. 
 
 II. A civil servant not falling under the above description, or a hired Derson em- 
 ployed in a manufacturing department as above. 
 
 III. Any other hired person employed in a public department. 
 
 Scale I. 
 
 Pension to widow, while unmarried and of good character, not exceeding ten- 
 sixtieths of the husband's salary and emoluments at the date of the injury, or £15 a 
 year, whichever is greater; and 
 
 Pension to each child until he or she attains the age of 15, not exceeding one-sixth of 
 the rate which might be granted to the widow, but the aggregate of the children's 
 pensions not to exceed the amount which might be granted to the widow. 
 
 Scale II. 
 
 Pension to widow not to exceed ten-sixtieths of the husband's salary and emolu- 
 ments, or £10 a year, whichever is greater; and 
 
 Gratuity to children, not exceeding £1 multiplied by the total number of their 
 years, starting from their ages at the time of their father's death, and ending with 15 
 years; the total gratuity not to be less than £10 or more than £50. 
 
 Scale III. 
 
 Pension to the widow not exceeding eight-sixtieths of the husband's salary and 
 emoluments, or £10, whichever is greater. 
 
 Gratuity to children not exceeding 16 shillings multiplied by the total number of 
 their years, starting from their ages at the date of their father's death and ending with 
 15 years; the total gratuity not to be less than £8 or more than £40. 
 
 In the case of motherless children the award under any scale may be of twice the 
 usual rate. 
 
 If the service of the deceased at the date of the injury was less than five years the 
 award under any scale shall be — 
 
 To the widow a gratuity not exceeding one-half of the salary and emoluments of 
 the deceased. 
 
 To each child a gratuity not exceeding one-twelfth of the salary and emoluments 
 of the deceased; but the total gratuity to widow and children shall not exceed one 
 year's salary and emoluments of the deceased. 
 
CIVIL-SERVICE EETlEEMEiSTT IN GREAT BRITAIN. 203 
 
 MOTHERS or MEN KILLED IN THE DISCHARGE OF DUTY. 
 
 If the deceased does not leave a widow, and if his mother was wholly dependent 
 upon him for her support, the award which might have been made to a widow may be 
 made to the mother. 
 
 (Signed) Herbert Eustace Maxwell. 
 
 W. H. Walrond. 
 Treasury Chambers, September, 1887. 
 
 Appendix V. 
 
 SCHEME OF COMPENSATION (NO. 116) IN CASE OF INJURY TO WORK- 
 MEN IN GOVERNMENT ESTABLISHMENTS. 
 
 [D. 780— Established May, 1903; revised December, 1907.] 
 
 Certified by the chief registrar of friendly societies, under date of 16th December, 
 1907, as providing scales of compensation not less favourable to the workmen and 
 their dependants than the corresponding scales in the workmen's compensation act, 
 1906. The new or altered provisions are italicized. 
 
 A. Death from injury. 
 
 1. When it is established to the satisfaction of the treasury that the death of a 
 workman has resulted from an injury to which the provisions of the workmen's com- 
 pensation act, 1906, apply, and that the workman has left any dependants wholly or 
 partially dependent upon his earnings at the time of his death, a sum equal to the 
 earnings of the deceased in the employment of the Government during the three years 
 next preceding the injury, or the sum of £150, whichever is the larger, but not exceed- 
 ing in any case £300, shall be payable in the case of dependants wholly dependent, 
 and half the same sum in the case of dependants partially dependent (where there 
 are no dependants wholly dependent) ; provided that the amount of any weekly pay- 
 ments made under this scheme in respect of the injury causing the death of the work- 
 man and any lump sum paid in commutation thereof shall be deducted from the sum 
 payable. 
 
 If the period of the workman's employment by the Government has been less than 
 the said three years, the amount of the earnings of the deceased during the said three 
 years shall be deemed to be 156 times his average weekly earnings during the period 
 of his actual employment by the Government. 
 
 The sum awarded will be paid to the dependants or to a trustee or trustees on their 
 behalf as the case may be. 
 
 2. The treasury may, in any case in which the authorities of a department consider 
 that the interests of a workman's dependants would be better served by a pension to 
 the widow or mother (where there is no widow) than by a lump sum, deal with the 
 case as follows, namely: 
 
 There shall be deducted from the lump sum payable to the dependants under the 
 scheme a portion for the dependent child or children, if any. Such portion shall not 
 exceed one-half of the entire amount if there is only one child, or two-thirds if there 
 are more than one, and there shall be granted to the widow or mother (where there 
 is no widow) a pension equal to the annuity which the remainder of the aforesaid 
 lump sum would purchase according to the post-ofSce tables for the purchase of imme- 
 diate annuities. Such pension shall not be liable to forfeiture in the event of the 
 re-marriage of the recipient. 
 
 3. If the authorities of the department consider it desirable in the interests of a 
 workman's dependants that a trustee or trustees should be appointed to administer 
 for their benefit the money awarded as compensation to them, they may appoint a 
 trustee or trustees, and pay the said money to him or them to be administered for the 
 benefit of the dependants accordingly. 
 
 4. On the death of a workman leaving no dependants a payment of not more than 
 £10 shall be made, to cover the reasonable expenses of his medical attendance and burial, 
 as under the workmen's compensation act. 
 
204 CIVIL-SERVICE retirement: in great BRITAIN. 
 
 B. Incapacity from injury. 
 
 5. When incapacity for work results from the injury, the injured workman shall 
 receive for the period, not exceeding six months, during which he is on the hurt list 
 on account of the injury, half his average weekly earnings during the previous 12 
 months, if he has been so long employed, and if not, half his average weekly earnings 
 for any less period during which he has been in the employment of the Government. 
 
 Should, hoivever, the average weekly earnings of a workman, who is under 21 years of 
 age at the date of the injury, he less than 20 shillings, such earnings shall he paid in full, 
 hut the weekly payments shall in no case exceed 10 shillings. 
 
 6. Should the rate of pay of his class be increased while he is on the hurt list he 
 shall participate in the increase. 
 
 7. In addition he shall receive free treatment in hospital, when the use of a hospital 
 is available to his department for the purpose. When it is not so available, he shall 
 receive free medical attendance. 
 
 8. Any workmen now serving who are entitled under the regulations of their depart- 
 ment to more favourable treatment while on the hurt list than is provided for above 
 shall continue to be so entitled. 
 
 9. When total or partial incapacity for work continues beyond the period for which 
 the workman receives hurt pay, as provided by clause 5, an allowance shall be paid 
 to him at the following rates, during the continuance of the incapacity, viz: "V^Tien 
 his capacity to contribute towards his own support has been shown to the satisfaction 
 of the treasury to have been — 
 
 (1) Totally destroyed, then twenty-four sixtieths; 
 
 (2) Materially impaired, eighteen sixtieths; 
 
 (3) Impaired, twelve sixtieths; 
 
 (4) Slightly impaired, six sixtieths; 
 
 of his average weekly earnings during the previous 12 months, if he has been so long 
 employed; but if not then during any less period for which he has been in the employ- 
 ment of the Government. Provided that in any case where it appears on sufficient evi- 
 deyice that a douht exists as to the incapacity of the workman under this clause the treasury 
 may obtain the opinion of a second medical practitioner. 
 
 In the case of a workman who was under 21 years of age at the date of the injury, and 
 whose average weekly earnings were less than 20 shillings, douhle the above rates of com- 
 pensation shall be atvarded, provided that the weekly payment shall in no case exceed 70 
 shillings. 
 
 10. If the workman continues in or returns to the employment of the Government 
 after the injury, the allowance awarded to him by way of compensation shall be paid 
 to him in addition to his earnings in the employment of the Government so long as 
 the degree of incapacity continues on account of which it was awarded, provided that 
 the said allowance, when added to his weekly earnings shall not exceed his average 
 weekly earnings during the 12 months preceding the injury, or during any shorter 
 period for which he has been in the employment of the Government, as the case may 
 be. Until such limit is reached no deduction shall be made from the said allowance. 
 
 In the case of a ivorkman who was under 21 years of age at the date of the injury, and 
 whose average iveekly earnings were less than 20 shillings, the alloivance awarded by way 
 of compensation, ivhen added to his weekly earnings, may be alloived to exceed the average 
 weekly earnings before the injury, as above determined, by such an amount as the treasury 
 may think that the circumstances justify. 
 
 Periodical adjustments of the award in accordance with these provisions may be 
 made at such intervals as may be sanctioned by the treasury. 
 
 11. If, after the injury, the workman leaves the employment of the Government, 
 the allowance shall be in addition to the pension, if any, for which he is qualified by 
 length of service, provided that the compensation for injury and the pension in respect 
 of length of service shall not together exceed his pay at the date of the injmy, or £300 
 a year, whichever is the less. 
 
 12. A permanent allowance awarded by way of compensation may be commuted 
 for a single payment, the amount of which shall be settled between the workman and 
 the authorities of the department, with the sanction of the treasury. 
 
 13. A claim for compensation for an injury which occurred more than three years 
 before the claim is preferred, and which is not the cause of the applicant's discharge 
 from the service, can not be entertained unless it can be clearly shown that the pros- 
 pect of obtaining fxuther employment has been diminished in consequence of the 
 injury. 
 
 14. Any ivorkman who wishes to tvithdraiu from the scheme may do so at any time. Notice 
 of vnthdrawal must be given by him in tvriting, on a form loJiich ivill be supplied for the 
 purpose on application, and the withdrawal will take effect as regards any accident happen- 
 ing after the receipt of the notice by the duly authorised officer. 
 
CIVIL-SEKVICE RETIEEMENT HsT GREAT BEITAIlSr. 205 
 
 15. Workmen who do not contract that the provisions of the scheme shall be sub- 
 stituted for the provisions of the act, or who at any time withdraw from the scheme, must 
 thenceforward be dealt with, in cases of injury, solely in the manner provided by the 
 act; and any benefits, in cases of injury, which such workmen now receive can no 
 longer be accorded. 
 
 Appendix VI. 
 AN ACT To amend the superannuation acts, 1834 to 1892 (20th September, 1909). 
 
 Be it enacted by the King's Most Excellent Majesty, by and with the advice and consent 
 of the- Lords , spiritual and temporal, and Commons, in this present Parliament assembled 
 and by the authority of the same, as follows: 
 
 I. (1) The proportion of the annual salary and emoluments on which the scale of 
 the superannuation allowances to be granted to male civil servants is to be calculated 
 shall, in the case of civil servants who enter the service after the passing of this act, 
 be one-eightieth instead of one-sixtieth, and accordingly section two of the superan- 
 nuation act, 1859, shall, as respects such civil servants, have effect as if for the words 
 "sixtieth" and "sixtieths," wherever they occur, there were substituted the words 
 "eightieth" and "eightieths." 
 
 (2) The treasury may grant by way of additional allowance to any such civil servant 
 who retires after having served for not less than two years, in addition to the superan- 
 nuation allowance (if any) to which he may become entitled or the gratuity (if any) 
 which may be granted to him under section six of the superannuation act, 1859, a 
 lump sum equal to one-thirtieth of the annual salary and emoluments of his ofiice 
 multiplied by the number of complete years he has served, so, however, that the 
 additional allowance shall in no case exceed one and a half times the amount of such 
 salary and emoluments : 
 
 Provided, That if a civil servant retires from the service after attaining the age 
 of sixty-five years, there shall be deducted from the amount of the additional allow- 
 ance which would otherwise be payable to him one-twentieth of that amount for every 
 complete year he has served after attaining that age. 
 
 II. (1) "Where a male civil servant who enters the service after the passing of this 
 act dies, after he has served five years or upwards, whilst still employed in the service, 
 the treasury may grant to his legal personal representatives a gratuity equal to the 
 annual salary and emoluments of his office: 
 
 Provided, That if he dies after attaining the age of sixty-five years, the amount of 
 the gratuity which may be so granted shall be reduced by one-twentieth of that amount 
 for every complete year he has served after attaining that age. 
 
 (2) Where any such civil servant having become entitled to a superannuation 
 allowance dies after he has retired from the service, and the sums actually received by 
 him at the time of his death on account of such superannuation allowance, together 
 with the sum received by him by way of additional allowance, are less than the amount 
 of the annual salary and emoluments of his office, the treasury may grant to his legal 
 personal representatives a gratuity equal to the deficiency. 
 
 III. (1) Subject to regulations made by the treasury, the treasury may allow any 
 male civil servant who has entered the service before the date of the passing of this 
 act, and who at that date is under sixty years of age, to adopt the provisions of this act, 
 and in such case there may be granted to him or his legal personal representatives 
 such superannuation and other allowances and gratuity as might have been granted 
 had he entered the service after the passing of this act, except that the amount of the 
 additional allowance payable on retirement shall be increased by one-half per cent in 
 respect of each complete year he had served at the passing of this act. 
 
 (2) Nothing in this act shall affect the right to superannuation allowance or gratuity 
 of a civil servant who has entered the service before the passing of this act, and who 
 either is at that time over sixty years of age, or is under sixty years of age and does not 
 adopt the provisions of this act. 
 
 IV. Subject to the provisions of this act the provisions of the superannuation acts, 
 1834 to 1892, with respect to the qualifications for obtaining superannuation allowances 
 and gratuities, and to the manner of reckoning years of service and amount of annual 
 salary and emoluments, and to the diminution of superannuation allowances, and to 
 the determination of questions by the treasury shall apply in respect of additional 
 allowances and gratuities under this act in like manner as they apply in respect of 
 superannuation allowances under those acts. 
 
206 CIVIL-SBEVICE RETIREMENT IN GREAT BRITAIN. 
 
 V. A warrant framed by the treasury under section one of the superannuation act, 
 1887, with respect to the grant of gratuities and allowances to civil servants injured 
 in the discharge of their duty may be revoked or from time to time varied by a fresh 
 warrant, and every such warrant shall be laid before Parliament. 
 
 VI. (1) It shall be lawful for the treasury to grant to any person retiring or removed 
 from the public service in consequence of the abolition of his office, or for the purpose 
 of facilitating improvements in the organisation of the department to which he 
 belonged, by which greater efficiency and economy can be effected, such special allow- 
 ance or allowances by way of compensation as on a full consideration of the circum- 
 stances of the case seem to the treasury to be a reasonable and just compensation for 
 the loss of office, but not exceeding in any case the amount which a civil servant would 
 be entitled to or which might be granted to a civil servant if he retired on the ground 
 of ill health. 
 
 (2) The foregoing provision shall apply only to persons entering the service after 
 the date of the passing of this act, and shall apply to those persons in substitution for 
 section seven of the superannuation act, 1859. 
 
 Nothing herein contained shall affect the application of the said section seven of the 
 superannuation act, 1859, to persons who have entered the service before that date 
 or the practice of the treasury thereunder. 
 
 VII. (1) The treasury may from time to time make rules for the purpose of carrying 
 this act into effect and for making such adaptations and modifications of the provisions 
 of the superannuation acts, 1834 to 1892, and other enactments relating to superannua- 
 tion allowances and pensions of persons who have served partly in the civil service 
 and partly in some other service entitling them to a pension as may be necessary for 
 adapting those provisions to the provisions of this act, and for altering the rules made 
 by the treasury under the superannuation act, 1892. 
 
 (2) Before any rules made under this section come into force a draft thereof shall 
 be laid before each House of Parliament for a period of not less than thirty days during 
 the session of Parliament, and if either of those houses of Parliament, before the expi- 
 ration of those thirty days, presents an address to His Majesty against the draft or any 
 part thereof, no further proceedings shall be taken thereon, without prejudice to the 
 making of any new draft rules. 
 
 VIII. This act may be cited as the superannuation act, 1909, and shall be read aa 
 one with the superannuation acts, 1834 to 1892, and those acts and this act may be cited 
 together as the superannuation acts, 1834 to 1909. 
 
CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 
 
 207 
 
CONTENTS 
 
 Civil-service retirement in New Zealand, by Herbert D. Brown: Page. 
 
 Summary 211 
 
 Pension system, 1858 to 1871 212 
 
 Pension act of 1856 213 
 
 Pension act of 1858 (the first general pension) 215 
 
 Reorganization of civil service and pension act of 1866 215 
 
 Abolition of civil pensions in 1871 215 
 
 Com.pulsory savings scheme, 1886 to 1893 217 
 
 Reasons for adoption of the scheme 217 
 
 Need of a proper superannuation system recognized 220 
 
 Civil-service insurance act, 1893 222 
 
 Main features of the act 222 
 
 Purpose of the act : 223 
 
 Debate on the bill in Parliament 224 
 
 Criticism of the act 226 
 
 Public service superannuation act. 1907 228 
 
 Superannuation bill first introduced, 1906 228 
 
 Collection of statistics of civil service made by actuary 229 
 
 Cost of proposed bill based on statistics collected 233 
 
 Consideration of how cost might be met 234 
 
 Recommendation of actuary of how cost should be met 238 
 
 Amendments to the proposed bill recommended by actuary 239 
 
 Advantages of a superannuation system cited by actuary 240 
 
 Superannuation bill of 1907 introduced 240 
 
 Actuary made only estimate of cost, instead of calculation 242 
 
 Main features of the law enacted 244 
 
 Operation of law, first six months 246 
 
 Public attitude in regard to law 247 
 
 Teachers', police, and government railways superannuation acts consoli- 
 dated 249 
 
 Comparison of benefits under various government schemes 250 
 
 Report on the teachers' fund 251 
 
 Report on the police fund 252 
 
 Report on the government railways fund 253 
 
 Conclusions 254 
 
 Appendix : 
 
 Public service superannuation act, 1907 257 
 
 35885— S. Doc. 290, 61-2 14* 209 
 
CIVIL SERVICE RETIREMENT IN NEW ZEALAND. 
 
 BY HERBEET D. BROWN. ^ 
 
 SUMMARY. 
 
 The Government of New Zealand has proceeded with great delib- 
 eration and conservatism in working out the problem of retiring its 
 civil employees. It has profited to a marked degree by the experience 
 of others, and has sought to avoid mistakes that have wrecked the 
 schemes of other countries. 
 
 A system of granting straight pensions and gratuities out of the 
 Treasury was begun in 1858 and continued until 1871, when it was 
 abolished, chiefly on the ground of expense. 
 
 Then for thirteen years the Government did nothing for its aged 
 employees except pay "compensation" (they called it "compensa- 
 sation for loss of office") to the extent of one month's salary for 
 every year that an employee had been in the service. 
 
 In 1886, with a view to the reduction of public expenditures, an 
 act was passed which required all civil employees to save 5 per cent 
 of their salaries. This amount was deducted from their salaries and 
 handed over to the public trustee, an official of the New Zealand Govern- 
 ment, whose functions and office may be called peculiar to that colony, 
 who invested it and returned it with interest to the employee, when 
 the latter left the public service. 
 
 This savings arrangement proving inadequate as a superannuation 
 measure in the case of employees who lived a long time after retire- 
 ment, it was abolished in 1893, and New Zealand adopted for civil 
 employees a system of compulsory insurance through the Government 
 Life Insurance Office. The premiums were deducted from salaries, 
 according to a sliding scale. The employees insured themselves for 
 each of two alternative benefits — for a death benefit in case of death 
 before reaching the age of 60 years, or for an annuity if living at that 
 age. 
 
 Compulsory insurance, owing to the heavy premiums necessary 
 to provide both benefits, proved as unsatisfactory a provision for 
 retirement as compulsory savings had been. All classes of govern- 
 ment employees were discontented, but after 1893 no retirement leg- 
 islation affecting employees of the "Public Service" proper was passed 
 until 1907. Measures affecting special classes of government employ- 
 ees such as the police force, the railway officers, and teachers were 
 
 «Mr. Brown desires to give credit to Harriet Connor Brown for valuable assistance 
 in the collection of historical data. 
 
 211 
 
212 CIVIL-SEEVICE EETIREMENT IF NEW ZEALAND. 
 
 passed, however, in the intervening years. The superannuation laws 
 enacted were as follows: 
 
 In 1899, the Police Provident Fund Act, subsequently consolidated 
 into "The Police Force Act, 1908." In 1902, the Government Rail- 
 ways Superannuation Fund Act, subsequently consolidated into 
 "The Government Railways Act, 1908." In 1905 the Teachers' 
 Superannuation Fund Act subsequently consolidated into "The 
 Public Service Classification and Superannuation Am^endment Act, 
 1908." In 1907 the Public Service Superannuation Act subsequently 
 consolidated into "The Public Service Classification and Superan- 
 nuation Act, 1908.' 
 
 It is reported (by the American consul-general at Auckland, New 
 Zealand) that these separate schemes will no doubt soon be amal- 
 gamated in one uniform system. They are all established on a 
 contributory basis, the employees paying into the fund a percentage 
 of salary which varies according to age at entrance into the service, 
 and the Government paying £20,000 ($97,330) yearly to the public- 
 service fund, besides whatever more may be necessary, £7,000 
 ($34,066) to the teachers' fund, and guaranteeing to make up any 
 deficiency in all other schemes. The pensions granted are based on 
 length of service and average salary during the last three years. 
 Payment of pensions on services rendered prior to the adoption of 
 this plan is made entirely by the State. The State contributes some- 
 thing also to the pensions of those whose service begins after the 
 adoption of the plan, since the benefits promised under the plan are 
 more generous than could be provided by any feasible deduction 
 from salary. {"') 
 
 THE PENSION SYSTEM, 1858 TO 1871. 
 
 The changes made by New Zealand from time to time in its method 
 of providing for superannuated employees reflect the material and 
 economic progress of the colony. 
 
 The history of New Zealand as a British colony dates from the 
 year 1840. From 1840 to 1853 New Zealand was governed as a 
 Crown colony, all the real authority of government resting with 
 officials in the Colonial Office in England. A governor, an executive 
 council, and a legislative council held office in New Zealand, but 
 all were appointed directly by the Crown. In 1852 the imperial 
 Parliament passed an act which conferred on the colony a constitu- 
 tion. Popular elections were held in 1853 and the first colonial par- 
 liament met on May 24, 1854. Those who had drawn up the consti- 
 tution had failed to provide for what is called "responsible govern- 
 ment," by which is meant a government in which "Ministers, the 
 responsible officers of the Crown, assume and resign office practically 
 
 o See page 254. 
 
CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 213 
 
 at the will of a majority of the representatives of the people." The 
 constitution of 1852 contained no provision for bringing the ministry 
 to an end by vote of the House, and the Colonial Office in England 
 had sent no directions on this point. All the newly elected members 
 of the House of Representatives could do, therefore, was to make 
 speeches, the real power being still vested in the old executive council. 
 The acting governor was influenced by members of that same execu- 
 tive council, who were not disposed to give up their authority and 
 privileges. The House presented an address to him, urging him to 
 take measures to establish responsible government, but he replied 
 that the act conferring the constitution contained nothing to sanction 
 such a course and that he was unable to do anything without the 
 permission of England. He agreed, however, to add three members 
 of the House to the executive council, the three patent members of 
 that body expressing themselves as willing to retire, on condition 
 that suitable pensions were provided them. Three members of the 
 House were accordingly sworn in as members of the executive council 
 and therefore as responsible advisers to the governor, but after a few 
 weeks' trial resigned. They assigned as reason for their resignation 
 the fact that the acting governor had not called upon the patent 
 members of the executive council to re&ign. He, in his turn, defended 
 his action by saying that no pensions bill had been passed and it was 
 impossible for him to turn his old advisers adrift. A conflict ensued 
 between the administration and the assembly which resulted in a 
 victory for the assembly. A bill was passed for the establishment of 
 a ministry responsible to the House, and it was approved by the 
 Home Government in a dispatch written by the secretary of state on 
 December 8, 1854, but on condition, as will be seen from the following, 
 that the retiring officials be pensioned at the expense of the colony : 
 
 I have taken the earliest opportunity of informing you that Her 
 Majesty's Government have no objection whatever to offer to the 
 establishment of the system known as "responsible government" in 
 New Zealand. They have no reason to doubt that it will prove the 
 best adapted for developing the interests as well as satisfying the 
 wishes of the community. Nor have they any desire to propose 
 terms or to lay down restrictions on your assent to the measures which 
 may be necessary for that object, except that of which the necessity 
 appears to be fully recognized by the General Assembly— namely, the 
 making provision for certain officers who have accepted their offices 
 on the equitable understanding of their permanence, and who now 
 may be liable to removal. (") 
 
 Pension Act of 1856. 
 
 At the first session of the second Parliament, which met on April 
 15, 1856, the first business taken up in both the House and legislative 
 council was, accordingly, the formation of a responsible ministry. 
 
 o New Zealand Parliamentary Debates, Second Parliament, 1856-1858, p. 13. 
 
214 CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 
 
 It was stated in Parliament that the great boon of responsible govern- 
 ment could be secured only at some expense to the colony; that is, 
 by payment of pensions to existing holders of office in order to allow 
 of the new executive taking the practical administration of affairs. 
 It was explained that the governor, in imposing that condition, was 
 the mere agent of imperial authority and acting according to in- 
 structions from which he could not depart. (") 
 
 The first business before Parliament, therefore, was consideration 
 of the proposed pensions bill, a measure which provided for buying 
 off the old officials who had been appointed to their positions by the 
 ruling powers in England. These were only three in number, the 
 colonial secretary, the colonial treasurer, and the attorney-general, 
 but pensions were not granted to them without debate, as it was con- 
 tended by certain members of the House that these officials had not 
 administered their offices so as to conduce to the welfare of the colony 
 but the contrary, and that "retiring officers should be treated ac- 
 cording to their deserts." Doctor Featherston, member from the 
 city of Wellington, declared: 
 
 If, too, these pensions were granted, where was the House to stop ? 
 Ought not every individual who had been or was liable to be dis- 
 missed to be provided for in the same way? If these officials had 
 any claim it was against the Colonial Office, whose servants and 
 tools they had been; and, if there was one doctrine against which 
 more than another the House was called upon to protest it was that of 
 vested interests. If not guarded against, it would creep in at every 
 point, till it imposed a burden that would be absolutely ruinous. C") 
 
 In reply to this Mr. Sewell said that. 
 
 His honorable friend, the member for Wellington city, had exag- 
 gerated the question before them by treating it as if it were, or as if 
 it comprehended, some important general principle whether pensions 
 should be granted to all officials on their having to retire on the 
 introduction of responsible government. In voting for these pen- 
 sions he should not vote for any such principle, and he had never 
 placed it before the House in that light. Instead of placing the 
 question on stilts in this way — instead of making it a grand question 
 of constitutional principle— he had brought that subject before the 
 House as a motion of practical business, on the ground that liis 
 excellency was under the impression — it might be an erroneous one — 
 that he was bound, as the i^epresentative of the Home Government, 
 to protect the interests of the gentlemen holding these offices, and 
 to insist that, before removing them to make way for responsible 
 officers, some provision should be made for them.C") 
 
 After considerable debate the bill pensioning the three officials was 
 passed, although nearly all who took part in the discussion dis- 
 claimed the notion that ' ' because a man had for many years received 
 a large amount of pubHc money, therefore he should receive a pen- 
 
 "New Zealand Parliamentary Debates, Second Parliament, 1856-1858, p. 13. 
 6 Idem, p. 25. 
 
CIVIL-SEKVICE RETIREMENT IN NEW ZEALAND. 215 
 
 sion on retiring or being displaced," and agreed to the measure 
 merely as a means to an end. 
 
 Pension Act of 1858 (the First General Pension Law). 
 
 Despite Mr. Se well's assertion that the general principle of grant- 
 ing pensions to retiring officials was in no way involved in the passage 
 of the Pension Bill of 1856, we find that only two years later a gen- 
 eral pension system for the benefit of "any one in the civil service 
 except extra clerks" was inaugurated. The Act of 1858 provided 
 for retirement on annuity "in case of incapacity by age, ill-health, or 
 other infirmity after ten years of faithful and diligent service. If 
 the term of service had been ten to seventeen years, the annual 
 allowance was one-fourth of the employee's average salary for the 
 last three years. From seventeen to forty-five years the pension was 
 one-third of such salary plus one-eighty-fourth of such salary for each 
 year of service above seventeen. For forty-five years or more of 
 service the allowance was two-thirds of the said salary. In the dis- 
 cretion of the governor in council, relief up to one year's salary 
 could be granted the widow or family of one dying in the employ of 
 the general Government." 
 
 Reorganization of Civil Service and Pension Act of 1866. 
 
 Under the terms of a civil service act passed in 1866, changes were 
 made in the provisions for grant of pensions to civil employees. 
 This act was designed to provide for the organization, classification, 
 and regulation of the civil service. Government employees were 
 divided into five classes, appointments being made to the lowest 
 class on probation. Examinations were provided, but they were not 
 competitive. Promotion was made to depend on seniority in office, 
 so far as that principle could be followed without detriment to the 
 service, but the governor was authorized to appoint any one to a 
 vacancy if he stated his reasons to the general assembly. Dismissal 
 depended on the will of the executive. The allowance on retirement 
 granted under this bill reflects the influence of the British Superan- 
 nuation Act of 1859. It was fixed at one-sixtieth of the average 
 salary (of the three preceding years) for each year of service, eleven- 
 sixtieths for eleven years' service, twelve-sixtieths after twelve years' 
 service, etc., up to forty-sixtieths, or two-tliirds pay, after forty years 
 or more of service. 
 
 Abolition of Civil Pensions in 1871. 
 
 Those sections of the Civil Service Act of 1866 which provided for 
 pensions were repealed in 1871 as applied to persons coming into the 
 the service after that date; in other words, the pension system as a 
 system was abolished, though pensions continued to be paid to those 
 whom the colony had contracted to pension under the acts of 1858 
 
216 CIVIL-SEEVICE RETIREMENT IN NEW ZEALAND. 
 
 or 1866. The report of the actuary on the prospective superannua- 
 tion bill in November, 1907, shows that there were still 132 retired 
 civil employees on the pension fund at that late day, and 86 pros- 
 pective ones. C'*) The pensions paid in 1906 amounted to over £25,988 
 ($126,471), the gratuities to £8,377 ($40,767), the compensations to 
 £7,792 ($37,920). (^) 
 
 The system was abandoned in 1871 because Parliament saw that 
 the amount paid in pensions, though extremely small, was rapidly 
 increasing proportionately. In eleven years it went up from about 
 £160 ($779) to about £7,400 ($36,012), and there was fear that it 
 might double itself in a very few years. C^) This opposition to the pen- 
 sion system because of its growing expense had undoubtedly unusual co- 
 gency in the year 1871, a memorable year in the annals of New Zealand. 
 There was no money in the treasury for expenditure on future devel- 
 opment, much less on pensions for past services. The total European 
 population of the colony was then only 266,986 in number and the 
 total value of exports only a little over £5,000,000 ($24,332,500), 
 more than half of which was gold. The colony was staggering under 
 the effects of a fierce and devastating war with native tribes. One 
 historian of New Zealand writes: "The characteristic feature in 1871 
 of colonization in New Zealand, as a whole, was stagnation. Industry 
 languished; capital was withheld; property was depressed; employ- 
 ment, except in the gold fields and in their vicinity, was difficult to 
 be obtained; and the scanty population attached to the soil was 
 altogether inadequate to the development of the resources of the 
 country." It is not surprising that the legislature should have 
 regarded with disfavor a system of retiring public officials that 
 promised to make increasing claims on a treasury already bare. 
 
 Another objection urged against the pension system was the fact 
 that it made retrenchment in government work very difficult, a con- 
 sideration that reflects a very interesting phase in the development 
 of New Zealand. The decade of 1870-1880 is especially noteworthy 
 in the history of the islands because of the development during that 
 period of the public works policy, which resulted in the unification 
 of the colony and the doubling of the population. The public debt 
 amounted at that time to about £7,000,000 ($34,065,500) and a large 
 part of it had been spent in public works, but it had been raised on 
 the credit of the provincial legislatures only. This experience had 
 been sufiicient to teach legislators that flexibility in the civil service 
 was very advantageous when the Government was carrying on a 
 vigorous system of public works. Frequently the exigencies of the 
 task required that the service be temporarily increased or decreased. 
 
 « Report on Public Service Superannuation Bill, 1906. Minutes of evidence, p. 6. 
 *^ Idem, Appendix, p. 24. 
 
 c Second Report of Royal Commission on Superannuation in the Civil Service, 1903. 
 Minutes of evidence, p. 116. 
 
CIVIL-SEKVICE RETIREMENT IN NEW ZEALAND. 217 
 
 Any system which seemed to interfere, either legally or morally, with 
 a rather rapid reduction in the number of civil employees, when 
 necessary, was unpopular with members of the legislature. It was 
 natural, therefore, when entering on an enlarged policy of public 
 works that they should be inclined to express their disapproval of a 
 system which might hamper the effective execution of that policy. 
 
 It was contended also by some members that it was the business of 
 the Government to pay adequate salaries, but not to support its em- 
 ployees in old age. This theory of independent contractual relations 
 prevailing in debate, the pension system was abandoned, saving the 
 rights of existing employees. Lump sums were to be bestowed on 
 retirement either as gratuities in recognition of long service or com- 
 pensation for loss of office, but no more yearl}^ pensions were prom- 
 ised to those entering the service. 
 
 COMPULSORY SAVINGS SCHEME, 1886 TO 1893. 
 Reasons for Adoption of the Scheme. 
 
 Great industrial changes took place in New.Zealand between 1871, 
 the date of the abolition of the civil pension system, and 1886, the 
 year of the next legislation affecting civil employees. At the close of 
 the decade of road, railway, and bridge making, New Zealand found 
 itself with a great public debt, four thousand miles of telegraphs, 
 eleven hundred miles of railways, and innumerable new roads and 
 bridges. A period of profound business depression followed, in which 
 the government service suffered with the rest of the colony. Even 
 the gratuities and compensations granted civil employees were felt to 
 be too great a charge for the overburdened public to bear. When, 
 therefore, the civil-setvice reform bill was drawn up in 1886, a clause 
 was inserted providing that civil employees should be required to set 
 aside 5 per cent of their salaries, which should be returned to them 
 with interest on their retirement from office. The compulsory sav- 
 ings scheme was purely a move in. the interests of the taxpayer. It 
 was to be supposed, of course, that the employee who received his 
 savings in a lump sum, on leaving the service, would be less disposed 
 to ask for a gratuity or compensation than the one who found himself 
 entirely without funds on retirement from office. 
 
 This reform bill was intended to supersede the Civil Service Act of 
 1866, which was supposed to give the Government control of the civil 
 service, but which had remained a dead letter on the statute books. 
 The reform measure made explicit provision for the appointment, 
 classification, dismissal, and retirement of civil employees. The 
 clause providing for compulsory savings read as follows : 
 
 Out of the salary of every civil servant hereafter appointed there 
 shall be deducted the sum of five per centum per annum, which said 
 sum shall be paid into a separate fund to the public trustee, to be 
 
218 CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 
 
 invested at interest on such security as the PubHc Trust Office shall 
 approve. It may invest the same along with other sum or sums, but 
 a separate account shall be kept for the amount paid to the credit 
 of each such officer. (") 
 
 It should perhaps be explained that the public trustee in New 
 Zealand is an officer who administers all trusts placed in his hands 
 under the PubUc Trust Act of 1872. The functions of the public 
 trustee are very extensive, and include the care of estates of intes- 
 tates, of lunatics, and of the natives of the colony, as well as of 
 ordinary people. The object of the act was to relieve persons from 
 being obliged to burden their friends with the responsibility of acting 
 as trustees. Many owners of property avail themselves of the act. 
 The Public Trust Officer never dies, never leaves the colony, never 
 becomes insolvent. The office enjoys great popularity, and no fault 
 could be found with the provision for placing the savings of the civil 
 employees in the hands of the public trustee to be administered in 
 the same way that he administered other trust funds. He invested 
 it in ways he thought best, subject to the provisions of the act, lend- 
 ing it to the Government, to municipalities, and harbor boards, and 
 investing it in mortgages. When the employee left the civil service 
 the amount of his accumulations was returned to him with interest. 
 
 This new method of providing for retiring officials met with the 
 general approval of the legislature. The object of the bill was plainly 
 declared to be retrenchment in the civil service. Mr. Cowan, a mem- 
 ber of the House, said : 
 
 This bill is the carrying-out of a pledge made by the premier some 
 time ago, that he would endeavor to reduce the cost of the civil 
 service by from £30,000 to £40,000 ($145,995 to $194,660). I com- 
 mend him for his endeavors, and I believe that, after this bill is 
 amended in committee, it will have an effect, and a considerable 
 effect, in that direction. (^) 
 
 Very httle opposition was expressed, and that was mild. Mr. 
 Conolly, of the House, complained that the clause seemed to mean a 
 general reduction of salaries. Said he: 
 
 It must be remembered that it amounts to a reduction on all 
 salaries of 5 per cent. I do not say that there is anything wrong in 
 this provision, making a reduction in salaries by way of securing a 
 pension or retiring allowance, and I believe, as the premier says, it is 
 adopted in many large concerns. I think it exists in some of the 
 English railway companies, and I do not think it is a bad plan at all. 
 But I say the immediate effect is to reduce every man's salary by 5 
 per cent, and that, to those who have had no increase for a number of 
 years is a species of injustice. (*=) 
 
 oNew Zealand Parliamentary Debates, vol. 55, p. 372. 
 6 Idem, p. 381. 
 cidem, p. 376. 
 
CIVIL-SEEVICE RETIREMENT IN NEW ZEALAND. 219 
 
 "In the legislative council Mr. Bonar contended that the provision 
 should be amended so as to enable officers who had made arrange- 
 ments with a life insurance office to be exempt from the payment of 
 the 5 per cent, as they would still have to keep up their premiums. 
 
 Mr. Hatch of the House wished to limit the deduction to salaries 
 above a certain amount, but held that the civil service was too well 
 treated as it was, and that the principle of deductions was, therefore, 
 quite proper in the interest of the colony. Said he : 
 
 I do not see how it [the deductions] can be taken off salaries of £40 
 to £50 ($195 to $243) a year; but when the salary rises to, say, £150 
 ($730) a year there is no reason why the recipient of that salary 
 should not pay to a fund to provide something for himself when he 
 retires from the service. In fact, I do not see why we should not 
 bring the civil service down to the position of the merchant service. 
 If an employee who has been a long time in the latter service gets a 
 present of £100 or more on retiring, his employer considers that he has 
 been very liberal; but we see parties leaving the former service who 
 have been in the receipt of £500 or £600 ($2,433 or $2,920) for years, 
 and who get their thousand pounds or more when they retire. The 
 sooner we bring the civil service to the position of the merchant service 
 the better will it be for the colony, and the better we shall be served. C*) 
 
 In answer to this, another member of the House, Mr. Gore, said : 
 
 I think the principle of clause 11 is very good. A previous speaker 
 has said that the civil servants are very well able to look after them- 
 selves — and no doubt any man of fair education and good common- 
 sense is able to take care of himself. But we have a duty to our- 
 selves, and, although there may be many of the civil servants able to 
 take care of themselves, there may be many others who are not provi- 
 dent enough to do so. I am not one of those who wish to see salaries 
 reduced beyond what is a fair remuneration for a fair day's work. I 
 think there are many of them who are paid too little, and possibly 
 there may be some who are paid too much. Q') 
 
 With this limited discussion the compulsory-savings clause in the 
 civil service reform bill was passed and became a law. While it 
 appears to have been satisfactory to a certain extent, it was apparent 
 that, for the good of the service, other or additional legislation was 
 necessary. It afforded no adequate provision for employees who 
 might live many years after retiring from the civil service. The 
 obvious complement of the scheme, a system of deferred annuities 
 bought with the savings of the employees, is said to have been re- 
 garded with distrust, owing to the fact that New South Wales had 
 inaugurated a scheme with some such provisions in 1884, and while 
 the faults of that plan were not generally understood, nor the reasons 
 for its failure, it was believed in New Zealand, a few years after its 
 inception, that the fund was hopelessly insolvent. ('=) 
 
 oNew Zealand Parliamentary Debates, vol. 55, p. 376. 
 & Idem, p. 378. 
 
 c Report of Royal Commission on Superannuation in the Civil Service. 1903. 
 Minutes of evidence, p. 116. 
 
220 civil-seevice eetirement in new zealand. 
 
 Need of a Proper Superannuation System Recognized. 
 
 The way in which thoughtful students of pohtical institutions in 
 New Zealand took note of the civil service's need of a proper super- 
 annuation scheme and the inadequacy of the existing law is weU 
 shown in the last chapter of Mr. William Gisborne's work entitled 
 The Colony of New Zealand, published first in 1888, only two years 
 after the passage of the civil service reform bill. As Mr. Gisborne 
 had been previously a member of the House of Representatives and a 
 Responsible Minister, his words may be taken as those of one who 
 spoke with authority. Said he: 
 
 The civil service is an important factor in the work of representa- 
 tive institutions. Under the system of responsible government, 
 which, in the case of British colonies is the outcome of those institu- 
 tions, the civil service should, of course, be adapted to that system. 
 It is very questionable whether under any system a civil service 
 should, in the public interests, be in its personal composition change- 
 able according to the changes of political parties in power. But under 
 responsible government such periodical changes of persons employed 
 in the civil service would be absurd, and most mischievous. Respon- 
 sible government means that Ministers, the responsible officers of the 
 Crown, assume and resign office practically at the will of a majority 
 of the representatives of the people. Necessarily, therefore, at cer- . 
 tain times, often at no distant intervals, ministers undertake the 
 charge of executive departments, with the administrative work of 
 which they are more or less unacquainted, and when, as during 
 session, their time is absorbed by parliamentary work. It is indis- 
 pensable then that there should be in each department permanent 
 public servants, who are fully acquainted with their official work, and 
 from whom the new ministers can at once obtain information neces- 
 sary both for political and administrative purposes. Moreover, these 
 permanent officers continue to carry on uninterruptedly the routine of 
 public business. It is also necessary for the public good that these 
 officers should be disconnected from political partisanship, and be 
 loyal in respect of public business to each successiv-e ministry. They 
 should not be disqualified from voting at elections, but they certainly 
 should not be allowed to take up active political positions in other 
 respects. It is only in these ways that, under a system of responsible 
 government, the civil service can become adapted to that system, and 
 the public interests in all administrative work be best promoted. 
 
 These indispensable conditions of a civil service under a system 
 of responsible government give a specialty to that service, and render 
 its treatment one altogether distinct from that applicable to the 
 private staff of a mercantile or financial establishment. Those who 
 argue that Ministers of the Crown should be able to deal with the 
 appointment, removal, and promotion of pubhc servants just in the 
 same way that the head of a firm would deal in those respects with his 
 clerks, forget that those Ministers are only ephemeral representatives 
 of political parties, and that they are dealing with matters not per- 
 sonally their own, while heads of firms are in both respects on a 
 totally distinct footing. The adoption in the civil service of the 
 practice in these respects by private firms would be disastrous to 
 
CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 221 
 
 public interests. Civil servants are not the personal servants of the 
 Ministers of the day, but are the servants of the public, independently 
 of political parties. It is in the public interests that these servants, 
 while they are subject to rules which insure discipline and abstinence 
 from active participation, beyond voting, in political struggles, 
 should have held out to them some reasonable prospect of continuity 
 of office, except in cases of misconduct, and thus secure to the public 
 the growing advantage of their cumulative knowledge and experience. 
 In this view it is not the Ministry, and it is not the civil service itself, 
 which should be specially consulted, but the sole consideration should 
 be what is most to the permanent advantage of the public as a whole. 
 Accordingly, the problem is how, under the circumstances, public 
 administration can be best conducted, and at the lowest cost com- 
 patible with that condition. Responsible government makes this 
 provision in the case of high political office ; the question now is what 
 to do in the case of the rank and file of the official army. 
 
 The limitation of the number employed, the appointment of 
 qualified persons, and the appropriation of salaries would rest with 
 Ministers of the Crown and with the legislature, respectively. The 
 proper organization of the civil service would indirectly, to some 
 extent, affect these subjects, and would directly make provision on 
 other subjects which essentially involve the economy and efficiency 
 of public administration. Shortly, what is required, and what may 
 be reasonably anticipated from proper organization, is to attract 
 good men to the service, and to keep them there. For this purpose 
 a system based on definite conditions which would answer that two- 
 fold object should be devised and adopted under legislative sanction. 
 Vague, fluctuating, capricious treatment of public servants is repug- 
 nant to proper organization. Promiscuous patronage, arbitrary 
 removal, and spasmodic rushes into indiscriminate retrenchment 
 tend only to discouragement of good service, to the infliction of 
 injustice, and, in the end, to the increase of expenditure and to the 
 serious injury of public interests. 
 
 The following principles governing the constitution and conduct 
 of the civil service in New Zealand appear to me to be vital: 
 
 First, the persons first appointed should have successfully passed 
 either a competitive or a standard educational examination. 
 
 Secondly, there should be in the service classification which would 
 allow of gradual promotion in rank and in pay taking place. 
 
 Thirdly, provision should be made for reasonable allowance in 
 cases of removal from office on public grounds other than those of 
 misconduct. 
 
 Fourthly, pensions on a graduated scale should be provided, 
 either by general contribution from civil servants or by the State, 
 for cases of retirement from illness, infirmity, or old age. 
 
 Fifthly, proper regulations should be made for the conduct and 
 discipline of the civil service, and for the prohibition of civil servants 
 taking an active part in politics beyond voting at elections. 
 
 It is, of course, impossible to hope that rules can altogether 
 provide for all possible contingencies. The object of the rules is to 
 assert general principles which would lessen as much as possible 
 capricious or fluctuating exercise of authority over civil servants, 
 would subject them to equitable treatment, and thus tend to tlic 
 
222 CIVIL-SEEVICE RETIKEMENT IN NEW ZEALAND. 
 
 greatest public advantage. At the same time it must be antici- 
 pated that from time to time exceptional cases will occur, which 
 must be dealt with exceptionally on their own merits. 
 
 Looking at the present state of the New Zealand civil service, 
 I regret that, owing to the absence of practical recognition of the 
 foregoing principles, this state has been, and still is, lamentable, not 
 only on account of the individuals directly concerned, but also on 
 account of the public interests. It is in the latter view that this 
 subject should be considered, though it is impossible to refrain from 
 sorrow that a service containing a great number of able, faithful, 
 and old public servants should be unjustly treated and undeservedly 
 abused. The civil service seems to be kept as the scapegoat of the 
 sins and misfortunes of the colony; and its home is the wilderness. 
 So lately as September 10, 1890, Sir Frederick Whitaker, who has 
 been in the colony since its foundation, and has continuously since 
 1852 held high political position, stated, in his place in the legis- 
 lative council, that he had for many years past carefully watched 
 the civil service here and in other countries, and had come to the 
 conclusion that clearly the civil service of New Zealand was the 
 worst paid and the worst treated in the British dominions. This 
 corroboration of my view is the more strong because Sir Frederick 
 Whitaker has had unrivaled opportunity of forming a judgment @n 
 the subject and his impartiality can not be questioned. I am glad 
 to observe that recently a civil-service association has been formed. 
 So long as this body acts, as it declares its intention to do, in the 
 furtherance of its public interests, in due subjection to the law and 
 the regulations of the service, it may be reasonably hoped that this 
 association may do much legitimately to improve the status of the 
 service and to strengthen its claims to just consideration. This 
 step, and the fact that many leading public men in New Zealand 
 are in favor of the general principles which I have mentioned in 
 relation to the civil service, and that in the latest session the House 
 of Representatives sanctioned classification in the post and telegraph 
 department of the service, hold out a prospect that a better time is 
 coming, and that, in the interests of the public at large as well as in 
 its own, the New Zealand civil service may be placed on a proper 
 footing of organization and efficiency. (") 
 
 CIVIL SERVICE INSURANCE ACT, 1893. 
 
 Main Features of the Act. 
 
 The compulsory savings arrangement having been found inadequate 
 as a retirement measure for the civil service, the Civil Service Insur- 
 ance Act, a combined assurance and annuity scheme for the benefit of 
 civil servants, was passed in 1893 and made compulsory on all new 
 entrants into the service under forty years of age. This provided that 
 in return for monthly deductions, amounting to about £5 ($24.33) 
 annually for every £100 ($486.65) of salary, the Government Life 
 Insurance Department should contract to give a uniform initial insur- 
 
 oThe Colony of New Zealand, by William Gisborne, 1891, pp. 340-344. 
 
CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 223 
 
 ance of £100 ($486.65), increasing with the salary until the age of 60 
 was attained, and after that age an annuity varying with the age at 
 entry. Those who elected to pay a small extra premium could have 
 the assurance continued beyond age 60 until death. Employees who 
 had been appointed under the act of 1886 and had funds accumulated 
 to their credit in the hands of the public trustee, or men of a certain 
 age whom it would have been hard to force to insure in this way, were 
 allowed to elect whether they would go on under the old system of 
 1886 or begin the new system of compulsory insurance under the act 
 of 1893. 
 
 Purpose of the Act. 
 
 The general purpose of the act was set forth by Mr. Ward, a member 
 of the House, on moving the second reading of the bill. Said he: 
 
 Under "The Civil Service Reform Act, 1886," all persons appointed 
 to the civil service were required to deposit with the public trustee 5 
 per cent of their salaries. Such amount was allowed to accumulate 
 at interest, and remain in the Public Trust Office till the officer affected 
 left the service. He thought it would be conceded that such an ar- 
 rangement as that was a wise one, and had the effect of causing thrift 
 to be practiced by those who joined the service. But, in the opinion 
 of the Government, the existing measure did not go far enough. It 
 contained nothing in the nature of an insurance or a pension in old 
 age, and the Government were of opinion that a scheme of more 
 importance should be adopted, so that there might not only be pro- 
 vision for a civil servant's widow in the event of his death, but that 
 civil servants themselves should have an assured income to look for- 
 ward to after retiring from the service. The Government attach 
 great importance to the fact that this scheme would be self-support- 
 ing. The amount necessary would be paid by the civil servants, 
 except in one particular. In the event of incapacity, arising from no 
 fault of the officer, then a retiring compensation of one month's salary 
 for each year is provided for ; and there could be very little likelihood 
 of anything in the shape of a large sum of money being required in 
 this way. He might say that those who were being provided for 
 under the measure would be treated in all respects the same as out- 
 siders who found it desirable to patronize the Government Insurance 
 Office. In fact the ordinary procedure of the office would be carried 
 out by that department in dealing with insurances under this act. 
 The act would only deal with those appointed under the Civil Service 
 Reform Act of 1886. Those appointed prior to that act were entitled 
 either to a pension or to compensation for loss of office. Those ap- 
 pointed since the act referred to were to retire at sixty years of age; 
 and he might say that provision was made in the bill to enable those 
 who might receive a pension in the event of their retiring at sixty years 
 of age to receive also the full amount of insurance payable to them 
 even if death took place after sixty. There was no amount stated in 
 the bill as actually payable in the event of death, but the intention 
 was to insure one year's salary. * * * C*) 
 
 o New Zealand Parliamentary Debates, vol. 79, p. 191. 
 
224 civil-seevice ketieement in new zealand. 
 
 Debate on the Bill in Parliament. 
 
 In the debate which followed several objections to the bill were 
 brought forward. It was asked whether those of the civil employees 
 who had already insured their lives would have, under this bill,, to 
 effect another insurance, and it was explained by Mr. Ward that they 
 would not be exempted if already insured in the government office 
 or elsewhere, as the new insurance with that office was to be merely 
 a variation of the compulsory savings arrangement under the Public 
 Trust Office, and intended to take its place. 
 
 Several members expressed alarm at the idea of civil employees 
 being brought under the government insurance scheme, fearing that 
 the standard of health among them might be lower than among other 
 policy holders. Although civil employees were required to pass a 
 medical examination before joining the service, it was feared that the 
 health of many might have deteriorated since such examination and 
 the interests of other policyholders would therefore be jeopardized, 
 if such persons were accepted by the Life Insurance Department on 
 terms other than those on which ordinary insurers were admitted. 
 An interesting section in the act gave the government power to 
 bring in certain classes of people under the terms granted to civil 
 servants, provided two-thirds of their number asked for it. The 
 classes of Government employees thus privileged were — 
 
 (1) All members of the police force. 
 
 (2) All school-teachers under the "Education Act, 1877." 
 
 (3) All women and girls employed in the telegraph or telephone 
 service of the Government. 
 
 (4) All persons permanently employed in the Government printing 
 office. 
 
 (5) All housekeepers, messengers, and gardeners in the permanent 
 employment of the Government. 
 
 (6) All wardens of prisons, lunatic asylums, or sanitarium attend- 
 ants, criers of court, bailiffs, post-office distributers and telegraph 
 messenger boys, light-house keepers, boatmen, laborers, and other 
 persons in the permanent employment of the Government. 
 
 (7) All clerks, artisans, workmen, and other persons in the tem- 
 porary employment of the Government. 
 
 (8) Officers, noncommissioned officers, and men of the defense 
 force. 
 
 It was feared by some that to admit such bodies of public em- 
 ployees en masse into the privileges of the Government Life Insurance 
 Department was an unwise procedure. The reply to these objections 
 made by Mr. Ward in support of the bill, which voiced the view that 
 eventually prevailed, is recorded as follows: 
 
 He might say at once that, in the event of an officer who was 
 desirous of coming under this measure being in a very bad state of 
 
CIVIL-SEE VICE RETIREMENT IN NEW ZEALAND. 225 
 
 health, and shortly expected to die, he would not be allowed to trans- 
 fer, because the Government Insurance Department could not be 
 expected to have its benefits shared by persons who were really known 
 to be in such a state of health that no office would accept them; and 
 that was only fair and proper. Upon the whole, the Government 
 Insurance Department would accept without fresh medical certifi- 
 cates the whole staff of any department that applied to come under 
 the bill, for the simple reason that every officer who now entered the 
 civil service had to obtain a medical certificate before he was allowed 
 to come in, and it was within the knowledge of officers that there 
 were candidates refused entirely on the score of weak health. That 
 being so, he thought it might be accepted pretty generally that the 
 bulk of the civil servants of New Zealand were in very excellent 
 health. He could only say, speaking from a short experience of the 
 present system, that there had not been many cases of death. How- 
 ever, this scheme had received the very close attention of the Gov- 
 ernment Insurance Department, and they found that, provided the 
 scheme were made to embrace a whole department, the basis would 
 be so broad that they would be quite justified in taking the bulk of 
 these people in. * * * It was not desirable, if a few officers alone 
 applied, to admit them, as the honorable gentleman had indicated. 
 The very thing which other honorable members were so anxious to 
 prevent might then possibly take place. Neither ought they to admit 
 cases that would be refused by other offices on the score of health. 
 The safety of the thing consisted in the officers of any department 
 coming in in a body. This was a very important point, and he might 
 say at once that the Government would not alter the bill in this 
 respect. He felt sure the officers of the departments would be very 
 glad to take advantage of these provisions, and, by obtaining the 
 two- thirds majority, they could, as a body, come under the act. 
 
 * * * ^o\ 
 
 It should be explained that the New Zealand Government Life 
 Insurance Department had been established in 1869, at a time when 
 the failures of two well-known British offices had drawn public atten- 
 tion to the need of greater security in life assurance. The manage- 
 ment of the department is vested in an officer called ''The Govern- 
 ment Insurance Commissioner," who is appointed by the governor on 
 the recommendation of the Minister of the day. The department is 
 conducted almost exactly on the same principles as those generally 
 adopted by private mutual life insurance offices. All the usual classes 
 of policies are issued to those who can pass the customary physical 
 examination, and the colony is vigorously canvassed by traveling 
 agents in search of new business. 
 
 The people of New Zealand took great interest in the department 
 from the start. It has easily distanced all competitors. Its life- 
 insurance business is almost as much as that of all of its ten. com- 
 petitors together. The people are said to prefer the government 
 insurance because it has the guaranty of the Government behind it, 
 
 a New Zealand Parliamentary Debates, vol. 79, pp. 194, 195. 
 35885— S. Doc. 290, 61-2 15* 
 
226 CIVIL-SEKVICE EETIREMENT IN NEW ZEALAND. 
 
 because the rates are lower than in ordinary private companies, be- 
 cause its pohcies are incontestible and nonforfeitable, and because 
 the profits of the business go to the insured. This state life insurance 
 was not compulsory in the beginning for any class of citizens, but the 
 act of 1893 made it compulsory for civil employees under forty years 
 of age in lieu of a civil pension scheme. In case of leaving the public 
 service an employee could surrender his policy and get a surrender 
 value. Under no condition had he to forfeit the surrender value of 
 his pohcy, even if dismissed for misconduct. The insurance depart- 
 ment has from the first made the best possible terms to members of 
 the civil service, so that they have enjoyed an advantage, in that 
 respect, over the outside public. The money for the premiums is 
 collected in the cheapest and easiest manner possible. It is simply 
 deducted from the salaries by the proper government officials in the 
 course of keeping their routine accounts and it is then handed over 
 in a lump sum to the Government Life Insurance Department, which 
 can thus easily afford to make especially favorable rates to the civil 
 employees, since it has no commissions to pay for securing the 
 business. 
 
 Criticism of the Act. 
 
 The Insurance Act of 1893 does not seem to have been sufficient, 
 however, as a substitute for a retirement plan. It can easily be seen 
 that the price of endowment assurance is so high as to make it of 
 little use to the civil employee of small salary as a means of furnish- 
 ing him with an adequate retirement allowance. 
 
 The inadequacy of the endowment assurance as an old-age allow- 
 ance made it necessary for the Government to supplement this pro- 
 vision, in a great many cases, with gratuities and compensations. 
 The custom obtained of granting a gratuity to men who had been a 
 long time in the service, especially prominent and useful employees, 
 when they went out, "six months' and sometimes a year's salary. 
 This was done by special act of legislature, but the law of 1893 pro- 
 vided distinctly for granting an employee who became permanently 
 incapacitated through no fault of his own a sum equal to one month's 
 salary for each year of service. This allowance on account of in- 
 validity was entirely separate from the annuity which came to him 
 on reaching the age of 60. Under these terms a civil employee who 
 became incapacitated from further work at the age of 57, 58, or 59 
 was in a much better financial position than one who kept his health, 
 as he received a large lump sum, and at the age of 60 a regular an- 
 nuity al§o. 
 
 The law was considered faulty, as it made no provision for widows 
 and orphans except in the case of people who were killed in the serv- 
 ice. If an employee under 60 years of age were killed at his work, his 
 family received not merely his insurance but a gratuity also based on 
 
CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 
 
 227 
 
 his length of service. In many cases also of natural death special cir- 
 cumstances made it seem necessary to vote the widow a "compas- 
 sionate" allowance. 
 
 A complete summary of the compensation, gratuities, and pensions 
 paid yearly from 1858, the date of the inauguration of the first pen- 
 sion system in the colony, until 1907, the year when the Public 
 Service Superannuation Act was passed, was made by Mr. Morris Fox, 
 the actuary of the Government Life Insurance Department, who ex- 
 tracted this information from the journals of the House of Repre- 
 sentatives. It will be seen that all the payments for pensions, gra- 
 tuities, and compensation totaled for the year 1906-7 the large sum 
 of £42,157 ($205,157). The summary is as follows: 
 
 SUMMARY OF COMPENSATION, GRATUITIES, AND PENSIONS, 1859 TO 1907. 
 [From Report on Public Service Superannuation Bill, 1906, Appendix 6, p. 24.] 
 
 Financial year. 
 
 Compensa- 
 tion. 
 
 Gratuities. 
 
 Total com- 
 pensation 
 and gratu- 
 ities. 
 
 Pensions 
 under Civil 
 Service Acts. 
 
 1859-60 
 
 
 
 
 $907. 76 
 
 1860-61 
 
 
 $2, 189. 93 
 1,946.60 
 2,877.32 
 2,141.22 
 
 $2, 189. 93 
 1,946.60 
 2, 877. 32 
 2, 141. 22 
 
 1, 168. 14 
 
 1861-62 
 
 
 1,630.78 
 
 1862-63 
 
 
 1,791 58 
 
 1863-64. . 
 
 
 1,791.89 
 
 1864-65 
 
 
 1,963.53 
 
 1865-66 
 
 
 5,775.60 
 4,331.19 
 3,437.63 
 601. 42 
 4, 743. 21 
 4,014.86 
 12, 394. 06 
 4, 118. 80 
 13, 173. 35 
 7,202.42 
 14, 721. 16 
 8,597.48 
 5,718.14 
 3, 284. 89 
 13, 293. 65 
 9, 752. 99 
 14, 250. 73 
 7,786.40 
 13, 633. 82 
 14,069.25 
 21,597.57 
 17, 173. 47 
 6,502.82 
 9, 903. 33 
 7,562.54 
 18,918.52 
 16, 492. 63 
 26, 777. 92 
 9,871.70 
 17, 969. 55 
 9, 100. 36 
 17,425.11 
 6,279.25 
 7, 105. 09 
 13, 528. 87 
 24, 741. 29 
 9, 158. 75 
 19,052.35 
 11,241.62 
 16,789.43 
 14, 8.30. 66 
 40, 769. 10 
 
 5, 775. 60 
 
 4, 331. 19 
 10, 191. 32 
 36,258.92 
 
 9, 777. 16 
 11, 172. 65 
 25,311.27 
 11,746.19 
 14,596.11 
 
 8,044.32 
 14,786.05 
 14, 238. 38 
 
 9,397.21 
 20, 742. 95 
 16,447.91 
 102,529.51 
 52, 196. 27 
 14,322.58 
 30, 904. 04 
 45, 292. 29 
 61,279.90 
 36, 140. 47 
 90,347.83 
 82,467.14 
 42, 185. 80 
 49,609.97 
 101,968.48 
 76,-320.41 
 38,978.36 
 35, 380. 37 
 32, 102. 56 
 44, 325. 38 
 23, 444. 51 
 25,532.27 
 25, 672. 27 
 49, 798. 78 
 43, 456. 79 
 67,736.63 
 109, 669. 26 
 106,389.42 
 45,211.35 
 78,688.91 
 
 10, 655. 89 
 
 1866-67. 
 
 
 12, 328. 43 
 
 1867-68. 
 
 $6, 753. 69 
 35,657.50 
 5,033.95 
 7, 157. 79 
 12,917.21 
 7,627.39 
 1,422.76 
 841. 90 
 - . 64.89 
 5,640.90 
 3, 679. 07 
 17,458.06 
 3, 154. 26 
 92,776.52 
 37, 945. 54 
 6, 536. 18 
 17,270.22 
 31,22.3.04 
 .39,682.33 
 18,967.00 
 83, 845. 01 
 72,563.81 
 34, 623. 26 
 30, 691. 45 
 85,475.85 
 49,542.49 
 29, 106. 66 
 17, 410. 82 
 23,002.20 
 26, 900. 27 
 17, 165. 26 
 18, 427. 18 
 12, 143. 40 
 25,057.49 
 34, 298. 04 
 48, 684. 28 
 98,427.64 
 89, 599. 99 
 30,380.69 
 37, 919. 81 
 
 13, 790. 67 
 
 1868-69 
 
 25, 486. 95 
 
 1869-70. 
 
 28, 524. 87 
 
 1870-71 . 
 
 31,210.69 
 
 1871-72 
 
 34, 164. 51 
 
 1872-73. 
 
 35, 958. 24 
 
 1873-74. 
 
 41,672.69 
 
 1874-75 
 
 40, 152. 07 
 
 1875-76. 
 
 39, 191. 53 
 
 1876-77 
 
 51,387.14 
 
 1877-78. 
 
 57, 374. 37 
 
 1878-79 
 
 67, 418. 08 
 
 1879-80 
 
 62, 134. 86 
 
 1880-81. 
 
 82, 700. 49 
 
 1881-82 
 
 95, 512. 69 
 
 1882-83. . . 
 
 94, 595. 31 
 
 1883-84. 
 
 94, 791. 05 
 
 1884-85 
 
 99, 597. 57 
 
 1885-86. 
 
 93, 157. 06 
 
 1886-87 
 
 96, 230. 17 
 
 1887-88 
 
 105, 997. 32 
 
 1888-89. 
 
 110,579.21 
 
 1889-90 
 
 112, 997. 74 
 
 1890-91. 
 
 113,805.76 
 
 1891-92 
 
 107,911.70 
 
 1892-93 
 
 113, 152. 94 
 
 1893-94. 
 
 121,512.90 
 
 1894-95.* 
 
 122, 944. 66 
 
 1895-96 
 
 124, 986. 16 
 
 1896-97. 
 
 125, 154. 03 
 
 1897-98 
 
 127, 232. 55 
 
 1898-99. . 
 
 116,318.31 
 
 1899-1900 
 
 109, 374. 61 
 
 1900-1901. 
 
 104, 022. 59 
 
 1901-2 
 
 101,201.95 
 
 1902-3.. 
 
 115, 279. 94 
 
 1903-4 
 
 HI, 570. 94 
 
 1904-5 .. 
 
 115 629 48 
 
 1905-6 
 
 115,672.67 
 
 
 126 471 96 
 
 
 
 Total 
 
 1,217,075.80 
 
 516,848.05 
 
 1,733,923.85 
 
 3,519,106.43 
 
 
228 CIVIL-SEEVICE EETIEEMENT IN NEW ZEALAND. 
 
 THE PUBLIC SERVICE SUPERANNUATION ACT, 1907. 
 
 The Civil Service Insurance Act proving thus inadequate from the 
 first as a superannuation measure, different classes of public servants 
 made successful efforts from time to time to secure more satisfactory 
 legislation. In 1899 — only six years after the passage of the insur- 
 ance act — the members of the police force secured the passage of a 
 provident fund act which made provision for retirement on more sat- 
 isfactory basis than that offered them under the terms of the insur- 
 ance act. In 1902 the employees of the government railways and in 
 1905 the teachers did likewise. In 1906 a "Civil-Service Superannu- 
 ation Bill" was prepared and referred to the public accounts com- 
 mittee. The provisions of this measure are said to have been drawn 
 up under the direction of Sir Joseph Ward, the premier, who took 
 the livehest interest in the bill. On October 24, 1906, the com- 
 mittee recommended, in a report to the House of Representatives, 
 "that the civil service superannuation bill, as submitted, or any 
 other suggested scheme that will meet the position, be referred to the 
 actuary for examination and investigation and that he be requested 
 to furnish a full report on such scheme in time to enable it to be dealt 
 with next session." Mr. Fox, the actuary, accordingly took up the 
 work and submitted, on July 3, a very full report on the bill, together 
 with data and statistics relating to the civil service. As an outcome 
 of his investigation he recommended the adoption of the bill on con- 
 dition of certain modifications. The majority of the amendments 
 recommended by Mr. Fox were accepted, and "Public Superannuation 
 Bill, 1907," was drafted. The actuary made a favorable report on 
 this bill, and on November 25, 1907, it became a law. It was con- 
 solidated the following year with the Public Service Classification Act 
 of 1907, and the whole is now known as "The Public Service Classi- 
 fication and Superannuation Act, 1908." 
 
 Superannuation Bill First Proposed, 1906. 
 
 The special features of the present law can best be brought out by 
 a review of the investigations and reports which led to its enactment. 
 
 The benefits provided in the first bill proposed, the Civil Service 
 Superannuation Bill, 1906, were as follows iC') 
 
 I. On attainment of pension : Males, at age 60, or after 40 years' serv- 
 ice; females, at age 50, or after 30 years' service: 
 
 (a) A pension of one-sixtieth of yearly salary for each year's serv- 
 ice, with a limit of forty-sixtieths (two-thirds) of salary. 
 
 (h) Or the option, in lieu thereof, of a return of total contributions. 
 
 II. On retirement before pension age (on the ground of being 
 medically unfit for further duty) : 
 
 (a) At any time, a pension of one-sixtieth of yearly salary for each 
 year's service, limited to fort3^-sixtieths. 
 
 « Report on Public Service Superannuation Bill, 1906. Appendix 1, p. 17. 
 
CIVIL-SEEVICE EETIREMENT IN NEW ZEALAND. 229 
 
 (b) Or the option, in lieu thereof, of a return of total contributions. 
 
 III. On retirement before pension age (on other grounds than 
 medical unfitness) : 
 
 (a) On ordinary dismissal or retirement, a return of total contri- 
 butions. 
 
 (b) On dismissal for the commission of a crime, a return of the 
 balance of total contributions after any defalcations have been made 
 good. 
 
 IV. At death: 
 
 (a) At death before pension entered upon, leaving no widov/ 
 (widower) or children, a return of total contributions. 
 
 (6) At death before pension entered upon, leaving a widow (wid- 
 ower) or children, £18 ($88) yearly during widowhood (widower- 
 hood), and 5s. ($1.22) weekly for each child till fourteen years of 
 age; with the option of a return of such portion of the total contri- 
 butions as the board thinks fit. 
 
 (c) At death after pension entered upon, a return of the difference 
 between pension received and contributions paid to the fund. 
 
 V. Benefits already accrued: 
 
 (a) In addition to benefits I to IV, the bill provides that (1) moneys 
 already deducted from salaries, under "The Civil Service Reform 
 Act, 1886," or ''The Post and Telegraph Classification and Regu- 
 lation Act, 1890," shall be invested with the Public Trustee and 
 become the property of the contributors on retirement; (2) life-assur- 
 ance policies and annuities effected under "The Civil Service Insur- 
 ance Act, 1893," may be kept alive or the surrender value invested 
 with the public trustee for the benefit of the holders. 
 
 (h) The absolute or contingent rights to compensation for loss of 
 office when the act comes into operation (if any) are also preserved 
 until a corresponding amount of pension has been drawn. 
 
 Note. — The pensions are payable monthly, and are computed on the salary at 
 retirement, unless there has been promotion within five years, when the average 
 salary for the last seven years is taken as the basis. 
 
 To pay for these benefits the bill provided for the establishment 
 of a superannuation fund made up of contributions from the 
 employees, the Government guaranteeing the future adequacy of 
 the fund. 
 
 Collection of Statistics op Civil Service Made by Actuary. 
 
 The first step taken by Mr. Fox in examining into the soundness 
 of the proposed scheme was the collection of statistics regarding 
 the personnel of the public service. Receiving instructions to 
 include in his estimates all departments except railways and police 
 and such officers of the education department as were included in 
 the teachers' scheme, he addressed a circular to all other depart- 
 ments of the colonial government asking for information concerning 
 the number, age, sex, salary, and class of employment of all persons 
 in each department to whom the provisions of the bill would apply. 
 This was done in order that he might make a valuation of the accrued 
 liabilities, which would have to be assumed by the superannuation 
 fund on the inauguration of the proposed plan. The unfortunate 
 
230 
 
 CIVIL-SEEVICE RETIREMENT IN NEW ZEALAND. 
 
 experience of the neighboring colony of New South Wales served 
 as a warning in this respect, and the actuary of New Zealand felt 
 the necessity of pointing out the importance of differentiating care- 
 fully between liabilities that have to be assumed to cover past serv- 
 ices — that is, provision for old employees — and those that may be 
 incurred to cover future services ; that is, provision for entrants into 
 the service. 
 
 The information desired was furnished respecting 5,593 persons 
 among the various departments, as follows : 
 
 TABLE SHOWING 5,593 PERSONS TO WHOM IT WAS THOUGHT THE PROVISIONS OF 
 THE BILL WOULD APPLY, DISTRIBUTED AMONGST THE VARIOUS DEPARTMENTS. 
 
 [From Report on Public Service Superannuation Bill, 1906, p. 10.] 
 
 Department. 
 
 Males. 
 
 Females. 
 
 Total 
 number. 
 
 Total sala- 
 ries. 
 
 Post and telegraph 
 
 Lands and survey 
 
 Justice 
 
 Agriculture 
 
 Mental hospitals 
 
 Customs 
 
 PubUc works 
 
 Printing and stationery 
 
 Goveriunent life insurance 
 
 Prisons 
 
 Roads 
 
 Marine 
 
 Valuation 
 
 Defense 
 
 Colonial secretary 
 
 PubUc trust 
 
 Land transfer and deeds registry 
 
 Tourist and health resorts 
 
 Native 
 
 Mines 
 
 Labor 
 
 Audit 
 
 Land and income tax 
 
 House of Representatives 
 
 Treasury 
 
 Public health 
 
 Inspection of machinery 
 
 Education (excluding those coming under "The teachers' 
 
 superannuation act, 1905 " 
 
 Stamps 
 
 Crown law 
 
 State fire insurance 
 
 Registrar-general 
 
 Advances to settlers 
 
 Old-age pensions 
 
 Legislative council 
 
 Hospitals 
 
 Electoral 
 
 Friendly societies 
 
 Land for settlements 
 
 Industries and commerce 
 
 Colonial museiam 
 
 Native land purchase 
 
 Deduct 86 civil servants entitled to pensions under civil serv- 
 ice acts and not eligible under the present bill 
 
 Total 
 
 2,275 
 324 
 190 
 182 
 ' 268 
 188 
 170 
 173 
 123 
 120 
 96 
 107 
 77 
 73 
 60 
 65 
 SO 
 43 
 32 
 39 
 43 
 40 
 42 
 30 
 37 
 22 
 24 
 
 25 
 
 22 
 
 7 
 
 25 
 16 
 19 
 18 
 5 
 2 
 5 
 4 
 2 
 2 
 3 
 1 
 
 5,049 
 86 
 
 297 
 19 
 1 
 
 165 
 
 4 
 
 5 
 
 40 
 
 12 
 
 IS 
 
 2 
 
 1 
 
 4 
 
 1 
 
 4 
 
 13 
 
 1 
 
 5 
 
 2,572 
 343 
 191 
 182 
 433 
 192 
 175 
 213 
 135 
 133 
 98 
 108 
 81 
 74 
 64 
 78 
 51 
 48 
 32 
 39 
 47 
 42 
 44 
 36 
 44 
 22 
 25 
 
 38 
 26 
 7 
 27 
 16 
 19 
 18 
 5 
 3 
 6 
 5 
 2 
 2 
 3 
 1 
 
 ,622,588 
 371, 995 
 228,419 
 203, 210 
 192, 884 
 173, 758 
 169, 807 
 151,733 
 121,390 
 97, 403 
 96, 259 
 79, 952 
 76, 209 
 72,287 
 59, 512 
 57, 176 
 57, 142 
 48,772 
 47,838 
 46,811 
 45, 326 
 44, 991 
 44,378 
 41,604 
 39,784 
 31,910 
 30, 0S5 
 
 26, 698 
 23, 116 
 18, 298 
 17,300 
 16, 926 
 15, 159 
 14, 994 
 8,322 
 7,105 
 6,801 
 5,791 
 4,915 
 4,258 
 4,020 
 2,555 
 
 4,428,481 
 164,819 
 
 4,963 
 
 Assuming that the 5,593 persons referred to would all have been 
 eligible as members of the fund if it had come into operation at the 
 time the statistics were collected, it was necessary to value the liabil- 
 ities resulting from the application of the proposed contribution rates 
 
CIVIL-SERVICE EETIREMENT IN NEW ZEALAND. 231 
 
 and retiring benefits to those 5,593 persons. With great care Mr. Fox 
 explained the assumptions made and the statistical foundations of the 
 calculations on which this valuation rested. Here again he seems to 
 have been mindful of the experience of the actuaries of New South 
 Wales whose explanations and warnings in connection with the super- 
 annuation account of that colony were so disregarded, for he wrote: 
 "I feel this to be all the more necessary because, unfortunately, I am 
 aware that the use of recognized actuarial methods, though admitted 
 in smaller matters, is viewed with disapprobation and absolute sus- 
 picion by many people when applied to the investigation of certain 
 complicated statistical and financial matters, although these matters 
 peculiarly depend for their ultimate success on a proper treatment 
 of problems involving a reasonable estimate of many probabilities — 
 of life and death, widowhood, orphanhood, bachelorhood, increases in 
 salary, and retirement from service — all these being spread over a long 
 series of years and . combined with the interest-earning power of 
 money. While it is impossible in individual cases to make an accu- 
 rate estimate of such matters, it is found that in a large body of per- 
 sons the numbers living, dying, or doing acts within their own control, 
 such as resigning or marrying, are singularly constant from year to 
 year." 
 
 The rate of interest assumed by Mr. Fox in his calculations was 
 4 per cent, and he stated it as his opinion that the Government should 
 guarantee that rate of interest on the fund, as is done by many of the 
 British railway companies in their pension schemes. He thought that 
 the fund would probably be able to earn more than 4 per cent for some 
 years, but held that without a guarantee it would not be justifiable to 
 assume so high a rate as 4 per cent over a long period of time. 
 
 The mortality table used by Mr. Fox as a basis for calculating the 
 longevity of the civil servants, and considered by him particularly 
 appropriate to a New Zealand fund of this description, was Dr. Farr's 
 table relating to certain healthy districts in England. For chil- 
 dren's annuities he used the mortality experience of the children 
 of a large body of Scottish Presbyterian ministers, which was inves- 
 tigated by Mr. Archibald Hewat in 1902. The probabilities of leav- 
 ing children, with their ages, were taken from the New Zealand popu- 
 lation returns from 1895 to 1899. The probabilities of leaving a 
 widow or dying unmarried were derived from English census statis- 
 tics utilized by Mr. George King in his investigation relating to family 
 annuities. The ages of widows at death of husbands were taken from 
 the scale adopted by Mr. H. W. Manly in his ''Hypothetical Expe- 
 rience (1903)." 
 
 The average retirement age was assumed to be 61 for men, 51 for 
 women. The optional age provided in the bUl was 60 for men, but 
 Mr. Fox assumed that many would not retire until after that age, 
 
232 CIVIL-SEEVICE RETIREMENT IN NEW ZEALAND. 
 
 thus making the average age later than 60. At the same time, since 
 they would be allowed to retire as a matter of right before reaching 
 the age of 60 when they had served 40 years, or, with the consent of the 
 board, after 35 years, it would follow that all who joined the service 
 before reaching the age of 20 would be able to retire on a pension 
 between the ages of 55 and 60, and some of them between the ages of 
 50 and 55. The bill made 50 the optional age of retirement for 
 women, or earlier if they had had 30 years' service. Considering all 
 these circumstances the assumption that men would retire at the 
 average age of 61, women at the average age of 51, seemed to Mr. 
 Fox to be reasonable. 
 
 Having no data to work on, the actuary found himself unable to 
 estimate the probable strain on the fund due to premature retire- 
 ments on pension through physical disabilit}^. For the same reason 
 he was unable to compute the relief that would probably ensue from 
 those voluntarily retiring and leaving the interest on their accumula- 
 tions in the fund. He assumed, however, that these two uncertainties 
 would counteract each other, and though he said he could not speak 
 confidently on that matter, he gave it as his opinion that the balance 
 on either side would be immaterial. The uncertainty on these 
 points convinced him, however, of the necessity for periodical inves- 
 tigations of the progress of the fund. 
 
 The final assumption made by Mr. Fox was in regard to the rate of 
 salary increases from age to age. It is plain that the contributions 
 and benefits (except those payable to widows and children) and the 
 valuation of them depend on the amount of salary received, taking 
 into account prospective increases in salary. The average salary 
 received at each age at the present time was deduced by Mr. Fox 
 from the data furnished him by the departments, and these average 
 salaries were then graduated to remove irregularities. The present 
 salary of each person was then assumed to increase from age to age in 
 the same ratio as that of the graduated scale. The average and 
 graduated salaries for men and women were shown to be as follows : 
 
CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 
 
 233 
 
 AVERAGE SALARY RECEIVED AT EACH AGE AT THE PRESENT TIME, AND THESE 
 AVERAGE SALARIES GRADUATED TO REMOVE IRREGULARITIES. 
 
 [From Report on Public Service Superannuation Bill, 1906, p. 12.] 
 
 Age. 
 
 Aver- 
 age 
 salary. 
 
 Gradu- 
 ated 
 salary. 
 
 Age. 
 
 Aver- 
 age 
 salary. 
 
 Gradu- 
 ated 
 salary. 
 
 Age. 
 
 Aver- 
 age 
 salary. 
 
 Gradu- 
 ated 
 salary. 
 
 MALES. 
 15 
 
 $157 
 240 
 242 
 266 
 300 
 379 
 432 
 485 
 530 
 564 
 603 
 660 
 670 
 726 
 799 
 791 
 821 
 794 
 844 
 862 
 856 
 970 
 912 
 952 
 1,025 
 1,063 
 1,028 
 1,136 
 
 $170 
 204 
 243 
 285 
 328 
 375 
 423 
 467 
 516 
 566 
 611 
 659 
 696 
 728 
 759 
 784 
 804 
 830 
 854 
 876 
 900 
 922 
 947 
 976 
 1,005 
 1,034 
 1,068 
 1,097 
 
 MALES— con- 
 cluded. 
 
 43 
 
 $1,152 
 1,134 
 1,192 
 1,263 
 1,141 
 1,225 
 1,458 
 1,134 
 1,216 
 1,133 
 1,207 
 1,307 
 1,276 
 1,396 
 1,185 
 1,105 
 1,244 
 1,129 
 
 $1,134 
 1,158 
 1,180 
 1,200 
 1,212 
 1,221 
 1,229 
 1,231 
 1,231 
 1,231 
 1,231 
 1,231 
 1,231 
 1,231 
 1,231 
 1,231 
 1,231 
 1,231 
 
 FEMALES — con- 
 cluded. 
 
 23 
 
 $303 
 344 
 327 
 348 
 334 
 321 
 436 
 393 
 375 
 393 
 518 
 382 
 401 
 398 
 474 
 466 
 481 
 452 
 
 $292 
 
 16 
 
 44 
 
 24 
 
 310 
 
 17 
 
 45 
 
 25... 
 
 327 
 
 18 
 
 46 
 
 47 
 
 26 
 
 341 
 
 19 
 
 27 
 
 355 
 
 20 
 
 48 
 
 28 
 
 369 
 
 21 
 
 49.. 
 
 29 
 
 381 
 
 22 
 
 50 
 
 30 .. 
 
 393 
 
 23 
 
 51 
 
 31 
 
 404 
 
 24 
 
 52 
 
 32... 
 
 414 
 
 25 
 
 53 
 
 33 
 
 423 
 
 26 
 
 54 
 
 65 
 
 34 
 
 432 
 
 27 
 
 35 
 
 439 
 
 28 
 
 56 
 
 57 
 
 36 
 
 448 
 
 29 
 
 37 
 
 454 
 
 30 
 
 58 
 
 38 
 
 459 
 
 31 
 
 59. 
 
 39 
 
 465 
 
 32 
 
 60 
 
 40... 
 
 473 
 
 33 
 
 FEMALES. 
 15 
 
 41 
 
 481 
 
 34 
 
 42 
 
 349 
 427 
 811 
 575 
 681 
 414 
 341 
 473 
 487 
 
 491 
 
 35 
 
 43 
 
 497 
 
 36.. . 
 
 16 
 
 195 
 195 
 207 
 219 
 222 
 273 
 298 
 
 195 
 199 
 209 
 224 
 239 
 258 
 276 
 
 44 
 
 502 
 
 37 
 
 17 
 
 45 ... 
 
 506 
 
 38 
 
 18 
 
 46 
 
 506 
 
 39 
 
 19 
 
 47 
 
 506 
 
 40 
 
 20 
 
 48 
 
 606 
 
 41 
 
 21 
 
 49 
 
 506 
 
 42 
 
 22 
 
 50 
 
 506 
 
 
 
 
 
 Cost of Proposed Bill Based on Statistics Collected. 
 
 The result of Mr. Fox's valuation of the scheme proposed in the 
 bill, under the conditions assumed, showed that the capital value 
 of the full actuarial hability involved was £1,816,719 ($8,841,063), 
 of which £1,709,582 ($8,319,681) was incurred for men, and £107,137 
 ($521,382) for women. Mr. Fox also computed the value of the lia- 
 bility involved under various suggested modifications of the scheme, 
 such as with the addition of annuities to widows and children of 
 pensioners, with modified contributions, with half pensions only for 
 back service, and with the widows' annuities increased from £18 
 ($88) to £26 ($127) under all of the above conditions. He found 
 that the capital value of the full liability involved ranged from 
 £2,041,898 ($9,936,897) to £1,338,120 ($6,511,961), according to the 
 nature of the scheme, as will be seen from the following table: 
 
234 
 
 CIVIL-SERVICE EETIREMENT IN NEW ZEALAND. 
 
 SUMMARY OF VALUATIONS OF THE FUND OUTLINED IN THE BILL AND OF 
 MODIFICATIONS THEREOF. 
 
 [From Report on Public Service Superannuation Bill, 190(5. Appendix B, p. 23.] 
 
 
 
 Present value of— 
 
 
 Pensions. 
 
 Annuities. 
 
 3 i 
 2o 
 
 III 
 
 PI OJ o 
 
 a:i c3 iS 
 
 |38 
 
 .2 '^ 
 
 Pi 
 
 o 
 
 n 
 .2 
 
 B 
 S 
 
 a 
 o 
 o 
 
 £ 
 
 P 
 
 
 Scheme. 
 
 > 
 
 o 
 
 6 
 '> 
 
 0) 
 
 M 
 
 O 
 fen 
 
 o 
 o 
 
 a 
 S 
 2 
 
 1 
 
 o 
 
 1 
 
 I. With addition of 
 
 (M. 
 
 If. 
 
 {¥^ 
 
 /M. 
 \F. 
 
 {¥: 
 
 /M. 
 IF. 
 
 if. 
 
 fM. 
 
 If. 
 
 ;m. 
 If. 
 
 Dollars. 
 
 5, 647, 622 
 
 503, 736 
 
 Dollars. 
 
 4,980,011 
 
 181,185 
 
 Dollars. 
 1,297,978 
 
 Dolls. 
 419,370 
 
 Dolls. 
 
 55, 405 
 18, 191 
 
 Dolls . 
 
 62, 783 
 
 1,946 
 
 Dollars. 
 12, 463, 175 
 705,058 
 
 Dollars. 
 
 3,624,540 
 
 183,676 
 
 Dollars. 
 
 8,838,635 
 521,382 
 
 and children. a 
 
 
 
 
 6,151,358 
 
 5,161,196 
 
 1,297,978 
 
 419,376 
 
 73,596 
 
 64,729 
 
 13,168,233 
 
 3,808,216 
 
 9,360,017 
 
 II. Contributions 5, 6, 
 7, and 10 per cent.a 
 
 5,647,622 
 503, 736 
 
 4,980,011 
 181,185 
 
 810, 472 
 
 387,928 
 
 55,405 
 18,191 
 
 62,783 
 1,946 
 
 11,944,221 
 705,058 
 
 3,624,540 
 183, 676 
 
 8,319,681 
 521, 382 
 
 
 
 
 
 6,151,358 
 
 5,161,196 
 
 810,472 
 
 387,928 
 
 73,596 
 
 64,729 
 
 12,649,279 
 
 3,808,216 
 
 8,841,063 
 
 III. Contributions 5, 
 6, 7, 8, 9, and 10 per 
 cent, a 
 
 5,647,622 
 503,736 
 
 4,980,011 
 181, 185 
 
 810,472 
 
 387, 928 
 
 61,099 
 18,916 
 
 62, 783 
 1,946 
 
 11,949,915 
 705,783 
 
 4,099,233 
 193,677 
 
 7,850,682 
 512, 106 
 
 
 
 
 
 6,151,358 
 
 5,161,196 
 
 810, 472 
 
 387,928 
 
 80,015 
 
 64,729 
 
 12,655,698 
 
 4,292,910 
 
 8,302,788 
 
 IV. W i t h one-half 
 hack service only.o 
 
 5,647,622 
 603,736 
 
 2,741,499 
 90,595 
 
 810,472 
 
 387,928 
 
 55,405 
 18, 191 
 
 62, 783 
 1,946 
 
 9,705,709 
 614, 468 
 
 3,624,540 6,081,169 
 183,676^ 430,792 
 
 
 
 
 6,151,358 
 
 2,832,094 
 
 810,472 
 
 387,928 
 
 73,596 
 
 64, 729 
 
 10,320,177 
 
 3,808,216 6,511,961 
 
 V. As in I b. 
 
 5,647,622 
 503,736 
 
 4,980,011 
 181, 185 
 
 1,874,858 419,376 
 
 55,405 
 18, 191 
 
 62, 783 
 1,946 
 
 13,040,055 
 705,058 
 
 3,624,540 9,415,515 
 
 
 
 
 1 
 
 
 
 6,151,358 
 
 5,161,196 
 
 1,874,858 419,376 
 
 73,596 
 
 64,729 
 
 13,745,113 
 
 3,808,216 9,936,897 
 
 VI. As in 11 6... . 
 
 5,647,622 
 503,736 
 
 4,980,011 
 181,185 
 
 1,170,680 387,928 
 
 55, 405 
 18, 19i 
 
 62, 783 
 1,946 
 
 12,304,429 
 705,058 
 
 3,624,540 8,679,889 
 
 
 183,6761 521,382 
 
 
 [ 
 
 
 
 6,151,358 
 
 5,161,196 
 
 1,170,680|387,928 
 
 73,596 
 
 64,729 
 
 13,009,487 
 
 3,808,216 
 
 9,201,271 
 
 VII. As in III 6 
 
 5,647,622 
 503,736 
 
 4,980,011 
 181,185 
 
 1,170,680 
 
 387,928 
 
 61,099 
 18,9i6 
 
 62, 783 
 1,946 
 
 12,3:0,123 
 705,783 
 
 4,099,233 
 193,677 
 
 8,210,890 
 512,106 
 
 
 
 
 
 
 6,151,358 
 
 5,161,196 
 
 1,170,680 
 
 387,928 
 
 80,015 
 
 64, 729 
 
 13,015,906 
 
 4,292,910 
 
 8,722,996 
 
 Vm. As in IV b 
 
 5,647,622 
 503, 736 
 
 2,741,499 
 90,595 
 
 1,170,680 
 
 387,928 
 
 55, 405 
 18, 191 
 
 62, 783 
 1,946 
 
 10,065,917 
 614,468 
 
 3,624,540 
 183,676 
 
 6,441,377 
 430, 792 
 
 
 
 
 
 
 
 6,151,358 
 
 2,832,094 
 
 1, 170, 680 
 
 387,928 
 
 73, 596 
 
 64,729 
 
 10,680,385 
 
 3,808,216 
 
 6,872,169 
 
 a Widows' annuities, £10 i 
 
 b Widows' annuities, £26 ($127). 
 
 It will be noted that these sums ranging from £2,041,898 ($9,936,- 
 897) to £1,338,120 ($6,511,961) include the accrued hability for back 
 services and the prospective liability for future services. 
 
 Consideration of Hoav Cost Might be Met. 
 
 The question to be decided was : How shall these liabilities be met ? 
 There seems to have been no thought in the mind of Mr. Fox but that 
 the whole of the liability for back services should be borne by the Gov- 
 ernment, a point which does not seem to have been questioned by 
 the Government. He stated it to be clearly a matter of opinion, how- 
 
CIVIL-SERVICE EETIREMENT IN NEW ZEALAND. 235 
 
 ever, as to how much (if any) of the deferred liabihty should be met 
 by present contributions from the Government and the deferred 
 pensioners, and how much should be left to be met by the Government 
 of 45 years hence; on the one hand, how much it is considered practi- 
 cable or desirable to take in yearly contributions from the prospective 
 pensioners to meet a portion of the liability when it accrues, and, on 
 the other hand, what proportion (if any) of the balance of future 
 liability should be met by the present, and what proportion should be 
 left to the future Government. There was no suggestion on Mr. 
 Fox's part of the other alternative that the entire liability for future 
 services might be borne by the pensioners themselves, a suggestion 
 that would indeed have been impracticable in view of the generous 
 benefits provided under the scheme. 
 
 In the opinion of Mr. Fox, then, there were only two ways of placing 
 a government scheme of deferred pensions to its employees on a sound 
 footing. The one course was to exact no contribution from the pros- 
 pective pensioners and to leave the whole of the future liability to be 
 met by future generations as it accrued. This would be simply a 
 straight pension such as that maintained by the British Government 
 for its civil servants. Stating, however, that a contributory plan is 
 generally considered more desirable than a pure pension, Mr. Fox 
 insisted on the importance in such a plan of reserving and accumu- 
 lating the contributions to meet the contributors' portion of liability 
 and not using them, in earlier years, to pay other claims which have 
 not been provided for by contributions, namely, pensions to persons 
 already in the service at the time of the establishment of the plan. 
 He maintained that such claims should certainly be met from other 
 sources as they fall in, and not discharged by using accumulations 
 formed for the purpose of meeting altogether different liabilities. 
 If this were done he held that the fund, assuming that it were other- 
 wise conducted properly, would be found, at successive investigations, 
 to be sufficient to meet that portion of the liability which it was 
 intended to meet, and it would therefore be sound from any point of 
 view. 
 
 As for the liability on account of back services, which should be 
 borne by the Government, Mr. Fox showed by the use of the following 
 table of prospective pensions to men arising from the scheme con- 
 tained in the bill how that should be kept entirely separate from the 
 liability for future services to be met in part by contributions from 
 the younger members. 
 
236 
 
 CIVIL-SEEVICE EETIREMTENT IN NEW ZEALAND. 
 
 PROPER TREATMENT OF LIABILITIES ARISING FROM PROSPECTIVE PENSIONS 
 
 OF MALES. 
 
 [From Report on Public Service Superannuation Bill, 1906, p. 13.] 
 
 Age. 
 
 81, 
 80, 
 79, 
 78, 
 77, 
 76, 
 75, 
 74 
 73 
 72, 
 71. 
 70. 
 69 
 68. 
 67. 
 66. 
 65. 
 64. 
 63. 
 62. 
 61. 
 
 60 
 59 
 58 
 57 
 56 
 55 
 54 
 53 
 52 
 51 
 50 
 
 Num- 
 ber. 
 
 Back 
 service. 
 
 $224 
 273 
 2,273 
 161 
 399 
 1,226 
 4,171 
 949 
 4,618 
 1,572 
 2,618 
 2,073 
 3,499 
 13,183 
 9,387 
 15,787 
 19,354 
 15,658 
 14,171 
 13,777 
 13,792 
 
 139,065 
 
 12,570 
 23,023 
 16,565 
 14,200 
 19,748 
 19,777 
 21,223 
 24,586 
 26,036 
 32,382 
 27,491 
 
 Future 
 service. 
 
 2,073 
 2,433 
 2,609 
 4,652 
 4,725 
 7,168 
 9,334 
 10,541 
 14,789 
 15,587 
 
 $224 
 273 
 2,273 
 161 
 399 
 1,226 
 4,171 
 949 
 4,618 
 1,572 
 2,618 
 2,073 
 3,499 
 13,183 
 9,387 
 15,787 
 19,354 
 15,558 
 14,171 
 13,777 
 13,792 
 
 139,065 
 
 13,154 
 25,096 
 18,998 
 16,809 
 24,400 
 24,502 
 28,391 
 33,920 
 36,577 
 47,171 
 43,078 
 
 Age. 
 
 49. 
 48. 
 47. 
 46. 
 45. 
 44. 
 43. 
 42. 
 41. 
 40 
 39 
 38 
 37 
 36 
 35 
 34 
 33 
 32 
 31 
 30 
 29 
 28 
 27 
 26 
 25 
 24 
 23 
 22 
 21 
 20 
 19 
 18 
 17 
 16 
 15 
 
 Num- 
 ber. 
 
 93 
 
 85 
 78 
 84 
 92 
 85 
 85 
 92 
 88 
 92 
 109 
 101 
 97 
 107 
 105 
 102 
 106 
 107 
 139 
 152 
 143 
 107 
 119 
 136 
 129 
 132 
 117 
 171 
 217 
 225 
 247 
 156 
 140 
 74 
 9 
 
 Back 
 service. 
 
 $44,650 
 35,039 
 30,630 
 32,601 
 33,501 
 26,406 
 27,097 
 27,554 
 23,291 
 26,766 
 29,958 
 27,131 
 22,439 
 26,011 
 22,756 
 20,191 
 18,877 
 17,544 
 24,683 
 24,143 
 20,751 
 12,711 
 11,865 
 12,536 
 9,446 
 7,674 
 4,706 
 3,577 
 
 Future 
 service. 
 
 $27,179 
 22,751 
 21,106 
 27,233 
 30,523 
 29,024 
 31,895 
 37,117 
 34,742 
 40,757 
 50,174 
 46,514 
 46,047 
 57,760 
 53,259 
 55,634 
 60,179 
 60,938 
 87,242 
 97,676 
 98,761 
 72,248 
 79,903 
 97,778 
 94,084 
 100,002 
 93,792 
 141,985 
 181,720 
 186,552 
 185,156 
 119,473 
 114,538 
 71,508 
 6,823 
 
 Total. 
 
 $71,829 
 57,790 
 51,736 
 59,834- 
 64,024 
 65,430 
 58,992 
 64,671 
 58,033 
 67,623 
 80,132 
 73,645 
 68,486 
 83,771 
 76,015 
 75,826 
 79,056 
 78,482 
 111,925 
 127,819 
 119,512 
 84,959 
 91,768 
 110,314 
 103,530 
 107,676 
 98,498 
 145,562 
 181,720 
 186,552 
 185,156 
 119,473 
 114,538 
 71,508 
 6,823 
 
 It will be seen that if the 292 men over 60 years of age all retired 
 on pension immediately the sum of £28,576 ($139,065) would be 
 payable during the first year on their account. "If it be deliberately 
 resolved to offer these pensions," said Mr. Fox, ''it should also be 
 recognized that they constitute a present liability, and they should 
 be met out of the present resources of the State." He then showed 
 how, in each succeeding year, it would also be necessary to similarly 
 provide the pensions which would become due on account of back 
 service to the survivors of the present members shown in the table as 
 living at each age under 60 down to age 22 when the liability for back 
 service would vanish. The outgo for pensions on back service would, 
 of course, diminish as the pensioners died off. 
 
 Mr. Fox showed also, from the above table, how members of the 
 service who had served some time before the adoption of the proposed 
 scheme would ultimately retire on pensions provided partly by the 
 Government and partly by their own contributions. The seventy- 
 five men shown as now aged 50 would, if they survived and remained 
 ten years, be entitled to £3,203 ($15,587) a year for their future ten 
 years' service, in addition to the £5,649 ($27,491) for back service. 
 These men would be contributing 10 per cent of their salaries during 
 the next ten years, whereas the full rate necessary would be approxi- 
 
CIVIL-SEE VICE RETIREMENT IN NEW ZEALAND. 237 
 
 mately 15 per cent. Thus, two-thirds of their future-service pensions 
 would have been purchased by their own contributions, if those con- 
 tributions had been safeguarded as advocated above, leaving the 
 remaining one-third of the survivors' pensions to be defrayed by the 
 Government, in the same way as the whole of the back-service 
 pensions. 
 
 The full rates of contribution necessary at various ages having 
 been ascertained, it would be for the Government to say what pro- 
 portion of these rates should be required from the contributors to 
 the fund. The sum so contributed should be used only for the 
 purpose of meeting the portions of the current and future liabili- 
 ties for which they were intended. That part of the contributions 
 intended to meet a portion of the future liability should be accumu- 
 lated at interest and not used for any other purpose. The remainder 
 of the current and future liabilities not so provided for by the contri- 
 butions should be discharged year by year, as they accrue, by the 
 Government of the day, and no portion whatever of the contributed 
 fund should be used for that purpose. An actuarial investigation 
 of the fund should be made triennially (or quinquennially) in order 
 to test the sufficiency of the contributed fund and to ascertain the 
 probable extent of the present accruing liability which will have to 
 be met by the Government during the succeeding three (or five) 
 years. 
 
 The full contributions required at different ages to furnish the bene- 
 fits given in the bill were computed to be as follows: ('^) 
 
 At age 18 8.6 per cent of salary. 
 
 At age 23 9.3 per cent of salary. 
 
 At age 28 9.8 per cent of salary. 
 
 At age 33 10.4 per cent of salary. 
 
 At age 38 11.1 per cent of salary. 
 
 At age 43 12.1 per cent of salary. 
 
 At age 48 13.6 per cent of salary. 
 
 At age 53 15.6 per cent of salary. 
 
 At age 58 17.9 per cent of salary. 
 
 The contributions in the bill were — 
 
 At age 40 and under 5.0 per cent of salary. 
 
 At age 41 6.0 per cent of salary. 
 
 At age 46 7.0 per cent of salary. 
 
 At age 51 and over 10.0 per cent of salary. 
 
 The difference between the amounts contributed under the bill 
 and the amounts required to furnish the proposed benefits would 
 have to be contributed by the Government. 
 
 The rates of contribution determined on show that New Zealand 
 profited in that respect from the disastrous experience of New South 
 Wales, where the flat-rate contribution of 4 per cent of salary had been 
 
 a Report on Public Service Superannuation Bill, 1906, p. 14. 
 
238 CIVIL-SEEVICE EETIREMENT IN NEW ZEALAND. 
 
 found inadequate for the payment of benefits. All of the actuaries 
 who examined into the state and sufficiency of the New South Wales 
 fund had commented on the inadequacy of the contributions and one 
 of them had pointed out, with great emphasis, the fact that the rate 
 of contribution must depend necessarily on the age of entrance into 
 the service, a fundamental principle carefully observed in New 
 Zealand's bill. 
 
 Recommendation of Actuary of How Cost Should be Met. 
 
 Mr. Fox showed that there are several ways in which the liability 
 incurred in starting the proposed scheme might be met. The capital 
 sum of £1,816,719 ($8,841,063) might be paid in immediately, but 
 this course would not be practicable. A yearly payment of £72,669 
 ($353,643), which is the interest on the capital sum at 4 per cent, 
 might be made, but this course would require much larger initial 
 payments than are necessary. What Mr. Fox proposed therefore 
 was this : The liability for back services to be met by the Govern- 
 ment year by year, as it accrues ; liability for future services to be 
 met by demanding from the members such proportion as might be 
 thought proper of the full contributions necessary to provide the 
 benefits, and by accumulating these to pay a corresponding propor- 
 tion of the future liabilities as they fall due, and the Government of 
 the day to pay, year by year, as they accrue, the remaining future 
 liabilities not provided for by members' contributions. In order to 
 give effect to this arrangement he repeated that it would be necessary 
 to have a periodical investigation of the fund to ascertain the amounts 
 which will be required from time to time to meet the balance of 
 current outgo without trenching on the fund contributed by the 
 civil employees. Taking everything into consideration, Mr. Fox 
 stated that, in his opinion, a yearly subsidy of £30,000 ($145,995) 
 would be sufficient for the first three years, but that ultimately 
 £50,000 or £60,000 ($243,325 or $291,990) would probably be 
 required. It was his desire to ascertain in what way the fund could 
 be most conveniently made actuarially sound with a minimum 
 strain on the public purse by way of financial assistance. He con- 
 sidered that that would be done most effectively by making the 
 subsidy as small as possible at first, and subject to a comparatively 
 small and practically regular increase so long as it should be neces- 
 sary. At each successive triennial investigation the amount re- 
 quired, during the following period, to meet the balance of current 
 outgo could be determined with greater accuracy. Mr. Fox said: 
 
 In advising as to the probable outgo of the first three years of the 
 scheme I am in a very different position from that I shall occupy at 
 
CIVIL-SERVICE EETIREMENT IN NEW ZEALAND. 239 
 
 the first triennial investigation in regard to the second three years, 
 because there is at present no experience whatever of members 
 respecting retirements and withdrawals. The bulk of the outgo 
 will result from the payment of pensions to those entitled to retire 
 immediately. If they all went on the fund at the outset the claims 
 on their account would amount to approximately £27,800 ($135,289) 
 in the first year, £26,600 ($129,449) in the second, and £25,300 
 ($123,122) in the third year — this outgo decreasing yearly. On the 
 other hand, the pensions which will become due to those now aged 
 57, 58, and 59 (or 47, 48, and 49 in the case of women), who may 
 become pensioners during the triennium, though small at first, will 
 be of an increasing nature, and the contributions of these members 
 will not have had time to accumulate to an appreciable amount. 
 Taking everything into consideration, I think that a yearly subsidy 
 of £30,000 ($145,995) will be sufiicient for the first three years. As 
 I have said, however, I am quite unable to estimate the relief to the 
 fund which will be experienced through members abstaining from 
 retiring immediately they have the right to do so, nor am I able to 
 estimate the strain upon the fund which will result from members 
 under the pension-ages being retired on pension owing to ill health. 
 This disadvantage will apply with less force at each successive 
 triennial investigation in consequence of the accumulation of sta- 
 tistics of the actual experience of members in these respects. But, 
 as I have said, I think a yearly grant of £30,000 ($145,995) will 
 supply all that will be required during the first three years. ('^) 
 
 Amendments to the Proposed Bill Recommended by Actuary. 
 
 As the outcome of his investigation Mr. Fox recommended there- 
 fore that the bill be adopted with the following amendments: 
 
 (1) That the interest credited to "the contributed fund" shall not 
 be at a lower rate than 4 per cent. 
 
 (2) That the widows' annuities shall be increased from £18 ($88) 
 to £26 ($127). 
 
 (3) That the annuities shall be payable to the widows and chil- 
 dren of pensioners as well as to the widows and children of members 
 who die while in the service. 
 
 (4) That a yearly grant of £30,000 ($145,995) shall be made during 
 the first three years. 
 
 (5) That this yearly grant shall be increased (or decreased) from 
 time to time in the manner explained heretofore, in order to meet 
 the yearly accruing liabilit}'' unprovided for by members' contribu- 
 tions. 
 
 (6) That, in order to ascertain the necessary periodical grants a 
 triennial actuarial investigation of the fund shall be made, the tri- 
 ennial report to state what will be the probable sum required for the 
 ensuing three years. 
 
 (7) There will be no necessity to retain the present provision for 
 the guarantee of any deficiency in the fund.(^) 
 
 o Report on Public Service Superannuation Bill, 1906, p. 15. 
 6 Idem, p. 16. 
 
240 civil-service retirement in new zealand. 
 
 Advantages of a Superannuation System. 
 
 In closing his report Mr. Fox submitted his reasons for recom- 
 mending superannuation measures generaUy and this scheme in par- 
 ticular. Said he: 
 
 The advantages arising from well-considered superannuation 
 schemes are so evident that many large employers of clerical and 
 other labor have recognized their importance by adopting schemes 
 of the kind in practice, and the tendency of the present day appears 
 to be in the direction of extending the system. It has been pointed 
 out by others that a sentimental consideration for the employee is 
 not the sole motive for expenditure of this kind by corporations and 
 bodies of men engaged in the profitable investment of capital. They 
 are certainly guided by business principles and realize that well- 
 considered expenditure in this direction is justified by the ultimate 
 results. All employees are compelled to partially provide for their 
 future, thus relieving their employer of the assistance he would be 
 practically forced to extend in necessitous cases. But perhaps the 
 chief advantages to the employer are that the employees as a body 
 are more firmly attached to his service and he is enabled to exercise 
 a freer hand in retiring aged employees at high salaries and promoting 
 younger men at lower salaries. All interests are best served in the 
 end by placing on the pension list old servants who are past their 
 work and replacing them by younger ones who are in their prime. 
 
 I respectfully submit that the following are sound reasons why the 
 scheme I am advocating should be accepted in its entirety : 
 
 (1) On the one hand, it will give full effect to the wishes of the civil 
 service. 
 
 (2) On the other hand, it will impose the minimum o/ liability upon 
 the Government to begin with, which liability will not be erratically 
 subject to sudden large increases in the future. The increase in the 
 cost of superannuation itself will be very gradual, being for many years 
 probably between £1,000 and £2,000 ($4,867 and S9,733) per annum, 
 and when the present outlay for compensation, gratuities, and pen- 
 sions is taken into account I believe the yearly increase in the total 
 Government assistance to civil servants will be still further reduced. 
 Such a gradual increase will cause no undue strain to fall on the future 
 increasing resources of the country. 
 
 (3) The fund will he always sound if otherwise properly conducted. 
 When the unsatisfactory condition of some large government funds 
 of this kind in other parts of the world is considered, it will be recog- 
 nized that this is a matter of the first importance; and I say, without 
 any reservation, that the fund may be subjected at any time to the 
 most exacting actuarial investigation, and, if no departure has been 
 made from the principles I have laid down, it will always pass the 
 test satisfactorily, thereby adding one more to the many large con- 
 cerns of which the Dominion of New Zealand has cause to be proud. ('*) 
 
 Superannuation Bill of 1907 Proposed. 
 
 Following this actuarial investigation, the bill was redrafted 
 as the "Public Service Superannuation Bill, 1907." On November 
 
 «» Report on Public Service Superannuation Bill, 1906, p. 17. 
 
CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 241 
 
 12, 1907, Mr. Fox submitted a brief report on this second bill, which 
 he found very rnuch stronger from an actuarial viewpoint than the 
 one of the previous year. The chief improvements were ones recom- 
 mended by Mr. Fox in his previous report, namely, a provision for a 
 yearly subsidy of £20,000 ($97,330) (though he had asked for £30,000) 
 ($145,995); a provision for a triennal investigation and suitable form 
 of actuarial report thereon; and a provision making widows' and 
 orphans' annuities payable in the case of contributors dying after 
 (as well as before) becoming superannuated, the balance of compensa- 
 tion not received by way of pension being included in the optional 
 capital payment. Two other important changes were made in the 
 bill. The scale of contributions between ages 30 and 50 was increased 
 from 5, 5, 6, and 7 per cent to 6, 7, 8, and 9 per cent. The pensions 
 were based on the average salary of the last three years instead of on 
 the final salary. 
 
 In one respect this second bill, as first drafted, was a disappoint- 
 ment to the actuary, and he accordingly made a protest in his report, 
 which proved effectual, for the undesirable clause in the bill was 
 changed to correspond with his recommendation. He had strongly 
 advocated, from the first, that the section guaranteeing any future 
 deficiency in the fund be omitted altogether and a section inserted 
 making provision for the annual appropriation of £30,000 ($145,995), 
 and such further sums as the triennial investigation showed were 
 necessary. He stated that he did not insist on the sum of £30,000 
 ($145,995) as absolutely necessary, that £20,000 ($97,330) would do 
 as well if provision were made for triennial adjustment of the amount, 
 should it prove to be insufficient. "I inserted £30,000 ($145,995)," 
 he said, " because, after strict inquiry, I considered that sum would 
 be sufficient, while I am not sure that a smaller sum would." 
 
 In conclusion, he emphasized the fact that the scheme would 
 have two opposite effects. While it would require an initial annual 
 subsidy of £20,000 to £30,000 ($97,330 to $145,995), subject to an 
 annual increase for some years, it would also have the effect of dimin- 
 ishing expenditures in other directions. There had been paid out 
 of the Consohdated Fund, the year before, over £8,000 ($38,932) as 
 gratuities, an outlay that, under the terms of the bill, would cease 
 immediately. There was also paid out over £8,000 ($38,932) as 
 compensation, an expense that would cease to accrue when the act 
 came into operation, and in twenty years or so would practically 
 cease. Finally, there was also paid during the previous year over 
 £26,000 ($126,529) as pensions, and in about twenty years this 
 outgo would also cease. There was thus £42,157 ($205,157)" paid 
 from the Consolidated Fund the year before as assistance to civil 
 servants by way of gratuities, compensation, and pensions, and as 
 
 « See page 227. 
 35885— S. Doc. 290, 61-2 16* 
 
242 CIVIL-SEEVICE KETIREMENT IN NEW ZEALAND. 
 
 this outgo would diminish, under the terms of the bill, until it prac- 
 tically ceased altogether in about twenty years, while the expendi- 
 ture under the bill was increasing at the same time, Mr. Fox thought it 
 it evident that the practical consideration of importance was the total 
 annual amount required from the consolidated fund for all these pur- 
 poses taken together. He stated that he thought it highly probable 
 that the annual decrease in the present outgo would practically balance 
 the annual increase in the subsidy for the next twenty years. 
 
 Actuary Made Only Estimate of Cost, Instead of Calculation. 
 
 It is of interest in considering the probable cost to the New Zealand 
 Government of establishing and maintaining the proposed superan- 
 nuation fund to note that after the first year the amounts mentioned 
 by the actuary are all estimates and not calculations. The sum of 
 money required the first year to retire all those in the service who 
 had reached the age of retirement was calculated to be £28,576 
 ($139,065). It would have been perfectly possible, having all the 
 necessary data as to the age, length of service, and amount of salary 
 of all the 5,593 members of the civil service, to have carried out the 
 calculation to the end of the period when all present members of the 
 service would be dead, and thus have shown with precision the total 
 maximum cost of the annuities for back services to all present members 
 of the service. It is to be regretted that the calculations were not car- 
 ried out to the end, so that the possible maximum cost might be 
 known with definiteness. The actual cost would, of course, be less 
 than such a maximum cost, since no allowance could have been 
 made for resignations in the absence of data on the subject. The 
 calculation of a possible maximum cost would, however, be much 
 more satisfactory than the most conservative estimate, acknowledged 
 to be merely an estimate. At the hearings of the Public Accounts 
 Committee on November 13, 1907, Mr. Fox was examined on the 
 matter of cost as follows: 
 
 What is the maximum amount which a scheme like this will in- 
 volve the colony in ? — I have explained on previous occasions when I 
 have been here that I have an objection to saying that I can give 
 correct estimates for a long distance ahead; but I can form some 
 idea, and I will give you that idea. Whatever is the initial subsidy 
 required, that will have to go on increasing for a large number of 
 years. I have been looking lately at the composite effect of all the 
 payments for pensions, gratuities, and compensation, totaling 
 £42,000 ($204,393) at present; and the £30,000 ($145,995) added on 
 to that for the first year would make £72,000 ($350,388) to come out 
 of the government purse. It will never, I consider, be more than 
 that. In the course of twenty years' time the £42,000 ($204,393) 
 will have vanished altogether, roughly speaking. At that time the 
 total yearly outgo will be very much less than the first year's £72,000 
 ($350,388)— very much less; but the £30,000 ($145,995) will have 
 increased. It may have increased to £55,000 or £60,000 ($267,658 
 or $291,990). That will take the place of everything included in the 
 
CIVIL-SEEVICE EETIKEMENT IN NEW ZEALAND. 243 
 
 present £72,000 (S350,388). After the first year £7,000 or £8,000 
 ($34,066 or $38,932) paid in gratuities will vanish altogether from 
 the total, and so the £72,000 ($350,388) will not all be wanted by 
 that much. Taking the £42,000 ($204,393) that is being paid at 
 the present time per year, I consider that possibly not more than 
 £10,000 ($48,665) per annum over that sum will be wanted for the 
 whole thing eventually. That is about £50,000 ($243,325). I am 
 speaking of fifty years' ahead or more. The amount will have 
 increased to more than £50,000 ($243,325) previous to that, but 
 will be likely to come down to, say, £50,000 ($243,325) as a perma- 
 nency. That will take the place of everything — there will be no 
 other outgo. 
 
 For how long will the amount to be paid under the bill keep on 
 increasing? — For a good many years. 
 
 Can you give us any idea how long? What I want to get at is 
 what the colony is being committed to? — I will still take the whole 
 lot together— the £42,000 ($204,393) that is being paid now and the 
 £30,000 ($145,995) proposed to be paid out, making £72,000 ($350,388) 
 altogether. I estimate that in about thirty-five years' time the total 
 amount will be about the same as that. It will be all on account 
 of the pension fund then — there will be no other outlay. It will 
 certainly have come down in eighty years' time to its final level — 
 say £50,000 ($243,325). («) 
 
 It can not be stated whether this uncertainty as to the ultimate 
 cost of the enterprise in which the Government was embarked by 
 the passage of the superannuation act left any feeling of uneasiness 
 in the minds of those who voted for it. At a meeting held to com- 
 memorate the passing of the act. Sir Joseph Ward, the Premier, is 
 reported by the New Zealand Times of December 19, 1907, to have 
 reminded the people of "this potent fact, that in addition to the 
 £20,000 ($97,330) a year which the country was now contributing, 
 at any time, if that amount was found to be insufficient, the country 
 was bound by act of Parliament to provide the increase, whatever 
 that might be. They knew from the actuary that the amount in 
 time must be increased to £50,000 or £60,000 ($243,325 or $291,990) 
 a year. He believed that without a contented service the country 
 did not get the full value in return. It was proper that the country 
 should pay its servants well so as to secure attachment to the serv- 
 ice, and thus retain its employees. He believed they would get 
 that attachment as a result of this act." Another speaker at this 
 same meeting, Mr. G. Allport, chairman of the superannuation com- 
 mittee, denied that the civil servants were paying for much of what 
 they got, and said that "they were not going to pay a sufficient amount, 
 by a long way, to provide the pensions they would receive, and they 
 ought to be grateful to the Government and the country for having 
 agreed to contribute in the manner which was done, enabling a sub- 
 stantial pension to be paid to each member of the service upon his 
 retirement." 
 
 « Report on Public Service Superannuation Bill. 1906. Minutes of evidence, p. 4. 
 
244 CIVIL-SEKVICE RETIREMENT IN NEW ZEALAND. 
 
 The bill was passed November 25 and became a law with the fol- 
 lowing provision in reference to a subsidy: 
 
 "In the month of January in every year the minister of finance 
 shall pay into the fund and out of the Consolidated Fund, without 
 further appropriation than this act, the sum of twenty thousand 
 pounds (S97,330), together with such further amount (if any) as is 
 deemed by the governor in council, in accordance with the aforesaid 
 report of the actuary to be required to meet the charges on the fund 
 during the ensuing year." 
 
 Main Features of the Law Enacted. 
 
 The main features of the law are then as follows: All permanent 
 civil servants and all temporary clerks who had served the Gov- 
 ernment for more than five years continuously are included in the 
 pubhc service superannuation scheme, if not provided for by the 
 police, railway, or teachers' funds. They were given the oppor- 
 tunity for six months of joining the fund. An^^one who did not elect 
 to become a contributor within the prescribed six months is not 
 allowed to do so at a future time, except on payment of a sum equal 
 to the total contributions he would have paid had he elected to be- 
 come a contributor in the beginning, plus five per cent compound 
 interest. Anyone who joins the fund has the option of continuing 
 the hfe insurance policy he had been required to take out under pre- 
 vious legislation, or of surrendering it. In case he elects not to join 
 the superannuation fund, he is required to continue the policy. All 
 new entrants to the public service are compelled to join the fund. 
 The amount of their contributions is determined by their age on 
 entering the service, ranging from 5 to 10 per cent of their salaries. 
 Pensions are claimable by men at the age of 65 (60 was the age origi- 
 nally chosen, but the change to 65 was made in committee at the last 
 moment) or after forty years of service, and by women at the age of 
 55 or after thirty years of service. There is no compulsory age of 
 retirement. The amount of each pension is as many sixtieths of the 
 average salary during the last three years before retirement as the 
 pensioner has been years in the service, but it will, in no case, exceed 
 two-thirds of this terminal salary. The contributor may elect on 
 retirement to take the amount of his contributions, without interest, 
 instead of this retiring allowance. In case of medical unfitness, 
 retirement is allowed on the usual pension of ^o^th for each year of 
 service. The medical certificate of two approved practitioners is re- 
 quired to satisfy the board that the employee has become permanently 
 unable to perform his duties by reason of mental or bodily infirmity 
 not caused by irregular or intemperate habits. An ordinary medical 
 examination is required on entrance into the service. In case of the 
 death of a male contributor, whether before or after becoming entitled 
 
CIVIL-SERVICE RETIREMENT IN NEW ZEALAND, 245 
 
 to a retiring allowance, an annuity of £18 ($88) a year is granted to 
 his widow, or she may choose instead the return of the deceased's 
 contributions. Five shillings ($1.22) a week is granted to each child 
 under 14 years of age, whether the deceased contributor is a male or 
 a female parent. Where there is neither widow nor child the differ- 
 ence between the contributions paid by the deceased and the pension 
 received by him or her is paid to his or her legal representatives. In 
 case of voluntary withdrawal or in case of dismissal for any cause, 
 the contributor is entitled to a refund of the whole amount actually 
 contributed by him to the fund, but without interest. The fund 
 established under this act consists of the contributions of the em- 
 ployees, the subsidy from the Government, and the interest accruing 
 from the investment of the fund. All moneys belonging to the fund 
 are paid to the public trustee, who invests them in freehold securities 
 at current rates of interest. The average rate of interest yielded by 
 such investments is reported (by a member of the board) to be about 
 5 per cent. The fund is administered by a board called the Public 
 Service Superannuation Board consisting of ten members, of whom 
 five are appointed by the governor and five elected by the contribu- 
 tors. This board has the services of one secretary and two clerks. 
 The cost of administration is reported to be nil except for the sum of 
 £400 ($1,947) per annum paid to the secretary of the board as salary. 
 
 ''The Public Service Superannuation Act, 1907," accordingly 
 came into operation January 1, 1908. Immediately applications to 
 become contributors to the fund commenced to come in, and to an 
 extent that showed at once that the act was a popular measure and 
 would prove most successful in its operation. Up to the end of 
 June, 1908, that is, six months after the act became effective, no 
 fewer than 7,028 members of the public service voluntarily became 
 contributors. This included the majority of the 5,593 persons 
 enumerated in the census of the departments made by the actuary and 
 also officials who, prior to the passing of the Classification Act of 1907, 
 were only temporarily employed but who became permanent officers 
 by the passage of that act. 
 
 The act provides that, until an official becomes a contributor to 
 the fund, he is subject to the provisions of the previous civil service 
 acts relating to insurance and deductions from salary. On becoming 
 a contributor, the official is entitled at his option — 
 
 (1) To keep his insurance policy alive independently of the 
 superannuation act; 
 
 (2) To surrender the policy and have its surrender value paid to 
 the public trustee to be invested independently of the fund, and to 
 be paid to him, together with all interests on it, when he retires or 
 to his personal representatives on his death; or, 
 
 (3) To surrender the policy and receive the equivalent of its 
 surrender value in the form of a paid-up policy. 
 
246 CIVIL-SEEVICE RETIREMENT IN NEW ZEALAND. 
 
 Since the provision for widows and dependents under the new super- 
 annuation scheme is not on such a high scale as to make insurance no 
 longer necessary,- it is the expectation of the government insurance 
 commissioner that large numbers of civil servants whose own old age 
 is well provided for by the superannuation fund will see the wisdom 
 of making provision for their families by assurance on their lives, for, 
 which the department offers special facilities. Even though compul- 
 sory insurance was imposed, under the Act of 1893, only on new 
 entrants under forty years of age, a large proportion of the support 
 given to the Insurance Department came from voluntary action on 
 the part of government employees in all branches and grades of the 
 service, including teachers, policemen, railway men, and civil serv- 
 ants. The following statement, taken from a ''Brief Survey of New 
 Zealand's State Life Insurance," prepared for distribution at the 
 Franco-British Exposition in London, 1908, shows that government 
 employees contributed in premiums upwards of £44,000 ($214,126) a 
 year out of a total premium income of over £320,000 ($1,557,280). 
 Of this less than 13 per cent was of the nature of compulsory insur- 
 ance, as shown by the following statement: 
 
 Yearly premiums. 
 
 Railways $74, 457 
 
 Posts and Telegraphs 37, 959 
 
 Education 27, 252 
 
 Police Force 9, 733 
 
 Other Departments (per Treasury) 40, 392 
 
 Voluntary assurance premiums 189, 793 
 
 Compulsory assurance premiums (under Civil Service Insurance Act) 28, 226 
 
 218, 019 
 
 Operation of Law, First Six Months. 
 
 The Public Service Superannuation Board's report for the first six 
 months of the law's operation shows, however, that considerable diffi- 
 culty was experienced at first, owing to the fact that the temporary 
 officers who had become permanent were under the impression that 
 they were exempt from the necessity enjoined on all officers joining 
 the service since 1893 of having to insure their lives, and they con- 
 sidered that the option given by the act to all those newly made per- 
 manent of having the privilege of electing within six months to 
 become contributors, exempted them in the meantime from having to 
 insure under the provisions of ''The Civil Service Insurance Act, 
 1893," should they decide not to become contributors until the six 
 months' option had expired. This was, however, overcome, and 
 with a few exceptions they undertook the responsibihties of other 
 public officers and joined the fund. 
 
 This report states that "the popularity of the act has been dis- 
 tinctly proved by the very large number of officials who have volun- 
 tarily joined as contributors. There are cases where some who have 
 
CIVIL-SERVICE EETIREMEl<rT IN NEW ZEALAND. 247 
 
 become permanent officers under the Classification Act, and who had 
 to join as contributors or insure, demurred at having to accept the 
 responsibihties of the position, and considered it somewhat of a hard- 
 ship that, being already insured in the Government Insurance OSice 
 or other private companies, they should have their small salaries 
 further taxed by having to contribute to the fund or take out a policy 
 under "The Civil Service Insurance Act, 1893;" but, as against the 
 few who felt this hardship, a large majority of the public service felt 
 that a very great privilege had been accorded them under the liberal 
 provisions of the act. Many of these had given years of their life to 
 the service of the Dominion as temporary officials, and had no hope 
 or prospect of any retiring allowance when their time came to leave 
 the service, and they were gratified to find that under this act their 
 past service would be taken into account when they retired, and that 
 they would be accorded the same privileges as regards a retiring allow- 
 ance as those permanent officers with whom they had worked for 
 many years." 
 
 The following statement for the six months ending June 30, 1908, 
 was made:(") 
 
 Number of contributors 7, 028 
 
 Annual contributions $267, 658 
 
 Contribution from the Consolidated Fund $97, 330 
 
 Retiring allowances granted 63 
 
 Representing an annual payment of $26, 547. 43 
 
 Number of officials retired as medically unfit 9 
 
 Representing an annual payment of $3, 931. 69 
 
 Number of contributors who have died during the six months 9 
 
 Annual pension to five widows and seven children 
 
 The total allowances granted, it will be seen, amount to £6,444 lid. 
 ($31,359.95). The largest pension paid is £339 3s. 4d. ($1,650.55) and 
 the smallest £12 9s. 9d. ($60.77). 
 
 Public Attitude in Regard to Law. 
 
 The superannuation scheme seems to be satisfactory to the New 
 Zealand public as well as to the civil employees. Press comments 
 at the time of its adoption took the form of congratulation rather 
 than of any criticism of the extra charge laid on the country. Sym- 
 pathetic interest was also shown by Australian and English papers. 
 "While the superannuation scheme undoubtedly imposes a heavy 
 tax on the Consolidated Revenue, it at the same time relieves it from 
 another heavy outlay, and the additional cost of superannuation is 
 not so great as might at first be supposed," was the comment of a 
 Melbourne paper. (^) This cost was denominated by another journal 
 as a "very moderate pull on the Dominion's exchequer." (*=) "The 
 annual cost of the scheme, although not yet ascertained, will, to some 
 
 a Report of Public Service Superannuation Board, June 30, 1908. 
 
 6 Australasian Insurance and Banking Record, Melbourne, February 20, 1908. 
 
 c New Zealand Times, November 21, 1907. 
 
248 CIVIL-SERVICE EETIREMENT IN NEW ZEALAND. 
 
 extent, be offset by a direct saving in other directions, while the 
 indirect saving through securing a more efficient public service 
 should be very material," was the view expressed by a Sydney 
 paper. C*^) The comment of a London insurance paper was ''We 
 believe there is here outlined an admirable scheme of superannu- 
 ation, the administration of which will be watched with interest in 
 many quarters of the world. We content ourselves in the mean- 
 time with observing that the indications are that it will work out to 
 the benefit of deserving State servants, whose habits of thrift and 
 self-help it will stimulate, without imposing an undue burden upon 
 the people of the Dominion." C*) 
 
 The principle involved in the sharp line of demarcation drawn by 
 the actuary between the payment of allowances on services rendered 
 prior to the adoption of the plan and the payment of allowances on 
 services rendered after the adoption of the plan was clearly under- 
 stood and discussed in some of the editorial comments. Speaking of 
 the difficulties which presented themselves in the way of an apph- 
 cation of the pension idea which would be at once financially sound 
 and fair in its operation, the London Insurance Record said : 
 
 As the premier pointed out in the course of a debate on the bill, 
 the civil service in New Zealand is old compared with the age of the 
 country, and it was because of that fact that there was a supreme 
 difficulty on the part of the Government in putting on the statute 
 book a superannuation act forty years after some of the men had 
 joined the service, the incidence of which was light in its burden 
 upon members of the service. If the scheme had been commenced 
 forty years ago a universal contribution rate of 3 or 4 per cent of 
 salary for every one in the service would have sufficed. But the 
 country has grown up, the old men in the service are leaving, and 
 those who remain must fill the void. 
 
 More clearly still the Sydney "Review" states the problem and its 
 solution in the separation of accrued from future liabilities: 
 
 The pensions are liberal, and a scheme of this description, applying 
 to present officers, many of whom can retire immediately on very 
 fair pensions, must of necessity entail a heavy liability on the part 
 of any government. The favorite method, however (vide New 
 South Wales and Cape Colony civil service schemes), has been to 
 ignore this liability and to go on paying the pensions of the old men 
 who retire, out of the contributions of the young men who join the 
 scheme, until the funds are exhausted, and the outlay for pensions 
 exceeds the income from contributions. The actuary, Mr. Morris 
 Fox, has made the recklessness of this method quite apparent in his 
 comprehensive reports, and the Government has agreed to start the 
 scheme with an annual payment of £20,000 ($97,330), the subsidy 
 to be increased by such further amounts as will be sufficient to pay 
 the difference between the pensions falling due and the amount of 
 
 o Sydney Review, February 29, 1908. 
 
 b London Inaurance Record, February 21, 1908. 
 
CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 249 
 
 pension the contributions would have actually purchased. (For 
 example, if an old servant retires on £400 ($1,947) a year while his 
 contributions would only have purchased £10 ($49), the fund pays 
 the £10 ($49), and the Government finds the balance, £390 ($1,898) 
 per annum. The contributions of the younger members will therefor 
 be accumulated at compound interest to help provide their pensions 
 when they become payable, and will not be absorbed by meeting 
 more immediate liabilities; the cost of providing current pensions 
 being borne by the present taxpayers, and not by posterity. If the 
 scheme were commenced without contributions, the pensions falling 
 due would be the measure of the Government's annual liability, 
 and by meeting this liability (or rather the portion not paid for by 
 the contributor) at once. Sir Joseph Ward has made a fair division of 
 the annual outlay between present and future taxpayers. It is this 
 simple, but ingenious financial arrangement which differentiates the 
 scheme from all others with which we are familiar, and the result is 
 three-fold; the solvency of the fund is secured, the present strain 
 on the exchequer is the minimum compatible with soundness, and 
 only a fair share of the liability is transferred to posterity. 
 
 TEACHERS', POLICE, AND GOVERNMENT RAILWAYS 
 SUPERANNUATION ACTS CONSOLIDATED. 
 
 It is generally felt that it would be desirable to harmonize the 
 details of all the plans so that the provisions for civil servants, 
 teachers, policemen, and railway men might all be included in one 
 comprehensive law. A long step toward that end was taken last 
 year when the four acts of consolidation were passed: 
 
 (1) "The Public Service Classification and Superannuation Act, 
 1908," which is a consolidation of the "Public Service Classification 
 Act, 1907," and the "Public Service Superannuation Act, 1907," 
 with the exception of certain omitted sections. 
 
 (2) "The Public Service Classification and Superannuation Amend- 
 ment, 1908," which is to be read with and deemed part of the above 
 act, being merely an amendment to include the teachers under the 
 general terms of classification and superannuation provided for 
 members of the "public service." 
 
 (3) "The Police Force Act, 1908," which is a consolidation of 
 "The Police Force Act, 1886," "The Police Provident Fund Act, 
 1899," and those sections of the "Public Service Superannuation 
 Act, 1907," which relate to the rate of contribution paid by con- 
 tributors to the Fund. 
 
 (4) "The Government Railways Act, 1908," which is a consohda- 
 tion of various improvement acts including "The Government 
 Railways Superannuation Fund Act, 1902," "The Government Rail- 
 ways Superannuation Fund Contributions Act, 1903," and the 
 sections in the "Public Service Superannuation Act, 1907," relating 
 to the rate of contributions to be paid to the Fund by contributors 
 entering the service at various ages. 
 
250 
 
 CIVIL-SERVICE EETIEEMENT IN NEW ZEALAND. 
 
 The result of these various consolidation acts is that contribu- 
 tion to the superannuation fund is compulsory now for new entrants 
 in every branch of the government service, and contributions are 
 fixed at uniform rates for all branches. The rates of contribution 
 are those adopted for the public service and the teachers, which 
 were notably higher than those formerly imposed on the railways 
 members, being 5, 6, 7, 8, 9, and 10 per cent for various ages as 
 against 3, 4, 5, 6, 7, and 10 per cent for the same ages. 
 
 The four laws now read uniformly as regards the rates of contri- 
 bution to be paid by a contributor, as follows: 
 
 (a) Five per cent if his age does not exceed 30 years at the time 
 when the first contribution becomes payable; 
 
 (6) Six per cent if his age then exceeds 30 years but does not 
 exceed 35 years; 
 
 (c) Seven per cent if his age then exceeds 35 years but does not 
 exceed 40 years; 
 
 id) Eight per cent if his age then exceeds 40 years but does not 
 exceed 45 years; 
 
 (e) Nine per cent if his age then exceeds 45 years but does not 
 exceed 50 years; and 
 
 (/) Ten per cent if his age then exceeds 50 years. 
 
 The consolidation of the various acts resulted also in the harmo- 
 nization of some slight variations in the benefits offered. The most 
 striking discrepancy was in the case of the teachers' plan, in which 
 back service counted for only one-half in determining the amount 
 of the pension, a provision that seems to have caused considerable 
 discontent. "The Public Service Classification and Superannuation 
 Amendment, 1908," corrected this discrimination, giving teachers 
 full credit for back service and giving them pensions on the same 
 basis as the public servants. A comparison of the benefits under 
 the various New Zealand government superannuation schemes now 
 in force is as follows: 
 
 COMPARISON OF BENEFITS UNDER THE VARIOUS GOVERNMENT SUPERANNUATION 
 SCHEMES IN FORCE IN NEW ZEALAND. 
 
 Benefit. 
 
 Public Service Fund and 
 Teachers' Fund. 
 
 Railway Fimd. 
 
 Police Fund. 
 
 I. Pensions on ordinary 
 
 
 
 
 retirement, at or over 
 
 
 
 
 pension age: 
 
 
 
 
 (1) Retiring age 
 
 Age 05 or after 40 years' 
 
 Age CO or after 40 years' 
 
 Age 60 and not less than 
 
 
 service, or age 60 with 
 
 service, or 35 years' 
 
 25 years' service. 
 
 
 approval of minister. 
 
 service with permis- 
 sion of board. 
 
 
 (2) Amount of pen- 
 
 n'ath of average salary 
 
 B^uth of final salary (or 
 
 Same as in railway fund. 
 
 sion. 
 
 for last 3 years, for 
 
 average of last 7 years. 
 
 
 
 each year of service. 
 
 if increased in last 5 
 years) for each year of 
 service. 
 
 
 (3) Pension limit 
 
 Jg or 5 of average salary 
 
 J8 or § of final salary (as 
 
 §g or % of final salary. 
 
 
 (as above). 
 
 above). 
 
 
CIVIL-SEKVICE EETIREMENT IN NEW ZEALAND. 
 
 251 
 
 COMPAEISON OF BENEFITS UNDER THE VARIOUS GOVERNMENT SUPERANNUATION 
 SCHEMES IN FORCE IN NEW ZEALAND— Continued. 
 
 Benefit. 
 
 Public Service Fund and 
 Teachers' Fund. 
 
 Railway Fund. 
 
 Police Fund. 
 
 II. Benefits on retire- 
 ment before pension 
 age: 
 Medically unfit 
 
 II. Benefits on death of 
 pensioner. 
 
 IV. Benefit on death of 
 contributor while 
 in service: 
 
 ( 1) If no widow or 
 
 children. 
 
 (2) If widow or chil- 
 
 dren. 
 
 V. Benefits on voluntary 
 
 withdrawal or dis- 
 missal (not for mis- 
 conduct) before pen- 
 sion age. 
 
 VI. Benefits on dismissal 
 
 for misconduct. 
 
 ^oth of average salary 
 for last 3 years, for 
 each year of service. 
 (In teachers' fund only 
 after 15 years' service. ) 
 
 (a) If no widow or chil- 
 dren: Diflerence be- 
 tween contributions 
 paid and pensions re- 
 ceived. 
 
 (6) If a widow: An an- 
 nuity of £18 ($88) dur- 
 ing widowhood, or 
 option of diflerence 
 between contributions 
 paid and pensions re- 
 ceived. 
 
 (c) If children: A weekly 
 payment of 5s. ($1.22) 
 for each child until 14 
 years of age. 
 
 Same as above . 
 do. 
 
 Return of contributions 
 
 withjout interest. 
 
 Same as above. 
 
 g^th of final salary (or 
 average of last 7 years, 
 if increased in last 5 
 years) for each year of 
 service. 
 
 Difference between con- 
 tributions paid and 
 pension received, to- 
 gether with compen- 
 sation (1887, Act). 
 
 Same as above. 
 
 An annuity of £18 ($88) 
 during widowh o o d , 
 and 5s. ($1.22) per 
 week for each child 
 until 14 years of age or 
 option of return of 
 such portion of contri- 
 butions as the Board 
 thinks proper. 
 
 Return of contributions 
 without interest, to- 
 gether with compen- 
 sation (1887, Act). 
 
 Return of contributions 
 without interest. 
 
 Under 5 years: Return of 
 contributions. 
 
 5 to 15 years: 1 month's 
 pay for each year's 
 service up to 12. 
 
 Over 15 years: The usual 
 pension. 
 
 If injured on duty. Board 
 may grant pension up 
 to limit. 
 
 Diflerence between con- 
 tributions . paid and 
 pension received (at 
 discretion of Board). 
 
 No benefit. 
 
 If from injuries on duty: 
 An annuity of £ 18 ($88) 
 during wdowhood, 
 and 5s. ($1.22) per week 
 for each child until 14 
 years of age. 
 
 If not from injuries on 
 duty: Such sum as the 
 Board thinks proper 
 up to amount of contri- 
 butions. 
 
 Under 10 years: Nothing, 
 
 After 10 years, and not 
 over 25: Return of 
 three-fourths of contri- 
 butions. 
 
 Return of not more than 
 one-half of contribu- 
 tions. 
 
 Compared with 4,963 men and 630 women in the pubhc service in 
 1907, there were that same year 815 men and 6 women in the poHce 
 scheme, and 8,265 men in the railway scheme, and in 1908 there were 
 1,436 men and 1,446 women in the teachers' plan. 
 
 Report on the Teachers' Fund. 
 
 The second report of the board constituted by "The Teachers' 
 Superannuation Act, 1905," shows that the number of contributors 
 to the Teachers' Superannuation Fund on March 31, 1908, was 2,882. 
 The aggregate annual salaries of the contributors to the fund was 
 £446,607 (S2, 173, 413) and the actual amount of contributions received 
 during the year was £32,676 ($159,018). Thirty-eight new retiring 
 allowances were granted during the year to contributors, 6 allowances 
 
252 CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 
 
 to widows and orphans, which added to 94 already existing made a 
 total of 138 allowances granted, but as 8 of them were discontinued 
 during the year only 130 existed at the end of the year. These 
 amounted to £6,062 10s. lid. ($29,503). 
 
 Of the number of contributors who retired during the year 24 (in- 
 cluding 4 "medically unfit" cases) were granted annual allowances 
 aggregating £1,389 10s. ($6,762). Six widows and eight children, 
 the representatives of six contributors who died, were granted annual 
 allowances amounting to £212 ($1,032) and a refund of contributions 
 of £132 9s. 9d. ($644.75). The total number of retired contributors 
 on account of whom annual allowances were granted during the year 
 was therefore 30. Four contributors whose length of service was 
 not over fifteen years retired as being "medically unfit for further 
 duty." In each of these cases, a sum equal to one-twelfth part of 
 the total salary received by them during all theyears of their service 
 prior to January 1, 1906, was granted, together with a refund of 
 their contributions to the fund. The total amounts were £212 10s. 
 Id. ($1,034.15) and £21 9s. 9d. ($104.57), respectively: total £233 
 19s. lOd. ($1,138.72). Seven contributors died before entering upon 
 pension, and their contributions to the fund, amounting to £87 4s. 3d. 
 ($424.42) were paid to their legal representatives. To one hundred 
 contributors who voluntarily retired from the education service 
 before becoming entitled to participate in the benefits of the fund 
 contributions amounting to £1,014 10s. Id. ($4,937.08) were re- 
 turned. The total number of contributors who retired from the 
 education service during the year was 141. Five pensioners died 
 during the year, of whom 4 left widows, and 2 children under the age 
 of fourteen years, to whom annual allowances were granted. Three 
 children attained the age of fourteen years, and their allowances 
 consequently ceased. 
 
 The balance to the credit of the fund at the close of March, 1908, 
 was £62,222 lis. ($302,806), and of this sum £48,100 ($234,079) was 
 invested on mortgage — £37,100 ($180,547) at 4^ per cent, and 
 £11,000 ($53,532) at 5 per cent. The balance of £14,122 lis. 
 ($68,727), bearing interest at 4 per cent was awaiting investment by 
 the public trustee. 
 
 Report on the Police Fund. 
 
 The last annual report of the Board of Administration of the 
 Police Provident Fund shows that 1 sergeant and 7 constables were 
 retired with annual allowances during the year which ended on 
 March 31, 1908. There were at that date 3 exinspectors, 22 exser- 
 geants, 40 exconstables, 3 exdetectives, 2 widows, and 2 children 
 on the fund, their aggregate annual allowance being £6,574 2s. 6d. 
 ($31,992.98). The balance sheet shows that the contributions dur- 
 
CIVIL-SEKVICE RETIREMENT IN NEW ZEALAND. 253 
 
 ing the year amounted to £7,232 3s. 4d. ($35,195.34), fines to £46 12s. 
 6d. ($226.90), and interest to £1,509 16s. 9d. ($7,347.62), whereas, 
 on the other hand, life allowances amounted to £6,327 19s. 3d. 
 ($30,795.03), and numerous other grants were paid, leaving to the 
 credit of the fund of £30,537 5s. 7d. ($148,609.67), an increase over 
 the amount on hand at the corresponding date of the preceding year 
 of £1,411 4s. 4d. ($6,867.69). 
 
 Report on the Government Railways Fund. 
 
 The report of the Board on the Government Railways Super- 
 annuation Fund for the year ending March 31, 1908, shows that 
 members contributed £45,669 Os. 9d. ($223,248.37) to the fund dur- 
 ing the year; fines amounted to £239 5s. ($1,164.31), and interest to 
 £5,352 3s. ($26,046.24), while on the other hand, superannuation 
 allowances to the amount of £26,758 16s. 7d. ($13,279.85) were paid 
 during the year to 484 members of the railway service who had either 
 voluntarily resigned or been retired as medically unfit, allowances 
 amounting to £3,799 12s. 9d. ($18,490.94) were paid to 105 widows 
 and 173 children, the dependents of deceased members of the service 
 who had not retired on superannuation at the time of their death, 
 refunds amounting to £342 9s. Id. ($1,666.55) were paid to the legal 
 representatives of deceased members, a sum of £3,610 19s. 7d. 
 ($17,572.83), representing contributions of members of the service 
 who voluntarily retired or whose services were otherwise dispensed 
 with during the year was refunded to members concerned and other 
 small disbursements were made, leaving a balance to the credit of 
 the fund of £126,642 18s. lid. ($616,307.90). 
 
 The total amount of annual allowances granted by the Board from 
 the beginning of the fund until the end of March, 1908, was distributed 
 as follows :('^) 
 
 Life allowances on account of voluntary retirements (449 persons) 1140, 766. 74 
 
 Life allowances on account of retirements as "medically unfit," (87 
 
 persons) 24,193.13 
 
 Allowances to 109 widows and 211 children 22, 935. 39 
 
 Total annual allowances granted 187, 895. 26 
 
 Seventy beneficiaries have died since the inauguration of the fund, 
 including nineteen during the year under review, and seven members 
 who had been placed on the fund as "medically unfit" resumed duty. 
 The fund was relieved of an annual Hability of £4,621 18s. ($22,492.48) 
 in respect to these seventy-seven members. Forty-four children 
 have reached the age of fourteen years (eight during the past year), 
 two children have died, six widows remarried, and three widows died, 
 lessening the liability of the fund by an additional £761 13s. ($3,706.57) 
 per annum. 
 
 o Report of Board on Government Railways Superannuation Fund, 1908, p. 2. 
 
254 
 
 CIVIL-SEKVICE KETIEEMENT IN NEW ZEALAND. 
 
 The number of persons actually on the fund at March 31st, 1908, 
 was 724, involving an annual habihty of £33,226 7s. 9d. ($161,696.21) 
 as shown by the following statement of annual balances and annual 
 allowances actually granted by the board :(") 
 
 
 Balance. 
 
 Allowances. 
 
 1903 
 
 J{34,340.88 
 196,401.54 
 334,184.42 
 442,776.52 
 538,899.72 
 616,307.90 
 
 
 1904 
 
 $58,450.23 
 
 1905. 
 
 41 , 459. 58 
 
 1906 
 
 30,895.85 
 
 1907 
 
 21,406.50 
 
 1908. 
 
 35, 683. 10 
 
 
 
 Less members died, etc 
 
 
 187,895.26 
 26, 199. 05 
 
 
 
 
 Annual liability at March 31 , 1908 
 
 161,696.21 
 
 
 
 
 CONCLUSIONS. 
 
 The experience of New Zealand in retiring its civil employees is 
 particularly instructive to the student of superannuation schemes. 
 Hampered by few theories or precedents, but mindful of the experi- 
 ence of the mother country and of other British colonies, the citizens 
 of New Zealand have proceeded to try several schemes, discarding a 
 scheme as soon as its inadequacy or unsuitability was demonstrated 
 and substituting another which was free from the features found 
 objectionable in previous ones. The result has been a gradual devel- 
 opment of ideas along rational lines, until it would seem that there 
 has been evolved a plan that is actuarially sound, one that meets 
 the requirements of the service, and one that fits in with the ideas 
 of the people generally as to what is fair and suitable. 
 
 After thirteen years of experience in granting straight pensions 
 that plan was abandoned because of the fear that it meant eventually 
 a too heavy charge on the public treasury. Abandoning the pension 
 system, therefore. New Zealand contented itself for a period of 
 thirteen years with making gifts of lump sums to each employee 
 retiring from the service, basing the amount of the gift on the length 
 of service. This was, however, merely a makeshift in recognition of 
 the fact that old people could not be dismissed from office without 
 great hardship unless some kind of provision was made for them. 
 Even this was felt to be too heavy a burden on the Treasury, however, 
 and there followed the Act of 1886, which authorized deductions from 
 salaries, and was simply a scheme of compulsory savings established 
 with the idea that the superannuated employee must be taken care of, 
 but at his own and not at the public expense. It should be noted 
 that the change made in 1886 was practically the withdrawal of a 
 privilege which existed before, the compensation of a month's salary 
 for every year's service, and was in harmony with the spirit of 
 
 o Report of Board on Government Railways Superannuation Fund, 1908, p. 1. 
 
CIVIL-SERVICE RETIREMENT IN NEW ZEALAND. 255 
 
 retrenchment which flourished in New Zealand in the last half of the 
 eighties, when there was a considerable cutting down of salaries and 
 dispensing with employees. While this arrangement promised relief 
 to the Treasury, it was not satisfactory to the employees of the Govern- 
 ment as a retirement measure, because they saw that the sum to the 
 credit of the individual on retirement would be inadequate in case 
 the officer lived many years after retirement. The actions taken in 
 1871 of abolishing the pension system, and in 1886 of abolishing the 
 compensation plan and requiring deductions from salaries were taken 
 purely in the interest of the treasury. In 1893, for the first time since 
 the pension system was established in 1858, action was taken which 
 was designed purely and simply in the interest of the service. Good 
 as far as it went, the provision for compulsory insurance proved^ 
 however, like the provision for compulsory savings, inadequate as a 
 substitute for a retirement measure. Finally, in 1907, a contributory 
 retirement plan with a subsidy from the Government was adopted. 
 This plan, by permitting continuance of insurance in the Government 
 Life Insurance Department if the employee so desires, affords ade- 
 quate provision for eveiy possible contingency in the life of the civil 
 employee. 
 
 The situation in New Zealand, therefore, at present is this: The 
 Government has come to realize, on the one side, and the civil 
 service, on the other, that it is impossible to get something for nothing. 
 The Government has ceased to attempt the abolition of pensions and 
 compensations and the compulsion of deductions from salary without 
 making a corresponding contribution, and has become willing not 
 merely to retire those who are already superannuated, but to con- 
 tribute a certain permanent annual subsidy toward the support of a 
 superannuation measure for the benefit of the civil service. At the 
 same time, the members of the civil service have come to see that a 
 system of free gifts from the Government, whether it be in the nature of 
 pensions, compensations, or gratuities, is not the most desirable plan 
 that could be devised, and they are almost unanimously willing to 
 contribute from their salaries to the support of a retirement plan 
 which meets their approval. 
 
 The plan is based on two fundamental principles not observed in 
 the contributory plans whose funds have become insolvent: 
 
 (1) The rates of contribution are fixed by the age of entrance into 
 the service and not by any arbitrary percentage of assessment. This 
 means that the amount of the annuity is determined in each case by 
 the length of service and amount of salary, and that each employee 
 contributes only to his own retirement, so that the plan is equitable 
 as between different classes of employees. 
 
 (2) A sharp line of demarcation is drawn in this plan between 
 accrued and future liabilities. The Government agrees to pay all 
 annuities on services rendered up to the time of the adoption of the 
 
256 CIVIL-SEEVICE EETIREMENT IN NEW ZEALAND. 
 
 plan. Since the contributions of the civil servants are not sufl&cient 
 to provide all the generous benefits — including those to invalids and 
 widows and orphans — the Government agrees to make up whatever 
 deficit there is on this score also. There is no expectation of making 
 the plan self-supporting. 
 
 The calculations as to the cost to the Government of estabUshing 
 and carrying on this plan were carried only through the first year, 
 but since the law makes provision for triennial valuations of the fund, 
 this is of little practical importance if the people of New Zealand 
 are wilHng to accept the plan on a mere estimate as to its cost. Even 
 if the possible maximum cost had been computed out to the last 
 year of life of the last member of the present service, the necessity 
 for frequent valuations of the fund would be imperative on other 
 grounds. The benefits provided under the plan are very liberal, 
 including as they do allowances for the disabled and for the widows 
 and orphans as well as for the superannuated. The sufficiency of the 
 fund to meet these benefits can be ascertained only by periodical 
 valuations, in ^dew of the uncertainty, owing to the lack of statistics, 
 as to the strain on the fund from invalidity allowances on the one 
 hand, and the relief on the other from the forfeiture of interest by 
 those resigning from the service before reaching the retirement age. 
 It is apparent, however, that the fundamental principles underlying 
 this plan might have been applied to a plan designed to be entirely 
 self-supporting, but the people of New Zealand have been willing to 
 increase the benefits under the plan beyond what the contributions of 
 the employees could support and to make the contributions necessary 
 for that purpose. With the liberal benefits provided under the 
 Superannuation Act of 1907, requiring permanent help from the 
 Government, it is plain that the actuary was right in insisting that a 
 provision for frequent valuations of the fund is necessary to insure its 
 actuarial soundness. 
 
 Certain details of the plan are worthy of note by the student. 
 There is no compulsory age of retirement, notwithstanding England's 
 experience that the absence of such provision is inadvisable. Pro- 
 vision is made for the cash refund of contributions on separation from 
 the service, but interest on them is forfeited — an offset to the liber- 
 ality of the benefits provided for those who remain in the service. 
 The retiring allowance is based on the salary during the last three 
 years of service rather than on the average salary. These are features 
 the wisdom of which can be determined only by experience. 
 
 New Zealand's experience in retiring its civil employees is especially 
 instructive for two reasons, first, because of the variety of experiments 
 made, and, second, because the final conclusion rests on theoretical 
 principles generally acknowledged to be sound and yet in actual 
 practice "more honored in the breach than in the observance." 
 
Appendix. 
 PUBLIC SERVICE SUPERANNUATION ACT. 
 
 [1907, No. 63.] 
 AN ACT to provide a Superannuation Fund for the Public Service (November 25, 1907). 
 
 Be it enacted by the General Assembly of New Zealand in Parliament assembled, and 
 by the authority of the same, as follows: 
 
 1. This Act may be cited as the Public Service Superannuation Act, 1907, and 
 shall come into operation on the first day of January, nineteen hundred and eight. 
 
 2. In this Act, if not inconsistent with the context, "Board" means the Public 
 Service Superannuation Board established under this Act. "Public Service" 
 includes the High Commissioner's Office, the Legislative Branch, and every Depart- 
 ment of the Government service except the Government Railways Department, so 
 much of the Police Department as is included in the Police Provident Fund Act, 
 1899, and so much of the Education Department as is included in the Teachers' 
 Superannuation Act, 1905. "Contributor" means a contributor to the fund. "De- 
 partment" means every branch of the Public Service which is administered sepa- 
 rately. "Fund" means the Public Service Superannuation Fund. "Regulations" 
 means regulations made by the Governor by Order in Council gazetted. "Salary " of 
 a contributor means the rate of salary or wages paid in respect of his service, but does 
 not include allowances or payment for overtime. 
 
 PUBLIC SERVICE SUPERANNUATION FUND. 
 
 3. There is hereby established in connection with the Public Service a fund to be 
 called the Public Service Superannuation Fund, which shall be administered by the 
 Board. 
 
 4. The fund shall consist of (a) the contributions from contributors as hereinafter 
 provided; (6) moneys at any time paid into the fund under sections thirty-two and 
 thirty-three hereof; and (c) interest from time to time accruing from investment of 
 the fund as hereinafter provided. 
 
 5. All moneys belonging to the fund shall be paid to the Public Trustee, who shall 
 from time to time invest the same in such manner as is prescribed by regulations. 
 
 6. The fund shall be administered by a Board called the Public Service Super- 
 annuation Board, consisting of ten members, namely: A Minister of the Crown; four 
 persons to be appointed and removable by the Governor in Council; two persons to 
 be elected by and from the contributors who belong to the Post and Telegraph Depart- 
 ment; and three persons to be elected by and from the contributors who belong to 
 other Departments of the Public Service. 
 
 7. (1) With respect to the elective members of the Board the following provisions 
 shall apply : 
 
 (a) A ballot of the members of the Post and Telegraph Department, and a separate 
 ballot of the members of the other Departments, shall be taken on the first Monday in 
 July, nineteen hundred and eight, and on the first Monday in March in every third 
 year thereafter. 
 
 (6) Every ballot shall be taken in manner prescribed by regulations; and if any 
 question arises as to the regularity or validity of any ballot, or the voting thereat, such 
 question shall be determined by the Minister of Internal Affairs, whose decision shall 
 be final. 
 
 (c) If any such member of the Board dies, or by notice in writing addressed to the 
 permanent head of the Department of Internal Affairs resigns his office, or ceases to be 
 a member of the Public Service, then and in any such case his seat shall become vacant. 
 
 (d) Such vacancy shall be filled by election by a ballot of the members of the De- 
 partment or Departments represented by the vacating member; but the person so 
 
 35885— S. Doc. 290, 61-2 17* 257 
 
258 CIVIL-SERVICE EETIEEMENT IN NEW ZEALAND. 
 
 elected shall hold office only for the residue of the period during which his predecessor 
 would have held the same if he had remained a member of the Board: 
 
 Provided that where such vacancy arises within three months before the ordinary 
 election, a ballot shall not be taken, but in lieu thereof the Governor may appoint to 
 such vacancy any member of the Department or Departments represented by the va- 
 cating member. 
 
 (2) Notice of the election or appointment of every member of the Board shall be 
 gazetted, and such gazetting shall be conclusive evidence of the validity of every such 
 election or api^ointment. 
 
 (3) The members to be apiDointed by the Governor in Council may be appointed at 
 any time after the coming into operation of this Act and they,, together with the Min- 
 ister, may, until the first election of the elective members, exercise all the powers and 
 functions of the Board. 
 
 8. With respect to the procedure of the Board the following provisions shall apply: 
 (a) The Minister shall be chairman at all meetings at which he is present, and in his 
 
 absence the Board shall elect some other member to be chairman. 
 
 (6) FiA'e members of the Board shall form a quorum. 
 
 (c) Subject to the provisions of this Act and the regulations made thereunder, the 
 Board may regulate its own proceedings. 
 
 9. The Governor may from time to time appoint some person to be Secretary of the 
 Board, and such person may hold the office of Secretary in conjunction with any other 
 office which the Governor deems to be not incompatible therewith, and shall receiA^e, 
 out of moneys to be appropriated by Parliament, such salary as the Governor from time 
 to time determines. 
 
 CONTRIBUTORS. 
 
 10. (1) Every person who on the coming into operation of this Act is permanently 
 employed in any capacity in the Public Service, and every person who on the coming 
 into operation of this Act is employed in any Department, and has been continuously 
 employed in any one or more Departments for a period of five years or more, may at 
 any time within six months after the coming into operation of this Act, by notice in 
 writing to the Secretary of the Board, elect to become a contributor to the fund. 
 
 (2) If he so elects, he shall as from the date of his election be a contributor, and en- 
 titled to all the benefits of the fund, subject to the provisions of this Act. 
 
 (3) If he does not so elect, he shall not at any future time become a contributor tc 
 the fund or participate in its benefits, except on payment of a sum computed in the 
 manner prescribed by regulations, and on such conditions as the Board, having due 
 regard to the interests of the fund, determines; but he shall continue to be entitled 
 to any rights to which but for the passing of this Act he would have been entitled. 
 
 (4) Every person who does not elect to become a contributor, and who has hitherto 
 had a deduction made from his salary under the Civil Service Reform Act, 1886, the 
 Post and Telegraph Classification and Regulation Act, 1890, or the Civil Service Insur- 
 ance Act, 1893, shall continue to pay such deduction as heretofore. 
 
 11. (1) All i^ersons who are first permanently employed in any capacity in the 
 Public Service after the coming into operation of this Act shall be contributors to the 
 fund, and the provisions of the Post and Telegraph Classification and Regulation Act, 
 1890, relating to deductions from salaries, and the Civil Service Insurance Act, 1893, 
 shall not apply to such contributors. 
 
 (2) Every person who on the coming into operation of this Act is temporarily 
 employed in any capacity in the Public Service may, at any time within six months 
 after having completed five years' continuous service in any one or more Departments, 
 elect, by notice in writing to the Secretary of the Board, to become a contributor to 
 the fund. If he so elects he shall, as from. the date of his election, be a contributor 
 entitled to all the benefits of the fund, subject to the provisions of this Act. 
 
 12. (1) The contribution from contributors shall in each case be the following per- 
 centage of the salary of each contributor respectively, and shall be deducted from the 
 contributor's salary as it becomes payable from time to time, that is to say — 
 
 (a) Five per centum if his age does not exceed thirty years at the tinie when the 
 first contribution becomes payable; 
 
 (6) Six per centum if his age then exceeds thirty years but does not exceed thirty- 
 five years; 
 
 (c) Seven per centum if his age then exceeds thirty-five years but does not exceed 
 forty years; 
 
 (j) Eight per centum if his age then exceeds forty years but does not exceed forty- 
 five years; 
 
 (e) Nine per centum if his age then exceeds forty-five years but does not exceed 
 fifty years; and 
 
CIVIL-SEEVICE EETIREMENT lii NEW ZEALAND. 259 
 
 (/) Ten per centum if his age then exceeds fifty years. 
 
 (2) The amount so deducted shall forthwith be paid by the Minister of Finance to 
 the Public Trustee to the credit of the fund. 
 
 (3) For the purposes of this section a contributor's age shall be deemed to exceed 
 thirty years on and after the thirtieth anniversary of his bii'th, and the other ages 
 mentioned in this section shall be calculated respectively in the same manner. 
 
 13. If the salary of a contributor is for any period temporarily stopped on the ground 
 of ill health, or if for any period a contributor is on leave of absence without salary, he 
 shall during such period continue to contribute to the fund in such manner and to 
 such extent as may be prescribed by regulations. 
 
 14. (1) "WTien any person who has had or is liable to have any part of his salary 
 deducted under the Civil Service Reform Act, 1886, or the Post and Telegraph Classi- 
 fication and Regulation Act, 1890, becomes a contributor, such deduction shall there- 
 upon cease, and the amount in the hands of the Public Trustee to his credit by virtue 
 of either of such Acts shall be vested independently of the fund for the benefit of the 
 contributor and shall, on his retirement or death, be paid as provided by such Act, in 
 addition to the benefits to which he is entitled under this Act. 
 
 (2) When any person who has effected a policy on his life under the Civil Service 
 Insurance Act, 1893, becomes a contributor, he shall be entitled at his option — 
 
 (a) To keep the policy alive independently of this Act; or 
 
 (b) To surrender the policy and have the surrender value thereof paid to the Public 
 Trustee to be invested independently of the fund, and to be paid, together with all 
 interest accrued thereon, to the contributor on his retirement, or to his personal 
 representatives on his death; or 
 
 (c) To surrender the policy and to receive the equivalent of its surrender value 
 in the form of a paid-up policy, following the terms and conditions of the surrendered 
 policy, or such other terms and conditions as may be mutually agreed upon between 
 the policy-holder and the Government Insurance Commissioner. 
 
 (3) The option conferred by the last preceding subsection may be exercised by the 
 policy-holder at any time after he becomes a contributor. 
 
 (4) The Governor in Council may at any time direct that the whole or any part 
 of the money standing to the credit of any contributor under subsections one and two 
 of this section shall be paid to such contributor. 
 
 15. When any person who is entitled under the Civil Service Act, 1866, to receive 
 compensation for loss of office becomes a contributor, the following provisions shall 
 apply: 
 
 (a) Save in the manner and to the extent hereinafter in this section stated, his 
 right to such compensation shall not be taken away or affected, but shall be cumulative 
 with his right to payment from the fund. 
 
 (6) Such compensation shall be calculated only in respect of the period of his 
 employment up to the time when he became a contributor and in respect of his salary 
 at the time when he became a contributor. 
 
 (c) If on his retirement from the Public Service he receives and accepts a retiring 
 allowance from the fund, he shall thereby forfeit his right to such compensation. He 
 shall be deemed to have received and accepted a retiring-allowance when he has 
 received and accepted his first installment thereof. 
 
 (d) If on his retirement from the Public Service he receives and accepts such com- 
 pensation, he shall forfeit his right to a retiring-allowance from the fund, and no 
 annuity or periodical payment shall be payable out of the fund on his death; but the 
 acceptance of such compensation shall not affect his right to a return of the contribu- 
 tions made by him to the fund, or, in case of his death, the right of any other person 
 to a return of such contributions. 
 
 (e) If after he has retired from the Public Service he dies before he has received 
 and accepted either a retiring-allowance from the fund or compensation under the 
 said A.ct, such compensation (if any) shall be payable to his personal representatives, 
 and no moneys shall be payable out of the fund except the amount of his contributions. 
 
 (/) Notwithstanding anything hereinljefore contained, if a contributor Avho has 
 received and accepted a retiring-allowance dies before the amount paid to him in 
 respect to such allowance is equal to the aggregate amount of the compensation to 
 which he was so entitled and his contributions to the fund, the difference between 
 the said amounts shall be payable out of the fund to and on behalf of the persons 
 entitled, under the provisions of sections twenty-five and twenty-six of this Act, to 
 the balance (if any) of his contributions to the fund. 
 
 16. If any dispute arises as to whether any person is a member of the Public Service 
 within the meaning of this Act, or as to whether any person is, or is entitled or bound 
 to become, a contributor to the fund, or as to the length of service of any contributor, 
 such dispute shall be determined by the Board, and the determination of the Board 
 shall be final and conclusive. 
 
260 CIVIL-SEEVICE RETIREMENT IN NEW ZEALAND. 
 
 BENEFITS OF THE FUND. 
 
 17. The fund shall be held and applied for the benefit of the contributors in the 
 manner and subject to the conditions hereinafter set forth. 
 
 18. (1) Every male contributor whose length of service is not less than forty years 
 or whose age is not less than sixty-five years, and every female contributor whose 
 length of service is not less than thirty years or whose age is not less than fifty-five 
 years, may at.any time retire from the Public Service at the expiration of three months' 
 notice of his or her intention so to do, and shall thereupon be entitled to receive from 
 the fund an annual retiring-allowance for the rest of his or her life, computed as follows: 
 
 For every year of service such contributor shall receive one-sixtieth part of his or 
 her annual salary, but in no case shall the retiring-allowance exceed two-thirds of such 
 salary : 
 
 Provided that the Minister in charge of the Department in which a contributor is 
 employed may extend the provisions of this section to any case in which the age of a 
 male contributor is not less than sixty years or the age of a female contributor is not 
 less than fifty years. 
 
 (2) In the last preceding subsection the term "service" means — 
 
 (a) In the case of an original contributor, continuous employment in the service of 
 the Government up to the date of the contributor's retirement, whether permanent 
 or temporary, and whether before or after the date at which he becomes a contributor, 
 and whether in the Public Service or in any one or more of the other branches of the 
 Government service; and 
 
 (b) In the case of a contributor who is not an original contributor continuous em- 
 ployment in the Public Service from the date at which he becomes a contributor up 
 to the date of his retirement. 
 
 (3) For the purposes of this section the Government service shall be deemed to 
 include the service of any Provincial Government and the service of the New Zealand 
 Railway Commissioners. 
 
 (4) The term " original contributor" means a person who becomes a contributor 
 under the provisions of section ten hereof. 
 
 19. (1) Every contributor who, with the consent or by the direction of the Minister, 
 retires from the Public Service on the ground of being medically unfit for further 
 duty shall on his retirement be entitled to receive from the fund a retiring-allowance 
 for the rest of his life, computed as mentioned in the last preceding section. 
 
 (2) In the case of a retiring-allowance being granted on the ground of the contribu- 
 tor being medically unfit for further duty, such retiring-allowance, or any one or 
 more installments thereof, may be forfeited by the Board if the contributor fails at any 
 time to submit himself for further medical examination when required by the Board, 
 or if, being reported on such examination to be medically fit to return to duty, the 
 contributor fails to do so when required by the Minister in charge of the Department 
 from which he retired; but this subsection shall not apply to any male contributor 
 after he has attained the age of sixty-five years, or to any female contributor after she 
 has attained the age of fifty-five years. 
 
 (3) For the purposes of this Act a contributor shall be deemed to be medically 
 unfit for further duty if on the certificate of at least two medical practitioners approved 
 by the Board it is established to the satisfaction of the Board that by reason of mental 
 or bodily infirmity, not caused by irregular or intemperate habits, such contributor 
 has become permanently unable to perform his duties. 
 
 20. (1) If any contributor who has retired from the Public Service on a retiring- 
 allowance is permanently reappointed to the Public Service, his retiring-allowance 
 shall thereupon cease to be payable, and he shall again become a contributor to the 
 fund; and if he subsequently retires from the said service his retiring-allowance shall 
 be calculated separatelj^ in respect of his two successive periods of service and of the 
 salary received by him in each of such periods. 
 
 (2) When in any other case than that provided for by the last preceding subsection 
 a contributor returns to duty while in receipt of a retiring-allowance, or receives pay- 
 ment for services rendered by him to or for any branch of the Government seridce 
 while in receipt of a retiring-allowance, then no more of such retiring-allowance shall 
 be paid than is equivalent, when added to the remuneration so received bv him in 
 •any one year, to his annual salary at the date of his retirement. 
 
 21. A contributor may on his retirement, or at any time before accepting the first 
 installment of his retiring-allowance, elect to accept a sum equal to the total amount 
 of his contributions to the fund in lieu of his retiring-allowance, in which case he 
 shall be entitled to receive such sum accordingly without interest, but no further sum 
 shall be payable out of the fund in the event of his death. 
 
 22. For the purpose of computing the retiring-allowance to be granted to a con- 
 tributor, his salary shall be deemed to be the average rate of salary received by him 
 
CIVIL-SEE VICE RETIREMENT IN NEW ZEALAND. 261 
 
 during the three years next preceding his retirement, or if his service has not con- 
 tinued for three years, then during the period of his service : 
 
 Provided that where by reason of the age or infirmity of a contributor his salary has 
 been reduced, or he has been transferred to a position inferior to that which he pre- 
 viously occupied, his retiring-allowance shall be computed on the average rate of 
 salary received by him during the three years next preceding such reduction or transfer . 
 
 23. A retiring allowance shall be paid by equal monthly installments, the first 
 installment being payable one month after the date of the contributor's retirement. 
 
 24. If any contributor voluntarily retires from the Public Service before becoming 
 entitled to a retiring allowance under this Act, or if his services are dispensed with 
 from any cause, he shall be entitled to a refund of the whole amount actually con- 
 tributed by him to the fund, but without interest. 
 
 25. If any male contributor dies, whether before or after becoming entitled to a 
 retiring allowance, the following provisions shall apply: 
 
 (a) If he leaves a wife surviving him, there shall be paid out of the fund to the 
 widow, at her election, either (i) an annuity of eighteen pounds during her widowhood ; 
 or (ii) the amount of the deceased contributor's contributions to the fund, less any 
 sums received by him from the fund in his lifetime. 
 
 (6) Any such election by the widow shall be final, and shall be deemed to be made 
 when the first payment from the fund is received and accepted by her. 
 
 (c) If the said contributor leaves a child or children under the age of fourteen years, 
 there shall be paid out of the fund to or on behalf of each such child the sum of five 
 shillings a week until such child attains the age of fourteen years. 
 
 (d) If the said contributor leaves no widow, the amount of his contributions to the 
 fund, less any sums which he has received out of the fund in his lifetime, and less any 
 sums which have been paid or may become payable in the future to or on behalf of 
 any child or children under the age of fourteen years under the foregoing provisions, 
 shall be paid to the personal representatives of the deceased contributor in trust for 
 the persons entitled thereto under his will, or, in case of intestacy, for the next of kin 
 or other persons entitled to his estate under the Statutes of Distribution. 
 
 26. When any female contributor dies, whether before or after becoming entitled to 
 a retiring allowance, the following provisions shall apply: 
 
 (a) If she leaves a child or children under the age of fourteen years, there shall be 
 paid out of the fund to or on behalf of each such child the sum of five shillings a week 
 until such child attains the age of fourteen years. 
 
 (6) The amount of the contributions of such deceased contributor, less any sums 
 which she has received out of the fund in her lifetime, and less any sums which have 
 been paid or may become payable in the future to or on behalf of any child under the 
 age of fourteen years under the foregoing provisions of this section, shall be paid to 
 her personal representative in trust for the persons entitled thereto under her will, or, 
 in case of her intestacy, for the next of kin or other persons entitled to her estate under 
 the Statutes of Distribution. 
 
 27. (1) Any moneys payable out of the fund under either of the two last preceding 
 sections to or on behalf of a child under the age of fourteen may, at the discretion of 
 the Board, be either paid to the child himself or expended by the Board for the benefit 
 of the child, or paid to the Public Trustee or any other person, to be expended on 
 behalf of the child in such manner as the Public Trustee or such other person thinks fit. 
 
 (2) Any moneys payable out of the fund under either of the two last preceding 
 sections to the personal representatives of a deceased contributor may, if no grant of 
 probate or letters of administration is obtained within three months after the death 
 of the contributor, be paid to the Public Trustee in trust for the persons beneficially 
 entitled thereto under this Act. 
 
 28. When compensation is paid by the Crown or any Government Department 
 under the provisions of the Workers' Compensation for Accidents Act, 1900, or any 
 Act amending or substituted for that Act, in respect of an accident to a contributor, 
 the following provisions shall apply : 
 
 (a) When such compensation is paid to the contributor in respect of an accident by 
 which he has become medically unfit for further duty, all moneys so received by him, 
 whether by way of a weekly payment or otherwise, shall to the extent thereof be 
 deemed to be received in satisfaction of his retiring allowance under this Act, and such 
 allowance shall be reduced or postponed accordingly in such manner as the Board 
 directs. 
 
 (6) When any such compensation has been received in respect of the death of a 
 contributor by any person entitled under this Act to receive any annuity or peri- 
 odical payment in consequence of such death, the compensation so received by that 
 person shall to the extent thereof be deemed to be received in satisfaction of such 
 annuity or periodical payment, and the same shall be reduced or postponed accord- 
 ingly in such manner as the Board directs. 
 
262 CIVIL-SEEVICE EETIEEMENT IN NEW ZEALAND. 
 
 (c) No such compensation shall take away or affect the right of a contributor or any- 
 other person to receive from the fund under the provisions of this Act the amount of 
 the contributions made to the fund by a contributor. 
 
 29. In no case shall any retiring allowance or other moneys granted or payable out 
 of the fund to any person be in any way assigned or charged or pass to any other person 
 by operation of law; nor shall any moneys payable out of the fund on the death of a 
 contributor be assets for the payment of his debts or liabilities. 
 
 MISCELLANEOUS. 
 
 30. (1) Before the first day of April in each year there shall be prepared by the 
 Board, in such form as may be prescribed by regulations, a statement of its revenue 
 account for the year ended on the thirty-first day of December preceding, and of its 
 balance sheet at the close of such year,' and a statement of membership and of retiring 
 and other allowances at the close of such year. 
 
 (2) Such accounts and statements, accompanied by a report from the Board, after 
 being audited by the Audit Office, shall, within ten days after the completion of the 
 aud.t, be forwarded by the Board to the Minister of Internal Affairs, who shall within 
 ten days after the receipt thereof lay the same before Parliament if then sitting, or 
 if not, then within ten days after the commencement of the next ensuing session. 
 
 31. (1) For the period ending on the thirty-first day of December, nineteen hundred 
 and ten, and for each triennial period thereafter, an examination of the fund shall be 
 made by an actuary appointed by the Governor. 
 
 (2) The actuary shall set forth the result of such examination in a report which 
 shall be so prepared as to show the state of the fund at the close of the period, having 
 regard to the prospective liabilities and assets and the probable annual sums required 
 by the fund to provide the retiring and other allowances falling due within the ensu- 
 ing three years without affecting or having recourse to the actuarial reserve apper- 
 taining to the contributors' contributions. 
 
 (3) The Board shall cause such report to be printed and a copy thereof to be sup- 
 plied to each contributor. 
 
 (4) A copy of such report shall, within ten days after it is received, be laid before 
 Parliament if then sitting, or if not, then within ten days after the comm'^ncement of 
 the next ensuing session. 
 
 32. (1) Forthwith after the coming into operation of this Act, and in the month of 
 January in every year thereafter, the Minister of Finance shall pay into the fund and 
 out of the Consolidated Fund, without further appropriation than this Act, the sum 
 of twenty thousand pounds, together with such further amount (if any) as is deemed 
 by the Governor in Council, in accordance with the aforesaid report of the actuary, 
 to be required to meet the charges on the fund during the ensuing year. 
 
 (2) A statement of all additional amounts so paid into the fund shall be laid before 
 Parliament within ten days after the payment thereof if Parliament is then sitting, 
 or, if not, then within ten days after the commencement of the next ensuing session. 
 
 33. (1) Fines which, pursuant to any Act or regulations relating to the Public 
 Service, would but for the passing of this Act be payable to any other fund shall here- 
 after be paid into the Public Service Superannuation Fund and shall form part thereof. 
 
 (2) Nothing in this section shall apply to any fines payable into the Police Provident 
 Fund or the Government Railways Superannuation Fund. 
 
 34. The Governor may from time to time, by Order in Council gazetted, make such 
 regulations as he thinks necessary for any of the following purposes: 
 
 (a) Prescribing the manner in which elections shall be conducted, and the facilities 
 to be given to members of the Public Service for voting thereat, and to the members 
 of the Board for attending meetings thereof; 
 
 (b) Prescribing the powers, functions, and procedure of the Board with respect to 
 the fund; 
 
 (c) Prescribing the mode of investment of moneys belonging to the fund; and 
 
 (d) Generally prescribing whatever else he thinks necessary in order to give full 
 effect to this Act. 
 
 ^ 35. The provisions of this Act shall not apply to the following persons: 
 
 (a) Members of the General Assembly or Ministers of the Crown : 
 
 (b) Any Judge of the Supreme Court or of the Court of Arbitration: 
 
 (c) The High Commissioner: 
 
 (d) Any person entitled under any Act to receive a pension on his retirement from 
 the Public Service: 
 
 (e) Any person who is remunerated by fees or commission and not by wages or 
 salary : 
 
 (/) Members of the Defence Forces, except the Permanent Militia and other persons 
 permanently employed in the said forces: 
 
CIVIL-SEEVICE EETIREMENT IN NEW ZEALAND. 263 
 
 (g) Any person who is appointed to any place or office which the Governor has by 
 Order in Council at or before the time of such appointment declared not to be subject 
 to the provisions of this Act. 
 
 OTHER SUPERANNUATION FUNDS. 
 
 36. When prior to the coming into operation of this Act any person has been trans- 
 ferred from the Public Service to the service of the New Zealand Railway Commis- 
 sioners or to the Government Railways Department, and has served continuously in 
 the Public Service and that service or Department, then, for the purpose of computing 
 his retiring-allowance under the Government Railways Superannuation Fund Act, 
 1902, such service shall be deemed to be service in that Department within the meaning 
 of that Act. 
 
 37. Any contributor to the Police Provident Fund, the Government Railways 
 Superannuation Fund, the Teachers' Superannuation Fund, or the Public Service 
 Superannuation Fund who is after the passing of this Act transferred from one branch 
 of the Government service to another shall continue as a contributor to the fund which 
 he originally joined, and shall be entitled to the benefits accruing thereunder in the 
 same manner as if no such transfer had taken place. 
 
 38. Every person who after the passing of this Act becomes a contributor to the 
 Police Provident Fund or the Government Railways Superannuation Fund shall con- 
 tribute to such fund at the same rate as that provided for by section twelve of this Act. 
 
 39. Section eleven of the Appropriation Act, 1887, is hereby repealed as from the 
 first day of April, nineteen hundred and eight; and, in the case of any person who 
 retires from the Civil Service after that date, any superannuation allowance to which 
 he is entitled under the Civil Service Act, 1866, shall be calculated in the same manner 
 as if the said section had not been passed. 
 
 SPECIAL PROVISION AS TO THE POLICE FORCE. 
 
 40. (1) On a day to be fixed by the Minister of Justice (being not later than six 
 months from the coming into operation of this Act) a ballot shall be taken of the con- 
 tributors to the Police Provident Fund on the proposal that such contributors shall 
 become contributors to the fund established under this Act in lieu of the first-men- 
 tioned fund. 
 
 (2) The ballot shall be taken in such manner as the said Minister directs. 
 
 (3) If the result of the ballot is that a majority of the votes recorded thereat are in 
 favor of the proposal, then, as from a date to be fixed by the Governor by notice in the 
 Gazette, the following provisions shall apply: 
 
 (a) The Police Provident Fund shall be abolished, and the amount then standing 
 to its credit shall be paid by the Public Trustee into the fund established under this 
 Act. 
 
 (6) All contributors to the Police Provident Fund shall be deemed to be contribu- 
 tors to the fund established under this Act, and shall thereafter contribute thereto at 
 the rate prescribed by this Act for the age of each such contributor at the date when 
 Ms first contribution became payable under the Police Provident Fund Act, 1899. 
 
 (c) All retiring and other allowances then payable under the last-mentioned Act 
 shall from time to time be payable out of the Public Service Superannuation Fund. 
 
 (d) The Police Force shall become part of the Public Service within the meaning 
 of this Act, and the provisions of this Act shall apply thereto accordingly. 
 
 (e) One person to be elected by the members of the Police force from among their 
 number shall be added to the Public Service Superannuation Board, which shall there- 
 after consist of eleven persons, and the provisions of section seven of this Act shall 
 apply, mutatis mutandis, to any such election, save that the first election shall take 
 place on a day to be determined by the Minister of Justice. 
 
 SPECIAL PROVISION FOR EMPLOYEES OF THE WELLINGTON AND MANAWATU RAILWAY 
 
 COMPANY. 
 
 41. (1) The Minister for Pv,ailways may at any time, by notice in the Gazette, declare 
 that the provisions of the Government Railways Superannuation Fund Act, 1902 
 (hereinafter referred to as the said Act), shall extend and apply to persons employed 
 by the Wellington and Manawatu Railway Company (Limited); and, subject to the 
 provisions of this section, such provisions shall be extended and apply accordingly aa 
 from a date to be fixed by the Minister in such notice. 
 
 (2) Every person who at the date so fixed is permanently employed in any capacity 
 by the said company may at any time within six months after that date elect to become 
 a contributor to the Government Railways Superannuation Fund, and if he so electa 
 
264 CIVIL-SERVICE EETIREMENT IN NEW ZEALAND. 
 
 he shall, subject to the provisions of the said Act and of this section, be entitled to 
 all the benefits of the said fund in the same manner as if he had first entered the service 
 of the Government Railways Department at the time when he so elects: 
 
 Provided that any such person may, if he so desires, pay into the said fund, either 
 in one sum or in such payments as may be prescribed by regulations, the amount of 
 contributions that would have been payable by him had he become a contributor on 
 the first day of January, nineteen hundred and three (the date when the said Act came 
 into operation), and in such case the benefits to which he is entitled shall be computed 
 as from such last-mentioned date, and the rate of his contributions shall be the same 
 as if he had become a contributor to the said fund on that date: 
 
 Provided also that, in consideration of the company paying into the fund by way 
 of subsidy either a sum of five thousand pounds or the sum of one thousand pounds 
 per annum for a period of five years (which payments the company is hereby authorized 
 to make), the benefits accruing to any person in the employ of the company on the 
 coming into operation of this Act, and who pays contributions as from the said first 
 day of January, nineteen hundred and three, shall be computed on his full period of 
 continuous service with the company. 
 
 (3) With respect to persons who after the date fixed by the Minister as aforesaid are 
 first permanently employed in any capacity by the said company, it shall be a condi- 
 tion of their employment that they shall be contributors to the said fund and be 
 entitled to its benefits: 
 
 Provided that before entering the company service every such person shall be 
 required to pass the medical examination prescribed by the Government Railways 
 Department in respect to persons who are entering the Government Railway service, 
 and such examination shall be made by the Government Railway Medical Ofiicer at 
 the expense of the company. 
 
 (4) The said company shall from time to time, when requested by the Minister for 
 Railways, furnish him with such information respecting the names of persons in its 
 employ, their age, length of service, and otherwise, as he may require. 
 
 (5) The Governor may from time to time, by Order in Council gazetted, make such 
 regulations as may be necessary for the carrying out of this section. 
 
APPENDIX G. 
 
 (Senate Document No, 420, 61st Congress, 2d Session.) 
 
 CIVIL-SERVICE RETIREMENT— NEW SOUTH WALES, 
 AUSTRALIA. 
 
 BY 
 
 HERBERT D. BROWN. 
 
 Prepared under the direction of Chas. P. Neill, Commissioner of Labor. 
 
LETTER OE TRANSMITTAL 
 
 Department of Commerce and Labor, 
 
 Office of the Secretary, 
 Washington^ March 8, 1910. 
 Sir: In compliance with your resolution 119, of January 11, 1910, 
 directing this department to furnish, as soon as practicable, " such in- 
 formation as may now be in the possession of the Bureau of Labor 
 on the subject of foreign and domestic retirement plans for em- 
 ployees of government civil service and in the service of industrial 
 and transportation corporations," I have the honor to transmit here- 
 with a report relating to civil service retirement in New South Wales. 
 The Bureau of Labor now has in course of preparation reports 
 covering civil service retirement systems in several other foreign 
 countries, and also a report covering existing provisions for retire- 
 ment for public-school teachers and other municipal employees, and 
 for employees of railroads in the United States. These reports will 
 be transmitted at as early a date as practicable. 
 Respectfully, 
 
 Benj. S. Cable, 
 Acting Secretary, 
 Hon. James S. Sherman, 
 
 President of the Senate^ Washington, D. G. 
 
 8 
 
COT^TE^fTS. 
 
 Letter of transmittal 3 
 
 Summary 7 
 
 Constitution Act of 1854 8 
 
 Civil service act of 1884 8 
 
 First triennial investigation of superannuation fund, 1887 10 
 
 Popularity of civil service act 10 
 
 Insolvency of superannuation fund indicated 11 
 
 Want of proper data for exact valuation of fund 12 
 
 Causes of deficiency of fund given by Actuary Teece 14 
 
 Inadequacy of contributions 14 
 
 Lack of provision for accrued liabilities 14 
 
 Eetirements for purposes of retrenchment 15 
 
 Computation of pensions on basis of fractional years 17 
 
 Payment of gratuities to widows and orphans 17 
 
 Remedial measures suggested 17 
 
 Skepticism of civil service board as to condition of fund 17 
 
 Second triennial investigation of superannuation fund, 1890 18 
 
 Insolvent condition of fund found intensified 18 
 
 Causes of deficiency of fund given by Actuary Trivett 20 
 
 Retirements before legal age for purpose of retrenchment 20 
 
 Insufficiency of contributions , 22 
 
 Unduly large benefits 22 
 
 Practice of ignoring interest on back contributions 22 
 
 Remedial measures recommended 22 
 
 Need of adequate data for valuation of fund 23 
 
 Advantages of maintaining fund and keeping it solvent 24 
 
 Continued reluctance of civil service board to accept actuary's findings. 24 
 
 Third triennial investigation of superannuation fund, 1893 26 
 
 Insolvent condition of fund extremely pronounced 26 
 
 This valuation of fund based on most extensive and accurate data 27 
 
 Causes of deficiency of fund given by Actuary Coghlan 28 
 
 Fund saddled with initial liability 28 
 
 Benefits disproportionate to contributions -- 28 
 
 Fund employed to carry out government's retrenchment policy.. 29 
 
 Remedial measures recommended 29 
 
 Reduction of 65 per cent in allowances necessary 29 
 
 Five changes in plan suggested as alternative 29 
 
 Final recognition by civil service board of inadequacy of plan 30 
 
 Hesitation of government to attempt reconstruction of fund 32 
 
 5 
 
6 CONTENTS. 
 
 Pasre. 
 
 Public service act of 1895 (consolidated with other acts in 1902) 32 
 
 Option of discontinuing payments allowed contributors 32 
 
 Endowment assurance required of new entrants 32 
 
 Fourth actuarial valuation of superannuation fund, 1897 34 
 
 Deficiency in superannuation fund found reduced 34 
 
 Option of discontinuing contributions not exercised by older 
 
 employees 35 
 
 Exhaustion of superannuation fund inevitable without outside help.. 36 
 
 Possible methods of resuscitating fund suggested 37 
 
 Civil service board opposed to resuscitation of existing fund 37 
 
 Fifth actuarial valuation of superannuation fund, 1901 38 
 
 Deficiency in superannuation fund still large 39 
 
 Exhaustive discussion of causes responsible for failure of fund 41 
 
 Fund established with dormant liability 41 
 
 Fund used for improper purposes :... 42 
 
 For purposes of retrenchment in salary expenditures 42 
 
 For payment of gratuities to dependents of deceased em- 
 ployees 42 
 
 Need of retirement measure still felt 42 
 
 Endowment assurance inadequate as retirement measure 43 
 
 Outline presented by Actuary Trivett of requirements for safe pension 
 
 scheme 43 
 
 Indorsement of actuary's views by civil service board 44 
 
 Public service (superannuation) act of 1903 44 
 
 Obligations toward contributors assumed by goyernment 44 
 
 Conclusions ....,.- 46 
 
CIVII-SEHVICE RETIREMENT IN" NEW SOUTH WALES, 
 AUSTRALIA. 
 
 By Herbert D. Brown." 
 SUMMARY. 
 
 The Government of New South Wales, Australia, has not had a 
 great variety of experience in retiring its civil employees, but that 
 little is typical of certain mathematical errors easily made in formu- 
 lating and carrying out a retirement policy, and it is therefore valu- 
 able as a warning. 
 
 A system of granting straight pensions out of a yearly subsidy 
 of £3,500 ($17,033) was launched in 1854 and continued for thirty 
 years. 
 
 The Civil Service Act of 1884 abolished the pension system and 
 established instead a contributory plan of retirement. This was 
 based on a 4 per cent deduction from salaries aided by a Government 
 subsidy of £20,000 ($97,330) for five years in addition to the £3,500 
 ($17,033) already granted. Owing to the actuarial unsoundness of 
 the plan, the superannuation fund established under it soon became 
 insolvent, and the plan was accordingly abandoned after eleven 
 years' trial. 
 
 The Public Service Act of 1895, subsequently consolidated into the 
 Public Service Act of 1902, provided for the withdrawal from the 
 superannuation fund of all who so desired and the bestowal on them 
 of a gratuity based on length of service and average salary instead of 
 a pension. This act also forbade future entrants into the service to 
 contribute to the fund and required them to take out endowment 
 assurance. 
 
 The Public Service (Superannuation) Act of 1903 was passed on 
 the actual exhaustion of the superannuation fund long known to be 
 insolvent. It provided for the Government's assumption of the 
 obligations of the fund. 
 
 The present state of affairs, then, is that the Government is engaged 
 in paying retirement allowances and gratuities to those whom it re- 
 quired for years to contribute to an insolvent fund. It will have to 
 continue to do so until all those who entered the service before 1895 
 are dead — an obligation that will not be fulfilled short of forty years 
 hence. Those who have entered the service since 1895 have only 
 their endowment assurance to look to on retirement from the service. 
 
 <» Mr. Brown desires to give credit to Harriet Connor Brown for valuable 
 assistance in the preparation of this report. 
 
8 CIVIL-SERVICE EETIEEMENT IN NEW SOUTH WALES. 
 
 This provision for compulsory insurance is not considered a com- 
 plete and satisfactory solution of the problem of superannuation in 
 the civil service. The following statement was made by the Govern- 
 ment Statistician of New South Wales in April, 1909, in answer to 
 an inquiry by the United States Bureau of Labor : 
 
 "When contribution to the superannuation fund was compulsory 
 it was not popular among a large number of public servants, par- 
 ticularly the younger members, but the general feeling now is in 
 favor of a superannuation fund." 
 
 CONSTITUTION ACT OF 1854. 
 
 Provision was made by imperial act in 1854 for setting aside the 
 annual sum of £3,500 ($17,033) from the Consolidated Revenue Fund 
 for pensions to superannuated officers of the civil service. 
 
 CIVIL SERVICE ACT OF 1884. 
 
 A study of the one contributory retirement plan tried by New 
 South Wales and the reasons for its failure throws much light on the 
 fundamental principles which must underlie any sound and equitable 
 superannuation measure. 
 
 Under the superannuation clauses of the Civil Service Act of 1884, 
 a fund called the " Civil Service Superannuation Account " was cre- 
 ated on January 1, 1885. To this fund all civil servants, with the excep- 
 tion of certain minor employees, were required to pay an annual con- 
 tribution of 4 per cent of their salaries. To it the Government agreed 
 to contribute an annual subsidy of £20,000 ($97,330) for five years, 
 in addition to the £3,500 ($17,033) already provided. Provision was 
 made in the law for an actuarial investigation into the state and 
 sufficiency of the fund every three years. Compulsory contributions 
 were required from all clerical, professional, and educational officers, 
 and also from officers in the higher branches of the railway, the 
 postal, and the telegraph services. The only exceptions made were 
 the cases of minor employees of the railway service, and messengers, 
 housekeepers, letter carriers, stampers or sorters, bailiffs, wardens, 
 matrons, nurses, attendants, boatmen, storemen, and persons employed 
 in the printing and telegraph offices, dredge and marine services, and 
 other persons occupying positions of similar class, character, or im- 
 portance. While not required to contribute to the fund, these persons 
 were allowed to do so if they so elected, and they thus became 
 entitled to the benefits of the fund. 
 
 The minimum age for entry of officers to the clerical division was 
 seventeen years, but no maximum age was prescribed. No age was 
 specified in regard to officers of the professional division. Pupil 
 teachers, from whom the main body of teachers was recruited, were 
 
CIVrL-SEEVTCE EETIKEMENT IN NEW SOUTH WALES. 9 
 
 required to be not less than fourteen nor more than seventeen years 
 of age at entry. No physical examination was required in connection 
 with entry to the public service. 
 
 Retirement was permitted to any civil employee who had served 
 for fifteen years or upward and who had reached the age of sixty 
 years, or who had become permanently incapacitated owing to in- 
 firmity of mind or body, whether by reason of illness, accident, or 
 merely the gradual passage of time. Retirement was not made 
 compulsory at age of sixty. 
 
 If retirement on account of physical incapacity was voluntary, the 
 report of the government medical officer only was required prior 
 to the authorization of retirement. If the retirement was compulsory, 
 a medical board consisting of three medical officers was required to 
 furnish a report. 
 
 No restriction of any kind was placed upon the employment of a 
 pensioner outside of the government service. The act contained a 
 provision which empowered the Government to recall to the service 
 officers retired on the ground of ill-health, who subsequently recov- 
 ered, but such provision was not acted upon in any case. If an officer 
 refused to return to the service when so called his pension was to be 
 forfeited, and of course if he resumed duty it was discontinued, but 
 in the event of a recurrence of his infirmity he was entitled to his 
 pension with any prescribed increase for additional service. 
 
 The rates of superannuation allowance were: For fifteen years of 
 service fifteen-sixtieths of the average annual salary for the three 
 years preceding date of retirement, for sixteen years of service sixteen- 
 sixtieths of the same, and so on, increasing one-sixtieth for every year 
 of service up to 40, at which the maximum allowance of forty-sixtieths, 
 or two-thirds, of such average salary is reached. The maximum 
 salary in respect of which contributions could be levied or superan- 
 nuation allowances computed was £1,000 ($4,867), in the general 
 division, and £1,200 ($5,840) in the professional division. 
 
 In addition to the pension benefits provision was made for the 
 payment of gratuities in the cases of such as had not served for 
 fifteen years, as follows: 
 
 (1) Those whose services were dispensed with (except for mis- 
 conduct) or who, owing to mental or bodily infirmity, might be com- 
 pelled to retire, one month's pay for each year of service. 
 
 (2) Those who, in the discharge of their duties, received such 
 bodily injury as might incapacitate them for further service, two 
 months' pay for each year of service, with a minimum allowance of 
 six months' salary. 
 
 (3) The widow or children under 16 years of age who might be left 
 by the death of an ofiicer " in necessitous circumstances," a maximum 
 allowance of six months' salary. 
 
10 CIVIL-SERVICE RETIREMEKT IN NEW SOtJTH WALES. 
 
 The whole amount to credit of the fund was in the' keeping of the 
 Government, and was credited with interest at the rate of 4 per cent 
 per annum, payable half-yearly. Pensions have been payable monthly 
 or occasionally, at the option of the pensioner, quarterly. 
 
 The deductions of contributions and the payment of pensions have 
 been attended to by officials of the Treasury in connection with their 
 general duties relating to the receipt of revenue and the disburse- 
 ment of public funds. The duties of administration, including consid- 
 eration of claims upon the superannuation account, have been per- 
 formed by the Public Service Board, which also has general super- 
 vision of the service, regulating matters of appointment, rates of pay, 
 and general discipline of the service. The only direct expense in 
 connection with the administration of the account has been an allow- 
 ance of £75 ($365) a year paid to the Government Actuary, in 
 addition to his regular salary. 
 
 FIRST TRIENNIAL INVESTIGATION OF SUPERANNUATION FUND, 
 
 1887. 
 
 While the Civil Service Act of 1884 continued in force for eleven 
 years, it was known long before it was repealed by the Public Service 
 Act of 1895 that the superannuation fund which it established was in 
 an unsatisfactory condition. The weakness of the plan and the 
 unsafety of the fund were revealed as early as 1889 by the first of the 
 triennial actuarial investigations undertaken in accordance with the 
 provisions of the law. The actuary intrusted with the duty of 
 inquiring into the state and sufficiency of the superannuation account 
 at this time was Mr. Eichard Teece, secretary of the Australian Mu- 
 tual Provident Society. He submitted to the Civil Service Board a 
 clear, careful, and elaborate report upon the subject, in which he 
 seriously impugned the solvency of the fund. His report was re- 
 ceived, however, with skepticism by the Civil Service Board and in- 
 difference by the public, and his recommendations were not acted upon. 
 
 POPULARITY OF CIVIL SERVICE ACT. 
 
 The general provisions of the act had met with popular approval. 
 There was a lively appreciation of its benefits and no serious disposi- 
 tion to count the ultimate cost. In its report of 1889 to the Colonial 
 Governor the Civil Service Board recommended amendment of that 
 section of the act which dealt with the claims of widows to gratui- 
 ties, saying that that provision — 
 
 Should be made general and not limited to those in " necessitous 
 circumstances," a provision which imposes on the board the invidious 
 
CIVIL-SERVICE RETIREMENT IN NEW SOUTH WALES. 11 
 
 duty of deciding, in each case submitted, whether the applicant is 
 or is not in such circumstances as to warrant a recommendation in her 
 favor. 
 
 This alteration was suggested by the Board in spite of the actuary's 
 warning as to the perilous condition of the fund. The practical 
 question of ways and means did not appear to excite any great atten- 
 tion from the members of the Board, who were principally struck 
 with the improvement wrought in the service by a measure which 
 provided retirement for the inefficient and promotion for the efficient. 
 Further saying: 
 
 We are of opinion, although the act requires amendment, as above 
 stated, its provisions have tended in a marked degree toward an 
 improved administration of the public departments, to good disci- 
 pline, and to a more efficient performance of duty on the part of the 
 officers, as the enforcement of a higher standard of educational attain- 
 ments in regard to candidates for employment has checked the admis- 
 sion to the service of unqualified persons. In the reorganization of 
 the departments, which has been carried on during the five years the 
 act has been in force, special attention has also been given to this 
 matter, and it is evident that very satisfactory results have been 
 secured under an admittedly defective act. 
 
 By the retirement, under the superannuation clauses of the act, of 
 the old and infirm, vacancies have occurred which have enabled the 
 junior officers to obtain merited promotion, and the certainty that 
 their claims would have fair consideration by the Board has, to a 
 large extent, removed the discontent which previously existed in some 
 departments." 
 
 INSOLVENCY OF SUPERANNUATION FUND INDICATED. 
 
 Mr. Teece took his task seriously and attempted conscientiously to 
 rouse the Board to an appreciation of the dangerous condition of the 
 fund and to suggest means of averting the danger. Said he : 
 
 My duty to the Board would have been fully discharged had I con- 
 tented myself with a mere valuation of the liabilities and the presen- 
 tation of a balance sheet exhibiting the surplus or deficiency in the 
 fund. During the progress of my investigation, however, several 
 letters from correspondents interested in the matter have appeared 
 in the press urging a reduction in the rate of contributions deducted 
 from the salaries of civil servants, while the editorial remarks of the 
 city journals on the reports of the Board indicate that there is a pre- 
 vailing opinion that the fund is in a highly satisfactory condition. 
 In view of these circumstances I feel that this report will cause a 
 somewhat rude awakening, and I therefore deem it advisable to sub- 
 mit to the Board explanations on various points which will, I hope, 
 enable its true meaning to be intelligently appreciated.* 
 
 « Report of the CivU Service Board of New Soutli Wales, 1889, p. 3. 
 ' Ibid., p. 7. 
 
12 
 
 CIVIL-SEBVICE RETIEEMENT IN NEW SOUTH WALES. 
 
 WANT OF PROPER DATA FOR EXACT VALUATION OF FUND. 
 
 In presenting his valuation of the liabilities of the fund, Mr. Teece 
 called attention to the difficulty of the task on account of the want 
 of proper data on which to base the calculations, and the uncertainty 
 of a nurnber of the factors involved. Tables of the rates of retire- 
 ment in various services are exceedingly scarce, but such as are avail- 
 able disclose the fact that the experience among one body of men can 
 not safely be assumed as that which will obtain among another body 
 differently circumstanced. The only safe experience for the determi- 
 nation of this element would have been that of the civil service itself 
 and there had not been time, as Mr. Teece pointed out, to collect and 
 tabulate this information, even if it had been accessible. Among the 
 elements of uncertainty involved in the calculation was that of the 
 rate of annual increases of salary which it would be possible to use 
 as a basis for calculating the average retiring allowance after various 
 periods of service. Mr. Teece also pointed out the danger to the 
 fund in the option which permitted certain classes of employees to 
 join or not join it, as they felt disposed, by showing that only those 
 who expected shortly to derive some tangible benefit would be likely 
 to join. Another element of uncertainty and danger in the plan, 
 which he condemned, was the provision of gratuities for widows and 
 orphans. " Such a provision," said he, " is out of place in a super- 
 annuation fund." While all these uncertain factors made the results 
 of his calculation less rigidly accurate than they otherwise would 
 have been, Mr. Teece's figures were still sufficiently exact to give 
 startling indication of the rapidity with which the claims on the fund 
 were accumulating. The receipts and disbursements between Janu- 
 ary 1, 1885, when the act went into effect, and December 31, 1887, 
 showed a balance of only £235,436 lis. 8d. ($1,145,752.13), while the 
 valuation balance sheet showed an estimated deficiency of £1,325,706, 
 10s. 4d. ($6,451,550.76). 
 
 CONSOLIDATED REVENUE ACCOUNT, JANUARY 1, 1885, TO DECEMBER 31, 1887. 
 [From report of the Civil Service Board of New South Wales for the year 1889.] 
 
 Receipts. 
 
 Disbursements. 
 
 Deductions from salaries 
 
 $949,607.81 
 
 291,990.00 
 
 51,098.25 
 
 72,074.63 
 
 957. 12 
 
 Pensions under Civil Service Act 
 
 Pensions under Civil Service Act 
 (schedule B) 
 
 $59,286.79 
 
 Government endowment 
 
 
 40,788.41 
 
 118,441.28 
 
 1,459.20 
 
 Interest 
 
 Gratuities 
 
 Fines 
 
 Refunds 
 
 
 Balance, being fund at December 31, 
 1887 
 
 1,145,752.13 
 
 
 
 
 
 1,365,727.81 
 
 1,365,727.81 
 
 By the following valuation balance sheet Mr. Teece showed very 
 clearly the unfortunate actuarial condition of the fund only three 
 
ClViL-SERVICE RETIREMENT IN NEW SOUTH WALES. 
 
 13 
 
 years after its establishment, the estimated deficiency being some shil- 
 lings more than £1,325,706 ($6,451,550) : 
 
 ', ALUATION BALANCE SHEET, CIVIL SERVICE SUPERANNUATION FUND, AS AT 
 
 DECEMBER 31, 1887. 
 
 Dr. 
 
 [From Report of the Civil Service Board of New South Wales, for the year 1889.] 
 
 Cr. 
 
 To present value of £3,398 lis. Id. 
 ($16,539.06), being pensions payable 
 to claimants under schedule B of 
 
 the Constitution Act , 
 
 To present value of £21,020 17s. 7d. 
 ($102,298.11) per annum, being pen- 
 sions entered on by 174 officers who 
 have retired in terms of the Civil 
 
 Service Act 
 
 To present value of prospective pen- 
 sions to officers in the service and 
 contributing to the fund at Decem- 
 ber 31, 1887: 
 6,834 in general 
 body (£2,287,029 
 
 12s. Od.) $11,129,829.55 
 
 1,631 female teach- 
 ers (£59,832 16s. 
 Od.) 291,176.32 
 
 To present value of gratuities to offi- 
 cers who may become incapaci- 
 tated before having served for fif- 
 teen years 
 
 $110,653.74 
 
 1,050,065.14 
 
 11,421,005.87 
 24,332.50 
 
 12,605,957.25 
 
 By amount of civil service fund at 
 
 December 31, 1887 
 
 By present value of contributions of 
 4 per cent per annum on salaries of 
 all contributors on the fund at 
 December 31, 1887: 
 6,834 in general 
 body (£621,070 
 
 10s. Od.) $3,022,439.59 
 
 1,631 female teach- 
 ers (£14,659 lOs. 
 Od.) 71,340.45 
 
 By present value of annual contribu- 
 tion of $17,033, provided under the 
 Constitution Act , 
 
 By present value of bact contribu- 
 tions of 4 per cent per annum from 
 date of entry up to December 31, 
 1884, to become available when 
 pensions are entered on , 
 
 By present value of government 
 contributions 
 
 By estimated deficiency 
 
 $1,145,752.13 
 
 3,093,780.04 
 
 425,818.75 
 
 1,298,138.88 
 
 190, 916. 69 
 6,451,550.76 
 
 12,605,957.25 
 
 Mr. Teece then showed how the estimated deficiency must have 
 
 increased still further. He did this by comparing the liabilities in 
 
 respect to pensions actually entered on at December 31, 1887, and 
 
 December 31, 1888, with the amounts to credit of the fund on those 
 
 dates : 
 
 December 31, 1887, the balance at credit of the fund was $1, 145, 752. 13 
 
 The liability under pensions actually entered on was " 1, 050, 065. 14 
 
 Difference 95, 686. 99 
 
 December 31, 1888, the balance had increased to 1, 457, 989. 34 
 
 The liability under pensions entered on was ° 1, 412, 819. 89 
 
 Difference . 45, 169. 45 
 
 Mr. Teece said: 
 
 These figures show that, notwithstanding the receipt of the £20,000 
 [$97,330] subsidy from the Government, the fund has gone to the 
 bad to the extent of £10,380 13s. 5d. [$50,517.53] in respect of pen- 
 sions entered on in one year. The figures further show that the 
 funds in hand at 31st December, 1888, were practically only suffi- 
 cient to meet the payment for pensions already granted up to that 
 date, while the enormous mass of dormant liabilities remained to be 
 provided for by the future contributions of the officers and the residue 
 of the annual grant of £3,500 [$17,033] under the Constitution Act. 
 When it is borne in mind that the contributions of the officers up to 
 31st of December, 1888, had been supplemented by the payment of 
 £80,000 [$389,320] out of the Consolidated Kevenues, and that only 
 
 •Excluding pensions under Schedule B, 
 
14 CIVIL-SERVICE RETIREMENT IN NEW SOUTH WALES. 
 
 one further payment of £20,000 [$97,330] from that source then 
 remained to be paid, it will be at once evident to any actuary, if not 
 to any business man, that the fund must be in an insolvent condition, 
 although opinions may differ regarding the amount of the defi- 
 ciency. Whatever uncertainty may exist regarding the proper 
 method of valuing the liabilities attaching to pensions not yet entered 
 on, there can be no doubt regarding the liability in respect of those 
 already enjoyed, and the figures I have quoted conclusively establish 
 the fact that the fund is in an insolvent condition." 
 
 CAUSES or DEFICIENCY OF FUND GIVEN BY ACTUARY TEECE. 
 
 Especially illuminating to the student of retirement plans is Mr. 
 Teece's analysis of the causes of the deficiency of the fund. 
 
 The first cause noted was the inadequacy of the contribution of 
 4 per cent per annum to provide the promised benefits. He showed 
 that this would be sufficient only in the case of an employee entering 
 the service at the age of 25 or under, and that for an entrant aged 30 
 a minimum contribution of 5 per cent would be necessary, for an 
 entrant aged 35 a minimum contribution of 6 per cent, for an entrant 
 aged 40 a minimum contribution of 7^ per cent, and so on. Finding 
 that the average age at entry of all the officers in the service (exclud- 
 ing female teachers) was just under 24 years, he concluded that the 
 minimum rate of contribution necessary to provide the promised 
 benefits (on the assumption of very moderate increases of salary) was 
 from 6 to 7 per cent. He added the caution that this rate would be 
 sufficient only when it was paid and accumulated at interest from 
 the commencement of service. 
 
 A second cause contributing to the insolvent state of the fund 
 pointed out by Mr. Teece was the absence of sufficient provision for 
 the accrued liabilities assumed by the fund at the inception of the 
 scheme. Even if the contributions of 4 per cent of salary had been 
 sufficient to pay the promised benefits, they would not have been suf- 
 ficient to pay pensions on services rendered prior to the adoption of 
 the plan. Wliile the officer had been entitled to rank for a pension in 
 respect of his full period of service, the fund had only been in receipt 
 of his contributions since the beginning of 1885, and the claimants 
 had come on the fund with such frequency that practically the entire 
 fund had been absorbed in three years. " The enormous dormant 
 liability with which the fund was burdened owing to this circum- 
 stance," says Mr. Teece, " was in some measure provided for by the 
 annual grant of £20,000 ($97,330) for five years, but the remedy was 
 utterly inadequate to the malady, which, of course, became further 
 intensified by the insufficiency under any cir(jumstances of the 4 per 
 cent reduction." * 
 
 " Report of the Civil Service Board of New Soutli Wales, 1889, p. 8. 
 * Ibid., p. 10. 
 
CIVIL-SERVICE KETIREMENT IN NEW SOUTH WALES. 15 
 
 The most important cause for the deficiency of the fund mentioned 
 by. Mr. Teece revealed a very astonishing political situation. It was 
 the unexpected liability in respect of pensions to officers who were 
 neither incapacitated nor had attained the age of 60 years. The num- 
 ber of retirements in 1885, during the first year of the operation of 
 the plan, was 19, the second year 43, the third year 120, which, allow- 
 ing 8 deaths, made a total of 174 pensioners drawing from the fund 
 £21,020 17s. 7d. ($102,298.10) per annum. The remarkable increase 
 for the year 1887 is explained by the fact that for political purposes 
 section 46 of the Act of 1884 was taken advantage of. This section 
 provided that when the services of any officer were dispensed with in 
 consequence of the abolition of his office he might be retired upon a 
 superannuation allowance. 
 
 In order to facilitate a scheme of retrenchment the Government 
 dismissed in 1887 a number of officers from the public service. Some 
 of these were rewarded with gratuities which were paid by the Gov- 
 ernment, but 25 were allotted retiring allowances aggregating a sum 
 of £4,282 Is. ($20,838.60) per annum, which were made a charge 
 upon the superannuation account. The Government appeared to 
 imagine that by paying to the fund the amount representing the back 
 contributions of 4 per cent on behalf of those whom it had forced 
 out of the service that it had fully provided for the extra liability 
 which was thus imposed on the fund. No account was taken, how- 
 ever, of the accumulations of interest, and the proceeding operated 
 prejudicially to the fund in another direction. By making pen- 
 sioners of these employees in an unnatural and irregular manner 
 the Government constituted them claimants on the fund at an earlier 
 period than they would otherwise have become so, and deprived the 
 fund of further contributions which would have been made to it had 
 they remained in active service. As many of those thus forced into 
 retirement were in the prime of life, some even under 31 years of age, 
 it is apparent that the cost of pensioning them was very great. 
 
 The essential unfairness of this action did not seem to have im- 
 pressed the Board very greatly, for in their report they made the 
 following statement of the case: "By the rearrangement and re- 
 duction of the staff great annual savings have been made in the de- 
 partments concerned, but the result has been to transfer from the 
 Consolidated Revenue to the superannuation fund so heavy a charge 
 as, in the opinion of the actuary, to seriously jeoj^ardize its solvency." 
 It did not seem to occur to the Board that justice to the civil em- 
 ployees was as well a proper subject for consideration in connection 
 with the matter as the solvency of the fund. Without expression of 
 apology or regret, the chairman of the Board stated to the Colonial 
 Secretary, in transmitting Mr. Teece's report, that, " at present, the 
 
16 
 
 OIVIL-SERVICE RETIREMENT IN NEW SOUTH WALES. 
 
 pensions created by the forced retirement of officers amounted to 
 £21,934 6s. lid. ($106,743.49) per annum, and future retirements of 
 a similar character for 1890 may be set down at £10,000 ($48,665) 
 more, or £30,000 ($145,995) in all, irrespective of the amounts paid to 
 those officers who are entitled to gratuities," * * *." The loss to 
 the employees who were still contributing to the fund seemed to the 
 chairman, somehow, to be counterbalanced, by the Government's sav- 
 ing through abolition of the pensioner's office. This confusion of ideas 
 would seem at least to be suggested by the following paragraph : ^ 
 
 Tested by the experience of the years 1885 to 1889, but eliminating 
 the pensions which have arisen under the retrenchment chiefly in 
 the Department of Public Lands, Public Instruction, and Eailways, 
 the actual results are so nearly in accord with the estimates arrived at 
 that they seem to prove that if the forced retirements had not been 
 carried out the fund could have borne all usual and legitimate claims 
 upon it. The disturbing element is the £21,934 6s. lid. ($106,743.49) 
 per annum, now paid to officers whose services have been dispensed 
 with, and by the abolition of whose offices the Government's saving 
 is estimated at £47,179 ($229,596.60) per annum. 
 
 The havoc wrought in the superannuation fund by the retirement 
 on pensions for purposes of retrenchment of officers of the civil service 
 can best be understood by reference to the list of such officers appended 
 to Mr. Teece's report. It is not necessary to give the whole list of 
 officers pensioned under such conditions, but the first twelve on the 
 list will suffice to show how young they were in many cases, and how 
 heavy in consequence the charge on the fund must have been : 
 
 Officers retired on pensions for purposes of retrenchment under section 46 of 
 the " civil service act," 18S4-^ 
 
 [From Report of the Civil Service Board of New South Wales for the year 1889.] 
 
 Pensioner and year pen- 
 sioned. 
 
 Occupation. 
 
 Age 
 (years). 
 
 Pension. 
 
 1885. 
 M' George, John . 
 
 1886. 
 Byrnne, M. M. G 
 
 1887. 
 
 Wilson, John 
 
 Goldsmith, Henry... 
 
 Allan, Henry A 
 
 Brown, Kdward 
 
 Canty, Michael 
 
 Chisholm, Daniel H . 
 
 Davidson, John 
 
 Ellis, JohnW 
 
 Evans, Thomas 
 
 Gerard, Francis 
 
 Superintendent Temporary Hospital for Insane, 
 Cooma. 
 
 Matron R. C. Orphanage, Parramatta. 
 
 School attendance office, public instruction . 
 
 do 
 
 Draftsman, survey ofi&ce 
 
 Clerk, lands 
 
 Draftsman, survey office 
 
 Chief draftsman, Albury survey office 
 
 clerk, survey office , 
 
 Chief draftsman, survey office 
 
 Accountant, survey office 
 
 Chief draftsman, occupation branch, lands. , 
 
 38 
 
 $341.39 
 
 813. 66 
 531. 91 
 566. 95 
 887. 16 
 605. 64 
 975. 73 
 1,075.74 
 1,870.68 
 821. 95 
 780. 83 
 
 " Report of the Civil Service Board of New South Wales, 1889, p. 13. 
 
 * Same report, p. 14. 
 
 • The full list comprises 130 names, of which only the first 12 are here given. 
 
CIVIL-SEEVICE EETIREMENT IN NEW SOUTH WALES. 17 
 
 Fourtli and fifth causes of the deficiency, in the opinion of Mr. 
 Teece, might be found in the method of computing pensions on the 
 basis of fractional instead of only integral years, and in the payment 
 of gratuities to widows and relatives of deceased officers, a provision 
 he regarded as repugnant to the principles of a superannuation 
 scheme, and which he considered should not have found a place in 
 the act. 
 
 REMEDIAL MEASURES SUGGESTED. 
 
 In considering how the fund might be placed in satisfactory con- 
 dition, Mr. Teece enumerated three courses, one or all of which might 
 be followed: 
 
 (1) The rate of contribution might be increased. 
 
 (2) The rates of pension might be reduced. 
 
 (3) The Government might rescue the fund from its unsatisfactory 
 condition and provide for its future stability. 
 
 He considered the first course inadvisable, believing that the con- 
 tribution of 4 per cent could scarcely be increased without inflicting 
 hardship on the contributors. He thought a reduction in the rate of 
 pensions not unfair, and suggested that the most equitable way to 
 accomplish this would be to base the amount of the pensions on the 
 average salaries over the whole period of service, instead of those of 
 the last three years. It was his opinion, however, that the chief 
 remedy must come from the Government. His recommendation was 
 that the Government be urged to grant an additional income of at 
 least £50,000 ($243,325) per annum in order that the fund might be 
 able to discharge the liabilities which it had incurred. He laid great 
 stress on the " positive cruelty " to the younger members of the 
 service of a condition which compelled them to go on contributing to 
 a fund after it was definitely known that when their time to retire 
 arrived there would be no funds wherewith to liquidate their claims. 
 
 SKEPTICISM OF CIVIL SERVICE BOARD AS TO CONDITION OF FUND. 
 
 Mr. Teece's warning and recommendations were not heeded. The 
 members of the Civil Service Board appear even to have doubted the 
 correctness of his conclusions. In transmitting his report to the 
 Colonial Secretary, in a letter dated December 30, 1889, the chairman 
 of the Board called attention to the unsatisfactory condition of the 
 fund as disclosed by Mr. Teece, and suggested the desirability of con- 
 tinuing to subsidize the fund, but added, " We find it difficult to 
 believe that the fund is in the deplorable condition reported by Mr. 
 Teece." The latter had stated, after careful valuation of the fund, 
 that " an additional income of at least £50,000 ($243,325) per annum " 
 would be required to place it in a solvent position, but the chairman, 
 S D— 61-2— Vol 59 23 
 
18 
 
 CIVIli-SERVICE RETIREMENT IN NEW SOUTH WALES. 
 
 of the Board set this conclusion aside with the following off-hand 
 statement : 
 
 The sum will, no doubt, at first si^ht be considered to be a large 
 one, but from a rough calculation it appears to us that £25,000 
 ($121,662.50) per annum will be sufficient in lieu of the sum suggested 
 by the actuary; and when it is considered that the necessity for the 
 payment is caused by a saving effected in the general expenditure of 
 about £85,679 ($416,957) per annum, the amount now suggested does 
 not appear to be excessive." 
 
 The result of the Board's refusal to be enlightened was that nothing 
 at all was done and the superannuation fund sank deeper and deeper 
 into insolvency. 
 
 SECOND TRIENNIAL INVESTIGATION OE SUPERANNUATION 
 
 EUND, 1890. 
 
 When the second triennial investigation of the superannuation 
 fund was made at the end of 1890, the " state and sufficiency " of that 
 fund was found to be in a very bad way. The actuary on this occa- 
 sion was Mr. John B. Trivett, actuary to the Civil Service Board, who 
 reported that the insolvent state indicated three years before by Mr. 
 Teece was " most distinct and intensified." The condition was much 
 worse at this time, because all payments by the Government had 
 ceased with the exception of the perpetuity of £3,500 ($17,033). 
 
 INSOLVENT CONDITION OF FUND. 
 
 Mr. Teece, as on December 31, 1887, had estimated the deficiency 
 on his valuation of the fund at close to £1,325,706 ($6,451,550). Mr. 
 Trivett, on December 31, 1890, estimated it at £1,592,568 ($7,750,234), 
 thus showing that the fund was tending in an unsatisfactory condi- 
 tion. He reported 419 pensioners drawing from the fund £56,783 
 ($276,334) per annum, a notable increase over the 174 pensioners 
 costing £21,021 ($102,299) reported by Mr. Teece. He brought out 
 the intensification of the insolvency in the following comparative 
 statement : 
 
 COMPARATIVE STATISTICS RELATING TO THE FUND FOR THE YEARS 1887 AND 1890. 
 
 Date. 
 
 Pen- 
 sioners. 
 
 Annui- 
 ties. 
 
 Total lia- 
 bility. 
 
 Credit of 
 fund. 
 
 Balance. 
 
 December 31 , 1887 
 
 174 
 419 
 
 $102, 299 
 276, 334 
 
 $1,050,064 
 2,460,425 
 
 $1,145,754 
 1,978,651 
 
 $95,690 credit. 
 481,774 debit. 
 
 December 31, 1890 
 
 
 Increase 
 
 245 
 
 174,035 
 
 1,410,361 
 
 832,897 
 
 577,464 debit. 
 
 
 'Report of the Civil Service Board of New South Wales, 1889, p. 13. 
 
CIVIL-SERVICE RETIREMENT IN NEW SOUTH WALES. 
 
 19 
 
 And regarding the prospective pensions, the balance sheet indi- 
 cates a deficit of immense proportions. 
 
 The receipts and disbursements during the second triennial period, 
 January 1, 1888, to December 31, 1890, showing a balance on hand of 
 £406,585 19s. Id. ($1,978,650.54) were given in the following state- 
 ment : " 
 
 Receipts. 
 
 Disbursements. 
 
 Balance, being fund at December 31, 
 1887 
 
 $1,145,752.13 
 194,660.00 
 
 61,098.25 
 944,215.85 
 
 131,235.09 
 
 91,060.12 
 
 1,069.51 
 
 239. 57 
 
 193,645.86 
 
 Pensions under Civil Service Act 
 
 8512,761.28 
 49, 910. 32 
 198,526.53 
 13, 127. 71 
 
 Government endowment 
 
 Gratuities 
 
 Transferred from schedule B, Consti- 
 
 Refunds . 
 
 
 Balance, being fund at December 31, 
 1890 
 
 
 Contributions from officers, current... 
 
 1,978,650.54 
 
 Payment by Goverrmient to meet 
 abatements which should have been 
 deducted from retrenchment pen- 
 
 
 Payments by Government of gratui- 
 ties to officers compulsorily retired, 
 
 
 
 
 Refunds 
 
 
 
 
 
 
 
 2,752,976.38 
 
 2,752,976.38 
 
 The valuation balance sheet showing an estimated deficiency of 
 £1,592,568 10s. lid. ($7,750,234.83) was as follows: 
 
 VALUATION BALANCE SHEET, CIVIL-SERVICE SUPERANNUATION FUND, AS AT 
 
 december 31, 1890. 
 Dr. Cb. 
 
 To present value of £3 ,500 ($17,033) per 
 annum, being pensions payable to 
 18 officers under schedule B of the 
 Constitution Act 
 
 To present value of £56,783 6s. 5d. 
 ($276,336) per annum, being pen- 
 sions payable to 419 officers who 
 have retired under the provisions of 
 the Civil Service Act 
 
 To present value of prospective pen- 
 sions to 8,208 officers in the service 
 and contributing to the fund at De- 
 cember 31, 1890 
 
 To present value of gratuities to offi- 
 cers who may retire before having 
 served fifteen years, in terms of the 
 act 
 
 $121,317.95 
 
 2, 460, 424. 29 
 
 11,810,338.28 
 
 34,065.50 
 
 14, 426, 146. 02 
 
 By amount of civil service fund, De- 
 cember 31, 1890 
 
 By present value of future contribu- 
 tions of 4 per cent per annum on 
 salaries of 8,208 contributors to 
 fund at December 31, 1890 , 
 
 By present value of annual contribu- 
 tion of £3,500 ($17,033), as pro- 
 vided under schedule B of the Con- 
 stitution Act , 
 
 By present value of back contribu- 
 tions of 4 per cent, on salaries for 
 period of service prior to December 
 31,1884 
 
 By estimated deficiency 
 
 $1,978,650.54 
 
 3,041,701.68 
 
 425,818.75 
 
 1,229,740.22 
 7. 750, 234. 83 
 
 14,426,146.02 
 
 Supplementary Report of the Civil Service Board of New South Wales, 1891, p. 8. 
 
20 
 
 CIVIL-SERVICE RETIREMENT IN NEW SOUTH W^AX/ES. 
 
 The amounts granted for retiring allowances during the seven years 
 since the inception of the Act of 1884 were shown by the accountant 
 of the Civil Service Board to be as follows: 
 
 AMOUNT GRANTED FOR PENSIONS FROM 1885 TO 1891, INCLUSIVE, UNDER PROVISIONS 
 OF THE SEVERAL SECTIONS OF THE CIVIL SERVICE ACT OP 1884. 
 
 [From Supplementary Report of the Civil Service Board of New South Wales, 1891.] 
 
 Year. 
 
 Section 43. 
 
 Section 44. 
 
 Section 45. 
 
 Section 46. 
 
 Total. 
 
 1885 
 
 SI, 811. 07 
 5, 431. 62 
 21,856.28 
 24,213.76 
 21, 325. 00 
 20, 932. 89 
 12, 278. 50 
 
 S4,560.74 
 10,519.12 
 9,493.69 
 13,244.91 
 6, 398. 90 
 7,857.21 
 6, 482. 18 
 
 S819.28 
 
 S341.39 
 610.26 
 33,061.30 
 9,587.00 
 76, 043. 18 
 29,628.87 
 22, 748. 70 
 
 $7,532.47 
 
 1886 
 
 16,561.00 
 
 1887 
 
 759.17 
 
 65, 170. 44 
 
 1888 
 
 47,045.67 
 
 1889 
 
 339.92 
 
 104,107.01 
 
 1890 
 
 58,418.97 
 
 1891 
 
 1,161.88 
 
 42,671.26 
 
 
 
 Total 
 
 107, 849. 12 
 18, 783. 47 
 
 58,556.75 
 7,219.94 
 
 3,080.25 
 1,520.54 
 
 172,020.70 
 10, 194. 10 
 
 341,506.82 
 
 
 37,718.05 
 
 
 
 
 89, 065. 65 
 
 51, 336. 81 
 
 1,559.71 
 
 161, 826. 60 
 
 303,788.77 
 
 
 
 CAUSES OF DEFICIENCY OF FUND GIVEN BY ACTUARY TRIVETT. 
 
 The chief reason for the increase of pensioners and the correspond- 
 ing growth in the deficit was found by Mr. Trivett to be the same 
 reason assigned three years before by Mr. Teece — abolition of offices 
 due to a general policy of retrenchment on the part of the Govern- 
 ment. Pensions paid to officers thus dismissed had become a charge 
 upon the superannuation account to the extent of £32,620 Is. 7d. 
 ($158,745.59) per annum. Said Mr. Trivett: 
 
 An extraordinary influx of entered-on pensioners has taken place 
 during the last four years. Many of these pensioners are in the 
 prime of life; 89 of them, or 21 per cent of the entire pension list, 
 being under the statutory age of 60 years, and having various terms, 
 ranging up to 27 years, to run before they would be legitimately due 
 for retirement. No annuity fund, however well-devised theoretically, 
 can be expected to sustain such drastic inroads into its resources as 
 are indicated in the above statement. 
 
 Appended to the report of the Civil Service Board was a statement 
 " showing the approximate loss to the superannuation account in con- 
 sequence of the services of officers in the civil service having been dis- 
 pensed with for purposes of retrenchment and reorganization before 
 they reached the age of 60 years, when, under section 43 of the civil- 
 service act, officers have the option of retirement." The first dozen 
 cases shown in the table and the totals for the entire table are as 
 follows; 
 
CIVIL-SERVICE RETIREMENT IN NEW SOUTH WALES. 
 
 21 
 
 STATEMENT SHOWING THE APPROXIMATE LOSS TO THE SUPERANNUATION 
 ACCOUNT IN CONSEQUENCE OF THE SERVICES OP OFFICERS IN THE CIVIL 
 SERVICE HAVING BEEN DISPENSED WITH FOR PURPOSES OF RETRENCH- 
 MENT AND REORGANIZATION BEFORE THEY REACHED THE AGE OF 60 
 YEARS, WHEN, UNDER SECTION 43 OP THE CIVIL-SERVICE ACT, OFFICERS 
 HAVE THE OPTION OP RETIREMENT. 
 
 [From Supplementary Report of the Civil Service Board of New South Wales, 1891.] 
 
 
 
 a> 
 a 
 
 (1) 
 
 
 > 
 o 
 to 
 
 0) 
 
 Si 
 
 
 
 
 aj 03 
 
 O o3 
 
 Is 
 
 ,gh the discon- 
 eduction from 
 and payment 
 ching the pre- 
 rement. 
 
 
 
 
 
 .Q 
 
 
 
 ^B2 
 
 03 ro O 
 
 Is 
 
 s2 
 
 Si's 
 
 OflScer's name. 
 
 
 
 03 
 
 03 
 Pi 
 
 cs H 
 
 
 
 
 So 
 
 go 
 
 r-< r^ ':j '^ u 
 
 ^psas-s 
 
 p 0) 0) O) O 
 
 
 
 5^ 
 
 p. 
 
 a 
 p 
 
 a 
 
 a 
 
 p 
 
 
 
 > 0) 
 
 
 
 
 ^ 
 
 
 PJ 
 
 g 
 
 a 
 
 "^ t- i^ 
 
 P-oj 
 
 m-S 
 
 
 
 O) 
 
 -a 
 to 
 
 
 o 
 a 
 
 a> 
 
 a 
 
 03 
 f-, 
 
 0) 
 
 p. 
 
 1 
 
 S 
 
 a 
 
 03 
 
 0) 
 
 a. 
 
 c3 
 
 sg| 
 ^?a 
 
 c S £ 
 
 I2 
 
 il 
 aa 
 
 o 
 
 [.1 '-1 
 '30d5 
 
 »-3 4^ o3 
 ©"O o 
 
 otal loss to t 
 tinuance of 
 the salaries 
 of their pec 
 scribed age 
 
 
 « 
 
 < 
 
 
 O 
 
 CLi 
 
 CC 
 
 <l 
 
 H 
 
 H 
 
 &H 
 
 Allan, H. A 
 
 Lands. 
 
 
 41 
 
 1887. 55 
 
 8566. 95 
 
 81, 532. 95 
 
 81,165.04 
 
 810, 772. 00 
 
 829, 126. 00 
 
 $11,937.04 
 
 Brown, Edward. 
 
 Lands. 
 
 
 48 
 
 1, 527. 01 
 
 887. 16 
 
 1, 800. 61 
 
 864. 29 
 
 10, 645. 96 
 
 21, 607. 26 
 
 11,510.25 
 
 Cantv, M 
 
 Lands. 
 
 
 S6 
 
 742. 20 
 
 605. 64 
 
 2,141.26 
 
 2,055.62 
 
 14, 535. 26 
 
 51, 390. 24 
 
 16, 590. 87 
 
 Chisholm,D.H. 
 
 Lands. 
 
 
 42 
 
 1,095.33 
 
 975.73 
 
 2,676.58 
 
 1,927.13 
 
 17, 563. 20 
 
 48, 178. 35 
 
 19,490.33 
 
 Evans, Thomas . 
 
 Lands. 
 
 
 42 
 
 1,209.39 
 
 821. 95 
 
 2,141.26 
 
 1, 541. 71 
 
 14,795.13 
 
 38, 542. 68 
 
 16,336.84 
 
 Gerard, Francis. 
 
 Lands. 
 
 
 38 
 
 840. 75 
 
 780. 83 
 
 2, 384. 59 
 
 2, 098. 43 
 
 14,603.88 
 
 52,490.87 
 
 19,276.69 
 
 Goggin,J. F 
 
 Lands. 
 
 
 46 
 
 1,275.96 
 
 921.47 
 
 2,384.59 
 
 1,335.37 
 
 12, 900. 60 
 
 33,384.19 
 
 14, 235. 97 
 
 Greaves, W. A. B. 
 
 Lands. 
 
 
 58 
 
 2,583.50 
 
 1,405.69 
 
 2, 798. 24 
 
 223. 86 
 
 2, 811. 38 
 
 5,596.48 
 
 3,035.24 
 
 Landers, J. P ... 
 
 Lands. 
 
 
 57 
 
 2,041.62 
 
 1, 398. 63 
 
 2, 676. 58 
 
 321. 19 
 
 4, 195. 90 
 
 8, 029. 73 
 
 4, 517. 09 
 
 Lewis, T. H 
 
 Lands. 
 
 
 58 
 
 2,761.48 
 
 1,913.51 
 
 3,163.23 
 
 253. 06 
 
 3, 827. 01 
 
 6,326.45 
 
 4,080.07 
 
 Neate,C.E 
 
 Lands. 
 
 
 58 
 
 1,328.51 
 
 963. 08 
 
 2,043.93 
 
 163. 51 
 
 1,926.16 
 
 4,087.86 
 
 2,089.68 
 
 Newman, T.E.L. 
 
 Lands. 
 
 
 39 
 
 630.35 
 
 472. 54 
 
 1,654.61 
 
 1,389.87 
 
 9, 923. 28 
 
 34, 746. 81 
 
 11,313.15 
 
 Total entire 
 
 
 
 
 
 
 
 
 
 
 
 listo 
 
 
 
 
 93, on. 29 
 
 78,194.25 
 
 182,756.54 
 
 81,07L17 
 
 763,460.84 
 
 2, 027, 753. 75 844. 532. no 
 
 
 
 
 
 ', 
 
 » The above are the first 12 names of the complete list of 96 names. 
 84 are omitted. 
 
 The remaining 
 
 The statement closes with the following summary: 
 
 It will thus be seen that, by the Government dispensing with these 
 officers, the civil-service superannuation account will sustain a loss 
 of £173,539 18s. 4d. ($844,532) by the payment of pensions before the 
 prescribed age of 60 years, when officers have the option of retirement, 
 and by the discontinuance of the 4 per cent contribution from their 
 salaries consequent on retirement, and this amount is exclusive of 
 interest which would accrue from year to year. Moreover, this sum 
 does not represent the total loss to the account, as many officers over 
 60 years of age have been compulsorily retired for purposes of 
 retrenchment who would have preferred to continue in the service if 
 they had been allowed to exercise the option granted them by sec- 
 tion 43. 
 
 l\niile the superannuation account suffers by this retrenchment, the 
 Government effects a saving during the same period of £416,676 
 ($2,027,753.75) in salaries. 
 
22 CIVIL-SERVICE EETIEEMEISTT IN NEW SOUTH WALES. 
 
 Three other causes given by Mr. Trivett leading to the existing 
 condition of the fund were the insufficiency of the contributions, 
 the unduly bountiful prospective benefits prescribed under the act, 
 and the practice observed when determining the net retiring allow- 
 ances of not charging interest on the unpaid back contributions for 
 the years prior to 1885 (the year of inception of the act) in reckoning 
 the abatement to be deducted from the gross pension, in respect of 
 such contributions. 
 
 REMEDIAIi MEASURES RECOMMENDED. 
 
 The remedial measures to deal with these four faulty conditions 
 recommended by Mr. Trivett were for the most part the same as those 
 suggested by Mr. Teece in 1887. He recommended first, however, 
 and with special emphasis, the rigid restriction of the retirement of 
 civil officers to cases of superannuation or invalidity only, leaving 
 retirement resulting from extraordinary causes, such as wholesale 
 retrenchment, to be dealt with by special measures. 
 
 In his opinion, the 4 per cent rate of contribution, though insuffi- 
 cient, should not be raised, as a higher rate would press very severely 
 on small-salaried men. He believed, however, that there was con- 
 siderable scope for amendment in the matter of benefits proposed 
 under the act and suggested that computation of the retiring allow- 
 ance on the basis of the average instead of the ultimate salary would 
 not only be more equitable, but also more economical. Said he: 
 
 Since the receipts from each officer are proportionate to the amount 
 of salary year by year throughout his official life, it is but just that 
 the basis upon which the retiring allowance is computed should have 
 a relation to his total emoluments, and not depend upon the advan- 
 tages nor the vicissitudes which might befall him during the last 
 three years of his service. For this reason an average salary, deduced 
 from his aggregate salary, should be adopted from which to derive 
 the amount payable as pension," 
 
 His recommendation to amend the fourth cause of disaster was 
 that interest should be charged on the unpaid back contributions of 
 4 per cent on salaries for the years antecedent to 1885. Said he : 
 
 The prevailing system of not adding interest on account of these 
 unpaid contributions is so opposed to financial usage as to require no 
 further argument to insure its condemnation." 
 
 Mr. Trivett called especial attention to the drain on the fimd 
 caused through that section of the act which permitted persons in 
 certain minor positions to join the fund at any time they saw fit. 
 
 <» Supp]ementary Report of the Civil Service Board of New South Wales, 
 1S91, p. 7. 
 
ClVlL-SEBViCE RETIREMENT IN NEW SOUTH WALES. 23 
 
 The practical result of this provision was, as Mr. Teece had predicted, 
 that they only did so a short time before their intended retirement, 
 sometimes within a week of leaving the service, a proceeding that 
 worked out clearly to the material detriment of the fund, even when 
 they paid their arrears, minus interest. 
 
 The chief relief to the fund, Mr. Trivett pointed out, must come 
 from the Government. Said he: 
 
 Taking the present circumstances of the fund into account, a sum 
 of £60,000 ($291,990) per annum will be necessary to maintain an 
 equilibrium. But, if the recommendations I have enunciated be car- 
 ried into effect, the conditions will be so greatly improved as to 
 require a very small annual grant. The amount then required I can 
 not quote with certainty until the results of the proposed treatment 
 shall have been ascertained by means of a subsequent investigation, 
 conducted, as I should desire, with the aid of the tables referred to 
 in the concluding paragraph of this report. <* 
 
 NEED OP ADEQUATE DATA FOR VALUATION OF FUND. 
 
 The paragraph to which he alluded contained a recommendation 
 " that steps be taken immediately to procure comprehensive abstracts 
 from the records " concerning " data respecting the careers of officials 
 prior to the inception of the act." This recommendation is interest- 
 ing to all students of retirement plans, for it brings into prominence 
 a fact that is soon appreciated by any one who tries to devise an 
 equitable contributory plan for a given service. That is the need of 
 accurate statistics concerning those already in the service, in order 
 that the accrued liabilities may be correctly estimated and kept dis- 
 tinct from all future liabilities. Mr. Trivett's valuation balance 
 sheet shows the item " present value of back contributions of 4 per 
 cent on salaries for periods of service prior to December 31, 1884," 
 which is what might be more simply termed the amount payable for 
 annuities for back services, or for annuities on services rendered prior 
 to the adoption of the plan. Owing to lack of information concern- 
 ing the personnel of the service, Mr. Trivett could only determine 
 approximately the value of this asset, whereas it should be ascertained 
 with all possible precision. The possession of a systematized history 
 of the members of the service for which a plan is devised is neces- 
 sary if accuracy is desired. " Such information," said Mr. Trivett, 
 " would enable us to formulate a local civil service experience, from 
 which tables could be derived suitable for our requirements." 
 
 " Suppiemeutary Keport of the Civil Service Board of New South Wales, 
 1891, p. 7. 
 
24 CIVIL-SERVICE RETIREMENT IN NEW SOUTH WALES. 
 
 ADVANTAGES OF MAINTAINING FUND AND KEEPING IT SOLVENT. 
 
 Mr, Trivett's view of the situation, despite the face that he felt an 
 annual grant of £60,000 ($291,990) immediately necessary to the 
 maintenance of the solvency of the fund, was far from being pessi- 
 mistic. Said he: 
 
 I feel assured, however, that the vote necessary under the amended 
 conditions will be insignificant in comparison with the benefits to be 
 derived from the operation of a financially-healthy retiring fund. 
 A superannuation fund, if soundly constituted and administered, 
 by securing the retirement of officers at an age when their capabilities 
 are waning, supplies an admirable aid by which the management of 
 the State's concerns can be maintained with a maximum of efficiency. 
 A man is most likely to evince zealous application to his duty when 
 promotion is assured through the gradual retirement of his seniors, 
 caused by the workings of a pension scheme, and when prompted by 
 the prospect of obtaining, in due rotation, some provision for his 
 closing years. But when the higher officials retain their positions 
 beyond the period of usefulness, on account of the absence of a retir- 
 ing allowance, the subordinates regard their occupation as temporary, 
 pending the opening up of avenues of advancement elsewhere, and 
 have very little incentive to qualify for higher responsibilities. 
 Hence it is clearly to the advantage of the Government to cooperate 
 in maintaining the fund on a solid foundation by contributing a 
 yearly subsidy.* 
 
 CONTINUED KELUCTANCE OF CIVIL SERVICE BOARD TO ACCEPT ACTUARY'S 
 
 FINDINGS. 
 
 On this occasion the Civil Service Board seems to have been more 
 willing to take the actuarial view point. In commenting on Mr. 
 Trivett's report, in a letter sent on April 28, 1892, to the Colonial 
 Secretary the Board suggested " that, as by the retirement of officers 
 for jDurposes of retrenchment a very large saving has been secured, 
 it is but fair that from such yearly saving an adequate amount should 
 be set aside to meet the pensions so created." The Board also made 
 the following suggestions for the reconstruction of the Act of 1884, 
 in its supplementary report for the year 1891, sent to the Governor 
 of the colony on November 15, 1892 : * 
 
 (1) That there be a limitation as to the age of persons allowed to 
 enter as contributors to the superannuation account (except in special 
 cases) . 
 
 (2) That no retirements or pensions be allowed under 60 years of 
 age, except under very rigid regulations. 
 
 (3) That a sufficient annual subsidy be granted to assist the fund. 
 
 * Supplementary Report of the Civil Service Board of New South Wales, 
 1891, p. 7. 
 
 ^ Same report, p. 5. 
 
CIVIL-SERVICE RETIREMENT IN NEW SOUTH WALES. 25 
 
 (4) That reorganizations and retrenchment retiring allowances 
 should not be a charge on the civil service superannuation account. 
 
 (5) That section 57 shall be so altered that the persons therein re- 
 ferred to [minor officials] must become contributors to the fund 
 within a limited period or lose their right of option. 
 
 (6) That, in the case of future entrants, service for pension pur- 
 poses should count only from the date of contribution to the fund. 
 
 On this occasion, as at the time of the previous investigation, the 
 Board complained of the " invidious duty " forced upon it in dispens- 
 ing gratuities to widows and children by inclusion of the words " in 
 necessitous circumstances " in the law. But this time, instead of ask- 
 ing that the bars be let down and the clause be made " general " and 
 not limited to those in necessity, they advocated a more rational and 
 economical amendment, as follows: "A more equitable arrangement 
 than that provided would be that in the case of the death of every 
 officer a certain proportion of his contributions should be returned to 
 his widow and children." 
 
 They objected, also, to that section of the act which made provision 
 for persons accidentally injured in the discharge of their duty, 
 saying that " compensation to an officer injured should be a charge 
 on the department concerned in his injury " and not on the fund. 
 
 While forced to admit the insolvency of the fund, the Civil Service 
 Board was still reluctant to concede any serious unsoundness in the 
 retirement plan. In commenting on Mr. Trivett's report, in their 
 own report of 1891, they showed their doubt of his conclusions, even 
 though those conclusions confirmed those reached by his predecessor^ 
 Mr. Teece. Said they: 
 
 That the fund is insolvent from an actuarial point of view there 
 can be no doubt, and the condition of insolvency is, in our opinion, 
 attributable to a departure from the original intentions of the 
 framers of the bill * * *. 
 
 With all respect for the strong and perhaps well-established 
 reasons advanced by the actuaries by whom the triennial investiga- 
 tions of the fund have been conducted, we are of opinion that a 
 return to the principles upon which the bill was first introduced and 
 a reconstruction of the act will bring the fund, in the course of a few 
 years, into a solvent condition," 
 
 This triennial investigation, like the previous one, resulted in no 
 amendments in the law and no practical legislation of any kind. 
 There arose a more general and definite feeling of apprehension in 
 regard to the state of the superannuation fund, but the recommenda- 
 tions of the actuary were not followed. 
 
 « Supplementary Report of the Civil Service Board of New South Wales, 
 1891, p. 3. 
 
26 civil-Service eetiremen"t iisr new sotrTH wales. 
 
 THIRD TRIENNIAL INVESTIGATION OF THE SUPERANNUATION 
 
 FUND, 1893. 
 
 INSOLVENT CONDITION OF FUND EXTREMELY PRONOUNCED. 
 
 As the time for making the third triennial investigation ap- 
 proached, the Board began seriously to consider the necessity for a 
 very strict examination of the fund. The two previous investiga- 
 tions had afforded strong and conclusive evidence that the principles 
 upon which the fund was based were totally unsound, and the con- 
 demnation of those principles by Mr. Teece, confirmed subsequently 
 by Mr. Trivett, together with the accumulated and increasing 
 deficiency disclosed by the valuations made, showed that each suc- 
 ceeding triennial investigation must add to the difficulties of the 
 Board in dealing with the future of the fund. The statement of 
 account for the year 1893 showed that the 4 per cent deduction from 
 salaries for that year amounted to £67,308 ($327,554) and the pensions 
 and gratuities paid under the Civil Service Act amounted to £75,262 
 ($366,263). These figures proved that the fund was not in a healthy 
 condition, and the Board thought it desirable to obtain the opinion 
 of a third competent actuary to conduct the third triennial investiga- 
 tion, " in order to compare the opinions of gentlemen whose mathe- 
 matical training enables them to arrive at conclusions which the 
 practical experience of the principles of life assurance has proved to 
 be generally correct and unassailable." They accordingly secured 
 the services of Mr. T. A. Coghlan, the Government Statistician. Mr. 
 Coghlan found that the deficiency on December 31, 1893, had grown 
 since the last valuation from £1,592,568 ($7,750,232) to £2,905,199 
 ($14,138,151). In language more forcible even than that employed 
 by his predecessors, he strove to show the deplorable state of affairs 
 and to make suggestions for reconstruction on a sound scientific 
 basis. Said he: 
 
 , The reports of the actuaries received far less attention at the hands 
 of those interested than they deserved, as apart from any question of 
 state policy it must have been apparent to contributors that it would 
 be a serious thiug if they were compelled to continue paying into a 
 fund which had on the best authority been declared to be fast lapsing 
 into insolvency, and from which the younger of their number could 
 not reasonably hope for benefit, while pensioners could hardly have 
 looked with composure on the more serious and immediate loss which 
 would befall them in the event of the fund collapsing or their pen- 
 sions being largely reduced. The apparent apathy in regard to the 
 condition of the fund was due to a lurking belief in the minds of 
 many otherwise well-informed persons that actuarial methods, 
 though very well in theory, do not usually stand the test of everyday 
 experience. It would be idle on my part to argue in support of 
 
ClVlL-SERViCE EETtREMEiTT IN FEW SOUTH WALES. 
 
 27 
 
 actuarial methods which are nothing if not the embodiment and ap- 
 plication of everyday experience, and I mention the matter of the 
 distrust exhibited in some quarters as to the correctness, from a busi- 
 ness point of view, of the actuarial conclusions, only in order to 
 point out that not only is there no cause for such distrust, but that if 
 the actuaries erred at all it was by presenting the condition of the 
 fund in a too favorable light.* 
 
 THIS VALUATION OF FUND BASED ON MOST EXTENSIVE AND ACCURATE 
 
 DATA. 
 
 Mr. Coghlan's valuation was of necessity, in many respects, the 
 most effectual test as yet applied to the fund. Not only had he a 
 longer period of experience under observation, but he went to the 
 trouble to collect from civil service records and to tabulate all the 
 information available concerning the ages, years of service, and 
 present and past salaries of all contributors to the fund. This 
 great labor was undertaken with a view to defining the average 
 salary at each age and the normal rate of increment. The soundness 
 of the policy which prompted this arduous preliminary undertak- 
 ing — the need of which had been noted three years before by Mr. 
 Trivett — is seen when comparison is made of the previous valuation 
 balance sheets with that presented by Mr. Coghlan in respect to the 
 items " prospective pensions " and " future contributions." The 
 striking difference in the values is due almost entirely to the ab- 
 sence from previous valuations of any allowance for increase of 
 salary. 
 
 Mr. Coghlan's report of receipts and disbursements during the 
 period of his investigation, January 1, 1891, to December 31, 1893, 
 showed a balance on hand on December 31, 1893, of £488,653 2s. lid. 
 ($2,378,030.53) as follows:^ 
 
 Receipts. 
 
 Disbursements. 
 
 Balance 
 
 $1,978,650.55 
 
 993. 613. 93 
 
 51,098.25 
 
 800. 26 
 
 345.85 
 
 127,065.59 
 
 42,942.48 
 
 263,194.96 
 
 Pensions, schedule B 
 
 $46 189 47 
 
 Deductions from salaries 
 
 
 910 113 69 
 
 Transferred from schedule B 
 
 Gratuities 
 
 113,167.37 
 
 Fines 
 
 Refund of 4 per cent deductions, 
 made in error 
 
 
 Gratuity refunded(offlcer reappointed) 
 
 8,157.29 
 
 Back contributions paid by Govern- 
 
 Fines refunded . 
 
 51.46 
 
 ment 
 
 Error credit transferred to Consoli- 
 dated Revenue 
 
 
 Gratuities paid by Government 
 
 2, 002. 06 
 
 Interest 
 
 B alance 
 
 2,378,0.30.53 
 
 
 
 
 3,457,711.87 
 
 3,457,711.87 
 
 « Civil Service Board, New South Wales. (Report on an Actuarial Examination of the 
 State and Sufficiency of the Civil Service Superannuation Account.) March 1, 1895, p. 9. 
 » Ibid., p. 13. 
 
28 
 
 CIVIL-SEKVICE E.ETIEE1MENT IN" NEW SOUTH WALES. 
 
 The valuation balance-sheet taken at the close of 1893 showed a 
 deficiency of £2,905,199 14s. 8d. ($14,138,154.50) as given below: 
 
 SUPERANNUATION ACCOUNT— VALUATION BALANCE SHEET, DECEMBER 31, 1893. 
 Db. ~ Cr. 
 
 To value of existing pensions under 
 
 schedule B 
 
 To value of existing pensions under 
 Civil-Service Act, 1884: 
 
 Males $3,208,783.47 
 
 Females 137,710.74 
 
 To value of existing pensions vested 
 but not yet entered on, being due 
 to contributors of 60 years and over 
 on their retirements: 
 
 Males $1,794,045.32 
 
 Females 35,919.05 
 
 To value of prospective pensions not 
 yet vested: 
 
 Males $16,181,137.28 
 
 Females 1,015,912.15 
 
 To value of retirement aDowances of 
 one month's salary for each year of 
 service, which will become payable 
 at age 60 to contributors who entered 
 the service at 46 and over: 
 
 Males $42,811.96 
 
 Females 2,771.02 
 
 To amount of retirement allowances 
 as above, now payable if claimed 
 (lives over 60): 
 
 Males $61, 705. 15 
 
 Females 2,150.18 
 
 $123, 962. 77 
 
 3,346,494.21 
 
 1,829,964.37 
 
 17,197,049.43 
 
 45, 582. 98 
 
 63,855.33 
 
 22, 606, 909. 09 
 
 By balance pei Civfl Service Report 
 for 1893 , 
 
 By value of £3,500 per aimum from 
 
 Consolidated Revenue , 
 
 By value of back contributions, to 
 be made good before pensions are 
 entered on: 
 
 Males $989,905.94 
 
 Females 26,497.10 
 
 By value of future contributions: 
 
 Males $4,324,381.63 
 
 Females 324,120.64 
 
 By deficiency. 
 
 $2,378,030.53 
 425,818.75 
 
 1,016,403.04 
 4,648,502.27 
 
 14, 138, 154. 50 
 
 22,606,909.09 
 
 CAUSES OF DEFICIENCY OF FUND GIVEN BY ACTUARY COGHLAN. 
 
 Mr. Coghlan's report proved conclusively that the Civil Service Act 
 of 1884 was a failure. The object of that act was to secure pensions 
 to officers on their retirement under certain conditions, and for this 
 purpose to establish a fund which would eventually become self-sup- 
 porting. This was to be achieved by the payment from the Consoli- 
 dated Revenue of a specified grant for a limited number of years and 
 the contribution by the civil servants of a fixed percentage of their 
 salaries. Mr. Coghlan pointed out that this plan would have been 
 perfectly feasible had the fund been established on a solvent basis, 
 with a clear knowledge of the original liabilities incurred, had the 
 promised benefits been on a scale proportionate to the price paid for 
 them, and had no charge been made upon the fund otherwise than in 
 accordance with the original plan. He showed how all three of 
 these conditions had been violated; how through disregarding the 
 operation of compound interest and the life contingencies in calculat- 
 ing the liabilities assumed, the fund was saddled with an initial 
 liability of little less than £1,000,000 ($4,866,500) ; how benefits and 
 contributions were never properly related to one another, the former 
 being either too large or the latter too small; and finally how the 
 
CIVIL-SEEVICE RETIREMENT IN NEW SOUTH WALES. 29 
 
 fund had become " the sport of political necessities," and wholesale 
 additions to the pension list been made in furtherance of a retrench- 
 ment policy. His conclusion was that " in the main points that make 
 for safety the fund is essentially unsound. It came into being over- 
 shadowed by an accrued, albeit unperceived debt, and carried the 
 seeds of further insolvency in its constitution, while the treatment 
 to which it has during its short life been exposed, and which would 
 severely try the strongest growth, has only hastened the early demise 
 to which it was predestined." 
 
 REMEDIAL MEASURES RECOMMENDED. 
 
 So serious did Mr. Coghlan find the condition of the fund, with a 
 deficiency of nearly three million sterling ($14,599,500), which was 
 increasing at the rate of £120,000 ($583,980) a year, that he did not 
 think any assistance the state could reasonably be expected to afford 
 would be of material service at that late day. To remedy conditions 
 within lines of the existing act he found the only course open to be a 
 reduction of allowances. The extent to which such a reduction would 
 have to be made was striking evidence of the hopeless condition of 
 the fund. Existing pensions and all prospective pensions would 
 need to be reduced by fully 65 per cent in order to bring about a 
 condition of solvency. As an alternative Mr. Coghlan suggested the 
 following changes in the Civil Service Act, believing that they would 
 establish the fund on a sound foundation, and would make 4 per 
 cent a safe deduction for all ages under 30 years : * 
 
 (1) That the pension age be postponed from 60 to 65 years, and 
 that payments from the fund be restricted to persons who have at- 
 tained the pension age or who, through infirmity, are forced to an 
 earlier retirement. 
 
 (2) That all payments to persons whose retirement is due to re- 
 trenchment or public policy be a charge on the Consolidated Revenue 
 until the attainment of 65 years of age, when the fund might take 
 over the liability. * * * 
 
 (3) That no person be hereafter admitted as a contributor who 
 is above the age of 35 years unless back contributions as from that 
 age, with compound interest at 4 per cent, be first secured to the fund. 
 
 (4) That pensions be computed on the average salary for the seven 
 years of service previous to retirement.^ * * * 
 
 (5) That no gratuities be paid to the relatives of deceased officers, 
 but that the fund grant insurance for limited amounts at pure pre- 
 mium rates; premiums to cease at the pension age, and the reserve 
 
 « Civil-Service Board, New South Wales (Report on an Actuarial Examination 
 of the State and Sufficiency of the Civil Service Superannuation Account), 
 March 1, 1895, p. 12. 
 
 * Mr, Coghlan stated that it would doubtless be more scientific to make the 
 average salary for the whole period of service the basis for the pension. 
 
30 civil-sepat:ce retirement in istew south wales. 
 
 thereon to be returned stiould the insurer retire from the service 
 before being pensioned. 
 
 Mr. Coghlan said: 
 
 On the foregoing lines I estimate that the deduction of 4 per cent 
 will provide a margin beyond requirements at all ages under 30 years, 
 with a possible reduction for male contributors at the lowest ages, 
 and for females of all ages. 
 
 The adoption of these reforms would establish the fund on a sound 
 foundation. It is true the accumulated deficit would not be entirely 
 removed, but it would be reduced to such modest dimensions that 
 Parliament might see fit to assist in its gradual extinction by means 
 of an annual allowance. 
 
 In conclusion. I would strongly press upon the Board the necessity 
 of closing the fimd to new entrants, unless under 3.5 years of age, until 
 steps are taken to reform the superannuation system in the direction 
 I have indicated, or in some other efficient manner. 
 
 FINAIi RECOGNITIOX BT CIVIL SERVICE BOARD OF INADEQUACY OF PLAN. 
 
 After digesting this last actuarial report, which so strongly con- 
 firmed all that the two former actuaries had said, the Civil Service 
 Board finally became convinced not only that the fund established 
 by the Act of 1884 was insolvent but that the plan itself was unsound. 
 
 Up to this time the Board had been unwilling to concede any serious 
 weakness in the principles underlying the Act of 1884. Forced to 
 admit the insolvency of the fund, they had still clung to the idea that 
 the plan itself was inherently sound and that all would have been well 
 but for the acts of the Government in loading up the fund unexpect- 
 edly with pensions for officials dispensed with before they had reached 
 the retirement age. But in forwarding 'Mr. Coghlan's report to the 
 Chief Secretary on March 1, 1895, the Board said: 
 
 The enormous dormant liability so clearly and forcibly illustrated 
 in the report furnished by Mr. Teece is made even more apparent by 
 the extended experience at the command of Mr. Coghlan. The com- 
 plete inadequacy of the original scheme is shown most clearly, and 
 the wonder is that the words of warning have been so long neglected." 
 
 Mr. Coghlan's report, confirming all that Mr. Teece and ]\Ir. Triv- 
 ett had previously said both as to the insolvency of the fund and the 
 structural weakness of the scheme, seems to have finally opened their 
 eyes to the true situation. The unfortunate history of the case was 
 then well summarized by them in their report to the Chief Secretary. 
 Said they: 
 
 There is abundant e\ddence that the fund was established on an 
 unscientific basis. The original bill was conceived in a liberal spirit, 
 
 ° Civil Service Board, New South Wales (Report on an Actuarial Examina- 
 tion of the State and Sufficiency of the Civil Service Sui)erannuation Account), 
 March 1, 1895, p. 3. 
 
CIVIL-SEBTICE £ETrE£ME^-T I>- >"EW SOUTH WALZ5. 31 
 
 and Parliament was prepared to act generoTislr in dealing with the 
 measure, bnt the accrued liabilities to officers in the service at the 
 time it was passed were not sufficiently prorided for. and the benefits 
 conferred by the act were quite out of proportion to the payments 
 made to the fund by the officers c<mcemed. It was at first proposed 
 that the fund should hare a perpetual endowment of £10.CKK) [SIS,- 
 G65] per annum, and an unlimited daim ux)on the Consolidated Eeve- 
 nne of the colony, should the amount of the endowment prore in- 
 sufficient. The calculations of the advising actuary were made on 
 this basis, and the present ccmdition of the fund in no way reflects 
 on the advisers of the Government at the time. The bill was after- 
 wards shorn of its equitable provisions in reference to its endow- 
 ment by the Grovemment, but no commensurate reduction was made 
 in the scale of pensions and gratuities, so that the fund was started 
 in an overweighted conditicoj. viz. accrued liabilities inadequately 
 provided for. and retiring allowances authorized on a scale beyond 
 the power of the contributions to provide. Added to this the Govern- 
 ment, immediately after the passing of this act. commenced a sys- 
 tem of reorganization and retrenchment, by which they made large 
 apparent savings of the salaries of officers di=x>en=ed with, but 
 charged upon the fund the pensicms of such dispensed-with of- 
 fice^ and thereby have imdermined the whole fabric." 
 
 The aspect of the situation that seemed to appeal m<^ strongly 
 to the Board was the position of the civil service employees who had 
 been contributing fca* years to the fund in the expectation of some 
 day reeeiving a pension, and in recommending !Mr. Cc^ilan's report 
 to the Chief Secretary ~ for most favorable consideraticm " they em- 
 phasized that phase of the problem. Said they: 
 
 The Board are of opinion that the fund has beai Tery unfairly 
 treated througJiCHit. Tlie Government have been relieved from the 
 payment of silaries to a number of persons it has beei thought de- 
 sirable to rsnove from the service, and the fond has afforded a con- 
 venieat means by which their removal has be«i effected. It is not too 
 nuch to a^nme that in the absence of the fund most of the public 
 servants removed would have ronained longer in the service, draw- 
 ing annual salaries from the Treasury. 
 
 Taking into consideration the large interests created by the estab- 
 lidiment of the fond, the number of pers<ms drawing pensions there- 
 from, and the almost entire reliance of a very large number of 
 offices upcm the expectation of pensions for which they have long 
 contribTited- it would be a cruel and inexpedient proceeding to sweep 
 away a fund having invested assets amounting to nearly a half a 
 million and an income of more than £90.000 [S437,985] per annum. 
 
 •GtH Service Bc^rd. Xew .Sontl! "Wales CBeport on an Aetna rial Exan- 
 Ir^ticm of the State and SaSdeo^ of tLe C:-l? Serrice Snp^aiUMiatkHi 
 A-cconnt), Mardi 1, 1S95, pu 7. « 
 
32 CIVIL-SERVICE EETIREMENT IN NEW SOUTH WALES. 
 
 HESITATION OF GOVERNMENT TO ATTEMPT RECONSTRUCTION OF FUND. 
 
 The Government accepted the conclusion of Mr. Coghlan that a 
 reduction of 65 per cent of allowances was practically repudiation of 
 its contract with the civil servants, and that such repudiation would 
 be wrong, but it was not willing to take the steps for reconstruction 
 of the fund declared by Mr. Coghlan to be necessary, if a sound con- 
 tributory plan of retirement was to be maintained. The legislation 
 that resulted from this third triennial investigation, therefore, was 
 merely a recognition of the fact that the fund was doomed and an 
 attempt to prevent further increases in the deficiency. This legis- 
 lation took the form of the Public Service Act of 1895. 
 
 PUBLIC SERVICE ACT OF 1895. 
 
 OPTION or DISCONTINUING PAYMENTS ALLOWED CONTRIBUTOIIS. 
 
 Part V of the Public Service Act of 1895, having to do with pen- 
 sions and gratuities, made a complete change in the system of grant- 
 ing retiring allowances. The option was given contributors of dis- 
 continuing their payments to the fund on giving notice to that effect 
 within a period of twelve months after the passage of the act. Their 
 interest in the fund ceased thereupon save in respect to their previous 
 payments, the return of which, improved at 3 per cent interest, was 
 to be granted at the termination of their official lives or at death if 
 it occurred before retirement. In lieu of a pension those who ceased 
 to contribute to the fund received, besides return of their contribu- 
 tions with interest, a gratuity of one month's pay for each year of 
 service, based on the average salary during the whole term of employ- 
 ment. Liability with respect to these gratuities was transferred to 
 the Government. Their original pension privileges were preserved 
 to those who had not availed themselves of the right of discontinuing 
 their contributions. Finally the fund was divested of its continu- 
 ing principle, the term of its existence being confined to the lives of 
 the current contributors. No pensions were to be paid to officers 
 appointed after the commencement of the act. No new entrants to 
 the service were allowed to contribute to the fund, but they were 
 required to assure their lives according to stated conditions. This 
 was the only provision in the act looking toward the solution of the 
 original problem of superannuation. 
 
 ENDOWMENT ASSURANCE REQUIRED OF NEW ENTRANTS. 
 
 It seems not unreasonable to suppose that this provision sprang 
 from Mr. Coghlan's recommendation, previously cited, that " no gra- 
 tuities be paid to the relatives of deceased officers, but that the fund 
 grant insurance for limited amounts at pure premium rates; pre- 
 
CIVIL-SEKVICE KETIREMENT IN NEW SOUTH WALES. 33 
 
 miums to cease at the pension age, and the reserve thereon to be re- 
 turned should the insurer retire from the service before being pen- 
 sioned." This plan was regarded with favor by the Civil Service 
 Board. In transmitting Mr. Coghlan's report to the Chief Secretary, 
 they said : 
 
 The proposal to substitute a plan of insurance in place of the 
 present objectionable system of gratuities is worthy of careful con-, 
 sideration. Policies at pure premium rates would cost very little, 
 the amount assured need not in any case be great, and it could be 
 made to var}^ with increases of salary. It would also be possible 
 to conduct this new feature of business in connection with the fund 
 by accepting the policies of members assured in public companies in 
 lieu of extra payments to the fund, with a condition that any such 
 policies should not be impoverished by obtaining loans or advances 
 of any kind or be subject to assignment." 
 
 The endowment assurance which the new entrant was required to 
 effect on his life was for alternative benefits : A lump sum in case of 
 death or an annuity in case he lived to reach the age of 60. The sec- 
 tion in the Act of 1895 (now consolidated with other enactments into 
 the Public Service Act of 1902) which made this provision reads as 
 follows : 
 
 No probationer shall have his appointment confirmed until he shall 
 have effected with some life assurance company carrying on business 
 in New South Wales an assurance on his life providing for the 
 pa3'ment of a sum of money at his death, or at the age of sixty, which- 
 ever event shall first happen. Such insurance shall be continued and 
 the amount thereof fixed and increased from time to time in accord- 
 ance with regulations made as herein provided in that behalf, and 
 no policy of insurance so effected shall during the time such person 
 remains in the public service be assignable either at law or in equity, 
 and the property and interest under such policy of the person in- 
 sured shall during the time aforesaid be wholly exempt from the 
 operation of any laws now or hereafter to be in force relating to 
 bankruptcy, and shall not be liable to be seized, levied upon, or sold, 
 upon, by, or under any legal process: Provided. That if such person 
 shall be unable to insure his life, or shall be unable to insure his life 
 without a loading of five years or more being made upon his age, and 
 in such latter case shall be unwilling to insure his life, he shall not 
 thereby be disqualified for appointment or promotion, but a pre- 
 scribed deduction shall be made at prescribed times from such per- 
 son's salary, which deductions shall be invested and accumulated in 
 the prescribed manner, and such accumulations shall be protected as 
 hereinbefore provided with respect to policies of insurance, and shall 
 be paid in full, without any deduction, and with all interest accumu- 
 lated thereon, to such person on his leaving the public service, or to 
 his representatives on his death, whichever shall first happen. 
 
 ''Civil Service Board, New South Wales (Report on an Actuarial Examina- 
 tion of the State and Sufficiency of the Civil Service Superannuation Account), 
 March 1, 1895, p. 6. 
 
 S D— 61-2— Vol 59 24 
 
54 CIVIL-SERVICE RETIREMENT IN NEW SOUTH WALES. 
 
 This provision is so like the compulsory insurance requirement 
 imposed on members of the civil service in New Zealand by passage 
 of the Civil Service Insurance Act of 1893, that it seems likely that 
 the one was fashioned in imitation of the other. The New Zealand 
 measure was soon found inadequate as a retirement provision for the 
 civil service, and was superseded by a more satisfactory scheme of 
 retirement, though many members of the service continue, voluntarily, 
 to keep up their insurance also. New South Wales has not yet fol- 
 lowed the example of its neighbor in making the insurance voluntary 
 and purely supplementary to an adequate scheme of retirement. 
 
 In one important respect the provision for compulsory insurance 
 would seem to have a tendency to raise the standard of efficiency 
 among members of a service. No physical examination was required 
 for entrance into the public service under the Civil Service Act of 
 1884, but the Public Service Act of 1895 provided for " a preliminary 
 jaiedical examination as to the health of the candidates." The fol- 
 lowing medical certificate must be satisfactorily filled out before the 
 candidate is allowed to submit himself to tests as to acquirements and 
 efficiency. 
 
 PUBLIC SERVICE BOARD, NEW SOUTH WALES. 
 
 (59 Vic, No. 25, sec. 22.) 
 
 (Address) . 
 
 (Date) 
 
 I HEREBY DECLARE that on this day of in the yenr I care- 
 fully examined , aged , a candidate for the position of . 
 
 I find that the said (a) ['• is " or " is not "] in 
 
 sound general health; (b) ["is" or "is not"] below the standards 
 
 of height, weight, chest measurement, respiratory capacity, and general develop- 
 ment proper to persons of apparent age ; (c) [" is " or " is not "] 
 
 free from deformities; (d) ["is" or "is not"] in possession of nor- 
 
 Hial vision; (e) ["is" or "is not"] in possession of correct color 
 
 Tision. 
 
 Special or explanatory remarks: . 
 
 I am of opinion that the said is free from any defect 
 
 which would render unfit for admission to the public service, or prevent 
 
 ae satisfactory discharge of the duties of the position for which applies. 
 
 Legally qualified medical practitioner. 
 The Chief Medical Officer of the Government, Sydney, 
 
 rOURTH ACTUARIAL VALUATION OF THE SUPERANNUATION 
 
 FUND, 1897. 
 
 DEFICIENCY IN SUPERANNUATION FUND FOUND REDUCED. 
 
 The effect of the Act of 1895 was, as expected, to reduce the de- 
 ficiency of the fund. A valuation as on December 31, 1897, was 
 ■lade by Mr. Trivett under the altered conditions, and showed that 
 Ifce deficiency had been reduced from £2,905,200 ($14,138,156), ac- 
 
CIVIL-SERVICE RETIREMENT IN NEW SOUTH WALES. 
 
 35 
 
 cording to Mr. Coghlan's valuation on December 31, 1893, to £1,344,541 
 ($6,543,209), or by the large sum of £1,560,659 ($7,594,947). 
 
 The following statement of receipts and disbursements between 
 January 1, 1894, and December 31, 1897, showed a balance of £420,648 
 15s. lOd. ($2,047,087.35) : • 
 
 Receipts. 
 
 Disbursements. 
 
 
 $2,331,008.65 
 
 1,010,185.90 
 
 76,ti47.38 
 
 386, 575. 09 
 
 2,683.69 
 
 115, 476. 06 
 43, 437. 12 
 2, 600. 58 
 
 Pensions under Civil Service Act 
 
 $1,596,688.73 
 65,714.54 
 105 469 42 
 
 Ded uc tions from salaries 
 
 Sched ule B , appropriations 
 
 Gratuities 
 
 
 Refunds 
 
 153,654 43 
 
 
 Balance, December 31, 1897 
 
 Total 
 
 
 Back contributions paid by Govern- 
 
 
 Gratuities paid by Government 
 
 2,047,087.35 
 
 
 Total 
 
 3,968,614.47 
 
 3,968,614.47 
 
 
 
 The valuation balance sheet showing the estimated deficiency of 
 £1,344,541 6s. lid. ($6,543,210.46) was as follows: 
 
 CIVIL-SERVICE SUPERANUATION FUND, VALUATION BALANCE SHEET 
 DECEMBER 31, 1897. 
 
 De. 
 
 Ce. 
 
 Present value of £93,454 15s. ($454,- 
 797.54) per annum, being pensions 
 entered on by 735 officers who have 
 retired under the provisions of the 
 Civil riervice Act of 1884 
 
 Present value of £3,499 15s. 7d. ($17,- 
 031.68) per annum, being pensions 
 entered on by 15 officers who have 
 retired under Schedule B, Constitu- 
 tion Act 
 
 Present value of prospective pensions 
 to 2,630 persons who were contribut- 
 ing to the fund December 31, 1897. . . 
 
 Present value of amount to be refund- 
 ed at retirement to 5.829 persons who 
 have ceased contributing, in accord- 
 ance with the provisions of section 
 62, Public Service Act 
 
 $3,605,962.03 
 
 104,230.68 
 
 5,767,730.26 
 
 933,848.85 
 
 10,411,77L82 
 
 Amount of civil service fund Decem- 
 ber 31, 1897 
 
 Present value of £3,500 ($17,033) per 
 annum, authorized by the Consti- 
 tution Act 
 
 Present value of future contribu- 
 tions of 4 per cent per annum from 
 salaries ofcontriliutors to the fund 
 December 31, 1897 
 
 Present value of unpaid contribu- 
 tions of 4 per cent per annum 
 from salaries, for period from date 
 of entry to date of inception of civil 
 service fund, available only at offi- 
 cers' retirement 
 
 Estimated deficiency 
 
 $2,047,087.35 
 425,818.75 
 
 1,186,087.10 
 
 209,568.16 
 6,543,210.46 
 
 10,411,771.82 
 
 This reduction in the deficiency was undoubtedly due to the opera- 
 tion of the new act, under which 5,829 past contributors to the fund 
 out of 9,593 gave up their prospective benefits to secure exemption 
 from further contributions and a refund of the contributions already 
 made bv them with interest. 
 
 OPTION OF DISCONTINUING CONTRIBUTIONS NOT EXERCISED BY OLDER 
 
 EMPLOYEES. 
 
 It was a matter of surprise to many that the deficiency in the 
 fund was still so large. The withdrawal of 5,829 persons from par- 
 ticipation in the benefits of the fund removed a great load of liability, 
 
 " The Civil Service Superanuuation Account, Nevp South Wales. 
 Report on the Condition of, on Dec. 31, 1897, p. 8.) 
 
 (Actuarial 
 
36 
 
 CIVIL-SERVICE BETIREMENT IN NEW SOUTH WALES. 
 
 but on the other hand few of the older officials ceased contributing 
 and there was no considerable number of withdrawals by officers 
 holding responsible positions and in receipt of large salaries. It is 
 interesting to note that the right of ceasing to contribute was exer- 
 cised by officers in the manner that would naturally have been ex- 
 pected. Young men with a long period to run before arrival at the 
 pension age, and with an admittedly insolvent fund as their pros- 
 pective means of support, together with those of all ages whose 
 physical condition gave slender expectation of participating to any 
 great extent, if at all, in the benefits of a retiring allowance, at once 
 seized the opportunity of securing something tangible in the promised 
 return of their contributions, and the women, as was fully expected, 
 retired from the fund in great numbers, only 12 per cent remaining. 
 On the other hand, the older officers, having long service behind them, 
 and thereby heavier claims in respect to pension rights, together with 
 those of middle age and sound constitution, having fair propects of 
 advancement, adhered to the fund. The average age of those who 
 adhered was 44 years and their average length of service eighteen 
 years. 
 
 The extent to which the privilege of withdrawal was accepted as 
 regards persons still in the service on December 31, 1897, was shown 
 bv Mr. Trivett in the following statement : 
 
 
 Contributors. 
 
 Noncontributors. 
 
 Whole service. 
 
 
 Aver- 
 age age 
 (years). 
 
 N um- 
 ber. 
 
 Per 
 
 cent. 
 
 Aver- 
 age age 
 (years). 
 
 Niun- 
 ber. 
 
 Per 
 
 cent. 
 
 .\ver- 
 age ag'" 
 years) 
 
 Num- 
 ber. 
 
 Per 
 
 cent. 
 
 General: 
 
 44 
 42 
 42 
 
 1,825 
 241 
 564 
 
 32 
 12 
 71 
 
 33 
 28 
 35 
 
 3,887 
 
 1, 716 
 
 226 
 
 68 
 88 
 29 
 
 36 
 30 
 40 
 
 5,712 
 
 1,957 
 
 790 
 
 100 
 
 
 100 
 
 
 100 
 
 
 
 
 43J- 
 
 2,(530 
 
 31 
 
 31?. 
 
 5,829 
 
 69 
 
 35 
 
 8,459 
 
 100 
 
 EXHAUSTION OF SUPERANNUATION FUND INEVITABLE WITHOUT OUTSIDE 
 
 HELP. 
 
 Although the legislation of 1895 had resulted in a reduction of 
 the deficiency of the fund, it offered no hope of making it solvent. 
 The fund was bound to become exhausted in time unless some new 
 source of supply was opened up. While the law of 1895 was helpful 
 in stopping the constant growth of obligations toward new entrants, 
 the withdrawal of officers under it had reduced the annual income 
 from £67,000 ($326,055) to £21,000 ($102,197). At the same time, 
 the pension rate per annum had not decreased and would not do so 
 for many years, since the older officers had maintained their con- 
 
CIVIL-SERVICE BETIREMENT IN" NEW SOUTH WALES. 37 
 
 nection with the fund in large proportions and would consequentlj^ 
 supply a steady stream of annual entrants to the pension list almost 
 equal in volume to what would be experienced if no right of with- 
 drawal had been offered to their particular age classes. Until, 
 therefore, the influx of claimants on the fund proceeding from this 
 body of contributors of almost normal strength had ceased, very little 
 diminution in the annual payments could be expected. It was ap- 
 parent that unless help came the time was sure to arrive when there 
 would be no more money in the treasury of the fund, and a large 
 body of pensioners waiting vainly to be paid as usual. 
 
 POSSIBLE METHODS OF RESUSCITATING FUND SUGGESTED. 
 
 Mr. Trivett considered the question of what could be done. Said he : 
 
 In the case of a pension fund, where the valuation reveals a de- 
 ficiency of moderate proportions, the leeway may be overtaken by 
 increasing the contributions, by diminishing the benefits, or by a 
 combination of both methods. 
 
 In the present case, however, the deficiency amounts to nearly 63 
 per cent of the total obligations; or, in other words, the assets are 
 equal to little more than one-third of the liabilities, and in such 
 an extremity it would be unreasonable to expect more than a slight 
 degree of improvement by applying the methods available for the 
 adjustment of slight deficits. The conclusion is, therefore, most 
 plain that extraneous support must be supplied, otherwise liquidation 
 with its attendant privation to at least 743 helpless beings already 
 retired is our only option. 
 
 The only possible extraneous source of aid is the Consolidated 
 Revenue. * * * 
 
 But the fund being in so parlous a condition, the beneficiaries must 
 be expected to assist in the buoying-up process by submitting to a re- 
 duction in their benefits.'* 
 
 Mr. Trivett then made the following statement of possible read- 
 justments through a combination of subsidy and reduction : « 
 
 No reduction, a subsidy of $377,154 per annum necessary. 
 10 per ceuL, a subsidy of $323,622 per annum necessary. 
 15 per cent, a subsidy of $296,856 per annum necessary. 
 20 per cent, a subsidy of $270,091 per annum necessary. 
 25 per cent, a subsidy of $243,325 per annum necessary. 
 
 The possibilities thus outlined for the continuance of the fund did 
 not seem to appeal to the Civil Service Board. In transmitting Mr. 
 Trivett's report to the Governor of the colony on June 21, 1898, they 
 stated that they were definitely of opinion that no scheme worthy of 
 the attention of the Government could be devised which included an 
 increase in contribution rates or reduction in the pension scale. 
 
 » The Civil Service Superannuation Account, New South Wales (Actuarial 
 Report on the Condition of, December 31, 1897). 
 
38 CrVIL-SERVICE EETIREMENT IN NEW SOUTH WALES. 
 
 They recommended, therefore, that the sum to the credit of the 
 superannuation account should be divided into three portions. The 
 sum of £191,893 ($933,847), representing the interests of persons who 
 have ceased to contribute, should be set aside to meet the payments to 
 be made to such persons and the balance of the fund be divided be- 
 tween the general service and the railway service, the deficiencies to 
 be met by annual endowments until the whole obligation was dis- 
 charged. They thought it inadvisable to make any attempt to set the 
 existing scheme on its feet. Said they : 
 
 We have given a great deal of thought to the question of the possi- 
 bility of resuscitating the superannuation fund, because it is plain 
 to us that some sort of a superannuation system must always exist. 
 If old and invalid officers are not given a retiring allowance by the 
 direct provision of Parliament the custom which formerly existed 
 of retaining officers long after their period of usefulness is past will 
 again come into vogue, to the detriment of the service and the dis- 
 satisfaction of the younger officers. But we do not see any hope of 
 saving the existing system, and a careful investigation has convinced 
 us that the best course was adopted when the legislature closed the 
 fund to new entrants and allowed all who wished to cease contribut- 
 ing. The question of what must take the place of the superannuation 
 fund for persons who are now joining the service under the competi- 
 tive system is, fortunately, not pressing, and as a new service is 
 practically being created [through reorganization and retrenchment], 
 we do not anticipate that there will be any formidable difficulties to 
 be overcome in arranging a scheme of retiring allowance, just to the 
 State and acceptable to the public servants.** 
 
 The above paragraph was written on June 21, 1898, but down to 
 the present time no such " just and acceptable scheme " has been 
 adopted. It seems strange that they did not realize that the very 
 time to create a superannuation scheme, economically and advan- 
 tageously, was while a practically new service was being created, 
 since it could come into being then unhampered by a load of accrued 
 liabilities. Their general point of view as to treatment of the old 
 fund prevailed with the Government, which made no attempt to 
 revive the old fund or to create a new one, but simply assumed all 
 obligations toward pensioners when the fund became exhausted 
 in 1903. 
 
 FIFTH ACTUARIAL VALUATION OF THE SUPERANNUATION FUND, 
 
 1901. 
 
 The fifth and last actuarial valuation of New South Wales's 
 superannuation fund was made by Mr. Trivett three and a half years 
 after the previous one. The statement covering receipts and expendi- 
 
 ° The Civil Service Superannuation Account, New South Wales (Actuarial 
 Report on the Condition of, December 31, 1897), p. 5. 
 
CIVIL-SERVICE RETIREMENT IN NEW SOUTH WALES. 
 
 39 
 
 tures for the period January 1, 1885, to June 30, 1901, showed a bal- 
 ance on June 30, 1901, of £180,127 18s. 9d. ($876,592.61) as follows:" 
 
 Receipts. 
 
 Disbursements. 
 
 Government endowment 
 
 $486,650.00 
 281,040.38 
 
 4,253,577.63 
 
 1,103,655.23 
 
 5,513.72 
 
 654,592.69 
 2, 530. 03 
 
 Pensions, schedule B 
 
 $261,815.94 
 
 4,771,268.19 
 
 559 805 40 
 
 Transfers, schedule B 
 
 Pensions, Civil Service Act 
 
 Contributions by officers, being 4 per 
 
 Gratuities 
 
 cent on salaries 
 
 Refunds to e.x-contributors, under 
 Public Service Act 
 
 
 Interest 
 
 284,173.79 
 
 33, 903. 75 
 
 876, 592. 61 
 
 Fines 
 
 
 Transfers from Consolidated Revenue 
 
 Balance, June 30, 1901 
 
 fund 
 
 
 Sundries 
 
 
 
 
 
 6,787,559.68 
 
 6,787,559.68 
 
 DEFICIENCY IN SUPERANNUATION FUND STILL LARGE. 
 
 The valuation balance sheet showing the present value of the 
 deficiency on the same date to be £1,761,075 7s. lOd. ($8,570,273.39) 
 was as follows: 
 
 CIVIL SERVICE SUPERANNUATION FUND— VALUATION BALANCE SHEET AS AT 
 
 JUNE 30, 1901. 
 
 Dr. 
 
 Cb. 
 
 To pensions entered on by 807 males 
 for £99,049 10s. (S482,024.39) per an- 
 num 
 
 To pensions entered on by 61 females 
 for £3,713 5s. ($18,070.53) per annum 
 
 To pensions entered on by 14 persons 
 for £3,255 2s. ($15,840.94) per annum 
 under schedule B, Constitution Act. 
 
 To pensions assigned to 14 persons for 
 £2,232 6s. (S10,863.49) per annum, 
 but not yet entered on , 
 
 To orospective pensions to 2,048 males 
 still in service for a probable amount 
 of £396,879 12s. ($1,931,414.57) per 
 annum 
 
 To prospective pensions to 197 fe- 
 males still in service for a probable 
 amount of £15,027 10s. ($73,129.10) 
 per annum 
 
 To prospective gratuities to persons of 
 less service than would entitle to 
 pension rights, nil 
 
 To refund of contributions to 5,144 per- 
 sons who have ceased contriljuting 
 to the fund, in the amount of 
 £261,762 Os. 2d. ($1,273,864.81), due 
 at various periods on death or at re- 
 tirement , 
 
 S3, 638, 799. 33 
 158, 880. 70 
 
 84, 755. 31 
 
 71,512.59 
 
 6, 169, 741. 44 
 
 941,850.65 
 
 11,309,868.33 
 
 By fund as at June 30, 1901 
 
 By value of future contributions of 4 
 per cent on salaries of 2,048 males 
 still in service 
 
 By value of future contributions of 4 
 per cent on salaries of 197 females 
 still in service ■. 
 
 By value of annual rate of £3,500 
 ($17,033) , as provided under sched- 
 B of Constitution Act 
 
 By value of abatement on prospec- 
 tive pensions in respect of unpaid 
 4 per cent on salaries for period 
 prior to passing of Civil Service 
 Act of 1884, being £99,209 16s, due 
 at various dates of retirement 
 
 By balance, being present Palue of 
 deficiency as at June 30, 1901 
 
 $876,592.61 
 
 1, 109, 223. 82 
 
 48, 173. 4S 
 
 425,818.75 
 
 279,786.28 
 8, 570, 273. 39 
 
 11,309,868.3* 
 
 "Public Service Boanl. New South Wales (Supplement to Sixth Annual Report, with Ul 
 Appendix relating to the Superannuation Account), November 1, 1902, p. 15. 
 
40 
 
 CIVIL-SERVICE RETIREMElSrT IN NEW SOUTH WALES. 
 
 Mr. Trivett's report, on this final occasion, was a very exhaastive 
 document. His summary of all pensions granted since the inception 
 of the act was as follows : 
 
 SUMMARY OF ALL PENSIONS GRANTED FROM JANUARY 1, 18S5, TO JUNE 30, 189L 
 
 [From Supplement to Sixth Annual Report, relating to the Superannuation Account, Public Service 
 
 Board, New South Wales.] 
 
 
 Pensions granted per annum under provisions of Civil Service Act, 1884— 
 
 Year of re- 
 tirement. 
 
 Section 43. 
 
 Section 44. 
 
 Section 45. 
 
 Section 46. 
 
 
 Number. 
 
 Amount. 
 
 Number. 
 
 Amount. 
 
 Number. ■ Amount. 
 
 Number. 
 
 Amount. 
 
 1885 
 
 8 
 
 22 
 44 
 39 
 33 
 29 
 22 
 20 
 48 
 31 
 36 
 113 
 27 
 40 
 20 
 35 
 35 
 
 $1,846.11 
 6,181.43 
 22, 384. t8 
 25, 4..0. 56 
 19,341.42 
 19,088.65 
 12,971.90 
 9,858.31 
 24, 678. 75 
 15, 778. 41 
 21,078.03 
 78, 517. 57 
 ]7,09;i.26 
 18, 855. 26 
 11.011.67 
 21,358.34 
 20, 820. 10 
 
 8 
 32 
 
 7 
 19 
 18 
 13 
 20 
 13 
 17 
 
 4 
 14 
 13 
 
 6 
 
 8 
 11 
 
 7 
 
 5 
 
 $4, 560. 40 
 19,344.34 
 2,602.12 
 11,930.22 
 5, 598, IS 
 7,301.94 
 9,607.93 
 6,7i4.i.S 
 7,02,!. 25 
 4, 9, 12 
 
 4, S45. 82 
 
 5. TJl. 38 
 3,3SS 30 
 5, 081. 85 
 3,800.98 
 2,295.-53 
 3,305.57 
 
 2 S814. 41 
 
 1 
 
 1 
 
 38 
 
 $341. 38 
 
 18S6 
 
 610 26 
 
 18S7 
 
 1 I 759.17 
 
 .?1 . 7,81 41 
 
 1883 
 
 7 8, 403. 96 
 79 71,t80. 38 
 
 3889 
 
 1 
 
 339. 92 
 
 1890 
 
 43 1 ''n 758 Ifi 
 
 1891 
 
 2 
 4 
 5 
 3 
 5 
 3 
 6 
 8 
 4 
 3 
 2 
 
 1, 161. 88 
 1,977.99 
 2, 697. 99- 
 1,129.51 
 3, 3.53. 99 
 893. 98 
 1,930.05 
 2,379-23 
 1,777.73 
 1,310.79 
 1,321.26 
 
 41 
 
 28 
 
 39 
 
 21 
 
 ■ 16 
 
 15 
 
 5 
 
 3 
 
 1 
 
 4 
 
 2 
 
 25,714 58 
 
 1892 
 
 15, 680. 10 
 
 389.3 
 
 1894 
 
 24, 489. 20 
 22, 967. 45 
 
 189.5 
 
 11 312 18 
 
 1896 
 
 11,401.72 
 
 1897 
 
 4, 334. 35 
 
 1898 
 
 1899 
 
 2, 592, 87 
 34S 20 
 
 1900 
 
 7,522.39 
 2, 027. 38 
 
 1901 
 
 
 
 Total. . 
 
 602 
 
 348, 307. 45 215 
 
 107,314.61 
 
 49 
 
 21,847.90 
 
 344 270, 965. 97 
 
 The following detailed revenue account for the entire life of the 
 superannuation fund down to the last valuation was among the 
 returns offered by Mr. Trivett : 
 
 DETAILED STATEMENT OF REVENUE AND EXPENDITURE, JANUARY 1, 1885, TO JUNE 
 30, 1901, OF THE NEW SOUTH WALES SUPERANNUATION FUND. 
 
 (From Supplement to Sixth Annual Report relating to the Superannuation Account, Public Service Board, 
 
 New South Wales.] 
 
 Year. 
 
 Revenue. 
 
 Balance 
 nrought 
 forward. 
 
 En- 
 dow- 
 ment 
 from 
 Gov- 
 ern- 
 ment. 
 
 Tran«;fpr >-0""'" 
 
 Sf ^^;;irS interest. 
 "°" ^- of salaries. 
 
 Fines. 
 
 Transfers 
 from Con- 
 solidated 
 Revenue 
 Fund. 
 
 Sun- 
 dries. 
 
 Total. 
 
 1885 
 
 1886 
 
 1887 
 
 1888 
 
 1889 
 
 1890 
 
 1891 
 
 1892 
 
 1893 
 
 1894 
 
 1895 (half 
 
 year).., 
 
 1895-96 . . , 
 
 1896-97.., 
 
 1899-1900 
 1900-1901 
 
 Total. 
 
 $342, 871. 85 
 728, 828. 37 
 1,124,094.08 
 l,429,8u4, 73 
 1,762,2,53.15 
 1,940,02.5.91 
 2, 108, 455. 82 
 2, 259, 889. 53 
 2, 331, 008. 65 
 
 2,406,864.48 
 2,483,727.16 
 2,521,191.98 
 2,190,891.30 
 1,882,905.89 
 1,600,67.5.09 
 1, 230, 585. 65 
 
 , 330 $17, 032. 75 $246, 3.50. 24 
 
 97, 330 
 97,330 
 97, 330 
 97, 330 
 
 17, 032. 
 17,032.75. 
 17,032,75 
 17,032.75 
 17,0.',2, 75' 
 17,0!2. 75 
 17, 0.j2. 75 
 17,032.75 
 17, 032. 75 
 
 8, 516. 38' 
 17,0.32.75 
 17, 032. 75 
 17,032.75; 
 17,032.75! 
 17,032.751 
 17,032.75 
 
 309,6t,0. 14 
 313,6r;6. 12i 
 313, 003. 22j 
 313,027.76] 
 318, 124. 04] 
 328. 2 ,7. 83! 
 337. 785. 371 
 327,. 5.57. 08i 
 319,294.84i 
 
 157, 872. 99 
 325, 8i .6. 11 
 155, 879. 73 
 123, 147. 09 
 127, 707. 79 
 122, 5.50. 15 
 113,817.14 
 
 937. 22 
 975. 77 
 503. 59 
 723. 64 
 481. 87 
 504. 18 
 629. 20 
 045. 13 
 905. 55 
 076. 18 
 
 $29.5. .39 , 
 
 363. 77 
 
 " 319. 73 .■^79,880. 
 378, 7<. l.\7.;4 
 381. 1,1 i:-;,'.. ].".- 
 370.40 7-.U7.;!. 
 392. .50 78,889. 
 30.5. .55: 66,491. 
 105.85 20,887. 
 398.32} 61,950. 
 
 48. 404. 42 
 99,347.63 
 99, 515. 18 
 87, 859. 00 
 75, .590. 33 
 64,000.031 
 49, 156. 25 
 
 7.58. 04i 67,933.70 
 962.07' 31.056.16' 
 396. 86' 
 
 4, 705. 421 
 
 18,977.04 
 
 $36,3,94.5.60 
 $34. 07 783, 2i 8. 35 
 154 9il,2i8,7i5. 81 
 157. 82 1, 615, 454. .59 
 39.09 2,052,773.28 
 75. 92 2, 239, 433. 85 
 376.26 2,447,1.14.29 
 
 2.615,115.97 
 
 2, 716, 378. 22 
 
 150.15 2,823,911.84 
 
 84. 35 2, 690, 416. 36 
 
 2,9.57,991,88 
 
 2, 794, 498. 1,5 
 
 27. 33 2, 418, 9.'.7. 47 
 
 2,107,942.18 
 
 466.25 1,804.724,27 
 963.87,1,430,532.70 
 
 486, 650,281, 040. 38 4, 253, 577. 641 1, 103, 655. 23, .5, 513. 72.654, 592. 67 2, 530. 03 
 
CIVIL.-SEIIVICE RETIREMENT IN NEW SOUTH WALES. 
 
 41 
 
 D-ETAILED STATEMENT OF REVENUE, ETC. — Continued. 
 
 Year. 
 
 Expenditure. 
 
 Pensions, 
 Schedule B 
 
 Pensions, 
 
 Civil Service 
 
 Act. 
 
 Gratuities. 
 
 Refund of 
 contribu- 
 tions under 
 section 02, 
 
 Public 
 Service Act 
 
 of 1895. 
 
 Sundries. 
 
 Balance. 
 
 Total. 
 
 1885 
 
 1886 
 
 1887 
 
 ISSS 
 
 1889 
 
 1890 
 
 1891 
 
 1892 
 
 1893 
 
 1894 
 
 1895 (lialf 
 
 vear) 
 
 1895-90 
 
 1896-97 
 
 1897-98 
 
 1898-99 
 
 1S99-1900.. 
 1900-1901.. 
 
 Total.... 
 
 $12,341.06 
 13, 749. 47 
 14, 697. 88 
 16, 942. 19 
 16, 628. 48 
 16, 339. 64 
 16, 905. 31 
 15, 765. 03 
 13,284.06 
 10, 750. 39 
 
 7, 755. 05 
 15, 844. 47 
 17,031.90 
 16, 848. 31 
 17,031.84 
 17,031.84 
 16, 869. 01 
 
 SI, 188. 14 
 13,591.73 
 44, 506. 92 
 107,086.12 
 169,321.05 
 236, 384. 54 
 275, 445. 91 
 306, 650. 23 
 328, 325. 78 
 363, 384. 57 
 
 183, 055. 91 
 375, 221. 28 
 446, 266. 47 
 455,320.46 
 452, 8(12. 44 
 520, 280. 41 
 492, 370. 25 
 
 SO, 889. 34 
 26, 407. 80 
 85, 144. 14 
 50,851.09 
 104, 023. 99 
 43,051.45 
 44, 566. 92 
 30, 589. 48 
 38, 010. 95 
 36, 248. 73 
 
 15,852.02 
 40, 373. 98 
 11,065.83 
 2, 953. 42 
 7, 153. 06 
 6,437.61 
 9,585.56 
 
 201,815.93 
 
 4, 771, 208. 21 
 
 $127, 840. 04 
 60, 830. 60 
 30, 154. 76 
 30, 243. 27 
 35, 105. 13 
 
 $655. 21 
 
 690. 98 
 
 272. 79 
 
 10, 710. 46 
 
 546. 61 
 
 3, 032. 31 
 
 2, 240. 33 
 
 2,221.70 
 
 5, 748. 78 
 
 681. 67 
 
 26.22 
 
 5, 3G0. 17 
 
 1,40.3.11 
 
 98.79 
 
 64.99 
 
 145. 49 
 
 4.14 
 
 $342, 871. 85 
 728, 828. 37 
 
 al, 124, 093. 59 
 1, 429, 864. 73 
 1,762,253.15 
 1, 940, 025. 91 
 2,108,4.55.82 
 2, 259, 889. 53 
 
 i 2,331,008.65 
 2, 406, 846. 48 
 
 2,483,727.16 
 2,521,191.98 
 2,190.891.30 
 1,882,905.89 
 1, 600, 675. 09 
 1, 230, 5S5. 65 
 876, 592. 61 
 
 559,805.37 284,173.80 | 33,903.75 
 
 S363, 945. 60 
 783, 268. 35 
 6 1,268,715.81 
 1,615,454.59 
 2, 052, 773. 28 
 2, 239, 433. 85 
 2, 447, 614. 29 
 2,615,115.97 
 2,716,378.22 
 2,823,911.84 
 
 2,690,416.36 
 2, 957, 991. 88 
 2, 794, 498. 65 
 2,418.957.47 
 2, 107, 942. 18 
 1,804,724.27 
 1,430,532.70 
 
 o See under revenue, balance brought forward for the year 1888. 
 
 b This total is 2 shillings (49 cents) more than the sum of the equivalent items as they appear in the 
 printed official report. 
 
 EXHAUSTIVE DISCUSSION OF CAUSES RESPONSIBLE FOR FAILURE OF FUND. 
 
 Mr. Trivett's discussion of the causes which operated to bring about 
 the failure of the fund and the principles which should underlie a 
 jDerfectly safe scheme of superannuation makes verj^ instructive and 
 interesting reading. Said he : 
 
 The present report relates to what will probably be the last investi- 
 gation which will be made into the affairs of this fund, since the 
 assets have dwindled to so low an amount as to bring the elfective 
 re.sources of the fund within easily measurable distance of extinc- 
 tion in point of time, and, therefore, to demand immediate sustenta- 
 tion measures to enable the claims of pensioners to be met. 
 
 In view of this crisis it seems befitting that a review of the opera- 
 tions of the fund from its inception to the date of valuation should 
 be made and i^resented, so that a complete knowledge of the system 
 of superannuation now so disastrously disappearing may be readily 
 obtained, and po-sibly some valuable information presented in a suc- 
 cinct form for use in any future measure respecting retiring allow- 
 ances.*' 
 
 He then went on to show how the fund was started on a basis which 
 carried failure from its very inception. It was established with a 
 liability on account of the civil service as it then existed, which the 
 
 "Public Service Board, New South Wales (Supplement to Sixth Annual 
 Report relating to the superannuation account), November 1, 1902, p. 4. 
 
42 CIVIL-SERVICE EETIREMENT IN NEW SOUTH WALES. 
 
 government endowment of £100,000 ($486,650) was utterly unable to 
 meet. In the second place, the fund was used for purposes such as 
 that of retrenchment and gratuities to relatives, which have no proper 
 place in a superannuation scheme, and which should never be per- 
 mitted in any scheme in which solvency is seriously regarded. He 
 denounced the provision for the retirement of an officer in case of the 
 abolition of his office as " entirely beyond the scope of any pension 
 system where solvency is in the remotest degree entertained, unless 
 extraordinary subventions are granted concurrently with the imposi- 
 tion of the burden arising from each pension thus prematurely cre- 
 ated." He computed the amount paid away to pensioners of this 
 class, to valuation date, as at least £430,000 ($2,092,595), or nearly 
 half the total pension payments, which had been £980,431 ($4,771,- 
 267). The premature payment of these pensions, added to the 
 lost contributions of such retired officers, discounted the revenues of 
 the fund in a large measure. Finally, Mr. Trivett found that the 
 payment of gratuities to persons who had not served sufficiently long 
 to acquire pension rights had been a severe drain on the fund. This 
 system of gratuities he declared " a fatal flaw in any scheme of super- 
 annuation, since the receipts by way of contribution can never be 
 equal by accumulation to the payment to the gratuitant, imless under 
 the very exceptional condition of a large reduction in salary from 
 that receivable in the early years of service." 
 
 The Act of 1884, according to Mr. Trivett, had fulfilled in an admi- 
 rable manner the chief and true requirement of any pension system; 
 that is, retirement for the aged. In that respect it was satisfactory. 
 It had conferred untold benefits on many worn-out officers, had de- 
 livered the State, by the saving in money and by increased efficiency 
 of the service from the undesirable condition which had previously 
 existed, when retiring allowances were voted in the estimates every 
 year, and when men, incapable through advanced age, adhered to 
 their positions long after their periods of usefulness had vanished. 
 The allowances were to be criticised, however, because they were based 
 on the average salary of the last three years rather than the average 
 salary of the whole term of service. Mr. Trivett found that the 
 provision of invalid pensions had been highly beneficial, and deserves 
 a place in any well-devised retirement system, but he also found that 
 the contributions in this case had been insufficient for the benefits con- 
 ferred and that the benefits, being based not on the average salary, as 
 they should have been, but on the annual salary for the last three 
 years, were too high. , 
 
 NEED OF RETIREMENT BOARD STILL FELT. 
 
 Having reviewed the mistakes of the past, Mr. Trivett laid stress 
 on the " serious fact " that " the same necessity of state, which 
 prompted the legislature of 1884 to pass a measure instituting a 
 
CIVIL-SEEYICE EETIBEMENT IN NEW SOUTH WAIVES. 43 
 
 system of retiring allowances, still existed and would continually 
 present for solution the problem of maintaining a public service in a 
 high state of efficiency and of ambitious hope, which is a necessary 
 accompaniment, by providing for the due retirement of the aged and 
 debilitated members of that service on some plan in accordance with 
 the humanity and enlightenment of the times." This problem, he 
 declared, " can only be solved by a strict observance of business prin- 
 ciples in the construction of whatever scheme may be adopted." 
 
 ENDOWMENT ASSURANCE INADEQUATE AS RETIREMENT MEASURE. 
 
 In Mr. Trivett's opinion, that paragraph of the Act of 1895 which 
 required officers to effect endowment assurance on entering the civil 
 service, did not promise much help. Said he, " The amount of such 
 assurance in the case of an average officer, according to the regula- 
 tions, will probably not exceed £200 ($973), which, whether regarded 
 as the purchase money for an annuity or as the capital for any other 
 form of investment, will not be of much value to the recipient. A 
 pension system would be the safest measure of insuring satisfactory 
 provision for retiring allowances ; and, if the pensioner himself pays 
 for the benefit, it would seem that the reasonableness of the proposi- 
 tion must be admitted." 
 
 OUTLINE or REQUIREMENTS TOR SAFE PENSION SCHEME. 
 
 In conclusion, Mr, Trivett presented an outline of requirements for 
 a pension scheme founded on safe principles and " lessons derivable 
 from the history of the civil service sujjerannuation fund.' They are 
 as follows: 
 
 (1) Pension should be payable only after age 60, or for ill health. 
 
 (2) Pension granted on the ground of ill health should be subject 
 to abatement, actuarially determined, in respect of the period by 
 which age 60 is anticipated. 
 
 (3) No gratuities should be allowed. 
 
 (4) The pension rate should be on a moderate scale (a) either hav- 
 ing some relation to the average salary, or (b) a fixed rate per annum 
 for all pensioners, e. g., the amount which might be fairly regarded 
 as a " living " rate. 
 
 (5) The contributions should be on a scale certified as sufficient 
 to meet the pension liability, 
 
 (6) Means should be provided, under one control, for keeping the 
 pension system under strict and comprehensive supervision, as to 
 granting pensions, as to periodic payment, and as to collecting data 
 relating to the public service." 
 
 He also made the following significant statement of the contribution 
 rates necessary to insure the sufficiency of a superannuation fund 
 which aims merely to provide revenues for pensions accruing accord- 
 
44 CIVIL-SERVICE RETIREMENT IN JnEW SOUTH WALES. 
 
 ing to the normal plan at age 60. A service was assumed with 
 
 salaries in progress as at present in the New South Wales civil service. 
 
 Entry age: 
 
 Under 20 years 5 per cent per annum. 
 
 20 and under 25 years . Si per cent per annum. 
 
 25 and under 30 years 5^ per cent per annum. 
 
 30 and under 35 years 6 per cent per annum. 
 
 35 and under 40 years 6^ per cent per annum. 
 
 Mr. Trivett's conclusion, at the close of New South Wales's experi- 
 ment, was that the details of a practicable system could be readily 
 worked out if the principles laid down by him were adhered to. " It 
 would be in every way regrettable," said he, " if the failure of a sys- 
 tem, which had been devised on an unsafe plan, should provide so 
 great a prejudice as to permanently prevent the adoption of some 
 well-founded retirement fun.d, a most essential attachment to any 
 efficient public service." <* 
 
 ENDORSEMENT OF ACTUARY TRIVETt's VIEWS BY CIVIL-SERVICE BOARD. 
 
 In submitting Mr. Trivett's report to the Governor of the colony, 
 on November 1, 1902, the Public Service Board indorsed his views in 
 the following words : 
 
 Mr. Trivett discusses in his report the terms on which a perfectly 
 safe scheme of superannuation could be maintained. With his re- 
 marks thereon the Board agree ; but as a question of policy is involved, 
 they do not feel called upon to make any recommendation. 
 
 They contented themselves, therefore, with pointing out that the 
 fund would become exhausted about the end of the current financial 
 year and should then be replenished from the Consolidated Revenue 
 in order that faith might be kept Avith the public servants. They 
 urged the passage of a short legislative act to give effect to that 
 proposal. 
 
 PUBLIC SERVICE (SUPERANNUATION) ACT, 1903. 
 
 OBLIGATIONS TOWARD CONTRIBUTOIIS ASSUMED BY GOVERN- 
 MENT. 
 
 In 1903 the disaster, foreseen eight years before when the Act of 
 1895 became a law, came to pass. The superannuation account be- 
 came exhausted. By that time the civil service employees had con- 
 tributed, including the interest earned, no less a sum than £1,100,839 
 ($.5,357,233). Those who had been joaying into the fund the longest 
 and who had paid the most, found themselves in the position of 
 
 "Public Service Board, New South Wales (Supplement to Sixth Annual Re- 
 port relating to the superannuation account), November 1, 1902, p. 9. 
 
CIVIL-SEEVICE RETIEEMEKT IN NEW SOUTH WALES. 
 
 45 
 
 having had their money all absorbed by those who had contributed 
 the least. The obligation of the Government being generally admitted 
 in the face of these facts, the Public Service (Superannuation) Act, 
 1903, was accordingly passed in line with the recommendations of the 
 Public Service Board. It provided that henceforth all amounts 
 payable to and out of the superannuation account should be paid to 
 and out of the Consolidated Revenue Fund. 
 
 The deficiency had been estimated by Mr. Trivett the previous year 
 to be £1,761,075 ($8,570,271) ; in other words, that that amount, from 
 an actuarial point of view, would be required to place the fund in a 
 position to meet all its claims. The state of the fund at the time 
 of the last valuation, as at June 30, 1901, was as follows : 
 
 Assets. 
 
 Liabilities. 
 
 Balance to credit 
 
 $87R, 593 
 
 1, 157, 400 
 
 425.819 
 
 279, 795 
 
 8,570,271 
 
 For existing pensions 
 
 $3,953,949- 
 6,414,171 
 
 Future contriliutions 
 
 
 Vote of £3,500 (S17,033) per annum. . . 
 Abatement on pensions. 
 
 For refunds to ex-contributors 
 
 Total 
 
 941,848 
 
 Deficienc V 
 
 
 
 
 Total 
 
 11,309,868 
 
 11,309,868 
 
 
 
 The Board did not propose that a loan be floated for the purpose of 
 paying off this deficiency, but indorsed instead the proposal made by 
 the Colonial Treasurer in his budget speech on September 24, 1902^ 
 that the necessary amounts be paid, from year to year, as necessity 
 arose, out of the Consolidated Revenue. " The amount to be pro- 
 vided will decrease every year," said he, " and at the end of forty- 
 four years it is computed that all claims will cease." 
 
 The act providing for the payment of superannuation allowances 
 out of the Consolidated Revenue on the exhaustion of the superannua- 
 tion account was accordingly passed on October 19, 1903. The second 
 section reads as follows : °' 
 
 2. Notwithstanding anything in section 70 of the Public Service 
 Act, 1902 [consolidated from Public Service Act, 1895], when the 
 Governor is advised that the superannuation account has become ex- 
 hausted, he shall so certify, and on such certificate being given — 
 
 (a) All deductions under section 53 of the Civil Service Act of 1884^ 
 as amended by the act 59 Victoria, No. 25, from the salaries of jDersons 
 shall be paid into the Consolidated Revenue Fund; 
 
 {h) All superannuation allowances j)ayable under the Civil Service 
 Act of 1884 and the Public Service Act, 1902, to any persons shall 
 continue to be paid to such persons in accordance with the provisions 
 of the said acts, but shall be paid from the Consolidated Revenue 
 Fund ; 
 
 {c) All persons being contributors to the superannuation account 
 at or after the commencement of this act and becoming entitled to 
 
 « Public Service (Superannuation) Act, 1903. New South Wales. 
 
46 CIVIL-SERVICE RETIREMENT IN NEW SOUTH WALES. 
 
 superannuation allowances shall be paid and shall receive out of the 
 Consolidated Revenue Fund allowances to be calculated at the same 
 rates and for the same periods as superannuation allowances payable 
 and receivable from the said account before the commencement of 
 this act; 
 
 (d) Every person who, having been in the civil service, had a 
 superannuation allowance computed or assigned at any time before 
 the commencement of this act consequent on his acceptance of another 
 office under the Crown which he now holds, but who is not receiving 
 such allowance, shall, upon retirement from such office, be paid from 
 the Consolidated Revenue Fund such allowance in accordance with 
 the provisions of the Civil Service Act of 1884 and the Public Service 
 Act, 1902 ; 
 
 (e) All amounts of refunds and interest theretofore payable out 
 of the superannuation account, under section 62 of the act 59 Victoria, 
 No. 25, or section 73 of the Public Service Act, 1902, and all gratuities 
 payable out of such account under section 51 of the Civil Service Act 
 of 1884, shall be paid out of the Consolidated Revenue Fund : 
 
 Provided, That the annual sum of £3,500, payable out of the Con- 
 solidated Revenue Fund, under setion 43 of the Constitution Act, 
 1902, shall be payable each year in satisfaction of the claims of such 
 officers as are or may become entitled to be paid thereunder. 
 
 So the matter stands to-day — the obligation of the Government 
 decreasing as the number of pensioners grows smaller every year with 
 the death of those who were in the service prior to the passage of the 
 Act of 1895. In the meantime, those who have come into the service 
 since that date have only their endowment insurance to look to for 
 support after they reach the age of retirement. 
 
 CONCLUSIONS. 
 
 The contributory plan devised for the retirement of superannuated 
 members of the civil service in New South Wales failed because it 
 was unsound and inequitable. The experience of this colony shows 
 that, in order to be satisfactory, a contributory plan must be based 
 on the following fundamental principles : 
 
 The contributions should be placed in a fund and invested at inter- 
 est under guarantee of the Government, a separate account being kept 
 with each contributor. Under the Act of 1884 the contributions were 
 funded and invested at interest. Careful attention was not given, 
 however, to the matter of interest in all cases. As pointed out by the 
 actuary in the first triennial report, the Government ignored the 
 interest factor in retiring officers because of abolition of office, paying 
 to the superannuation fund the back contributions of 4 per cent with- 
 out the interest that would have accumulated on these contributions, a 
 practice severely condemned also by the actuary in the second investi- 
 gation. AVhile the contributions were put into a fund and invested 
 separately from other government funds, no account was kept with 
 
CIVIL-SEKVICE RETIREMENT IN NEW SOUTH WALES. 47 
 
 each contributor. The assets were commingled, those received from 
 contributors of all ages and all salaries being indistinguishably 
 merged with each other. Even had the fund been found at each 
 actuarial investigation to be entirely sound, that would merely have 
 shown that the contributions in the aggregate were sufficient to pay 
 the pensions; it would not have proved that the plan was equitable 
 as between individual members and that the amount contributed was 
 in each case commensurate with the amount received. 
 
 The amount of contributions should be determined by the amount of 
 the annuity to be granted under the pension scale adopted. There 
 was no relation or ratio at all under the New South Wales 
 plan, between the amount contributed and the annuities received. 
 The flat-rate deduction of 4 per cent of salary for all ages and on 
 all salaries was inequitable as between individuals of different ages 
 and different salaries. The inadequacy of the contributions to pro- 
 vide for the benefits was pointed out by each of the three actuaries 
 who reported on the fund. The principle that the percentage of de- 
 duction from salaries should vary with the age of entrance into the 
 service, though he tried to strike an average, was pointed out by Mr. 
 Teece, in the first actuarial examination. It was brought out with 
 emphasis by Mr. Trivett also, in the second examination. The anal- 
 ysis made by these two actuaries of New South Wales' scheme shows 
 conclusively that flat-rate assessments are unscientific and disastrous. 
 I'he annuity should be based on the amount of salary and the length 
 of service. As the length of service depends naturally on the age of 
 entrance into the service, the percentage of deduction from salary 
 necessary to provide the required annuity must vary with the entrance 
 age. 
 
 There must be a sharp differentiation between accrued liabilities and 
 future liabilities. In each actuarial investigation made by the three 
 different actuaries employed to value the NeAV South Wales fund great 
 emphasis was laid on the fact that a failure to differentiate between ac- 
 crued liabilities and future liabilities was one of the chief causes for 
 the insolvency of the fund. The " enormous dormant liability " with 
 which the fund was burdened was counted among the causes of fail- 
 ure by Mr. Teece ; " the accrued, albeit unperceived, debt " which 
 overshadowed the fund from the beginning was held partly account- 
 able for its state of insolvency by Mr. Coghlan. The inability of the 
 government endowment of £100,000 ($486,650) to meet the initial 
 liability which the fund carried on account of the civil service was 
 held by Mr. Trivett to have condemned the plan from the beginning. 
 Here was an absolute agreement of experts amply sustained by the 
 facts. No more striking illustration could be asked of the principle 
 that contributions made by present employees should be held in re- 
 
48 CIVIL-SERVICE EETIEEMENT IN NEW SOUTH WALES. 
 
 serve to pay their future pensions, and that accrued liabilities — pen- 
 sions for past services — should be paid by the State. 
 
 Provision should be made for the refund of contributions in case 
 of separation from the service. A slight consciousness of the 
 wisdom and justice of such a provision was shown by the Civil 
 Service Board in its report to the Governor of the colony 
 after the second triennial investigation. Cases of contributors 
 to the fund dying in harness and leaving widows in necessitous 
 circumstances had been frequently brought to their attention. It 
 seems to have occurred to them, about this time, that instead of dis- 
 j^ensing gratuities to the widows and children of such emploj^ees it 
 would have been more rational and satisfactory to have given them a 
 right to the sums contributed by those employees. 
 
 The New South Wales experience shows that the amount of the 
 retiring allowance should be calculated on the basis of the average 
 rather than the final salary. Besides being a more scientific method 
 of calculation, this method recommended itself on the score of econ- 
 omy to the various actuaries consulted. Mr. Teece suggested that 
 the most equitable way to accomplish a reduction in the rate of 
 pensions was to base the amount of pensions on the average salaries 
 instead of on those of the last three years. Mr. Trivett recommended 
 as more equitable and more economical an average salary deduced 
 from the aggregate salary as the basis for calculating the amount of 
 the pension. Mr. Coghlan acknowledged this method as the scien- 
 tific one but contented himself with recommending as a basis for 
 calculating the pension the average salary for the last seven years of 
 service instead of that for the last three years. 
 
 A provision for life insurance is a desirable adjunct to a retirement 
 measure, but will not do as a substitute. The desirability of it Avas 
 doubtless impressed on the Civil Service Board of New South Wales 
 by virtue of its difficulties with the widows and orphans of employees 
 who died in the service. It is to be commended as having a tendency, 
 through the operation of medical selection in the choice of candidates, 
 to raise the standard of general efficiency in the service. As a substi- 
 tute for a proper retirement measure it is, however, inadequate, as 
 pointed out by Mr. Trivett in his last report. Nor is the necessity for 
 it so apparent, under a proper contributory plan, where provision is 
 made for the refund of contributions in case of withdrawal from the 
 service, save in the younger ages before the employees' contributions 
 are adequate as a protection for his family in case of death. 
 
 No gratuities should be allowed under a model retirement plan. 
 They lead to abuses of all kinds. They are not needed for the de- 
 pendents of such employees in case contributions are returned or in- 
 surance is provided. Mr. Teece regarded the payment of gratuities 
 
CIVIL-SERVICE RETIEEMENT IN NEW SOUTH WALES. 49 
 
 to relatives of deceased officers as " repugnant to the principles of a 
 superannuation scheme." Mr. Coghlan advised the discontinuance of 
 gratuities to relatives of deceased officers and the substitution of in- 
 surance benefits instead. Condemnation was also expressed of the 
 payment of gratuities under any circumstance, and especially to em- 
 ployees who leave before attaining pension age, showing that the 
 practice complicates and renders more or less uncertain the mathe- 
 matical calculations on the accuracy of which the solvency of the 
 fund must depend. 
 
 Provision for retirement in case of disability is a valuable and 
 necessary part of a retirement plan, but care should be taken that the 
 provision is calculated on a sound mathematical basis of facts. Mr. 
 Trivett pointed out, in his last report, that the contributions had 
 been insufficient to provide the invalid pensions. As stated in review- 
 ing that report, he showed that pensions granted before the regular 
 age of retirement, on the ground of ill health, should " be subject to 
 abatement, actuarially determined in respect of the period by which 
 age 60 [the legal retirement age under the New South Wales law] is 
 anticipated." 
 
 Granting allowances to officers leaving the service before the age 
 of retirement by reason of the abolition of their offices leads to grave 
 abuses and was the most striking, though not the most essential, 
 cause of the failure of the New South Wales plan. Such a practice 
 would enable the best of pension systems to " become the sport of 
 political necessities," to use the phrase of Mr. Coghlan, and it is, as 
 Mr. Trivett said, " entirely beyond the scope of any pension system 
 where solvency is in the remotest degree entertained." It is not 
 fair that a departmental change working to the advantage of the 
 Government, and it alone, should be charged to the account of the 
 body of employees. Nor would it seem to be at all necessary, in 
 most cases, that such a change should be, on the other hand, a loss 
 in any way to the Government, since places could usually be found 
 for the incumbents of abolished offices in other departments until 
 such time as they reach pensionable age and can legitimately, with- 
 out prejudice to the fund, leave the service. 
 
 8 D— 61-2— Vol 59 25 
 
APPENDIX D. 
 
 THE HAMILL, MAHEK, AND CUMMINS BILLS. 
 
THE HAMILL BILL. 
 
 [H. R. 9242, Sixty-second Congress, first session.] 
 A BILL To provide for tlie retirement of employees in the civil service. 
 
 Be it enacted by the Senate and House of Representatives of the United States of America 
 in Congress assembled, That beginning with the first day of July next following the 
 passage of this act all employees in the classified civil service shall be eligible for 
 retirement as hereinafter provided . 
 
 Sec. 2. That any employee who has served the United States for thirty years or 
 more and who shall have attained the age of sixty years or over shall receive fifty per 
 centum of the average annual salary, pay, or compensation he may have received 
 for the five years next preceding his retirement. Any employee who has served the 
 United States for a period of from twenty-five to thirty years and who shall have 
 attained the age of sixty-two years or over shall receive forty-five per centum of the 
 average annual salary, pay, or compensation he may have received for the five years 
 next preceding his retirement. Any employee who has served the United States for 
 a period of from twenty to twenty-five years and who shall have attained the age of 
 sixty-five years or over shall receive forty per centum of the average annual salary, 
 pay, or compensation he may have received for the five years next preceding his 
 retirement. 
 
 Sec. 3. That no employee provided for in this act shall be retained in the service 
 after arriving at the age of seventy years. 
 
 Sec. 4. That the payments provided for in this act shall be paid quarterly 
 throughout the life of the employee. 
 
 Sec 5. That any employee to whom this act applies who has served the United 
 States for not less than five years and who, by reason of accident or illness not due to 
 vicious habits and without fault or delinquency on his part, has become disabled, 
 shall be retired from the service on certificate from the head of the department or 
 independent office in which he is employed to the Secretary of the Treasury, setting 
 forth such disabilities, and on the approval of the Secretary of the Treasury he shall 
 receive thirty per centum of his average annual salary, pay, or compensation for the 
 five years next preceding his retirement for from five to ten years of service; forty per 
 centum for from ten to twenty years of service; fifty per centum for twenty-one yeai;g 
 and over. 
 
 Sec. 6. That for the purposes of this act the period of service shall be computed from 
 original employment, whether as a classified or unclassified employee, and shall 
 include periods of service at different times and service in one or more departments, 
 branches, or independent offices of the Government, the Signal Corps prior to July 
 first, eighteen hundred and ninety-one, and the general service in or under the War 
 Department prior to May sixth, eighteen hundred and ninety-six. 
 
 Sec 7. That the Secretary of the Treasury is hereby authorized and directed to 
 pay, out of any moneys in the Treasury not otherwise appropriated, a sum sufficient 
 to carry out the purposes of this act. 
 
 Sec 8. That the Secretary of the Treasury is hereby authorized to perform, or cause 
 to be performed, any and all acts and to make such rules and regulations as may be 
 necessary and proper for the purpose of carrying the provisions of this act into full 
 force and effect. 
 
 3 
 
4 THE hajMILl^ mahee. axd citmmixs bells. 
 
 THE MAHER BILL. 
 
 [H. K. 19399.. Sixty-second Congress, second session.] 
 
 BILL To provide for the retirement of employees in the classifled civil service in post offices of the first 
 
 and second class. 
 
 Be it enacted by the Senate and House of Representatives of the United States of America 
 in Congress assembled, That beginning with the first day of July next following the 
 passage of this act all employees in the classified ci\Tl sen-ice in post offices of the 
 first and second class shall be eligible for retirement as hereinafter provided. 
 
 Sec. 2. That any employee in the classified ci\"il sen-ice in post offices of the first 
 and second class who has served the United States for thirty years or more and who shall 
 have attained the age of sixty years or over may retire and shall receive fifty per 
 centum of the average- annual salary-, pay, or compensation he may have received 
 for the five years next preceding his retirement. An employee in the classified ci^^l 
 sen-ice in post offices of the first and second class who has sen-ed the United States for 
 the period of from twenty-five years to thirty years and who shall have attained the 
 age of sixty-two years or over may retire and shall receive forty-five per centum of the 
 average annual salary-, pay. or compensation he may have received for the five years 
 next preceding his retirement. Any employee in the classified ci^-il sen-ice in post 
 offices of the first and second class who has served the United States for the period of 
 from twenty to twenty-five years and who shall have attained the age of sixty-five 
 years or over may retire and shall receive forty per centum of the average annual 
 salar}-, pay, or compensation he may have received for the five years next preceding 
 his retirement. 
 
 Sec. 3. That no employee pro^-ided for in this act shall be retained in the sen-ice 
 after arri\-ing at the age of seventy years. 
 
 Sec. 4. That the payments provided for in this act shall be paid quarterly through- 
 out the life of the employee. 
 
 Sec. 5. That for the purpose of this act the period of se^^-ice shall be computed from 
 original employment, whether as a classified or unclassified employee, and shall 
 include periods of ser^-ice at different times and sen-ice in one or more departments, 
 branches, or independent offices of the Government. 
 
 Sec. 6. That the Postmaster General is hereby authorized and directed to pay. out 
 of any moneys accruing from the lapsed salary of employees in the classified civil 
 ser^-ice in post offices of the fir^t and second class, absent without pay where no sub- 
 stitute is employed, and moneys accruing from the failure to fill vacancies imme- 
 diately, and moneys accruing when the force is reduced temporarily when vacancies 
 occur, and moneys accruing from post-office money orders issued and not presented 
 for payment, a sum sufficient to carry out the purpose of this act. 
 
 Sec 7. That the Postmaster General is hereby authorized to perform or cause to be 
 performed any and all acts and to make such rules and regulations as may be neces- 
 sary and proper for the purpose of carr\-ing the provisions of this act into full force and 
 effect. 
 
 THE CUMMINS BILL. 
 
 [S. 5863, Sixty-second Congress, second session.] 
 A BILL For the retirement of employees in the ci^•il service, and for other purposes. 
 
 Be it enacted by the Senate and House of Representatives of the United States of America 
 in Congress assembled, That from and after the date at which this act takee effect the 
 employees of the permanent classified civil se^^•ice of the United States, except 
 postmasters, shall, for the purposes of this section, be divided into two groups as 
 follows, to wit: 
 
 Group one shall consist of the following-described employees, to wit: Railway 
 mail clerks, city letter carriers, rural letter carriers, and mechanics. 
 
THE HAMILL, ZNIAHEE, AXD CUMMIX5 BILLS. 5 
 
 Group two shall consist of the following-described employees, to wit: All employees 
 not in group one. 
 
 That each employee falling within group one shall retire from the classified civil 
 ser^nce of the United .States upon arriving at the age of sixty-five years, and each 
 employee falling within group two shall retire from such ser^dce upon arri^-ing at the 
 age of scA'enty years: Provided, however. That if within thirty days before any such 
 employee reaches the retiring age the head of the department or independent ofiice 
 in which he is employed certifies to the Secretary of the Treasury- that by reason of 
 his special efficiency and his wilKngness to remain in the ser\-ice a continuance of such 
 employee therein would be advantageous to the public servace, such employee may 
 be retained for a term not exceeding two years, and at the end of the two years he may, 
 by similar certification, be continued for an additional two years, and so on: Provided, 
 however. That after the first day of July, nineteen hundred and sixteen, no person 
 belonging to any of the classes of employees enumerated in group one or group two 
 of this section shall be continued in the sen-ice beyond the ages of retirement as herein 
 pro Aided. 
 
 Sec 2. That beginning with the first month after this act takes effect, and monthly 
 thereafter, there shall be deducted and withheld from the salarj-, pay, or compensa- 
 tion of everj- employee in the classified ci^-il ser^-ice of the United States, except 
 postmasters, who shall enter the service after such date, an amount, computed to the 
 nearest tenth of a doUar that will be sufficient, with interest thereon at four per centum 
 per annum, compotiuded annually, to accumulate for each such employee on arrivirg 
 at the age of retirement, as hereinbefore proA-ided, the sum of five thousand dollars: 
 Provided. That no deduction shall be made from any such employee while receiA-ing 
 less than six hundred doUars per year: And provided further, That no deduction shall 
 be more than ten per centum. 
 
 Sec. 3. That the amounts so deducted and withheld from the salarj-, pay, or com- 
 pensation of each such employee shall be deposited in the Treasury of the United 
 States, and shall be credited, together with the interest at four per centum per annum 
 compounded annually, to an indiA"idual account of the employee from whose salarj-, 
 pay, or compensation the deduction is made. The money so deducted and the income 
 derived therefrom may from time to time be deposited in sa%-ings banks designated by 
 the Secretary- of the Treasury for that purpose: Provided, however. That the saA-ings 
 banks receiA-ing such deposits shall pay interest thereon at a rate of not less than four 
 per centum per annum, compounded anuually. For the safe-keeping and prompt 
 paj-ment of the money deposited with them the Secretan,- of the Treasurj^ shall reqtiire 
 the saA-ings banks to give satisfactory- security, by the deposit of bonds of the United 
 States, bonds or other interest-bearing obligations of any State of the United States, 
 or any legally authorized bonds issued for municipal purposes by any city or town in 
 the United States which has been in existence as a city or town for a period of twenty- 
 five years, and which for a period of ten years preA-ious to such deposit has not defaulted 
 in the paj-ment of any part of either principal or interest of any funded debt authorized 
 to be contracted by it, and which has at such date more than twenty-five thousand 
 inhabitants, as established by the last national census, and whose net indebtedness 
 does not exceed five per centum of the valuation of taxable property therein, to be 
 ascertained by the last preceding valuation of property- for the assessment of taxes; or 
 any legally authorized bonds issued for municipal purposes by any city or town in the 
 United States which has been in existence as a city or town for a period of twenty-five 
 years, and which for a period of ten years pre^-ious to such deposit has not defaulted in 
 the paj-ment of any part of either principal or interest of any funded debt authorized 
 to be contracted by it, and which has at any such date more than two hundred thousand 
 inhabitants, as established by the last national census, and whose net indebtedness 
 does not exceed seven per centum of the vakiation of taxable property therein, to be 
 ascertained by the last preceding valuation of property for the assessment of taxes. 
 
6' THE HAMILL, MAHER^ AND CUMMINS BILLS. 
 
 In this clause the words "net indebtedness" mean the indebtedness of any city or 
 town, omitting debts created for supplying the inhabitants with water, and debts 
 created in anticipation of taxes to be paid within one year, and deducting the amount 
 of sinking funds available for the payment of the indebtedness included. The Secre- 
 tary of the Treasury shall accept, for the purpose of this act, securities herein enumer- 
 ated in such proportions as he may from time to time determine, and he may at any 
 time require the deposit of additional securities, or require any bank to change the 
 character of the securities already on deposit. It shall be the duty of the Secretary 
 of the Treasury to obtain information with reference to the value and character of the 
 securities authorized to be accepted under the provisions of this section, and he shall 
 from time to time furnish information to savings banks as to such bonds as would be 
 accepted as security. When consivStent with the best interest of the fund created by 
 this act, the Secretary of the Treasury shall distribute the deposits herein provided for, 
 as far as practicable, equitably between the different States and sections. 
 
 If for any reason the Secretary of the Treasury shall not be able to make satisfac- 
 tory arrangements with savings banks for all the fund, then he may invest the balance 
 in any of the aforementioned securities. 
 
 . The moneys deducted from salaries and the income derived therefrom shall be 
 held and deposited, or invested as above described, by the Secretary of the Treas- 
 ury until paid out as hereinafter provided. Any deficiency in the fund hereby 
 created to carry out the provisions of this act shall be paid out of any money in the 
 Treasury not otherwise appropriated. 
 
 For the purpose of aiding the Secretary of the Treasury in depositing and investing 
 the funds created by the act, a board of investment is hereby created, composed of the 
 Treasurer of the United States, the Comptroller of the Currency, and two persons to 
 be designated by the President from among the employees of the classified civil serv- 
 ice. The members of the board of investment shall be sworn and shall hold office 
 until others are appointed and qualified in their stead. 
 
 Sec. 4. That when any such employee reaches the retiring age, as aforesaid, and 
 retires from the service, the United States shall pay him the said sum of five thou- 
 sand dollars, or such lesser sum as may be the result of his contributions, and any such 
 additional sum, if any, as has been accumulated from his contributions by any excess 
 of interest over four per centum per annum, compounded annually, actually received 
 by the United States thereon; and if any such employee is retained in the service 
 after reaching the retiring age, a deduction of ten per centum of his monthly salary, 
 pay, or compensation shall thereafter be made while he remains in the service, and 
 the same shall be treated as other deductions under section two of this act. 
 
 Sec. 5. That upon absolute separation from the civil service by resignation or dis- 
 missal prior to the retiring age and only ujaon such separation, there shall be paid to 
 any such employee a sum made up of the sums so deducted from his salary, pay, or 
 compensation, with simple interest only: Provided, however, That upon separation 
 from the service by resignation or dismissal within less than five years after his admis- 
 sion thereto such employee shall be paid his contributions without interest. 
 
 Sec. 6. That in the case of the death of any such employee while in the service, there 
 shall be paid to the person or persons entitled to collect and receive his personal 
 estate a sum made up of the amounts so deducted from his salary, pay, or compensa- 
 tion, together with interest thereon at the rate of four per centum per annum, com- 
 pounded annually. 
 
 Sec. 7. That no employee who has received payment under section four of this act 
 shall be reinstated in the classified civil service until he deposits with the United 
 States the sum so paid, together with interest at four per centum per annum, com- 
 pounded annually, in which case the sum shall be replaced to the credit of his account, 
 and the former period of his service shall be reckoned as a part of his entire service. 
 
THE HAMILL.^ MAHEE^ AND CUMMINS BILLS. 7 
 
 Sec. 8. That every employee in the classified civil service of the United States at 
 the time this act takes effect, except postmasters, who entered the employ of the 
 Government whether as a classified or unclassified employee, shall within ninety days 
 after that date notify the head of the department in which he is employed, in writing, 
 whether he desires to make the payments and be accorded the privileges hereinafter 
 specified. If no such notice is given, it ^vill he held as the equivalent of a notice 
 that he does not de.sire to make the payments or be accorded such privileges, and the 
 notice once given shall be final. 
 
 If the notice aforesaid is in favor of making the payments and receiving the privileges, 
 then, beginning with the first month after the giving of such notice, there shall be 
 deducted and withheld from the salary, pay, or compensation of every such employee 
 a sum (computed to the nearest tenth of a dollar) equal to six per centum of his monthly 
 salary, pay, or compensation: Provided, hov;ever,Th.3it the sums so deducted and with- 
 held monthly, together with the interest thereon at four per centum per annum, com- 
 pounded annually, .shall not be more than sufficient to pro^'ide five thousand dollars 
 in one cash sum when the employee from whose salary, pay, or compensation the de- 
 ductions are made shall reach the age of retirement as hereinbefore pro"\dded. So 
 long as such employee remains in the ser\-ice such deductions from his salary, pay, or 
 compensation shall be made each month, and shall be dealt with as provided in the 
 foregoing sections for employees entering the service after the date this act takes effect. 
 In any such case there shall be paid to the employee when he retires from the service, 
 whether on account of age, resignation, or dismissal, a sum made up of the amounts so 
 deducted, together with interest at four per centum per annum, compounded annually, 
 with such additions, if any, as are the result of the Government ha^dng collected and 
 received more than the said rate of interest. There shall be paid to each such employee 
 who reaches the retiring age in the ser-\-ice a further sum determined as follows: 
 
 To each such employee who retires on account of age within one year after this act 
 takes effect, three thousand dollars; and to each such employee retiring thereafter at 
 the age of retirement three thousand dollars, less one hundred and fifty dollars for 
 each full year which shall have elapsed between the date this act takes effect and the 
 date such employee so retires. 
 
 Sec. 9. That evsrj' person to whom section two of this act applies, or who gives the 
 notice required in section eight, shall be deemed to consent and agree to the deductions 
 made and pro\'ided for in sections two and eight, and shall receijit in full for the 
 salar\-. pay, or compen-sation which he may be paid monthly or at any other time, 
 and which pa\Tnent shall be a full and complete discharge and acquittance of all 
 claims or demands whatsoever for ser\'ices rendered by such person during the period 
 covered by such deductions or paj-ments, except the sum to be paid upon separation 
 from the ser^dce; notwithstanding the provisions of sections one hundred and sixty- 
 seven, one hundred and sixty-eight, and one hundred and sixty-nine of the Revised 
 Statutes of the United States, or of any other law, rule, or regulation affecting the 
 salary, pay, or compensation of any such person or persons employed in the clai«&ified 
 ci\"il service. 
 
 Sec. 10. That the Secretary of the Treasury shall prepare and keep all needful 
 tables, records, and account.^ required for carrjdng out the pro\'kions of this act. He 
 shall make a detailed comparative report annually to Congress showdng all receipts 
 and disbursements under the pro\-ision.s of this act, together with the total number 
 of persons who received paj-ments hereunder and the amounts paid to each of them. 
 
 Sec. 11. That whenever any person becomes separated from the classified service by 
 reason of appointment in the uncla.«sified service, such separation shall not operate to 
 take him out of the provisions of this act. The President shall have power, in his 
 discretion, to exclude from the operation of this act any employee whose tenure of 
 office is intermittent or of uncertain duration. 
 
8 THE HAMILL, MAHER^ AND CUMMINS BILLS. 
 
 Sec. 12. That the contributions with their accumulations provided for in this act 
 shall not be assignable either in law or equity or be subject to execution or levy by 
 attachment, garnishment, or other legal process while in the possession of the United 
 States. 
 
 Sec. 13. That for the clerical and other service and all other expenses and dis- 
 bursements necessary in carrying out the pro\'isions of this act during the fiscal year 
 nineteen hundred and thirteen, including salaries and rent in the city of Washington, 
 there is hereby appropriated the sum of dollars, out of any money in the Treas- 
 
 ury not otherwise appropriated, to be available until expended. 
 
 Sec. 14. That the Secretary of the Treasury is hereby authorized to perform or cause 
 to be performed any and all acts and to make such rules and regulations as may be 
 necessary and proper for the purpose of carrying the provisions of this act into full 
 force and effect. 
 
APPENDIX E. 
 
 SCHEDULE CALLING FOR INFORMATION WITH 
 REGARD TO EMPLOYEES. 
 
SCHEDULE CALLING FOR INFORMATION WITH REGARD TO 
 
 EMPLOYEES. 
 
 No. ... 
 
 (This stub to be detached before returning schedule to commission.) 
 
 Name, 
 
 [Perforation.] 
 
 No 
 
 The President's Commission on Economy and Efficiency. 
 
 Department, Bureau, 
 
 1. Sex, 
 
 2. Description of work, 
 
 3. Class of work: 
 
 (a) Subclerical work, requiring some special skill or involving personal 
 
 responsibility, but not clerical or mechanical in its nature D 
 
 Examples of such work are duties ordinarily required of messengers, 
 watchmen, classified laborers, sorters, counters, etc. 
 
 (b) Clerical work of a simple or routine character, requiring care, accu- 
 
 racy, and skill D 
 
 Examples of such work are mere copying and typewriting; simple index- 
 ing; filing cards and papers; briefing contents of letters or documents on 
 back; preparing letters by fillitig blank forms for official signature; mailing 
 or dispatching; easy stenography; simple bookkeeping, requiring but little 
 knowledge of the theory of accounts. 
 
 (c) Clerical work of a routine character, requiring but little original 
 
 thought or consideration, but requiring judgment, responsibility, 
 
 and special skill D 
 
 Examples of such work are preparing briefs of papers in a case for record- 
 ing; expert filing; examining property returns; proof reading; issuance 
 and distribution of supplies; examining vouchers and disbursing accounts, 
 under the application of simple standards or requirements; recording cases 
 and transactions where considerable judgment is required to determine the 
 relative importance of factors, and preparing an adequate index thereof; 
 the ascertaining of facts independently and drafting action on average 
 cases; composing and preparing letters for official signature; stenography 
 requiring skill and practice; bookkeeping involving a knowledge of the 
 theory of accounts and departmental records and precedents. 
 
 (d) Work more or less routine, involving responsibility, special ability, 
 
 and original thought, consideration, and investigation Q 
 
 Examples of such work are directing and instructing clerks of lower 
 grades; expert stenography; editing; the ascertaining of facts independently 
 in complicated cases, and drafting action thereon; serving as confidential 
 clerk to head of department or bureau; bookkeeping involving an extended 
 knowledge of department records and precedents and the handling of intri- 
 cate accounts; recording complex and difficult cases and properly indexing 
 the same; service in purchasing and issuing supplies; service as paying 
 teller; examining money accounts requiring familiarity with the laws and 
 with regulations and requirements of the Treasury Department. 
 
 3 
 
INFOKMATION WITH REGARD TO EMPLOYEES. 
 
 3. Class of work — Continued. 
 
 (e) Work largely supervisory, or requiring the highest order of clerical 
 ability, involving much original thought, consideration, and in- 
 vestigation □ 
 
 Examples of such work are the investigation of large and intricate cases, 
 requiring familiarity with the laws and decisions of courts and with de- 
 partment practice and policy, and the drafting of action thereon; the 
 conduct of such investigations with the aid of assistants, whose work must 
 be directed and correlated; service as paying teller with large responsi- 
 bility; acting as chiefs of sections or divisions, and preparing or laying out 
 work for others. 
 
 (/) Work of a supervisory, executive, and administrative character Q 
 
 Examples: Duties ordinarily required of chiefs of divisions and chief 
 clerks. 
 (g) Professional, scientific, and technical Q 
 
 (h) Skilled trades. 
 
 a 
 
 4. War veteran (Answer "Yes" or "No") 
 
 5. Age at last birthday 
 
 6. Compensation: Annual, $ Per diem, $ 
 
 (Answer here if on annual basis.) (Answer here if on per diem basis.) 
 
 7. Aggregate years of service (include all periods except military and naval) ... 
 
 8. State the usual salary now paid in your bureau or office to the efficient employee3 
 
 engaged on the class of work assigned to the employee here rated, | 
 
 9. Rating in tenths on quantity of work performed by employee rated: 
 
 (Note. — Ten-tenths represents the quantity of the same class of work 
 performed by an efficient employee receiving the salary stated in answer 
 to Question No. 8.) 
 
 0/10 
 
 1/10 
 
 2/10 
 
 3/10 
 
 4/10 
 
 5/10 
 
 6/10 
 
 7/10 
 
 8/10 
 
 9/10 
 
 10/10 
 
 
 
 
 
 
 
 
 
 
 
 
 10. Rating on quality of work: 
 
 "Excellent." — An employee should be rated "Excellent" when he is 
 performing the highest quality of service in the grade to which he is regu- 
 larly assigned — that is, when he has reached the maximum of efficiency. 
 This implies that on occasions when there is need of ingenuity and initiative 
 the employee is resourceful and equal to assuming responsibility. 
 
 "Very good." — An employee should be rated "Very good " when he per- 
 forms exceptionally satisfactory service, which, however, falls slightly 
 below the standard of "Excellent" in that the employee lacks ingenuity 
 or power of initiative. 
 
 "Good." — An employee should be rated "Good" when his work is 
 acceptable and worthy of commendation but not exceptionally so. 
 
 "Fair." — An employee should be rated "Fair" when his work is some- 
 what inferior, compared with ordinary, acceptable service, being charac- 
 terized by a defective performance of duties. 
 
 "Poor."— An employee should be rated "Poor" when his work is dis- 
 tinctly inferior to ordinary, acceptable service. 
 
 "Very poor." — An employee should be rated "Very poor" when his work 
 is extremely unsatisfactory in quantity or quality, or both, but not so 
 unsatisfactory as to be wholly wortliless. 
 
INFORMATION WITH EEGARD TO EMPLOYEES. 5 
 
 10. Rating on quality of work — Continued. 
 
 "Nonproductive." — An employee should be rated "Nonproductive" 
 when his work is either wholly worthless or so faulty as to consume a large 
 amount of a second person's time in revising it. 
 
 Nonproductive. 
 
 Very- 
 poor. 
 
 Poor. 
 
 Fair. 
 
 Good. 
 
 Very 
 good. 
 
 Excel- 
 lent. 
 
 
 
 
 
 
 
 
 ll. Value of serAaces (not necessarily actual compensation) of employee rated: 
 
 Annual, $ Per diem, $ 
 
 (Answer here if on annual basis.) (Answer here if on per diem basis.) 
 
 Chief of Bureau or Office. 
 
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