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THE ORIGIN OF THE NEW SOUTH WALES GOVERNMENT RAILWAYS SUPERANNUATION FUND
The provision of an income for their years of retirement has
always been the vital concern of all members of the community and the demand has been met to a large extent by
the legislation of, first the State Government and later the
Federal Government, which gave to us our Old Age and Invalid
Pensions Act.
Pensions of this character are not regarded by intelligent citizens as savouring of charity, as the taxes paid and services rendered to the State, during their lifetimes, by men and women reaching the ages of 65 and 60 years respectively, certainly warrant the payments, although lamentably small, which for a few years are then made to those of them who have been unable to provide for themselves. But, sixty years ago, when the total number of employees was small, railwaymen were considering schemes whereby they themselves could institute a fund out of their wages and salaries for the purpose of providing pensions during the years following their retirement from the Service. The first definite result appeared in the Civil Service Act of 1884, in which Act provision was made for a fund to which salaried officers of the Crown were required to contribute at the rate of 4 per cent. of their salaries, the ultimate pension on retirement being calculated on the salary received during the final three years of service. Employees paid at daily or weekly rates and known as "wages" men, were eligible to join the fund, but had to make application for admission thereto. This fund commenced to operate on 1st January, 1885. A considerable number of salaried officers who had reached the retiring age, at once paid the percentage on the salaries received by them during the previous three years and retired forthwith, thus placing a very heavy burden on the fund right from its inception. The Railway Act of 1887 terminated the obligatory conditions of the 1884 Civil Service Act, contributors being given the option of remaining members of the fund, or of withdrawing and effecting life insurance. All employees who were not contributors to the 4% fund, and all new entrants to the Service were compelled to effect insurance on their lives. A considerable number of contributors remained in the 4% fund and suffered much trouble at the hands of governments, but, those who carried on, subsequently benefited very handsomely by the sacrifices necessitated. Life insurance seemed to be but a poor substitute for a superannuation fund, as no provision was made thereby for sickness, accident, or early retirement, and it was not long before many thoughtful employees were seeking ways and means of organising a scheme to provide for all of these things. Desultory discussions and suggestions on the subject took place for some years and culminated in a proposal by Chief Commissioner Eddy in 1889 to establish a fund on a percentage basis, but when it was submitted to a referendum of employees of the Service, the proposal was rejected. This set-back discouraged most of the advocates of a pension scheme and for some years, nothing further was done. In 1904 the idea was revived and several committees were constituted to formulate a new scheme, the main one being that under the chairmanship of Mr. Harry Richardson, Superintendent of the Lines. This committee went into the very difficult problem most earnestly, and their labours were rewarded. To Mr. Tom R. Johnson must be accorded the credit of putting life and vigour into the efforts, and it was during his term as Chief Railway Commissioner that finality was reached. The principal benefits of the Act in its present form are;
THE FUND A STATE ASSET
During the debates in both Houses of the State Parliament
in 1910, and on other occasions, the Superannuation Fund has
been adversely criticised. It has been repeatedly stated that
it is insolvent and that it is a burden on the finances of the
State.
These reasoners have not viewed the fund from a broad standpoint. They have failed to take into consideration the various factors in favour of the fund which transform it from a seeming financial burden into what has been in fact, a very distinct advantage to the assets of the State and Commonwealth Governments. To merely state, as has often been done, that such and such sums of money have been contributed to the fund from the State coffers each year, to supplement the amounts deducted from wages and salaries, and that this is evidence of financial failure, is to entirely mis-state the actual position. To such phases there should be added several others which actually resulted in the Superannuation Fund appearing as a benefactor to the State and Commonwealth finances for many years. The existence of the Superannuation Fund has allowed the retirement of many hundreds of employees on high salaries at the age of sixty years, whose services would, otherwise, certainly have been continued, such vacancies having almost invariably been filled by lower paid officers, and the savings to the Commissioner's wages bill in this respect have been very large. Again, the superannuation fund, provided primarily by the employees themselves, has saved the State and Commonwealth Governments thousands of pounds which would otherwise have been paid as old age pensions. It is estimated that in the year 1933, the Federal Old Age Pensions' payments were £220,000 less than they would have been, had the Railway Superannuation Fund not been in operation. It is true that in that year, the subsidy to the fund by the State Government was £290,000, but calculated on the old age pensions basis for each year from 1911, the total saving to the Governments has been very large indeed. Also, the morale of the Service has been raised by the existence of the fund. The fact that an employee may lose his superannuation payments as well as his job through misbehaviour, and that resignation with less than 15 years' service debars any refund of contributions, has done a great deal towards encouraging employees to give steady efficient service. The actual purchasing of a pension by each employee has also a beneficial influence on the staff generally, providing a definite encouragement to remain in the Service until retired by reason of age, and an assurance of at least a small income for their declining years. But the critic may point to the very large subsidies paid to the fund from 1930 onwards as proof of its failure. Figures represent merely the two main sources of income, Deductions from Salaries and Subsidies from Government funds, as shown in the official annual reports of the Superannuation Board. There are other sources of income, such as interest on the daily balance, refunds, maturity of life policies, etc., not dealt with herein. From 1917 to 1929 inclusive the subsidies were paid from Consolidated Revenue, and from 1930 to the present, from Railway and Tramway revenue. Of the total amount paid as subsidies, £402,650 was from Consolidated Revenue, £1,084,589 from Government Railway's Fund and £138,044/7/7 from the Commissioner for Road Transport and Tramways. MR. CLEARY'S OPINION
Reporting on the fund for the year ending 30th June,
1930, Mr. Commissioner Cleary said that it was on an unsound
basis from the commencement. He ascribed this to the rate of
contribution (1½%) being too low, and by the fact that the
older men in the Department at the time the Act was passed
were allowed to retire on pensions based on the whole of their
service, although they only contributed 1½% of their wages
for short periods ranging from a few weeks to a few years.
For example, an employee who retired a few weeks after the
Act commenced contributed the sum of 3/- to the Superannuation Account and retired on 1st November, 1910, since which
date he has been drawing a pension of £132 per annum! There
are many similar cases.
Mr. Cleary also pointed out that the retirements for the year 1930 had been abnormal. Retirements on pensions totalled 726 as compared with 322 in 1929, and gratuities paid to employees retired with less than 10 years' service amounted to £46,070 as against £5,535 paid similarly in the previous year. FACTS
It will be noted that for the first five years, the fund was
self supporting, no subsidy being required. Again in 1921 and
1922 there was no subsidy, owing to the basic wage being
increased from £3/16/6 to £4/5/0 per week. From this it will
be seen that the living wage basis has a vital influence on the
finances of the fund.
The large increases in subsidies for each year from 1931 were caused by the fall in the living wage and by heavy retrenchment of staff. The contributions to the fund were thus greatly decreased, and the expenditure enormously increased by the payment of gratuities to retrenched employees. But, it is most important to remember that, coincident with the increase in subsidies to the fund, there was a very large decrease in the amount of wages paid to employees, which, to a very large extent, preserved a balance in the accounts. For instance, in 1930, due to heavy retrenchment, £46,070 was paid in gratuities, representing one fortnight or one week's wages per year for each man retrenched. It is estimated that the saving in wages due to these retrenchments approximated £184,280 in 1930 alone, and this saving is continued indefinitely. In 1931, 1,192 gratuities were paid to retrenched employees, amounting to £27,209/10/2, and the estimated saving in wages was £108,838 for that year, in addition to the saving shown for 1930. It may be argued that such savings to the Railway Department would be offset by the cost of food relief from the State to the dismissed employees, and the reply would be that large numbers of such men secured other employment and, in any case, the gratuities paid would debar all o£ them for a long period from receiving State assistance in this way. THE GOODCHAP GRATUITY
When Mr. Goodchap became Commissioner in 1878, he
experienced great difficulty in securing suitable employees for
the railway service, owing to the ruling rate of wages outside
the service being somewhat greater than he was able to offer.
It was later alleged that, to offset this disparity, the Commissioner promised that all entrants to the service under the conditions he offered, would, upon retirement by reason of age, be paid a retiring allowance at the rate of one month's pay for each year of service. Mr. Goodchap retired on 22nd October, 1888, and it was some years later that the first claims were made for gratuities consistent with the alleged promise of Mr. Goodchap. Applicants were then informed that there was no record of any such promise, and the Commissioners and Government alike declined to recognise the claims. Apart from this, a gratuity at the rate of one pound for each year of service was approved to retiring employees. For some years agitation was carried on by interested employees and many members of the State Parliament made inquiries into the alleged Goodchap promise. At last, in 1917, a Parliamentary Select Committee inquired into the whole matter. Voluminous evidence was given and exhaustive search made amongst the old railway records. Eventually the Select Committee reported that it was satisfied that a promise of the kind alleged had been made but that no record of it could be found. Therefore, in the opinion of members of the committee, the employees who joined the service prior to 22nd October, 1888, had no legal claim to the gratuity, but had a strong moral claim. No action was taken by the Government in connection with this committee's report until 1919, when it was decided that all employees who joined the service prior to 22nd October, 1888, whose service was unbroken, and who had retired prior to 1/10/1910, should be paid upon retirement, due to age, the sum of two pounds for each complete year of service, providing they had at least ten complete years of service . Payments commenced in March, 1920, and were made to such employees as had retired, widows of retired employees, and widows of employees who had died whilst still employed. In cases where one pound for each year of service had already been paid, an additional pound per year was paid. Included in "continuous" service were cases in which employees had, through no fault of their own, been retrenched for short periods. Some years later, it was also decided that otherwise qualified employees who ceased duty during the 1917 strike would be treated similarly. Employees who joined the Service prior to 22/10/1888 and who retired after the Act came into force are paid £1 for each year of service. As, at the time of writing the above, 46 years have passed since the retirement of Mr. Goodchap, very few, if any, of that old brigade are now in the service. THE DRIFT and THE REMEDY
Successive Governments have expressed alarm at the drift
of the Railway Superannuation Fund towards insolvency, but,
so far as is known, no attempt has been made to deal with the
situation.
Other State Governments are similarly placed, and it is recognised that adjustment of the funds forms a gigantic and thankless task for any Government to undertake, and all have allowed the drift to continue. Were it not for the Party system which operates in politics to the almost total extinction of individual action, the matter would have been taken up long ago, but the machine parties are afraid that votes would be lost by courageous action on their part, and so have allowed the funds to drift. The Railway Superannuation Fund can and should be preserved by intelligent action. It is unthinkable that any Government, no matter what its political colour may be, should repudiate the pledges made twenty-four years ago to railway and tramway men; pledges, the fulfilment of which is essential to save thousands of men and women from destitution in their declining years. Repudiation of that kind would most certainly spell the extinction of any Government so blind to a sense of decency and so devoid of intelligence as even to advocate it. Mr. Commissioner Cleary was quite right when, in 1930, He stated that the unsound position of the fund was due, primarily, to the rate of contribution being too low. The rate should have been 2½% right from the beginning of the fund, and it can be seen now that Mr. Beeby, M.L.A., for Blayney, in 1910, and Mr. Hollis, M.L.A. for Newtown, in 1916, were amongst the few members of the House at the time the Bill went through and when it was later amended, who foresaw the present position of the fund, due to this cause. Contributions to the fund by employees have reached a grand total of £3,154,016/17/5, and subsidies from the Government total £1,625,282, a grand total of £4,779,298/17/5. Had the contributions to the fund been at the rate of 2½%, instead of 1½% from the inception of the fund, the total contributions to 30th June, 1934, would have amounted to £5,256,694/15/10, or £477,395 more than contributions and subsidies which were actually paid to the fund. There would, of course, have been an increase in disbursements by way of refunds, etc., but without any subsidies there would have still been a surplus in the fund at the present time. It may be noted by the same process that in 1934 the contributions at 2½% would have been £248,610 instead of £149,177, but would have been much below the total of actual contributions and subsidies, viz., £499,493, but it is clear that had 2½% always been deducted from wages and salaries, there would have been a surplus to carry forward from the previous years which would have covered the total disbursements, plus the surplus £477,298 as shown above. The heavy depression, the aftermath of the World War, was chiefly responsible for the parlous condition in which the fund stood at 30th June, 1934. Heavy falls in the living wage, and heavier retrenchments than the Service had ever previously known reduced the contributions from £215,171 in 1928 to £149,177 in 1934. The heavy retrenchments of employees under section 117b, increased gratuities under that section from £4,460 in 1928 as follows: 1929: £5,535. 1930: £46,070 1931: £27,209 1932: £12,281 1933: £40,777 1934: £14,747 Also, during these years, large numbers of officers were retired at the age of 60 years, who, under normal conditions, would have had up to five years longer service. These retirements caused an abnormal increase in the expenditure under section 114. It is reasonable to believe that the general improvement noticeable in industrial conditions will continue, and that we may safely say that the superannuation fund has passed through its worst years. It is not possible to recall the bad years, and by new methods, to wipe out the accumulated deficits, but it is possible to alter the conditions of the fund so that the rights of present and future contributors will be conserved without an unwieldy burden being placed on the State Treasury. The first step in this direction is an increase in the amount of contributions from 1½% to 2½%. Also, it has been previously shown that Commonwealth Old Age and Invalid Pensions have been largely reduced in numbers and expenditure by the operation of the Superannuation Fund, and it is reasonable and just to urge that the State Government should negotiate with the Federal Government for a reasonable subsidy to be paid by the latter to the fund. And lastly, just as all progressive firms make provisions for the subsidising of their employees' pension schemes, from general funds, the continued subsidising of the railway fund to a reasonable amount by the State Government, should, in combination with the foregoing suggestions, place the fund in a solvent position. There is one other matter which is often commented on by railway and tramway men, and that is the fact that the Superannuation Act makes no provision for widows of deceased members, beyond a refund of contributions. It is evident that such provision could only be made by an increase in contributions beyond 2½%, to an amount consistent with the quota of benefits desired. If Parliament decides to increase the rate of contributions as a means of rehabilitating the fund, the question will arise as to how the increase should be applied. Members of the fund will probably point out that although they will be called upon to make heavier payments, they will, on retirement, receive only the same rate of pension as men who were retired whilst the rate was only 1½%. But, in seeking the way out of the present financial morass, Parliament will have to deal with the conditions as they are, and not as they used to be. It should be remembered, also, that at the 1½% rate, a retired officer, in most cases drew, in less than twelve months, by way of pension, considerably more than he had paid into the fund, and as the fund must be saved, it is not expected that reasonable men will offer serious objection to the additional payments, should such be imposed. Reprinted from "A History of the New South Wales Government Railways Superannuation Fund",
Published by National Union of Railwaymen, March, 1935 Editor's Note: As from 1 June, 1964, the Railways Retirement Fund was established and no further memberships were opened in the Railway Superannuation Account. Existing members were encouraged to transfer to the new fund which had been established on a much more equitable footing. |
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