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We annex the CARLISLE 3 p.c. annuity values in a parallel col. for purposes of
3 p.c. comparison.
In 1827 another Committee of the H. of Commons on F. Sos. was appointed and sat; this time really with the view of eliciting information on the law of Mort., and the values of L. Annu. and Assu. in this country. The report of the Committee of 1825 was referred to this committee for consideration. Among the witnesses examined were Mr. Joshua Milne, Mr. Francis Baily, Mr. Charles Babbage, Mr. Benjamin Gompertz, Mr. John Naylor, Mr. Griffith Davies, Mr. J. D. Bailey, Mr. W. Morgan, and Mr. John Pensam, all men of known position in the then actuarial world. It is sufficient to say that the report abounds with information on annu. values, and kindred subjects; and that the appendix contains many tables of great interest.
As both this and the report of 1825 are now very rarely to be met with, it may be well to state that their substance will be given in these pages as the various topics to which they apply shall arise.
The scale for granting Gov. L. annu. under Mr. Perceval's scheme in 1808 had been calculated upon the Northampton T. As early as 1819 Mr. John Finlaison had demonstrated to Mr. Vansittart, that in consequence of the errors of these tables, the country was losing £8000 p. month. The demonstration, however, did not carry conviction to the mind of the Chancellor of the Exchequer; and even his successor Mr. Robinson paid no attention to the representation.
Mr. Finlaison addressed another letter, dated 30th April, 1827, to the Sec. of the Treasury, in which he showed that the loss occurring to the nation by means of these annu. was now at the rate of £8000 p. week, and that the loss in the preceding 3 months had amounted to £95,000 and upwards.
This last letter appears to have produced the desired effect, for in 1828 the National Finance Committee reported, that "having in the course of their inquiries discovered that the conditions under which the Commissioners of the Sinking Fund are required by the Act for enabling the Commissioners of the National Debt to grant annu. are extremely disadvantageous to the public, they feel it to be their duty to call the immediate attention of the House to the expediency of repealing that Act." The grant of L. Annu. on the Northampton rates was accordingly suspended on the 25th July, 1828; all the preceding Acts relating thereto being repealed. This was preparatory to the measure to be introduced in the following session.
In 1828 Mr. Edward Hulley pub. Tables showing the Values of Annu. and Assu. upon lives of equal ages, in single and ann. payments, according to the NORTHAMPTON T. MORT, rate of int. 3 p.c.; to which were added, examples and remarks illustrative of the method of determining the present values of these reversions analytically.
In the same year Mr. Lubbock read before the Cambridge Phil. So. a paper On the Calculation of Annu., and on some questions in the theory of Chances; and the same was pub. in the Trans. of that So. The paper is reprinted in vol. v. of the Assu. Mag., p. 197. In the following year (1829) Mr. Lubbock read another paper before the same So., On the Comparison of Various Tables of Annu., which was also pub. in the Trans., and reprinted in vol. v. of Assu. Mag., p. 277.
In 1829 a Select Committee of the House of Commons was appointed "to consider the petition of Cadogan Williams, recommending the purchase of Life Annu. under the authority of Gov. Turning to the petition, we find the following:
Your petitioner, who has paid much attention to the subject of assu. as they apply to the circumstances of the lower classes of society, does most humbly suggest as his opinion that it would be conferring great benefit on society in general, and the lower classes in particular, were the opportunity given them of buying an annu. to be paid them in the event they attained the age of 60 years, as it would be putting the lower classes in possession of means to make a provision against old age, which they do not at present possess. Your petitioner does further beg to suggest, that such assu. is unlimited in its application in a civilized country, and might be estab. and conducted under the authority of His Majesty's Gov., as there would be no risk of imposition from its members, it being dependent upon natural results, and in no wise on morals, which most other assu, cos, are more or less; and the contingency of pestilence which, were it to happen, might be trying to the resources of some cos., would be in its favour!
The document is unique; but a Committee was appointed; and in due course reported (inter alia) that
To the wealthy, and even to those who possess even a moderate share of affluence, numerous opportunities are afforded by the ins. offices and by Gov. securities, of providing incomes contingent upon remote events; while the humbler classes, to whom the means of insuring independence in advanced life are even more important, have hitherto enjoyed no opportunities of accomplishing this most desirable end.
The Committee stated, on the authority of Mr. Finlaison, that "a weekly payment of 25. continued from 20 to 30 years of age will secure to the contributor a life annu. of £20 p.a., to commence at the age of 55; a similar payment of 114d. from 20 years of age to 55 will secure to the contributor a life annu. of £20 from the termination of his contribution." The Committee suggest that the Savings Banks might be used to aid in the extension of the system; and this plan was actually adopted in 1853.
Strange to say, the Committee do not refer to an Act before the House that very session and passed into law, by which an annual payment of not less than £5 might be made available for the purchase of a deferred annu.; although one of the witnesses called attention to the same. The Committee made no other suggestions except that, if reappointed next session, they would try to frame a measure. The vicissitudes of parliamentary life are great; and they were not re-appointed.
The Act of 1829 just referred to was the 10 Geo. IV. c. 24. By authority of its provisions a new era was commenced in this branch of national finance. The preamble recites: "And it is expedient that the said Commissioners (of the National Debt) should be enabled to grant such annu. in future according to the duration of human life, as ascer tained by recent Tables of Obs. thereon." The Act then provides that annu. shall not be granted on any life or nominee under 15 years of age, with power to the Commissioners to decline granting an annu. on "sufficient grounds. Annu. might be purchased with money or by transfer of stock, but no stock less than 100 to be received. A new provision enabling the Commissioners to receive sums of not less than £5 p.a. for purchase of deferred annu. was introduced for the especial benefit of the industrial classes. The nominees were still to be residents in the U. K. All stocks to be converted into 3 p.c. before being exchanged. All money paid for purchase to be applied to reduction of National Debt. The tables of annuity values to be approved from time to time by the Commissioners of the Treasury, or any three of them; but such tables might be altered, revoked, or recalled, and new ones substituted, on proper notice given in the Gazette. Tables for time being in use to govern value of annu. to be granted. L. annu. under this Act to be carried to same account as those formerly granted. Annuities for years to be carried to separate account. Proof of age required: if no proof of birth, age at baptism taken. Persons might purchase annuities on lives of other persons' nominees, there being no restriction in this Act of amount of annu. to be granted on any one life. On death of annuitant, a quarter's annu. to be payable. L. annu. might be trans., in one amount, but nominee must not be changed; annu. for years might be transferred in one or more amounts. Registers, transfers, and receipts exempt from stamp duty. Heavy penalties for fraud. Accounts of annuities granted to be laid before Parliament.
The tables to be used in connexion with the Act, as they were liable to be changed, were not appended to the Act, but pub. separately. From the Tables first calculated, in conformity with this Act, some curious results have flown. In the first place, the new tables had been adopted with a view to prevent the loss which the former tables were on all hands admitted to have produced. Again, these new tables were calculated from materials in which the Gov. advisers had entire confidence-so much confidence, perhaps, that some very obvious defects in them were overlooked. They were indeed constructed from what may be termed selected lives: but the entire question of selection was not then sufficiently understood. The influence of selection is inherent to newly selected lives. It wears off after a series of years. To be efficacious it must be fresh. Selection was soon made against these tables, in a manner not before contemplated. The tables first adopted under the Act authorized an annuity of £62 to a man aged 90 for each £100 sunk. The first payment 3 months after the purchase. Shrewd gentlemen from the ins. offices, and from the Stock Exchange--aye, even the Commissioners of Greenwich Hospital, who were not always accredited with being the shrewdest of men-saw an opportunity, and availed themselves of it. In a word, a system of speculation in L. annu. set in equal to that of any former period, and far more certain in its results to the individual operators. Agents were sent off to the north to the hills of Cumberland, and the glens of Scotland. Robust men aged 90 were at a premium. Yorkshire was not overlooked: there were numerous old men residing in the glorious scenery of the West and North Ridings, whom to secure as nominees was to secure a fortune. There are numerous records current of the fortunes made by private speculators of these we take little heed: but under head of GOVERNMENT ANNUITANTS we shall adduce some authentic statistics which furnish results of real value.
The mistake was discovered and stopped by the removal of the advanced ages from the Table-but not till serious loss had resulted. We observe the following note to the tables now in use: "The Commissioners, etc., give notice that they will not grant any
annuity under the provisions of the Act upon the continuance of the life of any male or female nominee above the age of 65, unless the nominee shall have bonâ fide a beneficial interest in such annuity.'
In 1829 Mr. John Finlaison, the Actuary to the Commissioners of the National Debt, laid before Parl. an elaborate report, upon which he had been engaged for a period of 10 years, on the duration of life of the purchasers of the life annuities granted by Gov. under the Acts already enumerated, and among the nominees of the several Tontines to which we have referred. The following is a summary of the principal Tables in this report.
1. Observations on the English Tontine, which commenced in July, 1693-the last member dying in 1783-embracing 1002 lives.
2. Ditto L. annu. issued at the Exchequer, in 1745, 1746, 1757, 1766, 1778, and 1779, embracing 2552 lives.
3. Ditto three Irish Tontines of 1773, 1775, and 1778, embracing 3557 lives.
4. Great English Tontine of 1789, embracing 3495 selected lives.
5. Ditto lives chosen by lot, 4831 lives.
6. Ditto on the lives of the two last classes combined after age 50-both sexes.
7. Ditto on the Mort. of the nominees of L. annu. chargeable on the Sinking Fund issued in 1808, and in every subsequent year, 6892 lives.
The other tables show the results obtained from the same data for the sexes separately. The following are annu. values deduced from each of the preceding tables; 4 p. c. int., both sexes combined:
The annu. values deduced from the lives included in column No. I will be observed to be much less than those given in any of the other columns. This has led to various surmises. It will be noted that the lives included belong to an earlier period-to the previous century. But could that alone account for the difference? No. The real facts appear to be that Tontine projects being new in England, the lives were very badly selected. In the absence of exact information, it was natural to conclude that the younger the lives nominated, the greater the chance of survivorship. Experience has shown that there is a limitation in this respect. The mort. tables show that a life aged 5 has a better chance of living than a life aged I; and a life at 10 a better chance than a life at 5. Now, more than half the lives in the 1693 Tontine were under II when nominated, and more than one-fourth were under 6; and then, as male children frequently appear more robust than females, a larger proportion of males were selected. This was mistake number two. Subsequent investigations have shown that females are much better lives for such purposes than males. But at the period of these early Tontines-to which we have called special attention in the progress of this chapter-there is reason to suppose that even Dr. Halley was not aware of this fact. Mr. Milne thinks it probable that on account of their beauty and healthy appearance many children of scrofulous constitutions may have been selected. They on an average would be short-lived. Again, many of the nominees probably resided in Lond. or other large and crowded towns. This would add another cause of deterioration. The nominees in some French Tontines of about the same period were much better lives, as is shown by the annu. values deduced from their experience by De Parcieux.
It is curious to note the small difference between the results of columns 4 and 5 in the above table. The lives from which the results in No. 4 were deduced were selected. Those upon which No. 5 is based were chosen by lot; but they were taken from the upper and middle classes of society-as indeed in all prob. were those of No. 4. A considerable majority of females were included in No. 4; and of males in No. 5. It is probable that the different proportion of the sexes really accounts for the small difference in results that obtains; and not the influence of selection in any form.
The following Table shows the values of annu. as deduced from the mort. of the whole of the Male and Female Lives in the preceding 7 Tables, taken separately; int. 4 p.c.
The superior value of female lives had been shown by previous writers, as, for instance, by Dr. Price in his T. for Sweden and Finland; but not in the same degree as is shown here, and some of the individual tables of Mr. Finlaison show even greater differences than these shown by the combined tables.
It would be interesting to compare the actual mort. under No. I obs. with the estimated mort. of the Table we have given under date 1692. There were but 1002 lives exposed to risk instead of the 10,000 contemplated. That Table predicted that the last life would drop in 1792, surviving 99 years from the date of nomination. As a matter of fact, the last life (of the smaller number) died in 1783, having lived 90 years after nomination. On the 30th March, 1829, Mr. J. W. Lubbock (now Sir J. W. Lubbock, Bart.) read before the Cambridge Philosophical So. a paper On the Comparison of Various T. of Annuities; and the same was pub. in the Trans. of that So. shortly afterwards. abridgment of this paper was pub. in Assu. Mag. v., p. 277.
In this same year, 1829, Mr. Higham, the then Comptroller of the National Debt Office, proposed a plan for granting life, deferred, and term annuities, in connexion with Savings Banks, very similar to that adopted in 1833. Indeed, there cannot be much doubt that the Act of that year was based upon his recommendations.
In 1829 also Mr. James J. Duncan pub. in Glasgow Tables on the Prob. and Expectation of Male and Female Life in Glasgow; and of the Value of Annu. on Single Lives at all Ages, distinguishing the Sexes, at the several Rates of Int. of 3, 4, 5, and 6 p.c., deduced from the Glasgow Pop. and Mort. Bills, on an average of 6 years, from 1821 to 1827. The author says:
I have used a little liberty with the prob. in ascertaining the value of the annu. This was done to avoid the apparent inconsistency of, for example, age 90 of males showing a lower value than age 91: which a strict adherence to the prob., as shown in the T., would bring out. As this liberty, however, has only been taken in one or two of these extreme ages, it can lead to no practical error. He, in fact, adjusted the T. for these extreme ages. Annu. T.; int. 4 p.c. :
The following is an abstract of his
There was also pub. in Edin., the same year, Principles of Life Annu. and Assu. Practically Illustrated, by an Accountant (see again 1834). In 1830 Mr. Robert Rankin pub., A Familiar Treatise on Life Assu. and Annu., etc., etc., to which was appended orig. tables of the Prob. and Expectation of Life in the City of Bristol. [BRISTOL MORT. T.] No annu. values were deduced. In the same year Mr. J. B. Benwell pub., New Formula in the Valuation of Annu, on Lives, etc.
In 1832 Mr. T. R. Edmonds propounded his theory of mort. founded upon the discovery of a numerical law regulating the existence of every human being. He pub. a series of annu. tables deduced from this theory graduated in the most beautiful manner. Although derived from theoretic computation only, they differ but very slightly from many other tables in use, as will be seen by the annexed example:—
Age. Purchase. Age. Purchase.
20 17.69 75
In the same year Mr. Charles Ellis pub., The Law of Fire and Life Ins. and Annu., with Practical Obs.
In 1833, by 3 & 4 William IV., c. 14, power was given to trustees and managers of savings banks to grant annu. to depositors for life, deferred, or for terms of years, such persons being not under 15 years of age, and for annu. not exceeding £20 on any one life. Tables to be used to be approved by Commissioners of Treasury. The provisions of the Act were numerous. They were amended in 1844, and are now repealed. In the same year Mr. John Tidd Pratt pub., The Law Relating to the Purchase of Gov. Annu., through the medium of the Savings Banks and Parochial Sos., comprising the stat. 3 Wm. IV., c. 14, with notes and references. Mr. W. G. Lumley also pub., Law of Annu. and Rent-charges. This became a standard work, worthy of its learned author. In 1833 there was also pub., Instructions for the Estab. of Parochial Sos. for Granting Gov. Annu., immediate or deferred, pursuant to 3 Wm. IV., c. 14.
In 1834 an equitable measure was passed regarding life annu., viz., that in the absence of any express stipulation against apportionment, all annu. should be apportioned so that, on the decease of an annuitant, the personal representatives should take the proportion accruing from the then last payment up to date of death. There was an exception as to annu. granted by ins. asso. This practice of apportionment had prevailed since 1738 as to annu. arising out of land (see ANNU. APPORTIONMENT ACT).
In 1834 Mr. Cleghorn pub. a small vol. on the subject of Widows' Funds, in which he gave such information as he had been enabled to deduce from an investigation of the Widows' Fund of the Ministers of Scotland, of the frequency of marriages and remarriages amongst that body; and other information calculated to throw light upon the probable claims on the annu. funds of that and similarly constituted asso.
In 1834 also was pub. in Edin., Principles of Life Annu. and Assu., etc., Practically Illustrated; showing the method of calculating the value of annu., rev., assu. on lives, policies, etc., with a large collection of useful tables, comprising the value of annu., deduced from the Carlisle and Northampton T. of Mort., with an appendix containing a comparative table of the rates of prem, demanded by all the assu. offices in Britain. By an Accountant.
In 1835 Mr. Thomas Birch Kelly pub., A Practical Treatise on the Law of Life Annu. with the Statutes and Precedents, etc., etc. Mr. Kelly attributes the rise of life annu. to the existence of the Usury Laws: a circumstance which he was one of the first to discover ; but he was of opinion that life annu. were comparatively little known until the 18th century: an error from which further investigation might have freed him.
In the same year Mr. J. N. Mahon pub. a work on the duties and liabilities of executors and administrators under the Stamp Act; and a Table of Annu. and their Values.
In 1835 Mr. Charles Ansell's Treatise on Friendly Sos. was pub., and therein was contained a Mort. T. formed from the experience of F. Sos. for the ages 13 to 70 inclusive; and from the Northampton T. for the ages above 70. From this T. annu. values were given at the following rates of int.: 3, 34, 31, 4, and 5 p. c., and extended to 4 decimal places. We give an abstract of the T. at 3 rates:
It was in 1836 that the Independent West Middlesex scheme was concocted. Its hist., which is very remarkable, will be given pretty fully under its alphabetical title. The chief feature was the granting of annu. on terms which had not been heard of in modern times. They were indeed as much as 30 p.c. lower than the prices ordinarily charged. Thus a person aged 30 might secure [the promise of an] annu. of £80 for £1000 down. A writer in the Quarterly Review pointed out that a person securing such an annu. might insure his life so as to secure a return of his cap., and at the same time enjoy a handsome income. Large sums of money were obtained from the British public before the bubble burst.
In the appendix of official documents attached to the 3rd ann. Report of the Poor Law Commissioners (1837), we find the following in a letter addressed by the Sec. to the Boards of Guardians of Gt. Brit. :
But the Commissioners trust that you will, each in his own neighbourhood, do all in your power to promote the formation of such habits of forethought, of frugality, and self-dependence, as will keep them from falling back into pauperism, by aiding the estab. of sick-clubs, savings banks, and annu. sos. ; and by inculcating on your labourers and servants the importance of thus guarding against loss of work, sickness, and old age.