V THE UNIVERSITY OF ILLINOIS LIBRARY 332 B873 SEI,;!i^riH A TREATISE ON TONTINE ; i IN WHICH THE EVILS OF THE OLD SYSTEM ARE EXHIBITED, AN EQUITABLE PLAN SUGGESTED FOR RENDERING THE VALUABLE PRINCIPLE OF TONTINE MORE BENEFICIALLY APPLICABLE TO LIFE ANNUITIES : AN ACCOUNT OF THE SUCCESSFUL OPERATION FORMED UPON THE PRINCIPLE OF A PERPETUAL TONTINE AMONG THE ANNUITANTS. By CHARLES COMPTON, AUTHOR OF THE 'SAVINGS BANK ASSISTANT. LONDON : Printed by J. Powell, Hand Court, Upper Thames Street. SOLD BY EFFINGHAM WILSON, ROYAL EXCHANGE. 18: I TO THE RIGHT HONOURABLE , LORD VISCOUNT ALTHORPE, AND / THE MEMBERS OF HIS MAJESTY'S GOVERNMENT, THE PLAN OF FINANCE CONTAINED IN THIS PAMPHLET IS RESPECTFULLY SUBMITTED, BY THEIR MOST HUMBLE AND OBEDIENT SERVANT, THE AUTHOR. PREFACE. In calling public attention to the application of Tontines as exhibited in this Pamphlet, the Author feels it right to state, that he docs so after a patient and very minute investigation of the subject. He has already had the honor of submitting an outline of the plan to the Rt. Hon. the Chancellor of the Exchequer, which his Lordship has promised shall be * attentively considered.' The objections which are entertained against the system of Tontines, have arisen from the uncertain and long-deferred benefit that can accrue to the contributors, under the original plan of their opera- tion. The following pages are designed to shew in what manner the objectionable part of the system may be avoided, and the principle of Tontine ren- dered advantageous for Life Annuities. vni The mode by which this may be effected has long been under the consideration of the Author, and would have been laid before the public some years ago, had a favourable opportunity previously offered for submitting it to His Majesty's Govern- ment. Should the plan suggested meet with general ap- probation, it may be found serviceable as a financial measure, not only in this country, but in all other civilized nations. The very favourable reception which his little work on Savings Banks has already met with, in- duces the Author to hope that the Treatise now be- fore the Public will not prove unworthy of their consideration. TREATISE ON TONTINE. Among the many ingenious schemes of finance which have been agitated and adopted at different periods, it is not a httle remarkable that that of the Tontine has never yet been extended to the limits of its valuable principle, and that it has re- mained in a comparative state of infancy since its introduction by Tonti, in 1637, so as now to be little known, and scarcely any where to be found in operation. The probable cause of its having fallen into disuse may be, the subversion it experienced from its original purport, (that of affording an in- creased annuity in old age.) into a machine for pro- moting the views of sordid avarice : whereas the system, when properly arranged, is calculated to produce very extensive public benefit. The extravagant schemes set on foot in the last century, under the name of Tontines, and the chi- merical speculations to which they gave rise, suf- ficiently demonstrate their defective arrangement. But even the more legitimate application of the system is not altogether free from the same defect. The nature of the Tontine is this : ' an annuity, B 10 after a certain rate of interest, is granted to a num- ber of persons, divided into classes^ according to their respective ages ; so that annually the w^hole fund of each class is divided among the survivors of that class, till at last it falls to one, and upon the extinction of that life reverts to the power by which the Tontine was created, and which becomes there- by security for the due payment of the annuities.' Such being the plan, it is not surprising that Tontines have never become very popular: since no higher motive than a speculative avarice, looking for gain by the premature death of a neighbour, or the chance of possessing the whole annuity by becom- ing the survivor of the class, could induce any per- son to embrace them. The very circumstance of dividing Tontines into classes, which has hitherto been considered indis- pensable to their existence, has been the precise means of depriving them of that equitable character of which they certainly are capable, and has greatly increased the temptation to cupidity ; for, supposing a class to consist of persons of one age, each sub- scribing £100, the interest of which is to be di- vided among the survivors, there can be no benefit to any, but by the premature death of some; and many years must at all events expire, before the sur- vivorship can be worth consideration. But the classes are usually extended to five or ten years ; which practice, while it gives an additional incentive to avarice, by inducing those to join who would rank youngest in the class, from the supposed chance they have of outliving the elder, yet by deterring 11 those who would rank oldest, it docs in fact defeat its own purpose, by preventing the class from being so numerous as it would otherwise become. Another great disadvantage to the contributors to Tontines arises from the benefit of survivorship being continued till the death of the longest liver. This assimilates them to a lottery, in which there are many small prizes, with only one very large one. This disadvantage may be clearly elucidated by a reference to the Exchequer Tontine of 1789 ; the annuity of the first class, at the commencement, being only 41. 3s. per share of £100, on account of the length of time that the whole annuities would continue likely to be payable. Had the benefit of survivorship continued only for a definite number of years, and then for life to the survivors, the annuity would have been much greater per share in the first instance; whereas, on 5th April, 1829, after a lapse of about forty years, the annuity of that class had increased to only £6 : 3 : 3. From the foregoing observations, it will not be thought surprising that the nominees of the Irish Tontines should have been ' discontented at their own unreasonable longevity, because they would not die off fast enough ;' insomuch that a Select Com- mittee of Parliament was appointed to inquire into the facts. It was indeed impossible to be otherwise, according to the plan on which the old Government Tontines were regulated ; for subscribers were at liberty to nominate any life they pleased, instead of their own : so that the most temperate livers were selected, and the same life nominated by many in- 12 dividuals. His late Majesty, George the Third, was nominated by some, and the Rev. Rowland Hill by others, each of whom have proved to be among the best lives in the kingdom. And if it had so hap- pened that all the members of a class had nominat- ed the same life, there could have been no benefit of survivorship at all ; which at once shews the ab- surdity of the system. But these Tontines were as little calculated to be- nefit Government, as they were to give satisfaction to the contributors ; since one sturdy life was capa- ble of baffling all their computations. It remains to be shown, therefore, in what manner the prin- ciple of Tontine may be put in practice, so as to ensure the utmost advantages of life annuities to all classes, at every period of life, as composing one large family, and without exciting those avaricious feelings which have deservedly deprived Tontines of public approbation. The two great evils of the old system appear to be, forming the contributors into classes, and con- tinuing the Tontine till the death of the longest liver. The following plan will be found entirely to remove these evils, and to unite the benefit of sur- vivorship with the advantages of life annuity, both immediate and deferred: — For His Majesty's Government to create a Ton- tine Stock, bearing interest at a certain rate per an- num, and to permit persons of a certain age to pur- chase such Stock at par ; those younger or older than that age to be allowed to purchase the same Stock above or below par, according to their several 13 ages, with the benefit of survivorship for a certain number of years ; after which term the benefit of survivorship to cease, but the annuitants at that period to continue to receive their several annuities during their respective hves. The interest that such a Stock must bear would of course be regulated not only by the value of money at the time of creating the Stock, but also by the length of time that the benefit of survivor- ship is to continue. The public would invest money in such a Stock at less per cent per annum than in the purchase of a life annuity. This would be amply compensated by a gradual and certain increase per annum, which in a few years would greatly exceed the income of a life annuity; and this expectation of future benefit would prove a great inducement for persons to become purchas- ers, without exciting avarice and covetousness ; for as the younger purchasers would give more money for £100 Stock than the elder, they would be ac- tually giving up a part of their income for the be- nefit of the elder members, who, in their turn, would bequeath, as it were, their annuities to the younger as a compensation ; so that as the latter advanced in years, their incomes would increase, according as by the common course of nature they succeeded to occupy the places of the senior mem- bers. The popularity of such a scheme as this must depend, in some measure, upon the liberality of the terms offered by Government, as well as upon the expecj^tion of benefit from survivorship ; and as it 14 is presumed that the chief advantage to the country, contemplated by the granting of hfe annuities, is the exchange of perpetual annuities for terminable ones, rather than any actual profit in the transaction itself, is it not an object of some importance that they should be offered upon terms sufficiently libe- ral to induce the public to purchase them ? Under such considerations, it may be worthy the serious attention of the Legislature, whether, when the price of Stock is nearly one half above par, it would not be better to grant life annuieties, com- puted at a mean rate of interest, than to appropriate several millions of pounds sterling per annum, as a Sinking Fund* for the reduction of the National Debt ? A sufficient inducement would thus be of- fered to the public, so that many millions of per- * When the rate of interest is high, the sinking fund acts with great effect ; because the value of capital being low, in proportion as interest is high, a large proportional sum of the funded debt is redeemed for a small sum in pounds sterling, and a large amount of interest is also realized : but when the interest is low, and the value of capital high, a large sum in pounds sterling purchases but a small amount of Stock ; so that not only a small amount of the capital of the debt is redeemed, but (supposing the Stock cancelled when redeemed) the country is relieved from but a small portion of interest j and since the Stock redeemed is not cancelled, a fur- ther loss is occasioned by the larger interest realized by the pur- chase of the Stock at par being laid out at the same disadvantage as the Sinking Fund. It is therefore doubtful whether greater ad- vantages would not accrue from cancelling the Stock redeemed, or the greater part of it, whenever the funds rise to a given point, and causing the dividends due on annuities to become chargeable to the Consolidated Fund, suspending the Sinking Fund at the same time. 15 petual annuities would no doubt be annually ex- changed for them, and the National Debt be re- duced more rapidly than at present. Should the rate of interest hereafter increase, the Sinking Fund would again come into operation with good effect, and its necessity would be greater, by the increased rate of interest offering less induce- ment for investment in life annuities ; althousrh there is little doubt that the benefit of survivorship, including an average of all ages, will at all times in- duce the public to invest in a Tontine Stock, espe- cially if computed at a mean rate of interest. This mean rate of interest, for the last forty years, has been ascertained with the greatest accuracy by Mr. Finlaison, and explained by him in an ex- amination before a Committee of the House of Commons in 1829, upon the subject of Life Annu- ities in connexion \y\\\i Savings Banks. The de- tails are extremely curious, and will be read with great interest. The following question was asked by the Com- mittee : — ' But with reference to deferred annuities, ought you not rather to calculate upon what may be called the average rate of interest in the country, than upon what may be the existing interest at any par- ticular moment ?' To which Mr. Finlaison thus replied : — 'I am clearly of opinion that it would be just, as between Government and the purchasers of an- nuities in the class of society contemplated, that an average rate should be taken ; because there is a 16 manifest distinction between the rate of interest that should be allowed for money deposited for the purchase of remote interests, (those interests them- selves also continuing possibly for a remote period,) and the rate of interest that may be awarded at any particular time for the deposits of sums of money. If the Government were to permit an average rate to be given for the deposits of sums of money, the inconvenience that has happened might happen again ; namely, that when the rate of interest of money in the country was below the average rate allowed by Government, individuals would natu- rally flock to Savings Banks ; but when, on the contrary, the average rate allowed by Government was to any material extent below what the parties could make elsewhere by their money, it is as clear that the parties are likely to draw out their money. No such fluctuation, however, occurs in annuities ; the money being deposited in the contemplation of purchasing a life annuity, is there to continue till the term originally contemplated shall expire, and in that case Government, without any loss or gain whatever as between the party and the public, might justly grant an average rate of interest. It will be obvious to the Committee that the low rate of interest [viz. £3 : 8 : 5 J per cent] at which these tables have been computed, has a very sensible in- fluence upon the magnitude of the instalment to be paid for the life annuity ; whereas if the tables were computed at an average rate, (which average rate it is not difficult to assign,) the parties might purchase their annuities on cheaper terms, and the 17 Government be no losers in any manner whatever. That average rate has been discovered by me, with the very greatest certainty : many questions of im- portance depend upon its being known, and there- fore I thought it useful to have recourse to a labo- rious investigation, in order to ascertain it beyond all doubt. I went over all the purchases made by the Commissioners for the Reduction of the Na- tional Debt, in every quarter of a year, from 1786 down to the present time, and I discovered that the variable rate of interest resulting from the invest- ment of money in the three per cents, at their fluc- tuating prices, from day to day, was in the long run the very same, entirely to the minutest fraction, as the constant rate of four and a half per cent : thus the average rate of interest for money in the three per cents, the highest of all Government securities, has stood for forty years at four and a half per cent. If Stock had been purchased all that time at sixty- six and two-thirds, the quantity redeemed by the Commissioners would have been precisely the same as that which the Commissioners have redeemed. This coincidence seemed of so great importance, that it was found desirable to verify it by subsequent search. I commenced again in 1803, and carried it down quarter by quarter till 1827, and I found the very same circumstance occur ; the rate of in- terest was, from 1803 to 1828, four and a half per cent, payable half-yearly ; and the rate of interest from 1786 to 1827, was precisely the same in both periods. It is to be remembered, however, that there is very nearly the same number of years of c 18 peace and war in either period ; a matter which cannot but influence the question. Now, looking to all circumstances, especially to the gradual ac- cumulation of capital in the country, it might not, perhaps, be wise to infer, that the average rate for the next thirty or forty years would come up to four and a half per cent. If it should be taken at four per cent, it is utterly inconceivable that the public can sustain any loss ; because, allowing one half per cent for the continual accumulation of ca- pital which probably has been going on, and will go on for some time, such an allowance as a half per cent is amply sufficient.' It thus appears, that it is Mr. Finlaison's opinion that Government would, on the average, lose no- thing, by computing life annuities at four per cent ; so that there would be no need to take any part of the Sinking Fund into account, in the difference be- tween the current rate of interest and four per cent. In all computations of interest and annuity, it should be borne in mind that time and money are of equal value. This axiom will be readily as- sented to, since every one knows that the interest of £100 for ten days is the same as the interest of £\0 for one hundred days ; so that the common saying, * Time is money to him who lives by time,' will be found to be universally true, since every one lives by time, either in the way of annuity or labour. Upon reference, therefore, to the New Government Annuity Tables, it will be seen that when the rate of interest is four per cent, — 19 An annuity of 4 per cent may be purchased for perpetuity. 4^ for about 55 years. 4|- 47 years. 5 40| years. It will therefore be evident, that if any quantity of Stock be created, and the fund raised should amount to the same sum in pounds sterling — in other words, if the average purchase of the Stock be at par. Government would be able to grant an annuity upon the Stock of 41. \5s. per cent per an- num for forty-seven years. As it is part of this plan, however, that the survivors, at the termina- tion of the benefit of survivorship, should continue to receive the annuity they will be then entitled to during the remainder of their respective lives, it will be necessary to ascertain what term short of forty-seven years the Tontine Stock-holders should be allowed benefit of survivorship, in order to com- pensate Government for the additional expense that would be incurred, by continuing to pay the annu- ities during the lives of survivors, after the benefit of survivorship shall have ceased ; and presuming, for the sake of argument, that seven years would be sufficient for that purpose, it will leave forty years for the benefit of survivorship to continue, although the precise time must be matter of more minute calculation. The annuity at 4| per cent for about forty years has been preferred, because that rate of interest ad- mits of an investment in the Tontine Stock, for each age of life, at just one per cent less than in the purchase of a life annuity at the rate of 3^ per 20 cent interest : it also affords sufficient time for the benefit of survivorship to operate^ as almost every person of the age of forty years and upwards will have been gathered to his fathers before the expiration of another forty years. This rate of in- terest and term of years supposes, how^ever, that the average purchase of the Stock be at par; although it is most likely that the fund raised w^ould either fall short of, or exceed, the amount of Stock, according as the greater amount of Stock be purchased by persons older or younger than the age at which it is to be purchased at par. In either case an equiva- lent may be made, by extending or reducing the term of years ; which would not affect the Stock- holders generally, as it would be regulated by the average of their several ages, and the benefit of sur- vivorship would accordingly operate more speedily if the term of years were less, and more tardily if the term of years were greater. Thus, for instance, if one million of Stock be purchased, and the greater number of purchasers be elderly persons, the sum actually paid in pounds sterling may possibly be only £800,000 ; so that it would of course be im- possible for Government to grant 4~ per cent for the full term of forty years upon one million. They must therefore either reduce the rate of interest, or the term of years ; thus — As ^1^000,000 : 40 years : : ^800,000 : 32 years. The benefit of survivorship, in such case, must not continue for more than thirty-two years. The younger members would not, however, be 21 injured by the term being thus reduced, since the greater number of persons being old, there would be as many deaths at the end of thirty-two years as there would have been at the end of forty years, had the purchasers been younger. Again, if the greater number of purchasers be young, it may happen that £1,200,000 sterling may be raised upon the purchase of one million of Stock. Then it will be evident that Government would be able to grant more than 4f per cent for forty years, or the same annuity for a longer term of years : and most of the purchasers being young, it would perhaps be preferable to extend the term ; thus — As ^1,000,000 : 40 years : : ^1,200,000 : 48 years. The term might in this case be extended to forty- eight years. Should the sum raised admit the term to be ex- tended beyond forty-eight or fifty years, it would be better to make a proportionate addition to the divi- dend, rather than to extend the term beyond fifty years ; and on the other hand to make a proportion- ate reduction from the dividend, rather than reduce the term below thirty years. As already stated, any arrangement of this kind would not affect the Stock-holders generally, since it would be regulated by the average ages of the se- veral purchasers. But the advantages that would result to the public and to the Government from the creation of a Ton- tine Stock should now be exhibited. The benefit to the public would be, their ability to invest money 22 at only a small per centage less than in the purchase of a life annuity, with the benefit of survivorship for thirty or forty years ; for as the Tontine Stock com- prises an average of all ages, a few years will suffice to raise the income above that of a life annuity; and the loss of about one per cent to those who happen to die in the course of the first few years is hardly to be considered, since all persons sinking money in a life annuity expect to live long enough to receive an equivalent for the capital sunk ; so that in all cases a loss must be incurred by those who live only a few years, even if the annuity were greater than it is. The following table, which exhibits the price of the Stock, and also the interest which an investment of £100 sterling at the several ages will yield, has been constructed from the New Government Life Annuity Tables. The life annuity upon an invest- ment of £100, as stated in the first and second co- lumns, being first ascertained, the interest upon an investment of £100 in a Tontine Stock is fixed at one per cent less than in the investment in a life annuity at 3^ per cent interest; and the consequent price of the said Stock, at every age, is computed therefrom. The age at which the Stock may be purchased at par, is about thirty-six years, male life, which appears to be a tolerably fair average ; and the price of the Stock at every age being de- duced from the annuities granted by Government at the same age, must give a tolerably accurate va- lue of the Stock at each age ; and it has also this additional advantage, that it includes the charges of management. 23 Income of an Income of an'income of an Investment of Investment of Investment of t'lOO in a Life £100 in a Life' £100 in a Price of £100 Age. Annuity In- Annuity In- Tontine Stock of the Tontine terest at 3 j per terest at Sf per bearing Inter- Stock. cent Stock 85g cent Stock 91§ est at 4| per to 68|. to 93. cent. 15 £5 1 6 £4 17 3 ^3 17 3 ^122.9773 25 5 8 6 5 4 3 4 4 3 112.7596 36 5 19 5 14 10 4 14 10 100.1757 45 6 15 1 6 11 3 5 11 3 85.3932 55 8 9 10 8 5 11 7 5 11 65.1056 65 11 8 11 11 4 11 10 4 11 46.3414 75 17 6 1 17 2 1 16 2 1 29.4954 80 24 5 24 10 23 10 20.6148 By an attentive consideration of the foregoing table it will be seen, that the advantages of survi- vorship are as great at the oldest age as at any other; for although the annuity is at first as much below the income of a life annuity as at the youngest age, viz. about one per cent, yet the advantage of sur- vivorship operates exactly in proportion to the re- spective ages ; so that every additional five shillings per cent interest added to the Stock, would, to a per- son of the age of eighty, increase the interest of his investment above twenty-four shillings per cent, while an investment at the age of fifteen would be increased little more than four shillings ; thus com- pensating for the shorter time that the aged are likely to enjoy the benefit of survivorship. It is in this point that the great advantage of a Tontine Stock will consist. The young man not only re- ceives a less amount for his capital than the old man at the first investment, but continues to give up a large proportion of his income for the support of the aged ; and yet it cannot be said that he is a loser 24 in the end, for, supposing him to survive till the in- terest of the Tontine ceases to increase, he must survive all the aged, and thus succeed to their in- comes. It is perhaps unnecessary again to remark, that a Tontine Stock does not hold out an expectation of so large an income as the old Tontines : this has already been explained at the commencement of this Treatise. It is only necessary to prove that it possesses a decided advantage over life annuities ; which, if not yet sufficiently shown, will be made apparent from the actual state of the Exchequer Tontines, which have now existed above forty years, being the period here chosen for the continuance of a Tontine Stock. In 1789 the Exchequer Tontine was created, and on the 5th April, 1829, the number of deaths in each class were as follows : Total No. of Nominees, 1st class, under 20, 5991 > q.o 1 1^ Deaths 1924^— ^"'^^^ 2nd do. under 30, 936 > o'? oon Deaths 354^= ^^'^^^ 3rd do. under 40, 5531^ g^ g^^ Deaths oooj 4th do. under 50, 432 > 07701 Deaths 379^— ^'"'^^ 5th do. under 60, 289 > QOfiiK Deaths 285 ^~ ^^'^^^ 6th do. above 60, 106 > ,^^ Deaths 106 5 ~ ^^^- 424 087=^^^ ^'"^'600 100. 25 So that the general average of all the classes exhi- bits a mortality, in about forty years, of above seventy in every hundred, which, in a Tontine Stock of £4 : 15 : per cent, would increase the dividend to ;615 : 16 : 8 per cent, though the annuity in the first class of the Exchequer Tontine is only increased in the same period from £4 : 3 : to £6 : 3 : 3. The advantages to His Majesty's Government which would result from the creation of a Tontine Stock, would be, the conversion of a large amount of perpetual annuities for terminable ones, besides the immediate saving in, the annual charge, of one or more per cent upon the whole amount. This last advantage would indeed be compensated by the whole annuity being continued for forty years ; yet still it may be presumed that there is some con- siderable advantage in the reduction of the present annual charge. There is another advantage to be derived from the adoption of this measure, viz. that it will fur- nish a more correct data for ascertaining the law of mortality throughout the kingdom, more especially if Savings Banks were employed as part of the ma- chinery. It is to be considered, however, whether it would be right to allow depositors in Savings Banks to make purchases in the same Tontine Stock with those who would purchase direct from the Commissioners, since the maximum of the Savings Bank purchases would most probably be the mini- mum of the purchases of others; so that the deaths of the latter would greatly increase the dividends of D 26 such depositors, while those of the former would operate very slowly upon the general dividend. A separate Tontine for Savings Bank depositors might therefore, perhaps, be advisable. 27 The system of Tontine which niost nearly assi- milates to the plan laid down in the foregoing pages, is now in most successful operation in two Societies of recent formation ; viz. The Naval Annuitant Society, confined to officers in the Navy, and the General Annuity Endowment Association. The Author has had much pleasure in personally- assisting in the progress of the latter of these Institu- tions, which was established in September, 1829 ;* * The attention of the Author was first directed to this Society, hy a coincidence which will be best explained by an extract from the second edition of the ' Savings Bank Assistant.' In some ob- servations upon a plan laid before a Committee of the House of Commons to allow depositors in Savings Banks to purchase annu- ities through those establishments, the Author made the following remark : 'A valuable addition to the proposed plan would be, to grant reversionary annuities, commencing at the death of the sub- scriber, during the life of a nominee, which would enable a person to provide for his wife or aged parents on easy terms, who, in the event of his death, might otherwise be left entirely destitute of the means of support in the decline of life. Although this is somewhat on the principle of a life insurance, yet it is in fact only a provision for old age by way of annuity j and without it, a most essential link will be wanting in the chain of relief, which can no otherwise be supplied.' While the sheets were passing through the press, he observed an advertisement of the establishment of the General Annuity Endowment Association, for the insurance of contingent annuities to relatives after the death of the insurers ; thus em- bracing the very object he had suggested. He therefore imme- diately became a member, and has since had the honour of acting as one of the Auditors. 28 and the interest he has taken in its plans and opera- tions has induced him to consider more fully the nature of Tontines in general, and thus led to the present publication. He trusts, therefore, he may be excused for detailing the plan at large, more es- pecially as it is founded upon principles of so much equity and impartial justice, that, in his opinion, it only requires to be known, in order to be embraced by all classes of society. Some idea may be formed of the estimation in which it is held by those who have already become acquainted with it, by the cir- cumstance of nearly twelve hundred persons having become members in little more than three years. Similar societies have also been lately formed at York, Exeter, and Cork, and another is about to be established at Paris. The long list of Directors, Auditors, Arbitrators, &c. attached to this new Institution, might have created some fears in the public mind, at first, as to the economy of its proceedings, till they became ac- quainted with the fact, that the Secretary was the only officer who was remunerated for his services. The principle on which this Society is founded, is that of dividing the annual premiums and interest on capital annually among the nominated relatives of deceased members. This is an entirely new principle in life insurance ; being, in fact, a per- petual Tontine among the annuitants. The Associa- tion was established and enrolled under the Act of Parliament, 10th Geo. IV, cap. 92, for the purpose of securing, by mutual insurances, annuities to survivors, being relatives of its members, by small 29 annual payments on a graduated scale, commencing at 30^. under twenty-five years of age, and increas- ing 10*. for every five years, up to the age of sixty. The capital is formed thus. For the first five years no annuities are paid, the money, as it is subscribed, being paid into the Bank of England, to the account of the Commissioners for the Reduction of the National Debt, there to accumulate at com- pound interest, to form a permanent capital.* At the end of the sixth year the first annuities will be payable; but as there will then be comparatively few claimants, the whole of the premiums are not then to be divided, but only one twentieth part, with the interest on capital. Each annuity is also limited to fifty pounds ; so that if the amount to be divided should yield more than £50 for each annuity, the surplus, and the nineteen twentieths of the un- divided premiums, are to be added to the capital. The next year, the interest on capital, and two twen- tieths of the premiums, will be divided in like man- ner, the remainder being also added to the capital. It will thus be twenty-five years from the com- mencement of the Association before the principle will come into full operation, after which time the whole of the premiums and interest will be annually divided among the annuitants. The capital is fur- ther augmented by a sum charged at the time of nomination, in addition to the annual premium, for every year that a female nominee is younger than the member ; but no disparity money is paid for * The capital already amounts to about ^24000. 30 male nominees, unless they are thirty-six years younger than the member, in consequence of their ceasing to be annuitants after attaining twenty-one years. The design of the Society is, to occupy the place of the members at their decease, in a pecuniary point of view, towards the relatives they have no- minated ; and in order to afford the largest possible annuity to the claimants, there are several contin- gencies that will have the effect of withdrawing many claimants from the list of annuitants, without injury, however, to the paternal character of the So- ciety. For instance, an annuity ceases to be pay- able to a widow on her re-marrying ; but in case of her becoming a widow a second time, she may re- ceive her annuity as before : other female nominees cease to be annuitants on marriage, but will be again placed on the fund should they become widows. Male nominees, except the fathers of members who are annuitants for life, cease to be annuitants after the age of twenty-one ; but in cases of idiots and cripples being nominated, they will be considered as annuitants for life, upon payment of double the premiums, &c. which are paid for female nominees of the same age. From these numerous contingen- cies, the number of claimants will always be few in comparison to the number of members, so that the amount to be divided amongst them will be propor- tionably greater. The permanent capital of the Association being invested with the Commissioners for the Reduction of the National Debt, and bearing interest at the 31 rate of £3: 16 : OJ per cent, per annum is relieved from the risk of any depreciation in value that would attend it if laid out in the public funds. This ad- vantage, together with exemption from all stamp duties and agency, and rigid economy in the ex- penses of management, is the surest guarantee of the Society's being able to accomplish the laudable purposes for which it was established. This Institution forcibly addresses itself to those whose incomes terminate with their lives, as it will enable them to make a provision for their wi- dows, orphans, and other relatives, by such small annual payments as will not infringe on their do- mestic comforts, whilst such an insurance will ma- terially add to their peace of mind. Females may also become members, and nominate their children and relatives. Annuitants must be nominated five years before they will be entitled to receive annu- ities ; but should a member die previous to the end of the five years, and the nominee be unable to keep up the payments, the Association will pay all arrears, and deduct the amount, with five per cent, interest thereon, from the annuity when payable. Members are entitled to a second nomination, in case of the death of the first nominee, on pro- ducing certificates of good health. Persons are not required to nominate at the time of becoming members: and should they, being ba- chelors or widowers, afterwards marry and nominate their wives, the disparity sum will be charged on the class on which they originally entered ; and in the event of death, their nominees (being widows) 32 will be entitled to annuities on the completion of the first five years from the date of their joining the Society, instead of waiting, as in other cases, till the expiration of five years from the date of nomination. The Members are formed into eight classes, and on joining the Society pay the following premiums and entrance fee for each annuity, (quarterly, if de- sired,) which may be extended to any number not exceeding six, but not more than three annuities can be granted to one nominee. Years. Entrance Fee. Annual Payment. 1st Class, under 25 . . ^1 5 and ^1 10 O -\ i'g 5 X 2nd 25 and under 30 1 5 O 2 O 3rd 30 35 1 5 2 10 4th 35 40 1 5 3 5th 40 45 1 5 O 3 10 O 6th 45 50 1 5 4 7th 50 55 1 5 O 4 10 O 8th 55 60 1 5 5 J gya C 3 in t. c- i3 An entrance fee of 10^. for each annuity was charged in the first year, increasing 5^. per annum for the first five years. Example. A member under thirty wishing to provide an annuity for his wife, aged twenty-five, (being a disparity of five years,) would pay — For disparity (see 2nd Class in the Disparity Table cir- culated by the Society) .^0 16 O Entrance Fee 1 5 O Certificate of Admission, and Book of Rules O 2 6 Annual Premium 2 O O The last Annual Report O 6 Total for the first year ^4 4 O Ajid the future payment will be £2 annually. 33 'The Messrs. Morgans, Joint Actuaries of the Equitable Assurance Society, and John Tidd Pratt, Esq. Barrister at Law, appointed by Government to examine all Institutions formed under this Act, have approved of the equity and safety of the prin- ciple.' In order to afford the advantages of this Institu- tion to military officers on full pay, and those en- gaged in nautical pursuits, the Association is divided into two branches ; one, entitled ' The Civil Fund,* and the other, * The Military and Nautical Fund ;' each being kept distinct, as though they were two separate Societies. When the whole of the premiums and interest comes to be divided among the annuitants, the capi- tal will still continue gradually to increase, by the amounts paid for disparity ; and when the nominees of the present generation shall have passed away, the capital will be left for the nominees of the rising generation, who will then be the annuitants; so that there appears to be every probability that the Soci- ety will be able to accomplish the laudable design it has in view. In the first year's report the Directors remark, that * It is well known there are many Institutions in the Metropolis offering to the community the means of effecting assurances upon lives, in al- most every way which may be convenient; it is equally notorious, that other useful Societies exist of a more humble description, tending to the same object, and affording even to the inferior classes of society advantages commensurate with the amount £ 34 subscribed for : notwitbstanding these facilities, there was sufficient evidence, as exhibited in the excellent design of the Naval Annuitant Society, (a Society confined exclusively to naval officers,) that an Institution combining the principles of a life as- surance with those of a. Friendly Society, might be established with advantages equal, if not superior, to either : with this feeling, the plan of the General Endowment Annuity Association was originally brought to the notice of the public by Mr. Walter, the present Secretary, early in the year 1829 ; and after receiving the approbation of several individuals, competent judges of its merits, and notwithstanding the prejudices then existing against almost any new scheme, however feasible, the plan was finally ar- ranged and carried into operation on the 1st Octo- ber, 1829. The General Annuity Endowment As- sociation, thus constituted, has increased progres- sively, both in the number of its members and the amount of its capital, in a manner realizing the ex- pectations entertained by its projectors, and the Di- rectors who had the management of its concerns : and while its utility is apparent in holding out to individuals a sure means of protection to valued re- latives, the equity v^^hich characterizes its leading principles, together with the economy of its ma- nagement, cannot fail in accomplishing those happy results professed to be attainable through its me- dium.' In their second yearly report, * the Directors ob- serve, as evidence of the fact of the general esti- mation in which the principles of the Society are 35 held, that gentlemen equally eminent in their pi'o- fessions, their respectability in society, and for their high scientific attainments, are constantly enrolling themselves as members of the Association.' This incomparable system of mutual assistance to the relatives of deceased members was devised by a naval officer, Lieut. Somerville, who first attempted the establishment of the Naval Annuitant S(jciety ; and the plan does equal credit to the soundness of his judgment, to the acuteness of his foresight, and to the benevolent feelings of his heart. From the above outline, it will be seen that the Society can never become insolvent, because it does not, as most other Societies, engage to pay a cer- tain sum at the death of the insurer, in return for a certain premium received during life. The only engagement on the part of the Society is, to di- vide the interest on capital, and a certain portion of the annual premiums, equally among the annuitants. On the other hand, the Society is equally re- moved from the possession of a large unappropriated capital ; since whatever amount the capital may be, the interest will be divided among the claimants : and although for many years a large proportion of the premiums will not be divided, yet this accumu- lation is only for the purpose of equalizing the amount of the annuity, and to strengthen the Soci- ety against that period vvlien the deaths will come into fuller operation. In every view that can be taken of the General Annuity Endowment Association, it affords the most perfect satisfaction. Not only is the strictest 36 attention paid to economy in its proceedings, but every facility of inspection is afforded to the mem- bers ; and the accounts of the Society are kept with such minuteness of precision, that a great deal of unnecessary labour is at present entailed upon the Secretary, which, as the Society increases in its operations, may probably require that the accounts be arranged in a more condensed form. The steady progress of this new Insurance Soci- ety,* from its first commencement, will be seen by the following statement. In the first year, number of members 401 Capital £4,65g. second increased to 734 11,606. third 1077 21,720. In the 1st quarter of the 4th year, about 1200 nearly 25,000. Further information relative to this Society may be obtained at the Office, 63, Old Broad Street, London. * A Society sDmewhat similar to this Association has existed in Berlin ever since the year 1775. The payment of their annuities is regulated in the following manner : — If a member die within the first year, the nominees receive nothing j tf within the second year, one fifth ; if within the third year, two fifths ; if within the fourth year, three fifths 3 if within the fifth year, four fifths. Aftei completion of five years, they are entitled to the whole annuity. They do not admit persons of 45 years of age, if 29 years older than the nominee ; of 50 years, if 24 years older j of 55 years, if 19 years older j or of 60 years, if 14 years older than the nomi- nee : but there is probably no sum paid for disparity of age. THE END. J. PowErr,, Prinler, Hand Court, Upper Thames SUeet, London. LATELY PUBLISHED, THE SAVINGS BANK ASSISTANT, Exhibiting the whole Machinery of Savings Banks j with nu- merous Interest Tables, adapted to the use of Savings Banks and Friendly Societies. Second Edition. To which is prefixed, with Observations, The Report of a Select Committee of the House of Commons upon Life Annuities in connexion with Savings Banks. By CHARLES COMPTON. London : Published by Longman, Rees, Orme, Brown, and Green, Paternoster Row, and Saunders and Benning, Fleet Street : sold also by A. Black, Edinburgh, and Milliken and Son, Dublin ; and may be procured through any Booksellers in the United Kingdom. Price Five Shillings. It is gratifying to the Author to find that this little Work has met with such satisfactory encouragement as to require a Second Edition; and the testimonies he has received of its utility have as- sured him that his attempt to facilitate the calculations of Interest in Savings Banks, and to improve the general conduct of their Ac- counts, has not been unattended with success. He has also endea- voured to render it a useful manual to the Trustees and Managers of Savings Banks, by enabling them to obtain an easy insight into the whole machinery; knowing, by experience, that many Gentlemen who benevolently devote their time to the promotion of these bene- ficial Establishments, are still unacquainted with the processes of their internal management. * Mr. Compton's Treatise comprises a variety of useful information relative to Savings Banks, with many judicious hints for an improved management of these Establishments. The tables for computing interest will be found equally useful for Friendly Socikties.' British Press. ' The Savings Bank Assistant contains a practical and ready method of cal- culating in'erest on deposits in Savings Banks, with numerous tables adapted to the different rates of interest allowed by those Establishments, &c. The utility of such a book is self evident, and we have only to add that the plan of the work is most comprehensive and complete.' Gentleman's Magazine. [mm over.] ' A useful book, with tables and computations for a very beneficial Institu- tion. It will save the friends and managers of Savings Banks much labour.' Literary Gazette. ' We have felt great pleasure, in looking over this work, to find that the au- thor has anticipated most of the difficulties that are likely to occur in the affairs of Savintjs Banks ; and has offered a plan, both concise and perspicuous, for their management.' Weekly Times. ' We can recommend the perusal of this little work to all who are well wish- ers to the Savings Bank System, from the importance of the information which it contains, and the excellent and judicious arrangements which it suggests for the better management of these Establishments.' Public Ledger. ' The fact of this work having already attained a second edition, is the best proof of its utility ; and we may add, that, upon examining it carefully, we have found nothing to detract from the opinion which appears to be generally entertained of it. The object of the author has been to simplify, and conse- quently to facilitate the business of Savings Banks, by making known a more easy and accurate method of keeping their accounts, and computing the interest on deposits, than has been generally adopted. We may just mention, in addi- tion, that Mr. Compton's work contains a great deal of useful information to the Members of Friendly Societies and Annuitants generally, as well as to those who are connected with Savings Banks.' Morning Advertiser.