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DIVISION II. of Treatise on Associations for Promdent Investment.

INDUSTRIAL
INVESTMENT AND EMIGEATION,

BEISa A
ON

BENEFIT BUILDING SOCIETIES AND TONTINES,

AND ON

The General Principles of Associations

FOR

LAND INVESTMENT AND COLONIZATION,

WITH SOME

New Theorems in the Doctrine of Compound Interest.

ARTHUEiSCRATCHLEY, M.A., F.R.A.S.,

'^resident of the Friendly Societies' Iiufiliite,

AND

Formerhj Fellow and Sadlerian Lecturer of Queens' College, Camhriilge.

PUBLISHED AT THE

FRIENDLY SOCIETIES' INSTITUTE, 4, TRAFALGAR SQUARE,

AND Br

CHARLES MITCHELL, RED LION COURT, FLEET STREET, LOXDOK.

JroCCCLVII.

Third Edition, Enlarged.

'■•flfC

f^SfTV Of SOUTHERN CM fFORMIA LIRRARV

CONTENTS.

PART I.
TREATISE ON BENEFIT BUILDING SOCIETIES.

Chaptijr 1. Introduction ... ... ... ... ... ... Page 1

2. New Theorems in Compound Interest ... ... 11

3. On Terminating Benefit Building Societies ... 26

4. On Permanent Building Societies... ... ... 52

5. The Practical Management of a Building Society 67

6. The Balance Sheets of a Building Society ... 80

7. Rules for a Permanent Building and Investment

Society 94

8. On Life or Fidelity Assurance applied to Building

Societies ... ... ... ••. ... ... 124

9. The Act for the regulation of Benefit Building

Societies, with Observations & Legal Decisions 140

PART IL

TREATISE ON FREEHOLD LAND SOCIETIES, TONTINE
ASSOCIATIONS, & EMIGRATION SOCIETIES.

Chapter 1. Freehold Land Societies 157

2. Tontine Associations ... ... ... ... 173

3. Building Companies and Suburban Villages —

Remarks on the Rural Districts ... ... 187

4. Freehold Life Assurance — Application to the

extension of Emigration and Colonization ... 199

5. Benefit Emigration and Colonization Societies

— Draft Rules for the same 219

Appendix on the Doctrine of Compound Interest, Tontines,
A Deposit System for Saving's Banks, Deposit
Life Assurance, &c. ... ... ... ... 233

Practical Tables for Benefit Building Societies and

other Industrial Associations 297

. *^ ^ KJ' W*. J;.. W

PRELIMINARY REMARKS.

I. In the First Edition of this work, which was published in
the year 1847, we undertook, mainly, to examine the charac-
teristics of Benefit Building Societies, which were, then, all
established on the Terminating System, and endeavoured,
while pointing out and classifying errors of practice and
theory into which the majority had fallen, to *lay down
principles which might serve as a guide to the correct forma-
tion of future societies, and as the basis of some consistency
in their subsequent operations. We desired also to urge,
upon the Managers and Directors of many that were already
in existence, the necessity of turning their attention to the
errors described, and of taking such measures as might be
calculated to remedy the evil, by introducing judicious altera-
tions into their rules and rates of subscription, or by making
such other improvements as would be likely to avert from the
societies confided to their care the disastrous termination, which
they could not otherwise avoid. We recommended, also, the
new system, we had devised, of associations on the principle of
Permanent existence.

It is gratifying to observe, that this effort to raise the
standing of a class of institutions so eminently philanthropic
has not been wholly unsuccessful. A great many new
associations have been formed since 1847, upon sound and
equitable principles ; while the managers of others, of
some years' standing, have manifested considerable readiness
to attend to the suggestions offered to them, and have sought

" Prciace to first edition.

VI PRELIMINARY REMARKS.

to improve the defective portions of the constitution of their
respective societies.

They have seen that it is better to meet the difficulty,
whilst the effects of erroneous systems are still young, and
before the mischief produced has become insurmountable ;
and it is no slight justification for praise, that, on being called
together and informed by their Managers of the imprac-
ticability of their fulfilling, as the associations were then
constituted, the original letter of promise, the members, in
most cases, have consented to steps being taken for the intro-
duction of sound principles, although their previous expec-
tations were thus disappointed.

A great number of Terminating Societies have, conse-
quently, been converted into Permanent associations ; and rules
and tables have been adopted, by which all previously existing
and subsequent members are placed on the same footing as if
the new clauses had been in force from the beginning. The legal
impediments, which borrowers might have thrown in the way
of improvement, have been obviated by due care having been
taken that the conversion should proceed in so impartial a
manner, that neither their just interests should be disregarded,
nor their cause favoured to the disadvantage of the general
body.

This was all the more necessary, as several societies, that
have been converted without proper precaution in this
respect, have become involved in litigation, with its conse-
quent endless expenses, which might have been easily
avoided if the requisite conditions had been attended to at
the time of the conversion.

II. Thus far, therefore, the object aimed at by us has been
attained; and it would not have been necessary to make much
addition to the previous editions of this work, were it not
that a strong tendency in the public mind, towards the forma-
tion of other kinds of Industrial Associations, has become more
and more manifest; and Benefit Building Societies, under the

PRELIMINARY REMARKS. Vll

name of *Freehold Land Societies, have been applied to the
attainment of new objects, such as the extension of the
Elective Franchise, &c., which are totally different from that
for which they were originally designed, and were not con-
templated in the Act of Parliament relating to their govern-
ment.

III. As, however, it is desirable that the new features thus
introduced, as well as those which characterize other similar
societies, should be guarded from the defects which have so
disfigured their predecessors, we have traced, in additional
pages, the general outlines of some of the chief varieties of
the new institutions, under the form of supplementary chap-
ters to the more detailed account contained in the first part
of this Division of the Treatise. We have, also, endeavoured to
explain the advantages of Tontine associations, and the excel-
lent application that might be made of Life Assurance, with

he systems of Fidelity and Loan Guarantee. Chapters have,
further, been added in explanation of the principles upon which
Benefit Societies might be formed, so as to assist in the high
purposes of systematic Emigration and Colonization.

IV. To bring the Art of Colonization within the compre-
hension of the industrious classes, we believe it is necessary to
interest their minds and pecuniary ambition in the subject.
The control and advocacy of the movement must be committed
to their diligence and sympathy. It is not by the reserved and
distant-mannered representatives of a great company, that
their co-operation in systematic colonization will ever be
obtained, or the Art be developed to perfection ; but by the
Super-association — if we may be allowed the term — of a series
of industrial associations united for the furtherance of the
same popular object.

* [See Division III., or, Treatise on the Enfranchisement and Improve-
ment of Copt/hold, Church, and Life Leasehold Property, for further
developments of the principle of Land Transfei- and Registration, and for
a set of Rules suited for a Freehold Land JSocict>/.]

via PRELIMINARY REMARKS.

V. The plan that, in the last chapter of Part II., will be
found described for the carrying out our idea of Benefit
Emigration and Colonization Societies, may be, perhaps, in some
points, susceptible of advantageous modification or improve-
ment ; but in the absence, as yet, of those facilities that may
be properly accorded by the legislature, either to the central
company recommended by us, or to the Commission, which
is the agent of the Government, we can desire only that our
system should be accepted by our readers in the light of a
first attempt to adapt, for practical operation, the elements
of a mighty scheme.

On the locality to be selected, as the basis of any colony,
we have expressed no opinion, since that has not formed part
of the object of this work. Much, nevertheless, might be
said upon the question, if into consideration be taken the
relative distances of the colonists' future habitations from this
kingdom, and the great- r or less diminution which must arise
in the available means of their support left unexpended at
their arrival. The difierence in expense of maintenance
during passage to a colonist, or to the country that sends him
out, varies materially according to vv^hether the rendezvous of
emigration be the British provinces of North America, which,
at but 2,500 miles' distance, can be reached in ordinary^ sailing
vessels in some 30 days, or the Australian colonies, that
require, by the speediest method of transit upwards of 60
days to arrive at the end of a journey of 14,000 miles. On a
large body of emigrants the effect of such a difference in
expense would be of essential importance, and, to balance it
the land to be purchased should be at a much lower price, which
is the reverse of the actual fact at present. — {See note to page
230.)

The broad principles of the Art would, in any case, be the
same : to draw closer the ties between the colonies and the
mother country ; to reproduce England on the other side of
the great oceans ; to create for her superabundant population

PRELIMINARY REMARKS. IX

institutions, feelings, and a state of beneficial civilization, as
near akin to that of this country as possible ; and to induce the
parent to promote her own interest by watching after the future
welfare and by strengthening the hands of her children ; so that,
through discontent and indignation at neglect, they may never
be led even to consider the possible advantages of Separation.

VI. Before entering into the specialities of the Treatise, we
would detain the reader's attention, for a few moments, on the
legal constitution of associations, contemplated for the purpose
of fostering a provident spirit among the industrious classes,
whether it be in the investment of their savings, or in the
effecting of various objects rendered desirable by the neces-
sities of their situation. According to the present laws, un-
less by a special Act of Parliament or Royal Charter, a
legal existence can only be given to them by registration
under the Friendly or Benefit Building Societies Acts, or
under the recent Act of 1856, (19 & 20 Vict. cap. 27) for the
regulation of Joint Stock Companies, whereby that of 1844
(7 & 8 Vict. cap. 110) is repealed. The new Act was passed
to meet the instances which used to occur, where admirable
institutions, from not being exactly within the definition of
the former privileged Acts, had either to be abandoned or
enrolled under that of a Joint Stock Company, and thus
entail responsibilit}^, without limit, upon the promoters and
others, who furnished, under the name of shareholders, the
working capital. By the new Act, Companies may be formed
either with or without limited liability to the shareholders,
and ver}' little expense is entailed in the registration. [See
Division VI. (of the work of which this is the 2nd Division)
on Industrial Partnership Societies under the new Act.] It
is to be hoped tlnit the facilities granted by the improved law
will afford a great impetus to the institution of superior
trading companies, under the management, and with the aid
of that class of prudent people, not mere speculators, who

X PRELIMINARY REMARKS.

have hitherto been deterred from entering into public enter-
prises, through tlie danger, in case of failure, of the total ruin
of themselves and of those members who may happen to be
possessed of property. The industrious classes used formerly
to see plans set on foot, with which they would readily asso-
ciate, were it not that, by so doing, they created a Joint
Stock Company with its indefinite responsibility. Through
this, too frequently, the best combinations were left in the
hands of reckless speculators, whose unlimited liability was
of no value.

Among the motives for the recent change in the law, were
the opinions expressed by the Parliamentary Committee, who
referred to the rapid increase in population and in wealth
of the middle and industrious classes within the last half
century, and who contended that the great change in the social
position of multitudes, from the growth of large towns and
crowded districts, renders it more than ever necessary that
corresponding alterations in the law should take place, both
to improve their condition and contentment, and to give
additional facilities to investments of the capital which their
industry and enterprise is constantly augmenting ; and " that
if such measures were carried into efFect^a stimulus would be
given to the industry of the country, likely to cause addi-
tional employment and contentment, without injury to any
class, and with increased securit}' to the welfare of all."

VII. We should mention, perhaps, that an Act (15 & 16
Vict. cap. 31, called the " Industrial and Provident Societies'
Act") was passed in 1852, ostensibly with the object of facili-
tating Industrial Trade Societies, but it has become a dead
letter from its birth, through the absurd restrictions it contains
as to r —

1st. The amount of interest a Member may have in the
Society.

2nd. The mode in which the profits are to be appliL'd, and

ord. The condition that his liability should be Mwlimited.

PRELIMINARY REMARKS/ XI

A variety of errors and oversights also disfigure the Act,
which it has been attempted partially to remove by subsequent
clumsy enactments in 1854 and 1856.

The new Joint Stock Company's Act of 1856 is, however,
infinitely preferable to all the above industrial Acts.

YIII. Yet all the contemplated improvements in industrial
associations will be rendered nugatory, unless some provision is
introduced to secure thorough respectability and good faith in
their management. The recent defalcations in Savings' Banks,
to such an extent as to require grants of money from Parliament,
for the relief of the subscribers, from utter loss of their savings,
and the reckless promises of so many of the Joint Stock Com-
panies, Friendly Societies, and Loan Companies, made to induce
business, cannot fail to produce conviction of the urgency of
some public system of Auditing accounts, whereby the interest
of the public at large may be protected. Even the few
investigations hitherto made by Public auditors, deputed for
that purpose to various institutions, have evinced the efficiency
of some such plan of inspection. It stands to reason, that
errors in the principles by which the form of the accounts is to
be guided, or unjustifiable measures in the management of the
concern, are only likely to be obviated by the check supplied
through an independent and impartial audit, by which not
only the Account books, but the Minute books of the Directors
and the Letter book of the Secretary are examined.

IX. The power of Association, which, in the present day,
is becoming so well understood, is applicable, of course, to
numerous other purposes besides those discussed in this
Division of the Treatise ; and we have endeavoured, in the
other Divisions, to explain the principles upon which other
associations should be established or conducted.

The arguments, adduced in support of our views respecting
the institutions specially examined in this part, are, however,
applicable to any other, in which it is desired to settle upon

Xll PRELIMINARY REMARKS.

a sure basis the relative position of the members. The truth
of the following remarks of the eminent philosopher, Rossi,
is now recognized.

" L'association est un instrument, une arme de la plus
haute puissance." . . . " Le progres social ne pent consister k
dissoudre toute association, mais a substituer aux associations
forcees, oppressives, des temps passes, des associations volon-
taires et equitables. ' ..." Tout peuple, chez lequel pent
se realiser cette haute combinaison de la puissance individuelle
avec le principe d'association, est entre definitivement dans la
carriere de la Civilisation Progressive.'''' *

But, in our admiration of the principle in question, through
which much benefit might be derived by the working classes,
from their co-operation in trades or manufactures, and the
maximum of advantage might be secured from the repro-
ductive use of their /acM^^ie^, just as in the material invest-
ment of their monetary property, we would not desire that, in
carrying out the association of individuals, the subdivision of
labour, and consequent speciality of employment, should be
carried to such an extent as to narrow the intellectual
faculties of any man to a single operation. With Adam
Smith, we feel " that the understandings of the greater part
of men are necessarily formed by their ordinary employment;
that dexterity at a particuh r trade seems too often to be
acquired at the expense of intellectual and social virtues;
that the uniformity of stationary life tends to render them
jncapable of exerting their strength with vigour and perse-
verance in any other employments than that to which they
have been used."

X. We commend to the attention of our readers one appli-
cation of which the Joint Stock Companies Act of 1856 is
susceptible, namely :

The formation of " Credit Foncier" or Land Credit Asso-

• Cours cV Economic Folidque. — llossi. Tome 2.

PRELIMINARY REMARKS. Xlll

ciations on the principles that have been found so beneficial
in Prussia, Poland, Bavaria, Hanover, and many of the smaller
German States; in Switzerland and Belgium, and which more
recently (in 1852) were introduced into France by the Em-
peror, then president of the Republic.

Their object is: firstly, to mobilize the soil, so as to give it
a transferable species of Credit which can be used and trans-
ferred like a bill of exchange ; and secondly, to facilitate the
liquidation of Mortgages on land by gradual instalments. The
reader, who is interested in the subject, should peruse the
Memoire (1848) of M. Wolowski on the organization of the
Credit Foncier; and the Manuals of M. Le Hir (1852) and
M. Emile Beres (1853), which contain much valuable infor-
mation on the subject of Land Credit Banks. The system of
the Credit Foncier of France, which we personally examined
in 1853, does not seem yet, however, to have met with the suc-
cess it deserves, through the opposition of the provincial notaries,
whose profits in conducting advances on land it would have
tended to diminish. The Report of M. Josseau to M. Dumas,
Minister of Agriculture (1851), should be consulted; as also
M. Royer's work on the Institutions for Land Credit in
Germany, and the recent admirable suggestions of Mr. Vincent
Scully, Q.C., M.P., for a new Land System.

Mr. Scully remarks that, "It is a most idle illusion to
imagine that a sound measure to facilitate Transfer of Land
can ever tend to its undue subdivision, to give an improper
impulse to democracy, or to affect injuriously the aristocratic
element of these kingdoms. Such a measure would produce
the very opposite results. Should the occasion arise, it will be
easy to demonstrate that the free Sale and Purchase of Land
can lead to no over-population of a country, or morcellement
of its farms. It would have a highly preservative tendency,
and would stabilitate a territorial proprietary, whilst admitting
all industrious classes into either a present or a prospective
participation in the ownership of Land. In the words of the

XIV PRELIMINARY REMARKS.

Chief Secretary for Ireland — ' Its operation would be to iii-
' crease the value of land to the Seller, and to give security
' to the Purchaser. It would also have the effect of enabling
' persons to buy small portions of land, and, by that means,
' of steadying the minds of the public and encouraging them to
' make investments at home.' "

It has been further argued by Mr. Scully that a system of
Land Deheyitures should be created, of which there are *already
several instances in force in England and Ireland — one of the
most remarkable being that conferred by the Legislature on the
Lands Improvemetit Company, through a special Act, the
16 8f 17 Vict. cap. 154, enabling it to charge land with trans-
ferable Debentures, in order that the owners may make
improvements tending to develope the resources of their lands.
It would be impossible to overrate the benefit, that would arise
to small capitalists from the existence of a general system of
fLand Debentures, to be registered in such a manner as would
adm.it of legal rights being secured without tedious or expensive
preliminaries.

* [For Example : — In England ; Land Drainage Company's Act, 12,
13 Vict. c. xci. ; Copyhold Enfranchisement Act, 15, 16 Vict. c. 51 ; Land
Improvement Company's Act, l(i, 17 Vict. c. cliv. — Ireland ; Land
Drainage Act, 5, 6 Vict. c. 89. s. 100 ; Farmer's Estate Society's Act, 11,
12 Vict. c. cliii.; 14, 15 Vict. c. cxliii. ; Sir J. Romilly's Secvu-ities for
Advances Bill of 1850. — Channel Islands ; See Duncan's Guernsey, p.
286 ; Berry's Guernsey, p. 177 ; Plee's Jersey, p. 251 ; Le Cras's Laws of
Jersey, p. 324 ; V. Scully on the Channel Islands, p. 64. — Europe ; See
"Land Credit Companies of Prussia," by W. Pollard Urquhart, M.P.
(1853) ; Jacob's Tour of Poland (1826) ; and as to Belgium, Hamburgh,
Frankfort, and parts of Germany, see Evidence of Mr. James Stewart
and Mr. John Stuart Mill, before the Commons Savings' Committee
of 1850.]

t [Agricultural Statistics (England). — A blue-book, lately pub-
lished, contains the reports of the Poor Law Inspectors on agricultural
statistics in England in 1854, presented to Parliament. Fi-om a general
summary prefixed to the local reports, it appears that the gross estimated

I'RELIMINAIIY Rl^MARKS. XV

XL The Appendix to this Division will be found to contain
various interesting investigations into the operations of societies
dealing with compound interest and life contingencies, and
more particularly suggestions for the extension of Savings
Banks, &c., by the* deposit system, which we have devised, of
contributions based upon two simultaneous rates of interest,
one for Accumulation, and the other for Withdrawals.

XII. In conclusion, we would impress upon our readers, tliat
the establishment of such associations and companies, as are

totals in the counties of England and Wales were as follows — viz.,
number of 'statute acres, 37,324,915, of which the following numbers
were under tillage for various grains — viz., 3,807,846 acres of wheat,
2,667,776 acres of barley, 1,302,782 of oats, 73,731 of rye, 698,188 of
beans and peas, 218,551 of vetches, 2,267,200 of turnips, 177,263 of man-
gold, 12,638 of carrots, 192,287 of potatoes, 10,156 of flax, 18,976 of
hops, 1,079 of osiers, 97,334 of other crops, and 895,969 bare fallow land,
making a grand total, under the agricultural division, of 12,441,776 acres.
The grand total number of acres under grass, amounted to 15,212,203,
including 8,174,946 acres of permanent pasture land, and 2,224,862 acres
of sheep walks and downs. The number of acres in houses, gardens,
roads, <fec., was 976,197 ; the number of acres in waste attached to farms,
786,658 ; the number of acres in wood and plantations, 1,697,362 ; the
number of aci'es in commons belonging to parishes, 1,937,164: the
number of acres in holdings of less than two acres, 459,447 ; and the
number of acres not accounted for, 3,814,108. The stock of all the
counties in England and Wales in 1854 included 1,050,931 horses,
258,079 colts, 1,376,730 milch cows, 707,192 calves, 1,339,279 other cattle,
including working oxen, 244,106 tups, 7,299,915 ewes, 6,987,982 lambs,
4,159,085 other sheep, and 2,363,724 swine. It should be explained that
returns have been received from eleven counties only, those for the re-
maining counties being simply estimated. In England, 61,496 acres, 3
roods, and 23 perches are occupied by railways ; while in Wales, 3,550
acres and 23 perches are occupied by railways.]

• [See Division I,- for a set of Deposit Tables, calculated by the
formulae above i-eferred to, for the use of Savings Banks and Industrial
Societies.]

XVI PRELIMINARY REMARKS.

considered in this Treatise, can only lead to satisfactory'
results, and avoid reacting, by failure, as a check upon the
continuous energy and forethought of the industrious classes,
through the managers constantly bearing in mind, that,
even when the broad principles of a system are definitely
settled, the details are far from being unimportant; that
nothing is more easy than to ruin the most carefully con-
structed plan by committing apparently trifling errors in its
execution ; that the inconsistencies and objections to many of
the existing associations, vs^hich we have examined, are easy
to obviate, as their prevention lies entirely within the province
of the parties who are charged with the management of the
society's operations ; and that our object is not only to expose
errors, but to direct attention to the principles of the plans
themselves, as containing materials for improvement, which
may be made beneficial to the community at large. With
the lamented economist, M. Frederic Bastiat, we would say
that, " *Aux douleurs de la concurrence I'humanife apprend,
chaque jour, a opposer deux puissants remedes : la Prevoy-
ance, fruit de I'experience et des lumieres, et 1' Association, qui
est la Prevoyance Organis^e.

• Harmonies Economiques.

A TREATISE ON BENEFIT BUILDING SOCIETIES,

AND ON THE

GENERAL PRINCIPLES OF ASSOCIATIONS

LAND INVESTMENT AND EMIGRATION.

PART I.

ON BENEFIT BUILDING SOCIETIES.

' The subject of this xoork has jiresented difficulties of a complicated
character, from the various j^hases under which the fecidiar defects of
individual societies appear. The task has, however, been lightened hij the
reflection, that, althoxogh it cannot be expected that this effort, to place
them upon a more rational and secure footing, loill m£et with the success
of wholly obviating errors for the future, yet a most important end will
at once be obtained, if the attention of the Patrons, Trustees, Directors
and other officers of many of these institutions, be awakened to the sense
of the grave moral responsibility incurred by them, in allowing their
names to be connected with schemes, which, while professing to beiufit,
do but cause injury to those, for ivhose good they were designed, — to
individuals not of equal information and position with themselves, but
from a class remarkable for the simple faith loith ^uhich they believe in
any statement, that is sanctioned by the coicntenance of their superiors.'' —
[Extract from preface to first edition.]

CHAPTER I.

INTRODUCTION.
Art. 1. — Among the remarkable features of the present
age, Benefit Building Societies occupy a very lead hig position.
They have increased in such numbers during the last few
years, not only in the metropolis, but in every part of the
kingdom, that it has become a matter interesting to all to
understand, correctly, their object and the true principles on
which they ought to be founded. This information is the
more desirable, as large sums of money are already subscribed

INTRODUCTION.

to these associations, and they seem likely in a few years to
engage in their operations a considerable portion of the in-
vesting capital of this country. But, although they have
received extensive support from the industrious classes, it
is painful to find, that very few of the existing societies are
guided by principles, which can, either in theory or practice,
justify the hope of their terminating with the advantageous re-
sults held out as an inducement to parties to become members.

That the principles of Building Societies should be erro-
neous, and yet that their popularity should be so widely
extended, may be ascribed to two causes. As yet, but few
persons of sound mathematical knowledge or experience in
calculations have turned their attention to the subject, and
the societies hitherto formed have been deprived of that basis
of science and just reasoning, which alone can ensure the
prosperity of this or any similar kind of speculation. On the
other hand, the members of these associations have, in general,
been led to expect from them an unreasonable degree of
benefit — a false impression, which has been shared even by
persons of the more educated orders.

2. — A Benefit Building Society, when properly constituted,
is a species of joint stock association, the members of which
subscribe periodically, and in proportion to the number of
shares they hold, different sums into one common fund,
which thus becomes large enough to be advantageously em-
ployed by being lent out at interest to such of the members
as desire advances ; and the interest, as soon as it is received,
making fresh capital, is lent out again and again, so as to be
continually reproductive. Large sums may be raised in this
manner; for, to take an example, if 1000 shares were sub-
scribed for at \0s. per month per share, the amount in one
year would be £G000, which, month by month as received,
might be advanced to any members, who should wish to
become borrowers. The payments of Borrowers are so
calculated as to enable them to repay, by equal monthly or

INTRODUCTION. 3

less frequent instalments, within a specified periocl, the prin-
cipal of the sum borrowed and whatever interest may be due
upon it throughout the duration of the loan. The other
members who have not borrowed, and who are generally
called Investers, receive, at the end of a given number of
years, a large sum, which is equivalent to the amount of their
subscriptions with compound interest accumulated upon them.

The idea of a society upon this principle, correctly formed and
afterwards properly managed, is of the most admirable kind.
For on the one hand, it holds out inducements to industrious
individuals to put by periodically from their incomes small or
large sums, which are invested for them by the society, and,
at the end of a certain time, are repaid to them in the shape
of a large accumulation, without their having themselves the
trouble of seeking for suitable investments ; while on the
other hand, the money subscribed, being advanced to some of
the members, enables them to purchase houses, or similar
property, and to repay the loan by small periodical instal-
ments, extended over a number of years.

3. — As regards the purchasing of house property, Benefit
Building Societies must be deemed peculiarly beneficial. We
have only to consider how large a portion of a man's income
is usually absorbed by the payment of rent, especially among
the lower classes, who pay for their tenancy much more
heavily than their richer neighbours, considering the relative
value of the houses which they occupy. It has been justly
said, that " Every one knows something of the ultimate cost
of hiring furniture for their houses or lodgings ; they know
that it is much more advantageous to the hirer of furniture
to buy the articles outright than to pay continually for their
use ; and, therefore, most prudent people in the middle and
humble walks of life, make it a rule to purchase their own
furniture and other articles of domestic comfort and con-
venience. They know that the price paid for long hiring is
at least equal to the original price of the article hired. And

B 2

INTRODUCTION.

yet how many thousands of persons there are in the Metropo-
lis only, who deem it an unwise extravagance not to purchase
their articles of household furniture, and yet are quite content
to hire their homes. What numbers occupy hired houses or
apartments, to deposit their own furniture in."

4. — It is, however, only by means of these societies that
persons, who are not possessed of capital and who merely
receive their incomes periodically, can ever become possessors
of a house ; and this they are enabled to do only from the
practical fact, that the annual repayments, required by a
society upon a loan, do not much exceed the rent of a house,
which could be purchased with the sum borrowed ; so that a
man living 10 or 14 years in a house, instead of paying his
rent to his landlord and thus losing so much money for ever,
pays it with a small addition to a Building Society for a
limited number of years, and in consideration of his consent
to this arrangement, the society advances him at ouce the
money requisite for the purchase of the property, which thus
in the stipulated time, when the loan has been repaid with
interest, becomes entii-ely his own, the money advanced being
in the meantime secured by a suitable mortgage.

5. — Such is the simple outline of the plan pursued in tlie
practice of Benefit Building Societies, and if efficient means
could be provided for securing correctness in their principles
of calculation and a fair and honourable way of carrying out
their object, these institutions might undoubtedly be con-
sidered as an excellent application of the system of mutual
association. A private individual usually finds it imprac-
ticable to obtain an advantageous accumulating interest for
the smaller sums, which he can spare from his necessities.
This arises from the circumstance of his having no means of
procui-ing satisfactory information respecting the adequacy of
any security contemplated for his investment, nor is he in the
way of hearing of remunerative opportunities, which present
themselves from time to time.

INTRODUCTION. O

An association, however, of provident persons can command
all that is wanting to the single member ; and, although the
trifling contribution of each by itself would be too small to
be capable of reproductive investment, yet, when united with
others in a large sum, it becomes a proportionate participator
and has its representative in the aggregate profits of the general
body. Moreover, where there exists a variety of amount of
talent and capital, their union for the purposes of carrying out
the same design facilitates and renders possible its accomplish-
ment. The efforts of a body of men in pursuit of a good object
are generally successful, whether they endeavour to attain for
themselves definite and tangible results by the operation of
great commercial enterprises, or whether they combine with
the provident desire to avert, as far as possible, the pecuniary
loss, to which the death of any individual among their number
would expose the members of his family. As an application
of the former species of association, though in a limited degree
and among humble classes. Benefit Building Societies have
proved a remarkable illustration of the great advantages
conferred by the working of this principle, but they are yet
so obscured by defects and errors, as to require the application
of many improvements, both in their system and practice, to
prevent them from sinking into disrepute.

6. — The first Benefit Building Society, which can be traced,
was founded in 1815 under the auspices of the Earl of
Selkirk. It was a village club at Karcudbright in Scotland.
Other institutions of a similar kind were afterwards estab-
lished in the same kingdom under the title of ' Menages,' and
the system was soon adopted in England by societies formed
in the neighbourhood of Manchester and Liverpool, and other
parts of the North. After the year 1830 they increased so
rapidly, that on the 14th of July 1836, a special act (6 and 7
William IV, cap. 32) was passed for their encouragement and
protection, in the provisions of which were embodied certain
clauses applicable to their conduct, which were included in

6 INTRODUCTION.

the statutes relating to Friendly Societies, passed in the
reigns of George III and George IV. As a proof of their
numbers it may be stated that up to the 30th September 1850,
there had been registered in the united kingdom considerably
over 2,000 societies, of which in England alone 169 were added
in the first nine months of that year — a proportionate increase
having taken place in Scotland and Ireland. Of these socie-
ties, there is evidence to shew that about 1,200 are yet in
existence, the total income of which is calculated at not less
than £2,400,000 a year. In fact, there are two or three whose
annual incomes are between £50,000 and £60,000 each.

7. — The Act of Parliament just mentioned was passed in
1836, under the designation of "An Act for the regulation
of Benefit Building Societies," for the express purpose of
encouraging the formation of such institutions, by granting
them various privileges, among which is the power of charging
a higher rate of interest than was formerly allowed ; while, to
protect their subsequent operations, it was enacted, that each
society should be governed by certain rules, to be approved
of, and so certified, by a barrister appointed by Government.

When this act was passed, it seems to have been overlooked
that societies of this kind would be exposed to more serious
danger than ever, when thus encouraged by a special act, if
the rates of subscription were to be left unguided by any
advice or check furnished by competent authority. This cir-
cumstance has been the cause of considerable mischief, inas-
much as by far the greater number of the existing building
societies are founded on incorrect principles of payment, and
many evince on the part of their originators much ignorance,
even of the simplest operations of compound interest. In
some instances the statements put forth are very extravagant,
and it would not be easy to account for the confidence with
which they are too often received, were it not that a species
of fascination for this kind of investment seems to possess the
minds of the industrious classes; and even persons of superior

INTRODUCTION.

position, who would be expected to have more information,
have united in giving their sanction to the error, for it has been
found that no Benefit Building Society has ever been started,
however ridiculous its pretensions, which has not speedily
succeeded in drawing together a number of shareholders.

8. — The tone of moderation assumed in many of the prospec-
tuses appears sometimes to proceed from an honest conviction on
the part of their authors, and, as such, is but too well fitted to
gain the confidence of single-minded persons : it is not unusual
to find some impossible project represented as "no specula-
tion— no scheme, by which uncertain results are to be obtained,
but a sober, well-tried, and successful mode of associating
together a number of persons for the benefit of the whole,"
and then, although it is deemed unnecessary to give the
grounds upon which their promises are founded, they shelter
themselves beneath the mantle of legislative sanction, and
adduce the Act of Parliament as being of " itself sufficient
evidence of the favourable opinion entertained by Government
of their Society." It cannot be wondered at that statements,
advanced in such language as this, and supported by so high
an authority, too frequently gain the confidence of the public.

9. — Nor is it thus only that the legitimate object of Building
Societies has been perverted. In order to render them popu-
lar and attractive, the projectors have also, in many cases,
not contented themselves with promising to the poor but
industrious man the privilege of becoming the possessor of a
house by easy means ; but have unhappily infused into him
an eager desire to obtain a disproportionate amount of gain in
his purchase. Hence it comes to pass, that, instead of his
feeling a lively satisfaction, at being able to get possession of
his house by the payment to a society of very little more than
the amount of his rent during a reasonable number of years,
he is taught to believe, that the important advantage he covets
can be obtained for him by means and within a period of time,
which connnon sense ought to have suggested as impossible.

O INTKOUUCTION.

Whilst this attraction is held out to the borrowers, a
similar sacrifice of principle is made to the investers, or non-
borrowers, who are promised large accumulations at the end
of a limited number of years, in return for disproportionately
small monthly subscriptions. The same prospectus will fre-
quently contain these incompatible statements, and yet the
subscribers believe with implicit and blind faith in the virtues
of the scheme, into the practicability of which they do not
trouble themselves to inquire. They lose sight of the fact,
that, in saving a little money they are but providing against
misfortunes and the exigencies of life : that facilities for the
investment of their savings are only valuable, in so far as they
increase their means for that purpose, and that, not for one
moment, should they labour under the delusion that, by
joining this or that association, their fortunes can be made
without trouble. Such hopes cannot receive too strong a check,
as they give rise to ideas, which lead the working classes beyond
their sphere, and incapacitate them for the exertion necessary
to maintain them in it, and thus cannot fail to induce misery
and disappointment in the end.

10. — In addition to the discouraging effect produced by the
errors introduced into so many existing societies, there are
other obstacles to their complete success, that arise from some
imperfections in the Act of Parliament relating to them, the
discussion of which would be too long in this place. More-
over, from these societies having been, up to a recent period,
chiefly dependent on the lower ranks of life, their resources
have been too limited to render their operations sufficiently
important to attract the attention or secure the assistance of
persons of information or talent. In the presence, however, of
these objections or difficulties, it may confidently be affirmed,
that their introduction into this country has been accompanied
by very happy results in promoting habits of economy and
prudence among the poorer classes. Much good has been
obtained by their enabling so large a number of persons to

INTRODUCTION. if

become possessors of houses and land, which, on tlie conclusion
of their payments, they occupy free of rent, and can transmit as
a little property to their family. This pecuniary interest serves
at once to bind them to the soil and to promote a feeling of love
and veneration for the national institutions of their country.

11. — Yet it is remarkable that this excellent principle has
been completely overlooked by a class of persons, in more easy
circumstances, to whose case it would admit of more ready
and certain application. There are a vast number of profes-
sional men, and others engaged in commercial pursuits, with
ample means, who continue lor years to pay away large sums
in rent, without reflecting, that, by uniting together in the for-
mation of a superior kind of Benefit Building Society, they
would be able to realise additional property for their families,
with but little extra outlay. Such a society would also oflfer
another channel for temporary investment to many non-com-
mercial persons of the higher classes, who would be willing, as
Investors, to lay out, from time to time, comparatively small
sums of money at advantageous interest.

\2. — Hitherto the money accumulated by these associations
has been devoted solely to the purpose of enabling members to
become purchasers of houses and land, or similar property ;
yet, as far as the principle is concerned, there is no reason why
it should not be applied to other objects, provided the invest-
ment obtained be equally safe. Illustrations of this kind will
be given further on (Chapter 8), where will be found remarks
on the plan of a Building Society, the shares of which, by the
adaptation of a combination of Life and even Fidelity Assur-
ance, can be made payable at the end of a definite number of
years, or sooner in case of death ; while, at the same time,
they may serve as security for the fidelity of the possessor,
when holding a situation of trust.

We shall conclude this chapter with a statement of
some of the leading examples of the various uses, to which
Benefit Building Societies are at present applicable.

10 INTRODUCTION.

1st. — Provisions for Old Age may be secured, payable at
the end of any number of years, by a person joining
the society as an invester.

2nd. — Houses can be purchased^ instead of being hired,
by an inconsiderable increase of annual outlay.

.'3rd. — Heads of large commercial establishments and
ministers of parishes may, by affording encourage-
ment, advice, and protection in the formation of such
societies, secure more benefit for their dependents and
the humbler members of their charge, than can be ob-
tained by any effort, however extensive, of private
charity.

4th. — Leaseholders, such as farmers or others, desirous
of providing for the Jine on renewal of their leases (if
for terms certain), can do so by joining a society as
investers, and subscribing for such number of shares
(to be received in full at the required time) as will
meet the amount desired. This obviously would be to
many an easy mode of providing for what is now often
felt to be a difficult and onerous charge.

5tli — The Premiums or Fees for placing boys as appren-
tices or articled clerks to solicitors, engineers, &c., can
be obtained in a similar way.

6th. — Marriage and Family Endowments of all kinds can
be secured.

7th. — Benevolent Institutions and Religious Societies
can borrow funds iov the erection of churches, alms
houses, schools, chapels, &c., or for the immediate
paying off of any debts from such institutions, and the
amount borrowed can subsequently be ]-epaid by chari-
table contributions periodically collected.

CHAPTER II.

ON THE NATURE OF THE OPERATIONS OF COMPOUND
INTEREST.

" L'Interet est Ic loycr d'un Capital prete, ou bien, en termes plus exactes,
achat des services productifs que peut I'endre un Capital." — Say, Eco-
nomie Politique, Tom. ii, p. 480, Ed. 4eme.

Art. 13. — Previously to describing the theoretical con-
struction of a Benefit Building society, or any other similar
association, a few remarks will be necessary respecting the
principles of compound interest, on which the rates of sub-
scription are supposed to be based, so that the general reader
may be enabled to judge of the manner in which the advan-
tages to be derived from these institutions are attainable, and
appreciate the influence, which the practical contingencies,
examined in the succeeding sections, may be expected to have
on the results produced by a mere theoretical investigation of
the subject.

It would be irrelevant to the object of this work, to enter
into the doctrine of interest further than may be necessary to
elucidate and explain the nature of Benefit Building and other
Investment societies ; we shall therefore confine ourselves to
a few general outlines, and refer the studious reader, for
more extended information, to Treatises specially devoted to
the science ; we have treated the subject analytically in the
Appendix, and in this chapter have merely collected some of
the practical results.

\2 INTEREST OF MONEY.

INTEREST OF MONEY.

14. — It is the custom in all civilized countries, that one
person borrowing a sum of mone}' from another, should pay
him periodically for its use a certain consideration under
the name of Interest. This consideration varies in amount
according to the nature of the security given for the loan,
the state of public monetary affairs, and occasionally other
circumstances. In order to simplify commercial transactions
and establish a standard of measurement for them, annual
rates of interest have been formed, varying from £1 upwards
for every £100 borrowed. This interest, although specified
nominally as an annual rate, is payable at such regular periods
as may be agreed upon, either by annual, half-yearly, or more
frequent equal instalments, each periodical payment being,
however, always proportional to the annual rate.

The highest rate of interest that a lender may legally
demand or receive for the use of his money, usually varies
with the commercial and political position of the country in
which the transaction takes place, and until lately in England
was fixed at five per cent, per annum, although special ex-
ceptions were made for the investments of building societies
and similar institutions. It does not seem clear for what
reason the rate of five per cent, was selected as the limit
allowed ; and it has been a question giving rise to a variety of
ojiinions, whether the existence of any such limit has not
been the occasion of more injury to commercial affairs, amidst
the fluctuations of public confidence, than it has produced
good by the restraint imposed upon usurious practices.

SIMPLE AND COMPOUND INTEREST.

1>^. — In treating of the advantage derived by investing
money, it is important to distinguish between Simple and
Compound interest.

If the sums received by the lender from time to time on

SIMPLE AND COMPOUND INTEREST. 13

account of interest are placed l)y him in similar investments,
as so much new capital, it is obvious that he not only realises
interest on the sum originally lent, but also on its interest,
thus increasing materially the advantage produced by his
money, for vehich he is consequently said to be receiving
compound interest.

The same w^ould be the result, if the borrower, instead of
actually paying the interest when it becomes due, were allowed
to increase his debt thereby, with the understanding that the
whole should be paid off in one sum at the end of the time
for which the loan was made ; the borrower undertaking to
place his creditor in the same pecuniary position as he would
have been in, had the instalments of interest been actually paid
periodically and themselves reinvested.

If, however, instead of supposing the interest, which should
have been paid from time to time, to be reproductive, the
borrower were only bound to pay the sum of the periodic
instalments on the original amount lent, without anything ad-
ditional for their non-payment at the epoch when they became
due, — then he is said to be paying only simple interest ; for
example :

Suppose £100 were borrowed for four years at the annual
rate of five per cent, simple interest, which is to be paid at
the end of the fourth year with the loan, then the amount
payable at that time would be £100 and four times £5, or
altogether £120.

16. — The way compound iriterest accumulates will be seen
by the following example : — Suppose A lends B £1000, for
fourteen years, at five per cent, interest, payable annually and
at the end of each year. At the end of the first year A
receives from B £50 for interest, which he reinvests by a
further loan to B, or to some other party. The amount
altogether thus lent is then £1050. At the end of the second
year A receives £52. IO5., as interest at five per cent., which

14 SIMPLE AND COMPOUND INTEREST.

he again lends out immediately, making his total investment
£1102. lOs. At the end of the third year the interest received
upon this loan of £1 102. 10^. is £55. 2s. 6d., which, being also
lent out, causes the total sum invested to be £1157. 12s. 6d.,
on which, at the end of the fourth year, A again receives in-
terest, and so on, until the end of the period, the advantage
derived from these repetitions of investment increasing every
year.

In this example we have seen that the lender in three years
clears £157. 12s. 6d. in the shape of interest on the £1000
originally lent, which is £7. 12^. 6d. more than he would have
obtained by simple interest. In the same way if we refer to
Table 3, which is formed on the above considerations, it is
found that at the end of fourteen years the £1000 would
amount to £1979. 18^. of which £979. I85. arises from com-
pound interest, being £279. I85. more than at simple interest.

17. — As in the practice of the societies which form the
subject of this work, interest is always supposed to be com-
pound and not simple, we will confine ourselves to remarks
on the various results appertaining to the realization of the
former, premising that whenever the rate of interest is men-
tioned, it always signifies the yearly rate, whether it be paid
in reality then, or at more frequent intervals.

18. — Respecting tables of interest and the preceding exam-
ple, it should be observed, that the calculations are only true,
supposing the money, which is received yearly, or otherwise,
for interest, to be immediately transferred to some investment
producing the same rate of interest, and in as frequent in-
stalments as the original investment did. The loss of a day
falsifies the calculations, and neglect of this most important
consideration is the cause of the frequent discrepancies which
are seen between valuations made on theory, and those con-
sistent with the circumstances of actual practice.

SIMPLE AND COMPOUND INTEREST. 15

19. — In commercial transactions, interest is more frequently
due half-yearly than yearly, and sometimes quarterly or
monthly, which materially increases the amount that a sum
of money will accumulate to at the end of a given time, since
the instalments of interest are then susceptible of more fre-
quent investments themselves, as so much new capital bearing-
interest. One instance will prove this : — Suppose £1000 were
lent for one year at five per cent, rate of interest, payable
half-yearly. At the end of six months the lender receives
half a year's interest, or £25. This, if invested immediately,
will itself produce, in six months, 1^5. 6d. interest, or the
lender will, at the end of the year, by his investment of £1000,
have made 50^. \2s. 6d., instead of the £50, which he would
have received had the interest been only payable yearly.

The greater advantage derived by the receipt of interest in
equal instalments, more frequent than once a year, is shewn
in Table 4, where are given the actual interests, realised at
the end of a year, corresponding to various nominal rates,
according as it is paid half-yearly, quarterly, or monthly, or
even at shorter intervals of time. When interest is supposed
due at the end of every moment of time, it is said to be mo-
mentaneous, and this hypothesis, to which other rates can be
reduced, gives rise to several curious investigations, which
are discussed at some length in the Appendix. See also
Tables 5 and 6.

20. — In cases where the amount of a sum is to be deter-
mined for a period of years beyond the limit of the tables
which are used, the results given in them may yet serve for
the purpose.

Example: suppose the amount of £100 is desired in thirty
years at five per cent, compound yearly interest. Ascertain
the amount in twenty-five years by Table G, and then by rule
of three determine what the sum produced at the end of
twenty-five years will accumulate to in five years more ; or

16 SIMPLE AND COMPOUND INTEREST.

what is the same thhig, the amount of £1 in thirty years is
equal to the product of the respective amounts in twenty-five
and five years. The multiplication is very easy when decimals
are used.

Thus in twenty-five years at five per cent. £100 amounts to
338/. 12s. 8d. Again in five years £100 would amount to
127/. 12s, 6d., therefore in five years 338/. 12^. 8d. will
amount to 432/. 3^. 10c?. — or the amount of £100 in thirty
years is 432/. 3s. lOd.

The General Theorem is : —

The amount of £1, in any given number of years, is equal
to the product of the respective amounts of £1 in any two or
more periods of years, into which the given number can be
separated.

ON DISCOUNT AND PRESENT VALUE.

21. — If a person be entitled to a certain amount at the end
of a given time, and wish in its stead to take its equivalent
value at present, the sum, which he ought to receive, is termed
the present value of the amount in question, and the differ-
ence between the two is called discount. The discount will
be greater or less according as the sum due is discounted at
simple or compound interest. In ordinary mercantile trans-
actions, to avoid the necessity for tables, it is usual to charge
a discount, equal to the simple interest on the whole debt,
for the time that exists between the present and the day on
which it is due. Thus if the amount be £100, and there
remain two years before it is due, the discount at five per
cent, rate of interest will be £10 : for eighteen months it
will be 7/. 10*. Qd., and similarly for other periods. This is
sufficiently accurate for the practical purposes of connnercial
affairs, and in fact is the only way in which the necessity for
separate calculations on every occasion can be obviated ; but
for debts extending over a large number of years, sucli a
method of computing the discount would give a result, whicli

ON DISCOUNT AND PRESENT VALUE. 17

would be much too large. When money is correctly dis-
counted at a certain rate of compound interest, the present
value is such a sum as will, by being improved, if invested
at once at the same rate, accumulate at the end of the given
time to the amount due.

Discount, therefore, being the inverse of interest, we have
this fact, corresponding to the one mentioned art. 19, that: —
The present value of a sum due at the end of a given time, is
less in proportion to the greater frequency of the periods, at
which the interest is supposed to be due.

Example : The present value of £1000, due in five years
and discounted at the rate of 4 per cent, compound yearly
interest, is 82U. 18s. Qd. But if the interest be calculated
as due half-yearly it is 820Z. lis. Od., and similarly it is less if
calculated as due quarterly or monthly.

Tables, which give the amounts to which a present sum
will accumulate, will serve inversely to give, by rule of three,
the present value of a sum due at the end of a specified
number of years.

For if £1 amount at 3 per cent, yearly interest to II. 3s. 2d.
in five years (see Table 3), then £1 is the present value of
II. 3s. 2d. due five years hence. Therefore, by rule of three,
175. 3d. is the present value of £1 due five years henCe.

22. — The important theorem in Art. 20 holds also for
present values.

23. — A table of present values is worth attention. (See
Sec. 2 Appendix.) If two rates of interest be followed down
the table, and the difference of the present values of £100,
at those rates of interest, be measured, it will be seen that
there is a period, at which the difference attains a maximum.
In other words. If one person A obtain a present loan or
advance from another person B, in return for which he is to
pay him a sum S in a certain number of years ; and A, out of the
money he has received, lends a smaller sum (through deduct-

18 ON ANNUITIES OR PERIODIC PAYMENTS.

ing a higher rate of interest) to a third party C, from whom
in repayment he is also to receive a sum S, which will enable
A to pay his debt to B : then the immediate profit derived by
A will be greatest, if he select the proper term of years for
his transaction.

ON ANNUITIES OR PERIODIC PAYMENTS.

24. — Having explained the operations, by which a single
sum changes its value, under the influence of interest in the
course of time, we will proceed to shew, what is the result, when
several sums are taken together into consideration. Annuity
is a term applied to the periodic payment of money at fixed
intervals. It is said to be a yearly, half-yearly, quarterly, or
monthly annuity, according as the periodic payments are made
once a year, or in two half-yearly, four quarterly, or twelve
monthly equal portions. Annuities are also termed certain,
if payable for a definite number of years ; but contingent, if
their duration depend on adventitious circumstances, such as
the existence of one or more lives, in which case they are
called Life Annuities. We will confine our attention to the
first kind, in which there are only two fundamental questions
requiring special examination, from which every problem
relating to annuities can be deduced, premising that, unless
the contrary is stated, the annuities are supposed payable at
the end of each year : —

First, — What sum an annuity would amount to at the end
of the time of its dm'ation, if each periodic payment were to
be invested and to produce compound interest :

Secondly, — What present sum paid down is equivalent to
an annuity payable for a given number of years :

These values will vary with the rate of interest supposed in
the calculations, and also with the frequency of the intervals,
at which the periodic payments of the annuity, or instalments

ON ANNUITIES OR PERIODIC PAYMENTS. 19

of interest thereon, are supposed clue. It is obvious, however,
that, first : — The amount of an annuity, at the end of the
time during which it is to continue, is the sum of the accu-
mulations of each periodic payment, improved at compound
interest, from the date at which each was paid or due, up to
the time of the expiration of the annuity. And secondly : —
The present value of an annuity is equal to the sum of the
present values of each of the periodic payments, discounted
at compound interest ; each payment being separately dis-
counted for the respective distance of time between the
present and the date at which it is due.

25. — Since an annuity is strictly equivalent to its Present
valuCy the party purchasing and the other selling being, as far
as the mathematical considerations go, in equal positions ; it
follows, that i\\e Amount of an annuity is exactly equal to the
amount, to which the present value of the annuity would
accumulate, if itself invested and improved at the same
interest, until the end of the given number of years.

Hence, when accurately calculated at the rate of interest
agreed upon, the Amount and the Present value of the
annuity are each exactly equivalent to the annuity itself, and
are thus equally applicable to the affairs of life, the one being
frequently exchanged for the other. Thus, a debtor may
clear off a given sum now due, by paying to his creditor,
either an equivalent annuity for a certain number of years,
or its amount at the end of that time ; and a land-holder,
whose estate is charged with an annuity, can compound for it
by giving a present sum in cash.

As an example: — referring to Tables 9 and 10, we see that
at 7 per cent, rate of yearly interest, the present value of
8/. Ss. Od., paid at the end of each year for ten years, is
nearly £59, and also that the amount of 81. Ss. Od. a year at
the end of ten years is 116/. \s. 2d.; moreover Table 3 shews
that the single sum £59 improved at 7 per cent, compound

c 2

}(J0 ON ANNUITIES OR PERIODIC PAYMENTS.

interest for ten years gives the same amount, proving that tlic
three are equivalent to each other; or in other words, suppos-
ing two men each to undertake to pay 8/. 85. Od. at the end
of each year to a society for ten years, and that one desired
to receive in return the present value of his ten years' pay-
ments, while the other determined to wait for his share until
the end of the time, they would hoth be fairly treated, in
respect of their subscriptions to the society, if the one re-
ceived £59 at once, and the other 1161. Is. 2d. at the termi-
nation of the annual payments.

The same reasoning applies to annuities of greater or
smaller amounts for different periods of duration, and a
society receiving, as in the above example, annuities from its
members and paying to some their present value and to others
their ultimate amount, is on the general principle of a Benefit
Building Society.

26. — The whole theory of annuities cannot be explained
without some analytical investigations, such as will be found
in the Appendix. For practice, Tables 9, 10, and 11 may be
used, in which are given, for various interests, the amount and
present value of an annuity of £1, payable at the end of each
year, and the annuity which £1 will purchase. These tables,
however, will serve for annuities greater than £1, and they
may be adapted when the annuity is paid at the beginning
instead of the end of each year.

27. — If the annuity be supposed payable half-yearly or
quarterly, or monthly as in Building Societies, some modifica-
tion is necessary in the tables, the nature of which is explained
in the Appendix. But it is clear that : — A smaller annuity
ought to be paid during a specified number of years, in con-
sideration of a given present sum, debt, or purchase-money,
in proportion to the greater frequency of the periods, at which
the equal portions of the annuity are to be paid. Similarly : —
The accumulated amount of an annuity, at the end of a given

ON ANNUITIES OR PERIODIC PAYMENTS. 2\

time, increases with the frequency/ of the intervals at which
the instahnents are paid,

28. — It will be observed that: — For a given annuity, the
amount at the end of a given number of years will increase
with the rate of interest at which the money is supposed
invested. And inversely : — The larger the accumulation
promised in return for the subscription of an annuity for a
stated time, the higher will the rate of interest be, at which
it must be invested. Hence, the first point to be thought of,
when an accumulation is promised for an annuity paid, is : —
Can the necessary rate of interest be obtained ? Can every
instalment of the annuity be immediately and continually
invested throughout the whole time, at the rate required?

Thus for example: — £6 a year will amount to 82/. 18*.
nearly, in ten years, at 7 per cent, rate of interest. But in
order that £6 a year may amount to £120, the rate of interest
required is 141 per cent. (See Appendix.)

Again, that £6 a year may amount to £140, or £3 a year
to £70 in the same time, the rate of interest required is
nearly 18 per cent.

29. — The number of years, during which a given annuity is
to be paid in return for a given present sum, debt, or purchase-
money, increases with the rate of interest supposed to be paid.
Inversely : — The advantage obtained by a borrower, who pays
a certain annuity in return for a loan, diminishes as the
number of years increases. Example : — If a borrower pay
8/. Ss. Qd. a year during ten years for a loan of £59, he is
paying at the rate of 7 per cent, compound yearly interest,
but if the time be increased to 13 years, the rate of interest
will be about 10| per cent.

30. — On comparing Table 3 with Table 9, it will be seen
that The difference of two successive values of the annuity-

22 ON THE DOUBLING OF MONEY.

table of amounts is equal to the sum given in the table of
single amounts for the lesser number of years. Example: —

The amount of a?i annuity of £1

in eleven years, at 5 per cent. = £14*2067
Ditto ditto in ten years.. = £12-5778

Difference = £1-6289

which is the amount of a single pound at 5 per cent, by
Table 3. So that Table 3 might in fact be calculated from
Table 9, if that were given.

The converse holds for jrresent values, see Tables 8 and 10.

31. — If annuity payments be deferred for a few years, the
2)resent value and the amount of such an annuity can be easily
deduced from the tables for immediate annuities. For instance,
the present value of a deferred annuity of £1 for ten years,
at 5 per cent., (the first payment to begin at the end of five
years,) is equal to the present value of the immediate annuity: —
viz., £7*7217 for ten years divided by the amount of £1 for
four years, or by £1*2155. The answer is £6-3527.

ON THE DOUBLING OF MONEY.

32. — When a sum of money increases to double its value
by the accumulation of compound interest, the analytical
investigations assume a peculiar form, from which we have
deduced the following theorems as bearing on the system of
many Benefit Building Societies: — (See ^ppe^idixj.

1. — For all rates of interest not exceeding 10 per cent. : —
The number of years, in which a single sum will become
double in amount by the accumulation of compound
interest, may be found by dividing 70 by the rate of
interest per cent., and taking that whole number which
is nearest to the quotient obtained.

ON THE DOUBLING OF MONEY. 23

The accuracy of this theorem may be j udf^ed of by Table 7,
but the property is valuable as furnishing a simple rule and
one easily remembered. Thus : —

If the rate of interest! then the number'
be 2 per cent, J of years will be

•>y -'2 " 5'

5? " 55 ■>■>

55 "2 55 55

55 * ■15 55

55 ^2 55 55

55 *^ 55 55

55 ^ '5 55

55 / 55 55

IS O •• •«

55 ^^ 55 55

which agree with the whole numbers given by the table.

When the rate of interest is higher than 10 per cent., a
larger dividend than 70 must be taken.

2. — The amount of an annuity of £1, in the exact time in

which a single sum would double, is equal to £100

divided by the rate of interest per cent.

Thus, at 5 per cent, money will double in 14 years and a

fraction, and £1 a year for the same time will amount to £100

divided by live, or £20, which agrees with Table 9.

^^. — From theorems 1 and 2, we have : —

3. — If a sum of money he horroived for such a time, that,
if U7ipaid, it would become doubled by the accumulation
of compound interest, then the debtor can liquidate his
debt with interest in that time, by an a^umity equal to
twice one years interest on the sum horroived : — If the

2 '

aearly,

= 35 years.

= 28

= 231

= 20

7_o

— 1/2

J. ^9

= 14

= ni

7 0
7

= 10

7_0
8

= 8f
or 9 nearly

70
9

or 8 nearly

7 0
10

= 7

24 ON THE DOUBLING OF MONEY.

time be a certain number of years and days, the last
payment of the debtor will be a fractional portion of
the year's annuity, proportionate to the fractional
number of days.
Thus, if £60 be borrowed for 14 years 76 days, (which is the

exact time in which money will double at yearly 5 per cent.),

then the debt can be repaid, including principal and interest,

by an annuity for that time after the rate of £6 a year, since

£3 is the interest on £60 at 5 per cent.

Again : — If £60 be borrowed for 10 years 90 days (the exact

time of doubling at 7 per cent.), then a yearly annuity of 81. 8s.

for that time will repay principal and interest — 4^ 4s. being

one year's interest on £60 at 7 per cent.

If the above annuities were paid in monthly instalments of

10*. and 14*. the debts would be repaid in very nearly fourteen

years and ten years respectively.

4. — The interest, at which money will double in a given
number of years, is nearly equal to 70 divided by the
number of years.

5. — If two equal sums be invested for the same time,
the one at simple, the other at compound interest, the
former will increase 70 per cent, in the time in which
the latter will double ; or, whatever be the rate, the
advantage in the time of doubling will be 30 per cent,
in favour of compound interest.

34. — The results obtained by means of the above theorems
become more accurate, when the instalments of interest or
annuity are due more often than once a year, and, in the case
of monthly payments, they are found to differ but very little
from the real values. The exact degree of approximation af-
forded by these theorems we have examined in the Ajipendix,
together with the (jeneral extension, of ivhich they admit, to

ON THE DOUBLING OF MONEY. 25

the case of money increasing to several times its original value.
One is most important : —

If a sum of money be borrowed for such a time, that (if
unpaid it would amount to /-fold its original value) then the
annuity which would pay it off, principal and interest in that
time, is equal to / divided by /, less one, times one year's
interest on the debt. Or : —

The amount of an annuity of £\ (accumulated at compound
interest, i per cent., during the whole time in which the single
sum, £1 would accumulate to &.f) is equal to jC^"" ^ ^^

35. — The Appendix also contains other theorems, which
have been deduced, relating to various interesting points in
the working of Compound Interest. The results in some
instances, however, are obtained only by the aid of anlaysis of
a somewhat high order. At the end of the practical Section
4, will be found the * Formula for calculating tables for the
allowance of interest, in case a society undertake to receive
occasional deposits, with power to the depositer of withdrawing
the whole or part of the sum, under certain conditions.

* [The principle referred to is analagous to the feature of Life Assurance
denominated "Deposit-Assurance " which Avas introduced by the Author some
years ago into the plans of the Western Life Assurance Society.]

CHAPTER 111.

ON BENEFIT BUILDING SOCIETIES AS AT PRESENT
CONSTITUTED.

SECTION I.

The theoretical principles of a Terminating Society.

[' A minute inquiry into the various systems of these associations has con-
firmed an opinion, suggested by previous experience, that, among other
defects, one stands prominent as the fatal obstacle in the vmy of their
stoccess, arising from the almost universal condition, by which the
existence of a Benefit Building ^Society is limited to a specified number
of years.' — See Preface to First Edition].

Art. 36. — Benefit Building Societies are generally founded
with the same object, but carried out with various modifications.
They are now divided into two distinct classes : the one termi-
nating, the other permanent. A terminating society is one,
which it is intended to close at the end of a certain period, when
all the shares of the members have realized their full amount.
In a permanent society it is merely the membership of a
shareholder that terminates at the end of a fixed number
of years, (when he receives the full value of his shares,) the
society itself continuing for ever. Whichever system be
adopted, the object of a Building Society is still the same,
namely, as we have stated in Chapter 1, to enable individuals
to associate together and unite their subscriptions from time
to time in one common fund, some for the simple purpose of
placing a portion of their incomes in an advantageous invest-

ON TERMINATING BUILDING SOCIETIES. Zt

ment, others with the view of borrowing money, by which
they may purchase houses or other similar property.

But, in order that one man may borrow, there must be
others who lend. To induce a person of limited means to
lay by periodically a portion of his income merely as an
investing member, some strong incentive must be held out,
and the only one that has been found successful, is to offer
him a high rate of interest for the use of his money. The
legislature, being aware of the force of this consideration,
and of the importance of removing any obstacle at that time
existing, passed the Benefit Building Society Act of 1836, in
which the following clause was specially introduced :

" And be it enacted, That it shall and may be lawful to
** and for any such society to have and receive from any
" member or members thereof any sum or sums of money,
" by way of bonus on any share or shares, for the privilege
" of receiving the same in advance prior to the same being
"realized, and also any interest for the share or shares so
"received, or any part thereof, without being subject or
"liable on account thereof, to any of the forfeitures or
" penalties enforced by any Act or Acts of Parliament re^
" lating to usury." So that, in other words, the society
might charge its borrowing members, under the name of
bonus, any rate of interest upon a loan which it might deem
advisable.

37. — In this chapter we shall examine the character and defi-
ciencies of Terminating societies, and in the next enter upon
the question of the merits of their successors on the new
principle of Permanence.

The majcrity of the terminating building societies announce
at the time of their formation, that their shares are a fixed
sum, usually £120, to be realised at the expiration of a
given number of years, by which time, it is expected, the
association will terminate with that result. Tlie number of

28 ON TERMINATING BUILDING SOCIETIES.

years is generally 10 or 14, although some societies exist
whose expected duration is 1 1 or 13 years, and some in which
the amount of the shares is £50 or £100. The subscriptions
of the members are a few shillings a month per share, varying
with the number of years calculated as the probable duration
of the society, but not allowed by the statute to exceed 20
shillings per share, and the Investing or non-borrowing mem-
bers are promised the amount of their shares at its close. The
subscriptions are received at monthly meetings, and, with as
little delay as practicable, are lent to those members, who wish
to become Borrowers, and to obtain a loan in the shape of a
present advance on each share they hold or take up, in lieu of
the amount, which they would otherwise receive at the end.
The sum advanced per share of course depends upon the
number of years, that remain between the time of borrowing
and the date, at which the society is expected to terminate.

38. — To explain this we will take an example, but it must
first be remarked, that, in most of the associations at present
existing in the United Kingdom, which have any principle of
reasoning for their guide, one of two rates of interest has
generally been adopted as the basis of the calculations ; their
expected duration being consequently different. These rates
are 5 or 7 per cent, per annum ; but the interest, though
taken at a nominal annual rate, is supposed to be realised at
the end of each month, instead of at the end of each year.
In practice many difficulties, to which attention is drawn
further on, oppose the actual realisation of interest monthly ;
yet, for the purpose of an example, the question may be
treated theoretically, as if no such impediments were in
existence.

Let the case be that of a 14 years terminating society,
formed on the basis of a 5 per cent, rate of interest, and
consisting of shares of £120 each, on which every member pays
lOs. at the beginning of each month during 14 years. This
sum is assumed, because such a monthly annuity would, at 5

ON TERMINATING BUILDING SOCTRTIES. 29

per cent, rate of interest supposed realised montJdy and con-
tinuously invested and reinvested, accumulate to £120 at the
end of nearly 14 years; hence £120 is the amount tliat a
non-borrowing member would be entitled to receive at the
close of the society.

On the other hand it is known, that £60 cash, invested at
5 per cent, rate of compound monthly interest, will accumu-
late to £120 in nearly 14 years. If then a member should
wish to discount one share and take its present value at the
beginning of the society, he would be entitled to receive £60,
in consideration of his subsequent monthly payment of 10^.,
or £6 a year for 14 years. Similarly, should he desire to
borrow £300, or 5 times 60, he would have to make pay-
ments on 5 shares, amounting to £30 a year.

As the society progresses in its existence, the number of
remaining months, over which a borrower's payments can
extend, diminishes ; so that the amount of advance per share,
which a member would be entitled to receive, if he wished to
borrow at a later period of the society than the beginning,
would depend upon the date of his first becoming a subscriber.
If he had only just entered before receiving a loan, the
amount of advance per share would merely be the discounted
present value of his future payments ; but if he had been a
subscriber for some months previously, then, in addition to the
allowance for his future subscriptions, he would also be
entitled to a sum arising from his past payments.

Thus, for example: — In the 14 years society in question, a
member whose subscriptions are 10^. a month, or £6 a year
for each £120 share, if he wished to borrow in the first month
of the 7th year and had been a subscriber from the beginning,
would receive 42/. \s. \d. on accomit of his past payments
during six years, and 38/. 19^. 8c?. in consideration of his
future subscriptions, making altogether 81/. Qs. 9d. We quote
one of the societies on this plan, but this can easily be proved
correct by means of a monthly compound interest table.

30 ON TERMINATING BUILDING SOCIETIES.

But if the borrower had only just become a member at the
begmning of the seventh year, and did not pay up any arrears
or back subscriptions, he would merely be entitled to 381. I9s. 8d.
as an advance, in consideration of the payment of £6 a year,
to be made by him during the remaining 8 years ; and, under
such circumstances, it is seen by rule of three that to obtain
a loan of 81/. Os. 9d., he would have to pay 12Z. 9s. 6d. a year
during the 8 years. So that in fact, the nearer a member, at
the time of his first joining, or taking up the required number
of new shares, and then borrowing, is to the epoch at which
the society is expected to close, the larger will be his pay-
ments in return for a given loan. As a second instance, it
would be found that, although a member, who borrowed £300
at the commencement, would merely pay £30 for 14 years,
yet, if he took up the shares at the beginning of the 9th year
and obtained the same loan, without paying up any arrear-
subscriptions, he would then have to pay 59/. 18^. Od. for the
remaining 6 years. Such a high rate of repayment becomes
very inconvenient to members of limited means, who may
wish to borrow money for the purchase of house property,
not at the beginning, but, when they have for some time been
members ; and the difficulty increases more and more, with
the progress of the institution.

39. — The preceding is an example at 5 per cent. Societies
formed upon the basis of 7 per cent, rate of interest are expected
to last only 10 years, and on this supposition there exist a
great many. The amount of the shares to be realised, at the
end of such a period, is usually, as before, £120, for which
the members pay 14;?. a month for 10 years. This rate of
payment is adopted, because such a monthly annuity would
amount to £120 at the end of nearly 10 years, supposing each
monthly payment immediately, as it is received, invested at
7 per cent, compound interest, calculated also as realised
monthly.

Again : — since £60, if similarly invested at 7 per cent.,

ON TERMINATING BUILDING SOCIETIES. 31

would, with its accumulations from compound interest,
amount to £120 at the end of nearly 10 years, it is obvious
that a member effecting a loan upon a share at the beginning,
and receiving £60 as its present value, would be in an equit-
able position with regard to a non-borrowing member, who
waited for the full value of his share or £120. at the termina-
tion of the society.

40. — Other associations exist founded on other rates of inter-
est, as 6 or 8 per cent., and of different expected periods of dura-
tion. The principle of calculation, however, is the same, and
the same remarks apply to all, whatever be the rate adopted.
The intention of each is to give to the investers the amount
of their shares in full, at the close of the number of years
representing the probable duration of the society ; and
throughout its existence to invest the funds, from time to
time as collected, in the shape of discounted advances to any
of the members who may wish to borrow. The amount of
advance per share being supposed proportionate — First : to
the number of years or months that the horroiver has already
been a subscriber ; and Secondly : to the imexpired time, lohich
remains between the epoch, at which he obtains the loan, and
the expected date of the termination of the association.

41. — Such is the system of the superior class of terminating
Benefit Building Societies, but it must not be supposed, that
all or even the greater number of the existing associations are
established on such accurate principles of calculation. This un-
fortunately is not the case. By far the majority are based on
rates of subscription fundamentally unsound, and, in their
subsequent dealings, both with the investers and borrowers,
proceed on assumptions, which cannot be justified by theo-
retical or practical reasoning. Of this the next section will
contain a few instances, which prevail in several hundreds of
the societies now in existence, and are selected not as being by
any means the most extravagant of the number, but simply
from the extent to which they are adopted.

32 CLASSIFICATION OF ERRORS.

The defects in most cases are so numerous and varied, and
in each individual society so intervs^oven one with another,
that it will be necessary for the better separation of ideas,
and in order to enable the reader to fully understand the
details into which we are about to enter, that we should
endeavour to introduce some classification among them. The
chief heads under which they may be resumed are as
follows : —

1. — Inaccuracy in theory: such as erroneous rates of
subscription, &:c.

2. — Practical causes, which nullify the results obtained
from accurate theory : such as loss of interest, the expenses
of management, &c.

3. — The pecuniary loss inseparable from the condition of
termination.

4. — The great inconvenience caused to individual mem-
bers by the terminating system : such as the difficulty of
withdrawing at the time when a member may desire it, or
of effecting the redemption of a mortgage on equitable
terms, &c.

5. — Losses through mismanagement: viz.. From too
frequent inattention to the sufficiency or soundness of
security accepted for investment ; or, from the consequences
of inaccuracy in balance sheets, &c. &c.

Some of these defects will be explained by themselves in
the next section; others, to avoid the necessity for subsequent
repetition, will be considered by way of contrast in the chap-
ters, which treat of the advantages of the permanent principle
and the practical working of building societies.

SOCIETIES ON ERRONEOUS PRINCIPLES. 33

Section 2.

Societies on erroneous principles.

42. — First instance: — Societies exist proposing to last 10
years only, and sometimes for a less period,- the shares of which
are £120, and the payments of the investers, \0s. a month : that
is to say, for a subscription of £6 a year during 10 years, or
a total payment of £60, a member is promised £120 at the
end of that time.

Now, in order that the payment of £6 a year may accumu-
late with compound interest to £120, in the course of 10
years, a rate equivalent to 14^ per cent, yearly interest must
be realised ; and unless the subscriptions be continually in-
vested and re-invested at this rate, the promised results are
impossible ; of this the reader may satisfy himself by referring
to the Appendix.

The borrower's repayments, however, do not bring into the
society a higher rate of interest than 7 or 8 per cent., and in
some cases much less ; for the same prospectuses state, that
if a member desire an advance in the first year, he will receive
£60 on each share, (sometimes only £55,) in return for which
he will have to pay 14^. a month, or 8/. 8*. Od. a year, for the 10
years, the extra 4^. being usually charged under the name of
redemption fee. A reference to Arts. 28 and 29 in the preced-
ing chapter, or to a compound monthly interest table, will shew
that the actual interest produced by these repayments, which

* The attention of Trustees and Directors is requested more particularly
to the remarks contained in this section.

34 SOCIETIES ON ERRONEOUS PRINCIPLES.

include principal and interest, is between 7 and 8 per cent,
per annum. The advances also, made in the second and sub-
sequent years of the existence of the association, are in the
same proportion ; — consequently, the subscriptions of the
members are incorrectly calculated to the large amount of
nearly 7 per cent, annual rate of interest, even although the
borrowers pay so high a rate as 8 per cent. Hence it follows,
that the promised results cannot he realised.

The above assumes that the monthly receipts are also re-
invested monthly. Such in reality is not the case. Indeed,
even if a society of this kind were to experience no pecuniary
loss from any of the causes, which will be examined further
on, yet the result would practically only be as follows : — By
Table 9, a yearly annuity of £6 invested continuously at 7
per cent, will accumulate to 82^. 18^. Od, in 10 years ; leaving
a deficit of 37/. 9,s. Od. per unadvanced share, or nearly one-
third of the promised amount, at the epoch of the expected
termination of the society.

* Again, even supposing the borrowers should unwittingly
consent to pay 10 per cent, interest for their loans, there
would yet be a deficiency of 24<l. 7s. 6d. ; since the amount of
£6. a year in, 10 years at 10 per cent, is only 951. 12s. 6d.

This remarkable instance of inaccuracy of rates is the
more worthy of notice, as it prevails with various other less
important errors in a very great number of the existing
Benefit Building societies, and thus involves the pecuniary
welfare of many shareholders. There can be no doubt,
however, that it entirely arises from ignorance, for the same
prospectuses usually declare, that the annual rate of interest,
which is charged from the borrowers, does not exceed 4 per
cent. This last statement may probably be suggested by some
misconception founded on the circumstance of the borrowers
paying 4*. a month per share more than the investers.

* See an instance at the end of this Section, Art. 45, of unjustifiable
usury, which is prevalent among many of the old societies.

SOCIETIES ON ERRONEOUS PRINCIPLES. OO

43. — * The Second instance is of a more complicated cha-
racter, and is introduced with considerable pretension by its
advocates as an improved plan of a Benefit Building Society.

The scheme professes to guarantee that the society shall
positively 7iof last more than 10 years; that non-borrowing
members, by paying 5s. a month, or £3 a year, for 10 years,
will be entitled to and shall receive £70 at the end of that
time, which will be £40 more than the total amount of the
10 years' subscriptions ; also, that a borrower shall receive as
an advance on each share, if there be no competitors with him
for the same loan, the total of the 10 years' subscription or £30,
in return for which he also shall pay 5s. a month or £3 a year
for 10 years: or, in other words, they give us to understand, that
a member can borrow £30, and repay the whole, including
principal " and interest," by ten payments of £3 extended
over 10 years.

If, however, there are several applicants for advances, then
the prospectuses state —

" That the funds of the society shall be put up to open
*' competition ; and the same shall be awarded to those mem-

[* The following advertisement, which is extracted from a weekly
periodical for May 1850, has during the past year l)een most industriously
inserted, and will serve as a specimen of popular credulity : —

"Immense success of Mr. , — — ■ 'g Building and Investment Societies.
£70 for every £30 Subscribed in a Fixed Term of Ten Years.

NOTICE.— The Members of the BUILDING AND
INVESTMENT SOCIETY may now (the Second Year having ter-
minated) receive the whole amount of their subscriptions with 18^ per Cent,
per Annum Interest thereon. By order of the Board,

(Signed) , Secretary.

Important to Persons desirous of Purchasing House Property.

j£?l,000 will be offered for Sale at the Second Meeting of the

BUILDING AND INVESTMENT SOCIETY, on Thursday Evening, the
9th of May, 1850, at half-past 7 o'clock. — Interest jyayable by the Borroiuers
from 1 to 5 per cent (!). — The whole amount of the purchase-money and
law charges advanced bj' the Society. — No arrears to pay — Fixed to close
in 10 years certain. — Subscription, 5s. per Share per Montli.

From the great number of Shares taken at the First Meeting, this Society
will be closed after the 3rd Meeting.]

D 2

3G SOCIETIES ON ERRONEOUS PRINCIPLES.

" bers who shall offer the highest premium or interest for the
" use thereof. By this plan the great evils, loss and un-
" certainty, attendant upon the rotation and balloting systems,
" are avoided.

" That the premiums or interest shall be the only sum
" payable by the borrowers for the use of the money that
" shall be advanced to them.

" That the premiums bid shall not be deducted from the
" sum to be advanced, but may be paid by equal monthly
" instalments, spread over the remainder of the ten years.

" This will be a very great accommodation to the borrowers,
" and is, in the opinion of the Directors, a great improvement
" upon the old systems, under which the premiums are de-
" ducted from the money to be advanced.

" In order that the members may be guided as to the
*' premiums they may safely bid for advances of money, the
" following table is given, showing the amount of interest, to
" which the premiums from £3 to £15 per share will be equal
" for the ten years : — namely.

Premiums, if given durinq the first iicar. Interest f

£. s. d. £. s. d.

3 0 0 Premium for ;in advance of £30, spread over 1 , n A

the 10 years, will be found equal to /

4 10 0 ditto 1 10 0

6 0 0 ditto 2 0 0

7 10 0 ditto 2 10 0
9 0 0 ditto 3 0 0

10 10 0 ditto 3 10 0

12 0 0 ditto 4 0 0

13 10 0 ditto 4 10 0
15 0 0 ditto 5 0 0

" While such great benefits are secured to the borrowers, it
" will be seen that those members, who shall allow their sub-
" scriptions to remain as investments, will receive, at the

SOCIETIES ON ERRONEOUS rRINCIPLES. 37

" expiration of tlic ten years certain, a very large profit,
" amounting, it is calculated, (from the facilities and encou-
** ragement afforded to borrowers, and the certainty of this
" society being always able to lend out its funds at a moderate
" rate of interest), to nearly £40 per share, or £70 for each
" £30 subscribed in the course of the 10 years : thus shewing,
" that persons wishing to invest their small savings, and
" parents desirous of securing a future provision for them-
" selves or their families, will be able to do so in this society
" with a vast deal more advantage and solid benefit, than they
•* can by investing their money in life assurances, or depositing
" the same in savings' banks, which do not in any case allow
** more than 3 per cent, per annum interest, or not above one-
" tenth of the estimated interest or projit to he gained hu
" investing money in this society,^''

" This plan clearly proves that, although the investers (that
" is to say those members who do not borrow money of the
*' society) will probably more than double the capital they
" may invest in this society in the 10 years; the borrowers
" will gain considerably more in the same time,"

We have quoted so much of this prospectus, because
the system is one, that contains a variety of complicated
errors common, unfortunately, to a considerable number of
societies.

It has been said, that the investors are promised £70, in
return for 10 annual payments of £3. — This cannot be
practicable unless the subscriptions arc invested after the rate
of 18 per cent, yearly interest, continuously realized during-
the 10 years, by the constant investment and re-investment of
the society's funds, in loans to borrowers. fSee Appendix).

Now the members who borrow, pay more or less, according
as there is competition or not for advances.

If there be no competition, a borrower gives no preuiiun),
and consequently, in obtaining a loan of £3Q per share, has

38 SOCIETIES ON ERRONEOUS PRINCIPLES.

only to pay £3 a year for 10 years, or in other words, he lias
the \oamv ithout pay i7ig any interest for it.

If there be competition, the highest premium he can pay
on each £30 share is £15, spread over 10 years: he therefore
obtains an advance of £30, for which he has to pay annually
£3 subscription, and £1. lOs". Od. instalment on his premium
during 10 years, which is equivalent to paying nearly 8 per
cent, rate of interest for the loan. See Table 10.

So that in the most favourable case the society would
experience annually a deficiency of 10 per cent, rate of
interest.

If the premium or discount, which a borrower allows, be
less than £,\.^, the repayments made by him are smaller, and
consequently the rate of interest obtained on the average is
less than 8 per cent. Hence, while, on the one hand, this
Improved plan undertakes to guarantee to the investers a
projit arising from the accumulations of their subscriptions at
\^ per cent, compound interest, yet, on the other, it is lending
out the money at rates, ivhich never can exceed 8 per cent.,
and in most cases toould he considerably less.

We pass over the other incorrect estimates advanced by the
prospectus, respecting the rates of interest, which are said to
correspond to the various amounts of premium mentioned, as
we conceive enough has been stated to prove the utter
unsoundness of the plan.

44, — Many other societies exist conducted upon various
schemes, which are equally fallacious, and up to the time of the
publication of the present edition, announcements such as the
following are constantly appearing in the public prints : —

" From the peculiar advantages oifered by this society, the
** investing members will reap above 20 per cent, interest for
" the use of their subscriptions," &c., &c.,

And further on, the same advertisements assert —

" That the borrowers will scarcely pay at the rate of 2 per
*' cent, interest for their loans."

SOCIETIES ON ERRONEOUS PRINCIPLES. 39

Again we find —

" It is calculated that those members who allow their sub-
" scriptions to accumulate at compound interest till the close
" of this society, will receive about 25 per cent, annual
" interest for the same, &c., &c. : and from 80 to 100 per cent,
"profit will be obtained by those members, who purchase
" property with the money advanced to them by the society."

Such statements require no comment.

It is not necessary to extend our inquiry into the defects of
other societies, as it is to be hoped that increasing knowledge
on this subject will prevent their formation for the future.
Our object in this place is rather to point out the general
practical objections to the system of terminating societies
altogether, than to rectify misconceptions, which arise from
ignorance. It is, however, worthy of notice, that the tendency
of most new societies is to diminish the rate of contribution
paid by the members, without making any corresponding re-
duction in the value of each share promised at their termina-
tion. Formerly a more secure principle was adopted, and the
monthly subscriptions required on each share were much
larger. For instance, in most of the old Liverpool and
Manchester Societies, the shares were fixed at £150, and the
monthly payments at 20*. per share. Hence, many succeeded
in terminating successfully. The modern associations, however,
diminish the monthly subscriptions one half, and yet take
only £30 off the amount of the share to be realised. In
general the statements put forth at the present day do not
depend upon principles deduced from sound knowledge or
careful reasoning, but seem rather to be the offspring of crude
guesses thrown out at random. The originators of the multi-
tudinous variety of new and improved plans, promising such
large benefits simultaneously to each of the two classes of
members, who alone constitute these societies, might, with as
much probability of success, devise a game of cards, at which
all who played should rise up winners. They do not reflect

40 SOCIETIES ON ERRONEOUS PRINCIPLES.

that, although a ftiir and reasonable benefit may be secured to
the invester by lending on equitable terms to the borrower,
yet, any extra profit beyond this, which is promised to the
one, can only be obtained at the expense of the other.

45. — By a mistaken interpretation of their rules, much
injustice is occasionally committed. For example, in some
associations the borrowers pay interest at 4 or 5 per cent, on
the amount advanced, pursuant to clauses similar to the
following : viz.,

" PAYMENT OF INTEREST.

" 1 . That any member having received his or her share or
shares, shall pay interest at £5 per cent, per annum, on the
amount borrowed, by equal monthly payments, such
interest to commence from the time the money is advanced,
or if the security for the same shall not be completed pre-
viously, then from the third month from the time of
purchase, and shall be subject to the same fines as for
subscriptions in arrear."

The obvious equitable interpretation of the preceding is,
that the interest-subscription shall be after the rate of 5 per
cent, on the whole sum borrowed, diminishing, if the debt
diminish, in just proportion. For example, let the debt be
£100; the borrower's payments would comprise the ordinary
subscription, and £5 a year or Ss, Ad. a month, for interest.
As, however, the principal of his debt is gradually liquidated
in the period of the society's duration, it would not be fair
to require him to keep on paying £5 a year for interest
to the end ; inasmuch as, in so doing, he is practically paying
sums in interest, which increase the rate from 5 per cent, up
to 50 per cent. Yet this is perpetrated in many societies.

BUILDING SOCIETIES AS AT PRESENT CONSTITUTED. 41

Section 3.

The leading practical objections to Benefit Building Societies
as at jjresent constituted.

46. — Among the objections which apply to the majority of
existing societies, there is one which is peculiar to those
founded on the terminating principle : —

In consequence of its being intended to close the society in
a given number of years, or as soon after as practicable, the
opportunity for investme7it soon ceases, as the members are
unwilling to borroio in the later years of its existence, lohen
the period, over which a loan can extend, has become small, and
the correspondijig rates of repayment much increased.

It is found by experience, and it is indeed a fact, which
common sense would suggest, that it is almost impossible to
find members who will care to borrow, when the first five or
six years of any society's expected duration have elapsed.
The monthly repayments upon a loan, which is to be only for
a short period, become too large to suit the means of the
industrious classes, who are usually the shareholders of a
Benefit Building Society; and this difficulty increases to an
insurmountable degree in the last years of the proposed term
of its existence. For although a man, who borrowed £300
for 14 years in order to purchase a house, might contrive with
comparative ease to pay £30 a year in addition to the taxes
and ground-rent ; yet he would probably be unable to pay
59/. IS5. Od. a year if the loan were merely for 6 years, or
85/. \2s. Gd. a year if it were only for 4 years, and similarly
for other periods.

In te)i-ycars societies the difficulty is still greater, as the
terms for loans are nuich shorter. This circumstance creates

42 THli LEADING PRACTICAL OBJECTIONS TO BENEFIT

therefore a cessation of investment, and consequently a loss
of interest, which altogether nullifies the calculations upon the
supposed truth of which the society was founded ; for it has
been shewn in the general remarks upon compound interest
contained in Chapter 2, that, even supposing the rates of a
society accurately calculated, they can only prove correct on the
supposition, that there is never any loss of interest on its
funds, or in fact, that all monies received from subscribers
are continuously invested until the end. Hence this objection,
which becomes greater and greater with the progress of the
society, stands prominent as a vital obstacle.

Some societies of recent formation have attempted to ob-
viate the difficulty by a plan, which, in some measure, would
be successful in preventing this loss of interest, were it not
that it entails another equally important objection relative to
the Expenses of the association. The plan alluded to consists
in dividing by lot any balance of money existing at a meeting,
where there are no borrowers, among those members who have
not yet received advances on their shares; so as to compel them
at once to withdraw from the society, as far as such shares are
concerned ; the amount paid on this forced withdrawal of each
share, being regulated by its value at the time of withdrawal,
according to the rules by which all the members are severally
and collectively governed.

Such a measure, though necessary, adds to the general
difficulties in the principle of termination, since it tends
month by month, in a rate rapidly increasing, to diminish the
number of the members of the association ; for in each suc-
cessive month of the last years of its expected existence, the
number of members, who desire to borrow, becomes less, and
in the absence of applications for advances, the number of
investers, or non-borrowers, who must be paid off, increases.
Thus the society, which might otherwise have succeeded,
rapidly sinks in importance, and Ihe expenses and any deji-
cie?ic/j of fiotds which, may afterwards be discovered, instead

ILDING SOCIETIES AS AT PRESENT CONSTITUTED. 43

of being spread over a large body, have to be borne by the
few, who are unlucky enough to remain to the end.

47. — The following objections for consideration, although
common to many societies, whether terminating or permanent,
are nevertheless increased and aggravated when the institution
is of a transitory character.

First. — The interest is usualbj calculated as likely to he
realized montlily, tohereas such is practically not the case.

It is not possible but that, from the very beginning of any
society's existence, some portion of its funds will at various
periods remain unemployed for a time. Sometimes this takes
place, because the balance in hand is not large enough to meet
the purpose of any borrower, particularly in the first year or
two, when the subscribers are too few in numbers to raise
quickly enough an adequate sum. Sometimes, on the contrary,
when the amount required by the borrowers, whose names are
entered, has been advanced, there remains a sum which is not
applied for.

Now it has been stated, that the interest is generally calcu-
lated as produced monthly, which would require that there
should never be even a day lost in investing the whole of the
subscriptions collected at each meeting ; and since this is
practically impossible, it may be laid down as an axiom, that
no society can be secure, whose rates of subscription are
formed upon such a principle. It is not remembered, that
although it is desirable to receive the subscriptions monthly,
yet it is not safe to act upon the hypothesis of their being
immediately reinvested, or of monthly interest being actually
obtained, as such a mode of calculation reduces the Rate of
repayment, which it is necessary to charge to a borrower for
a given loan. It is one thing to receive the repayments
monthly, and another to assume in the calculations, that they
will be as frequently reproductive of interest. In other words,
the safety of any society depends upon the managers always

44 THE LEADING PRACTICAL OBJECTIONS TO BENEFIT

having sufficient time, before the arrival of each of the cal-
culated periods for reinvestment, upon which the tables are
based, to complete the necessary details for preventing loss of
interest, by investing all monies which are not required for
the immediate purposes of management. This can only be
secured satisfactorily, by making the epochs of monetary re-
payment in each year more frequent than the periods, at
which allowance for interest is credited to the borrower in
the fundamental calculations. Hence, it would be safer, at all
events, if the interest were supposed paid quarterly ; but, in
order to remove any possible contingency from this source, we
consider that, in all calculations, which form the basis of
the subscriptions, the interest should be assumed as only
realized annually and at the end of each year. The difference
between this assumption and the actual result would be in
favour of the society, and useful for contingencies.

48. — Whilst we are upon this subject, it is important to direct
attention to another circumstance, which affects the accumula-
tions expected to be realized from interest. In many societies
there exists a practice of borrowing money from their bankers,
for the temporary purpose of accommodating members sooner
with advances. This is often done at the commencement of
the association, and occasionally later in the course of its
existence. If the sum charged by the bankers for the accom-
modation do not exceed the interest, which forms the basis of
the society, and, as such, is expected to be paid by the
borrowing members, then the transaction is safe and highly
advantageous. But if the bankers charge 8 or 85 per cent,
as at times has been the case, while the society only receives
5 or 6 per cent, from its borrowers, then a loss must be
experienced. Those societies, in which the Advance-repay-
ments are founded upon a 5 per cent, rate of interest, ought
to pay particular attention to this consideration. If money
be borrowed from extraneous sources, and it is undoubtedly

DUILDING SOCIETIES AS AT TRESENT CONSTITUTED. 45

often necessary to do so, in order to carry on and facilitate
operations, let care be taken that those members, who are
benefited by the accommodation, pay the extra charge.

49. — Secondly. — The loss from the expenses of management.

Whether the amount of monthly subscriptions from the
members of a Benefit Building society be theoretically suffi-
cient or not ; yet the promised results cannot be realized, in
consequence of the annual loss caused by the Expenses, which
are not adequately provided for.

In Section 1 we have seen that, in most societies founded
upon principles theoretically accurate, the present value of
each share at the time of an advance, or its amount at the end
of the specified number of years, are respectively equivalent
to the accumulation arising from the receipt and immediate
reinvestment of the monthly subscriptions thereon. It follows,
that the money so received cannot be appropriated to other
purposes without loss ; hence the expenses of starting and
giving publicity to a Building society, and those also of its
subsequent management, to however small a compass they are
reduced, must be defrayed out of some other source of revenue
than the share subscriptions.

If the initial and subsequent annual Expenses could be
accurately estimated beforehand, there would be no difficulty
in determining what payment per share ought to be contri-
buted by each member to meet the necessary outlay. In the
majority of cases, however, the probable amount of the ex-
penses is neither known nor provided for, although they are
frequently asserted to be covered by the entrance fees, fines
for non-payment of subscriptions when due, and a few other
trifling sources of profit, which the society may expect to
receive. To a certain extent this is correct, but in no case are
these receipts sufficient to defray more than a very small pro-
portion of the expenses. In the first place it must be re-

46 THE LEADING PRACTICAL OBJECTIONS TO BENEFIT

membered that a, fine is not wholly profit : a fine is inflicted
at SO much a month per share, for neglect of regularity in
paying the monthly subscriptions when due, and, therefore, is
partly requisite to supply the loss of interest, which the
society would otherwise experience. And, even assuming
that the preliminary expenses could be covered by the money
received from entrance fees, which an inspection of the various
Balance sheets would shew to be very seldom the case,
yet the mmual charges of management, consisting of office
rent, salaries, &c., must be provided for.

It can be shewn by an example taken at random, how such
an annual outlay would afiect the ultimate status of a Ter-
minating association. Take a 14-years Building society, whose
shares are £120, produced by a monthly subscription of lO*.
or £6 a year, and the annual expenses of which we will sup-
pose to amount to £12 a year. Now £72 is 12 times £6, or
equal to the amount of subscription received yearly on 12
shares, and, therefore, by the fundamental statements of the
society, is calculated as equivalent to 12 times £120, or
£1440; consequently the annual charges must produce a
deficiency of £1440 in the society's funds at the epoch of its
originally expected termination. This instance will apply in
principle to all societies, whether of 10, 12, or 14 years'
duration, unless, independently of the monthly share sub-
scriptions, they have adequately provided for the annual
expenditure. An inspection of many of the annual Balance
sheets will, moreover, shew that, when the difierent expenses
in the course of the year are added together, they will fre-
quently be found to average from £120 to £150 a year, which,
on the same principle of calculation as that made use of above,
must create, even from this source alone, a deficiency in the
society's funds, at the end, of from £2400 to £3000.

50. — Thirdly. — There is no provision made in the theoretical

BUILDING SOCIETIES AS AT PRESENT CONSTITUTED. 47

calculations for losses, which may he experienced through had
investments, ^c.

In all mercantile transactions of this kind losses must
occasionally happen ; and, whether they arise from wilful
neglect or carelessness, or other causes, such as deterioration
in the value of property, they combine to produce an effect
for which no provision is made in determining the subscrip-
tions to be paid by members. Although, at the commence-
ment of a Benefit Building society, it would of course be
impossible to foresee the individual event, or even the nature
of the events, which are likely to be productive of loss, yet
it is a matter of experience that losses will occur, entailing a
deficiency in the society's funds at the time of its promised
termination, which, with the combination of the other defects
already mentioned, will, in the case of a Terminating society,
tend to cause a prolongation of its existence beyond the
originally intended or stated period.* By such means the
duration of the subscriptions of both investers and borrowers
is unavoidably extended, and they suffer in consequence a
decided loss.

In the first clause of the Benefit Building Society Act, it
is provided that the duration of a society, and the consequent
continuance of the Borrower's repayments, shall depend, not
on any number of years specified in the prospectus, but, upon
the actual completion of the full amount of the unadvanced
shares ; so that a society may not close at the end of the
expected term of its existence, unless the funds collected at
the last monthly meeting shall be sufficient to give to each of
the Non-borrowing members a division per share equal to its
originally stated amount. If there be a deficiency, from
whatever cause it may proceed, then must all the members,
borrowers as well as non-borrowers, continue their subscrip-

* [A London Society, of which the proposed duration was 10 years, has
lately decided that, from the extent of its losses by advances on insufficient
or bad security, its term must be extended to 16 years.]

48 TIIR LEADING PRACTICAL OBJECTIONS TO BENEFIT

tions for such additional number of months as may be
necessary, unless they should all unanimously agree to dis-
solve the society and put up with the loss sustained.

We are aware, indeed, that, in some of the Terminating
societies, certain provisions have been inserted in the rules
that, whatever be the position of the society's affairs at the
end of the expected time of its duration, the borrowing
members shall not be required to continue their payments
beyond that period, but shall have their deeds returned to
them, and their property released from any further claims.
Such provisions are nevertheless of no legal avail whatever,
and cannot prevent a prolongation of the society, nor in any
way protect the borrowers from its consequences. No rule
can protect them from a liability for such continuance of
monthly subscriptions, as may be deemed necessary for the
purpose of making up any deficiency that may exist.

51. — It appears, therefore, that no society can possibly pos-
sess, at the end of the originally specified time, sufficient funds
to give to each Invester the full amount of his shares, even
supposing the rates are accurately calculated, unless : —
Throughout the whole previous duration of the association,
there has been no loss sustained, either through had invest-
ments or other causes, or from extraneous exjienses (not
covered hy sufficient extra contributions from each member
over and above the receipts from fines, fees, Sfc.J, and also
unless no month has ever passed during which any part of the
subscriptions has remained unproductive, so that, in other
words, no loss of interest has at any time occurred.

52. — Should there arise a deficiency from any one of these
causes and the duration of the society be prolonged, it will be
well to consider the effect, which such a result has upon the rela-
tive interests of the Investers and Borrowers respectively. An
extension of its existence for 3 or 4 years in reality causes the
borrowers to pay much more for the loans they have obtained.

BUILDING SOCIETIES AS AT PRESENT CONSTITUTED. A9

than tlicy imagined would be the case, when they entered into
their engagements towards the society. The interest which
they actually pay, instead of being perhaps only 5 or 7 per
cent., becomes thereby increased to more than 10 per cent.
An invester, also, not only does not receive the promised
amount at the expected time, respecting which he may very
likely have made pecuniary arrangements, but he is also com-
pelled to continue his own subscriptions ; by which means
the benefit, that he derives from his shares, is very materially
diminished.

As, however, the Investors have still the option of with-
drawing from the society, if they are willing to accept the
amount of dividend per share that the funds admit of, and
thus mutually agree to dissolve the association, it will often
be a question worthy of their serious consideration, whether
it will not be better to endeavour to make an arrangement
with the existing borrowing members, that the latter should
at once contribute something towards the deficiency, to be
determined by calculation, and then that all the members,
both investors and borrowers, should agree to dissolve the
society. Experience has shewn that this plan will really be
the most advantageous to the two classes of members, inas-
much as the investors will be prepared, in general, to put up
with some loss, or, in other words, to release the borrowers
upon liberal terms, in order to receive at once some
money for their shares, however the amount may fall short of
what they expected.

53. — * We have said that the Borrowers have not to make
good the whole deficiency in the society's funds, but only their
proportionate amounts, considered relatively to the otherwise
necessary continuation of subscriptions from both parties.

* [Since the publication of the first Edition, several old societies have re-
modelled their Rules and Rates of Subscription, and have been converted
into permanent institutions upon a simple plan founded upon the principles
contained in the following chapter. It is also highly gratifying to state, that
but very few terminating societies have been lately formed.]

50 THE LEADING PRACTICAL OBJECTIONS TO BENEFIT

Hence, it will be advisable, in order to avoid an unintentional
act of injustice to either, that the members should see that
the proper quota to be contributed is determined by accurate
calculation. In the Appendix we have given a specimen of
the mode of investigation to be adopted.

54. — In perusing these remarks respecting the majority of
the existing societies, and in comparing the liberal promises
contained in their prospectuses with the periodic reports of the
position of their aifairs, we believe the impartial reader can
arrive but at one conclusion. * He will become satisfied : —
That not one in twenty, or even in a greater number, can
possibly realize for its members, whether investers or bor-
rowers, the advantageous results originally promised ; and
that, at the various epochs of their expected termination,
there will be found such a deficiency of money as must
deprive the possessors of unadvanced shares of a considerable
portion of the accumulation, which they had been led to
expect; — That in many cases, so far from receiving £120 per
share, they will obtain less than £75, and that, if not disposed
to accept whatever sum may be then offered to them, they
will be forced to continue their subscriptions for several years
beyond the specified time ; — That these unfortunate results
have arisen in great measure from a lack of proper knowledge
and experience in the originators of these institutions, —
a circumstance that does not always escape the notice of the
industrious classes, and tends largely to diminish their faith
in the real advantages of prudent and economical habits ; —

*[Our readers should beware how they rely too hastily upon statements, which
they may hear, of individual societies having terminated successfully. They
will find, upon investigation, like the Author, that some questionable expedient
has been adopted, towards the last years of its intended existence, by which
an ajjparently prosperous end has been attained. For example, it may be
mentioned that in the North of England a society terminated lately with the
promised results, through the members paying for the last few years double
the original subscriptions upon their shares. The public were then informed
of the fact, that the shares had been realized: — The shareholders alone could
have stated, what they had paid for the same.]

BUILDING SOCIETIES AS AT PRESENT CONSTITUTED. 51

Lastly, that strong legislative measures are necessary for the
due regulation both of the legal establishment of a Benefit
Building society, and also of the system of its financial
operations ; and that some supervision should be exercised by
truly competent persons, not only at the commencement of
the society's existence, but subsequently, from time to time,
throughout its progress.

E 2

CHAPTER IV.

ON PERMANENT BENEFIT BUILDING SOCIETIES.

Art. 55. — Having reviewed some of the leading objections
to the plan of terminating societies, w^hich propose to close at
the expiration of a fixed number of years, or as soon after as
the stated amount of the unadvanced shares is realised, we
will now proceed to examine in detail the various superior
features of Xhe per7nanent system.

To enable an institution of this kind to conduct its opera-
tions successfully, as regards the profit, which is expected by
the investing members, at the same time that the borrowers
are freed from unjust responsibilities, it is proper, not only
that the rates of subscription and repayment should depend
upon a sound basis of mathematical reasoning ; but, also, that
the general system of the society's practical operations should
be, as much as possible, clear from those defects, which either
prevent the realisation of the expected interest within the
calculated time, or produce injury and personal inconvenience
to the members. It is essential, that due provision should be
made for the current expenses and liabilities, and that they
should no longer be left dependent upon the uncertain
receipts from fines or fees. The relative position of the two
classes of members should also be more equitably considered,
so that the profits of the one may not be increased by taking
an unfair advantage of the other ; and the period of the
duration of a mortgage should be rendered definite, in order
that the claim of the society upon a borrower may at all
times be subject to equitable adjustment, in case of his being
subsequently desirous of redeeming his property ; since it

ON PERMANENT BENEFIT BUILDING SOCIETIES. 53

is evident that any uncertainty, respecting the duration and
amount of a debt, tends materially to depreciate the saleable
value of the security held for it.

As, moreover, it is not easy to form an opinion of the
possible fluctuations in the value of money, when it is
involved in transactions extending over a lengthened number
of years, attention must be given to a suitable Reserve being
annually made upon the society's profits to form a protective
fund against future contingencies. Experience daily shews,
that Benefit Building Societies, from the peculiar nature of
their transactions, are exposed to losses, which cannot be
averted by the most careful or intelligent management. By
subjecting, however, the chance of their advent, to the laws of
* Average,' and b}^ providing a resource, whence any deficiency
may be at once made good, these institutions can be rendered,
on the whole, as secure and as advantageous mediums for
investment, as any other commercial societies in the kingdom.
56. — The Permanent plan, which we have devised, appears
to meet these requirements, as it is entirely free from most
of the objections peculiar to Terminating societies : —

1st. The difficulty of finding borrowers, at any time in
the course of the existence of a society, is removed.

2dly. New members may enter in any month without
paying up any arrears or increase of entrance fee. Hence,
the scope of the society's action is extended, and the
power, resulting from mutual association, of doing good, is
greatly augmented, as the number of shareholders increases
year by year, and even month by month, instead of di-
minishing.

3dly. The initial and annual expenses can be more equit-
ably divided, and spread over a larger number of members.
4thly. A member may, under reasonable restrictions,
withdraw his subscriptions, or effect the redemption of a
mortgage, without the delay or expense, that he would
experience in a terminating society.

54 ON PERMANENT BENEFIT BUILDING SOCIETIES.

5thly. The duration of members' subscriptions can be
fixed with greater certainty.

57. — The system of a Permanent Building Society, which
is most simple in its operations, may be explained as follows : —

The members are separated, as before, into two classes,
Investers and Borrowers.

The investers pay a certain monthly subscription during a
fixed number of years, calculated as sufficient for the realisa-
tion of their shares, at the end of which time the amount due
is paid to them, and they secede from the association as far as
such shares are concerned. The Investers represent the pro-
prietors of a company. New members can enter at any time,
and commence their subscriptions without paying up any
arrears or any increase on the original entrance fee, whereas in
terminating societies, the fee on entering is increased, without
sufficient reason, year by year, until, from being originally
only 2s. 6d., it is in some cases raised to six pounds per share.
The duration of a membership is counted from the month of
a member's first entrance. This causes every month a fresh
series of members to be added to the society or new shares to
be issued, so that, taking an example, if the term of mem-
bership were 10 years or 120 months, and 50 new shares on
the average were taken up every month, there would, at the
end of the first 10 years, be 6000 shares subscribed, supposing
always that, if any were withdrawn, the average were kept up
by an increase in the new comers. At the end of the first
120 months, or 10 years, 50 would be paid out, but as new
members would come in, the number of subscribers would be
undiminished, and month by mouth afterwards, as successive
periods of 120 months were completed, old members would
go out and new ones come in.

The Borrowers receive, at the time of obtaining an advance,
the full amount of their shares without any deduction beyond
H trifling commission, which is withheld as a contribution

ON PERMANENT BENEFIT BUILDING SOCIETIES, 55

towards the expenses and losses ; the loan is secured by a
mortgage on the property purchased, and in return they pay,
during an optional fixed number of years previously agreed
upon, a suitable monthly subscription, by which the debt is
liquidated with interest. The members, who become borrowers,
at once cease to he investers in respect of the shares on which
they obtain advances, and do not participate in any of the
subsequent liabilities or expenses of the society, nor con-
sequently in its profits, which in fact they anticipate by
obtaining their loans at a moderate and definite rate. The
general liabilities are provided for by taking, as the basis of
the calculations, a higher rate of interest for the repayments,
than is actually guaranteed to the investers for the realisation
of their sliares ; that is to say, if the amount of each share
held by an invester, which is promised to him at the end of
a fixed term of years, be equivalent to the accumulation of
his subscriptions at 4| or 5 per cent, compound interest, the
borrowers would nevertheless be charged about Q\ or 7 per cent.
This difference of 2 per cent, in the rate of interest obtained
is temporarily withheld from the investers, in order to form a
management and contingent fund, for the purpose of meeting
the expenses and contingencies of loss on the mortgages.
The customary commission, which is deducted from the loan, is
proportionate to the number of years of its duration, and
varies in amount with the local circumstances of the place in
which the society is conducted. It is regulated by a table,
where the advances are made by Rotation or the Ballot ; but
in the case of the Bidding system, it is replaced by the pre-
mium bid per share. A borrower must have been previously
an invester, but immediately after he borrows, he passes over
from one class to the other, receiving then whatever amount
is due to him on his investing shares, as arising from his past
subscriptions, with interest thereon from the date of his first
joining up to the time of his obtaining the advance. The repay-
ments of the borrowers are for a fixed term of vears, whatever

56 ON PERMANENT BENEFIT BUILDING SOCIETIES.

be the subsequent condition of the society, as it is not rea-
sonable that, when they have once given good and sufficient
security for a loan, they should be expected to share in the
responsibility of future investments. This is one great im-
provement upon the old system, where the period of the
subscriptions would depend on the future success or non-
success of the association, or upon the contingency of any
loss being sustained by it from other property mortgaged to
other members — so that in many cases the repayments are
extended over several years more than was expected by a
borrower when he first effected his loan.

58. — As regards those members who remain investers, the
system of periodically dividing a Bonus from the profits is
adopted, which has been found so productive of safety and
success to mutual Life Assurance companies. Instead of
forestalling the society's profits, by reducing the monthly
subscriptions of the investers to such a degree as barely to
leave them sufficient, even theoretically speaking, to produce
by accumulation the amount of the shares, the safer plan
already alluded to is adopted, of keeping the subscriptions
sufficiently high to be theoretically and practically adequate
for the purposes. Any surplus profits, which may arise beyond
the promised amount of the unadvanced shares, are periodi-
cally and proportionately divided among the investers in the
shape of a Profit-Bonus to be paid to them, with the other
sums due on the completion of the subscriptions upon each
share. The Bonus system thus possesses very great advan-
tages, inasmuch as it preserves to the society the possession
of a reserve fund over wliich it has power, and whence any
unexpected losses may be met.

59. — The borrowers of course are not entitled to participate
in this Surplus-Bonus, as they have secured the equivalent by
the manner in wliich they obtained their advances. This
point appears, since the publication of the first Edition of this
Treatise, to have been misunderstood, and several well-disposed

ON PERMANENT BENEFIT BUILDING SOCIETIES. 57

persons have exclaimed against an ajjparent disadvantage
offered to borrowers by the new system. They should, how-
ever, have reflected that the borrower is in all cases, practically,
equally well off, since by the very mode in which he obtains his
loan, he secures at once the enjoyment of an immediate profit,
which is still only prospective to the Invester. The money in
hand is of at least as much advantage to the borrower as the
deferred realisation of his shares can be to the subscriber,
who has to wait to the end of his membership.

60. — In a permanent institution of this kind there will be
little difliculty in obtaining borrowers, for the great objection
disappears which is made against terminating societies : — viz.,
that after a few years of their existence, the duration of a
mortgage is too limited, and the loan-repayments too heavy, to
suit the means of the class who are usually members. If the
society be permanent, a member can at any time become a
borrower, and yet have his advance for whatever period is most
suited to his means, the amount of monthly payments required
being less as the duration of the debt is extended.

61. — Again, since new members may come in at any time
without paying up any arrears, the society will, if properly
managed, continually receive a fresh accession of strength from
new subscribers, and thus generally possess, at each meeting,
funds sufl[iciently large to be capable of being invested without
delay ; whereas, it has been stated before as one of the difiicul-
ties in the old societies, that from their being comparatively
confined in their action, the funds collected at a subscription
meeting are frequently insufficient to meet the wants of any
borrowing member, and are consequently left idle and un-
productive of interest for, perhaps, some months, until by
subsequent additions they amount to the sum required.

The permanent principle therefore possesses several elements,
which tend materially to confirm the calculations founded
on the prohahility of a continuous realisation of interest.

58 ON PERMANENT BENEFIT BUILDING SOCIETIES.

G2. — It is, however, necessary and proper that a higher rate
of interest should be charged, in determining the advance
repayments, than the investers would be content to receive in
return for the subscriptions contributed by them, in order that
some margin may thus be provided for the various contingen-
cies to which these societies are exposed. These contingencies
arise not from the Investers but from the Borroivers. It is
through the loans that losses are likely to be produced, and
the borrowers should therefore pay sufficient interest to
protect the investers from such casualties. As we have said
before, the security offered to Benefit Building societies is
one of much tendency to be of an unsound nature, and out
of a large number of such investments, a few bad cases will
always arise entailing loss. * By charging, however, a suffi-
ciently high rate of interest from the borrowers, the annual
receipts from that source may be made large enough, not
only to meet the engagements in respect of interest on their
subscriptions, which the society has contracted towards the
investers, but also to cover any loss arising from bad security
or other causes.

In societies formed for the purpose of purchasing or dealing
with property, which does not consist of land, in or around
London, or other large towns, a very fair plan is to take 7

* [We have, since the first Edition, met with a similar view of the
principle involved, in the well-known Catechisme de VEconomie Politique,
by the late distinguished J. B. Say, at page 181 of the fourth edition.
The substance of his views is as follows: Capital is rendered avail-
able, by industrial enterprises, to produce an income under the name of
interest. The interest or income from such a source should be separated into
two j)arts. When a. sum of money is lent at a much higher rate of interest
than that of the public funds, say, at G per cent, per annum, only 3^ or 4 per
cent, (more or less) can be considered as the payment received from the
borrower by way of rent for the hiring of the money. The remainder 2^ or
2 per cent, (more or less) is to cover the extra risk existing in the investment,
or is the Preraimn of Assurance at which the lender (acting as his own Assurer)
can incur the chance of loss, to which he is exposed through making liis ad-
vance upon a security, that is not of the first class.] (See chapter further on
resjjecliuff Emigration Societies.)

ON PERMANENT BENEFIT BUILDING SOCIETIES. 59

per cent, rate of interest as the basis of the loan repayments,
since even that rate is sufficiently low to enable a member to
purchase a house on comparatively moderate terms, and in
consequence of the greater opportunities for other investments,
at apparently as high rates of interest, possessed by London
residents, which they might consider more secure than house-
mortgages, it would be nearly impossible to find lenders, or
investers, if a lower rate were charged, as (supposing that the
expenses, and losses which might arise, should absorb 2 per
cent, off the rate of interest obtained) they would not clear
more than 5 per cent, for their money.

63. — Again ; the Expe7ises, both initial and annual, can he
more equitably divided over present and future shareholders.

First, as regards the initial expenses, instead of their being
defrayed by the first series of members, they can be charged
as a debt against future as well as present subscribers, and be
paid off" by a certain fixed temporary deduction from the
surplus profits of the society. The annual expenses will in
a similar manner be borne by a much greater number of
members, than is the case in associations formed on the ter-
minating principle, with this one peculiar additional advantage,
that year by year as the society progresses, until the close of
the first period of the duration of the investers' shares, the
number of contributors will increase, instead of diminishing.
(See Appendix Sec. i' for further remarks on the rate of contri-
bution, which it is equitable to require from the members.)

04. — In permanent societies, any Borrower who may desire
it, can, under certain practical restrictions, be permitted to
redeem his mortgaye on much more equitable terms than
under the old system.

In a society of limited duration, if a borrower, or his family
in case of his death, before the mortgage is cleared off", make
application to pay off" the remainder of the debt, a much larger
sum is exacted, than would be required on a mere theoretical

60 ON PERMANENT BENEFIT BUILDING SOCIETIES.

view of the question, in consequence of the society no longer
possessing ojiportunities of investment for any sum which
may be returned on its hands, as the other members are un-
willing to borrow, when the loan can only be obtained for a
few years. So that a borrower, who wishes to clear off his
mortgage before the close of the association, has to pay not
only the net value of the remainder of his debt, but also some
compensation for the loss of interest, which will be expe-
rienced in those years, during which the money thus returned
will remain idle and unproductive in tlie hands of the society.
Hence, instances constantly occur of amounts being required
in redemption of a mortgage, which would be considered
unfair and exorbitant, were it not for the peculiar circum-
stances of the case.

In a permanent association, on the contrary, as opportuni-
ties for investments abound, the directors would be ready
to offer fair and reasonable terms for a redemption, in order
to increase their power of encouraging the entry of new mem-
bers by the prospect of an early advance.

65. — On the other hand the Withdrawal of shares by
Investing members is greatly facilitated.

In terminating societies, persons who may desire to discon-
tinue their membership, cannot do so without much difficulty
and delay, because the money they have subscribed is engaged
in the society's investments ; and as few, if any, new members
join after two or three years, the funds received from time
to time can only with considerable restriction be paid out on
withdrawing shares. Hence, it has been customary to inflict
fines, varying from 5s. to £10 per share, on parties withdraw-
ing. *This deduction is severely felt by the poor man, who,
when endeavouring to save a few pounds, docs not know at
what time lie may require them ; and who from unforeseen

* [A member, who has given notice to withdraw, should not be made to
participate in any loss, which may occur subsequent to the date of his notice. J

ON PERMANENT BENEFIT BUILDING SOCIETIES. (>l

circumstances may desire to withdraw some portion of his
suhscriptions, as the only means of freeing himself from,
perhaps, temporary difficulties. Yet, if withdrawals were
permitted without restriction, a terminating society could
never lend out the whole of the sums invested, as it might be
called upon at any time to return an inconvenient portion of
them. Consequently, in all the old Benefit Building societies,
the rules attempt to provide against this difficulty by making-
it not easy to withdraw shares. Moreover, the societies them-
selves are injured by applications for withdrawal, which they
cannot satisfy, as a feeling of distrust is excited which materi-
ally affects their subsequent operations. This inconvenience
does not exist in the permanent plan, simply because new
members continually enter, and there is always a floating
balance sufficient to meet any applications for withdrawal
within reasonable limits.

66, — The permanent system, described in the foregoing
pages, will best be understood by a few examples taken from
the rules of one of the societies, founded upon that principle,
which has met with great success : —

" The shares of Investing members are *£100 each, for
" which the subscription is

13^. Of?, a month for 10 years or 120 months,
or [10^. Od. „ 12i „ 150

8^. 4(/. „ 14 „ 1G8 „]

" They may, however, take half shares of £50, or quarter
" shares of £25 each, if they prefer it. Investing members
" can ivithdraw from the society, without fine, at any time after
"■ the first year, when the aiuount of their subscriptions will
" be returned, with interest, varying, according to the length
" of time the member has subscribed, from 1 per cent, up to

* [In some cases ,£50, and even ^25, would, perhaps, be the preferable
amount of each share, as the smaller the sum subscribed, the less the amount
of withdrawals.]

62 ■ ON PERMANENT BENEFIT BUILDING SOCIETIES.

" 6 per cent., according to the following table for whole
*' shares, and so in proportion for half and quarter shares, viz.,
At the end of the first year . . £

„ 2 years

53 O ,, . . .

,, 4 ,, .

,, o ,, . . ,

„ 6 „ . . . .

7
,, 8 „ .

,, t/ ,, . . .

At the last or 10th year" . . . 100 0 0
(With Profits in addition to the ^100.")

" Tnvesters may, if they desire it, cease their future pay-
" raents and leave their past subscriptions, as a Deposit
"■ producing compound interest, to be received back in one
" accumulated sum at the end of the term of their origi-
" nally selected membership." [The table being calculated
by the formula in Section 4 of the Appendix.]
" Parties intending to borrow must, in order to qualify,
' previously become members ; and, at the time of borrowing,
' they will be repaid the sum due for the past subscriptions

* on their shares with interest, and then receive, as a loan, the
' full amount of any number of shares they may require,
' without any deduction, beyond a small commission, which
' will be carried to the credit of a management and contin-

* gent fund, to defray expenses, &c.

" Loans, to the extent of £ , will be made to members
' on security of real or leasehold estate, house or land, in any

* part of England, for 5, 7, 10, 12, or 14 years, according as
' they may prefer.

"Example — * A member borrowing £100 on mortgage

* [The mortgage-deed must be for a term certain, as in the case of
annuities secured upon propei'ty. It will be ditferent from the ordinary deed
of the Terminating Building Societies.]

ON PERMANENT BENEFIT BUILDING SOCIETIES. 63

" will only be required to make the following repayments,

" including principal and interest, viz. —

*' If for 5 years £2. 0. 8 monthly or £6. 5. 0 quarterly

„ 7 „ 1. IL 0 „ 4. 15. 4

„ 10 „ 1. 3. 9 „ 3. 13. 1

„ 12 „ 1. 1. 0 „ 3. 4. 6

„ 14 „ 0. 19. 1 „ 2. 18. 9 „ "

The repayments of the borrowers are calculated at 6 or 7
per cent, rate of interest, whether the loan be taken for 5, 7,
10, 12, or 14 years, and, although actually paid monthly
or quarterly, they are regarded in the calculation as made
yearly and at the end of each year. This creates but a slight
augmentation in the amount of the periodic repayments, and
yet tends materially to increase the safety of the basis on
which such a society is founded.

" The amount of commission deducted is what a careful
" examination of the expenses and losses of other similar
" institutions has shewn to be necessary and sufficient." (See
the Rules in this Treatise.)

" The surplus profits of the society, (over and above the
" promised amount of the unadvanced shares,) will be ascer-
" tained yearly by an Actuary, and be apportioned, two-thirds
" to the credit of the investers, to be paid to them as a Bonus
" at the termination of their 10 years membership ; the other
" third to be carried to the credit of a Permanent guarantee
" fund, formed to meet any loss which may arise. This pro-
" portion in the division of surplus profits will, however, be
" varied as may be considered advisable, after the expiration
" of the first nine years of the society's existence.

" There will be no loss from bidding. Should there be
" more applicants for advances than can be supplied at one
" time, priority will be settled by ballot, (or rotation.)

64 ON PERMANENT BENEFIT BUILDING SOCIETIES.

" The receipts arising from the entrance fees, fines, &c., will
" all be carried to the credit of the management and contingent
" fund, out of which the different expenses will he defrayed.

" As an example of the working of this society : — Sup-
" pose a person desires to purchase a house for £300, which
** would return a net rental of £30 per annum, and that he
*' has been an investing member one year before he applies
" for the advance. He must hold 3 shares to borrow £300 ;
" and in this example we will suppose that he has paid one
" year's subscriptions on each of the 3 shares.

" By the table of withdrawals he is entitled to 3
" times £7. \Qs Od., or £23 8*. Od., in return for his past
" subscriptions. This sum he receives, at once, if he desire
" it, with the £300, and, ceasing to be an Invester, he
" borrows the £300 on the terms of the table of repay-
" ments (page 63) for Loans, for which only he gives
" security.

" If he effect this Loan for 10 years, his re-payments,
"including principal and interest, will be, £3. 11^. 3c?.
*' a month or annually .... £42 15 0

" Multiplied by 10 years .... 10

" Making the total re-payments . . £427 10 0
" Deduct 10 years' rent (paid or received) £300 0 0

" Leaving the cost, as far as the Benefit

" Building society is concerned, . £127 10 0
" For which sum the member has thus secured to his family
" a house, free of rent for the remainder of its lease. The
" above example is for 10 years. The purchase, however,
*' may be effected by smaller annual payments, if the Loan
" be taken out for 12 or 14 years."

" The deduction for commission, and the law expenses, must
" be provided for from tlie £23. ^s. or other private source.
" They of course add to the expenses of the purchase, but it

ON PERMANENT BENEFIT BUILDING SOCIETIES. O.)

" should he remembered that the payments of the horrotvers can in
"no way be increased or extended beyond the specified jieriod
" for which the loan is taken, as is the case in the old societies.
" Taking an example from one of them whose shares are
" £120, upon whicli, in the first year, a borrower would re-
" ceive onl}- about £55 in cash, and occasionally much less, he
" would be required to pay 146-. per month per share, or
" 8/. 8s. Od. per annum, until the close of the society, which
" is more likely to extend to 14, or even 16 years, than to
" terminate in 10 years ; but, confining the question to 10
" years, in order to obtain a loan for £300, he would have to
" pay a subscription upon five and a half shares, amounting
*' to 46/. 4*. Od. a-year ; whereas, in this society, it would
" cost only 42/. 15^. Of/."

67. — In the permanent plan just described, the period of
the Investers' subscriptions may be 10, 12, or 14 years, or
even longer or shorter without affecting tlie principle.
Either would answer equally well, and the result would
be the same to an Invester whatever term were adopted,
if the basis of the subscriptions were upon the same rate of
interest. We should recommend, however, that to avoid
complication, in no society should the investers have more
than one or two periods for the realisation of the unadvanced
shares, and their monthly subscriptions should not be less,
than what would be required to produce them by accumula-
tion in the stated time, at 4| or 5 per cent, compound yearly
interest Although it is not possible, a priori, to estimate the
amount of surplus profit, which will remain at the end of
each period, when the expenses and any losses that may
occur have been provided for, yet it is reasonable to ex-
pect, that if the society be carefully managed, each invester
will receive a Bonus in addition to the originally promised
amount of his share. What that Bonus will be must depend
on the success of the association, and every member will,

66 ON PERMANENT BENEFIT BUILDING SOCIETIES.

therefore, find it to his advantage to add his individual efforts
in promoting its prosperity. It will be satisfactory to reflect,
that the Management and Contingent Fund will be amply
adequate for its purpose, since it will include not only the
entrance fees, fines, and commission deducted from the loans at
the time of an advance, but, moreover, a fluctuating reserve
on each <£100 share, arising from the circumstance, that the
annual subscriptions paid by an investing member, viz., I3s.
a month or 71. I6s. Od. a year, are invested at 7 per cent,
compound interest, and in the case of its being realised
monthly, the reserve in 10 years would be as high as £11 per
share. — (See Section IV. Jppendix.)

68. — We will conclude this Chapter by suggesting an im-
provement in the pecuniary position of the Borrowers, by which
greater facilities will be afforded to them to realise benefit
from Advances. It is well known, that, for the first year after
his purchase, a borrower is, in most cases, scarcely able to
complete the necessary arrangements connected with the
furnishing his house, &c. ; and he experiences some difficulty
in providing for the increased payments, which begin at the
end of a month from the time of his obtaining a loan. The
original object of Benefit Building societies, viz., to enable
the industrious poor to become possessors of their homes,
would be accomplished, with greater certainty and less incon-
venience to the parties concerned, if the monthly repayments
upon advances did not begin for a year after the same had
been granted. The borrower would thus have time to look
about him and to settle comfortably in his purchase ; and the
society would merely have the repayments deferred for one
year, or for whatever other time might be agreed upon. It is
true, however, that for the association to be properly protected,
collateral security, personal or otherwise, should, perhaps, be
required during the time which is allowed before the repay-
ments commence. In the Appendix the formula is given for
the rate of contribution suitable for a loan so granted.

CHAPTER V.

THE PRACTICAL MANAGEMENT OF A BENEFIT BUILDING

SOCIETY.

Art. 69. — After recommending the adoption of the Perma-
nent instead of the Terminating principle, in the formation
of future Benefit Building societies, it may not be out of
place to add a few remarks, relative to their subsequent prac-
tical management, some of which also apply to the other
institutions considered in this Treatise.

At the commencement, great care ought to be exercised in
the judicious selection of suitable persons as officers. The
most important of these are undoubtedly the Solicitor and
Surveyor, from their influence, for good or evil, on the opera-
tions of the society; for it is upon their testimony respecting
the soundness and adequacy of the security offered for an
investment, that its safety and prosperity entirely depend.

When a member is desirous of purchasing a house, or other
similar property, he makes application to the directors, who
instruct the surveyor to examine and report on the nature,
position, and value of the proposed purchase. If these be
satisfactory, they then direct the solicitor to examine into the
right of sale or title which the seller possesses. Should this
also prove unexceptionable, the money is advanced for the
purchase, its repayment being secured by a mortgage on the
property for an agreed term of years. Let us now examine
the position of the Benefit Building society with respect to
this investment.

If, at some subsequent time, before the mortgage is cleared
off, the borrower were to discontinue his payments, the society

r o

G8 MANAGEMENT OF A BENEFIT BUILDING SOCIETY.

would be under the necessity of seizing the property and
reselling- it, in order to recover the remaining amount yet due
to it. Thence would arise various chances of loss.

It may happen that the locality in which the property is
situated may have diminished in public estimation, as is fre-
quently the case with many parts of London and other large
towns ; or the necessary repairs to which any new Purchaser
would be exposed, if they have been neglected by the late
occupier, might be found too heavy. Perhaps by a wilful
mis-statement or an error in judgment on the part of the
surveyor, the house may have been estimated at more than its
real value ; or, lastly, some defect in the original title may be
discovered. In any one of these cases an attempt to resell
the property would occasion loss.

70. — Now these contingencies may in a great measure be
averted by the selection of careful and respectable officers.

1st. As regards the Solicitor, who examines the title to
the property. This branch of law business, which is techni-
cally termed " conveyancing," is one of great intricacy and
difficulty, and requires peculiar skill and experience in the
person who undertakes it. The title-deeds to property are
often much involved, or present flaws and deficiencies, which
can only be detected by the most searching and patient
inquiry. On the other hand the prosperity of a Building-
society, the security of its investing members during the
continuance of a mortgage, and the subsequent undisturbed
enjoyment by the borrower of the property purchased, depend
solely and entirely upon the validity of these titles, and the
correct appreciation of the property which they represent.

For these reasons, the election of a competent solicitor is
one of the most important dvities which belong to the directors
of the society.

The person chosen should possess both experience and
talent; he should be a man of integrity and firm principle,
incapabh; alike of being influenced by motives of interest or

MANAGEMENT OF A BENEFIT IJUILDING SOCIETY, ()9

Iceliiigs c)l' private fVieudship; ami, besides these indispensable
qualifications, he should, if possible, in common with the
other officers of the societ}', be possessed of a good connection.
71. — To secure the services of a person thus qualified, an
adequate and liberal remuneration must be offered, instead of
the insufficient fees, which have hitherto been often tendered
by Building societies to their solicitors. The recompense
should be proportionate not only to the actual value of the
work done, but also to the heavy responsibility attached to
the office which they hold ; for, should the society sustain
any loss through the inaptitude or carelessness of its solicitor,
he is legally bound to make good the deficiency. An example
of this is reported in The I'imes newspaper of the 12th of
April 1842, containing a trial at the Liverpool Assizes, of an
action brought by the Trustees of a Benefit Building society
against the solicitors employed in preparing the mortgage
deed to the society, for a sum of £],o50 lent to a shareholder.
It appeared that the property intended to be mortgaged was
freehold, and that the solicitors had, by some oversight,
omitted to obtain the assignment of an " attendant term ;"
by which means, when it became necessary to proceed to a
sale of the property, in consequence of the non-payment of
the subscriptions due from the shareholder, it was found that
the mortgage was useless for that purpose. The society,
therefore, brought their action against the solicitors to recover
the money, which had been advanced ou the faith of their
taking a proper security. The jury gave a verdict for the
society (the plaintiffs) for £1,350. The counsel for the
Building society, in his address to the jury, stated, in refer-
ence to the profession of a solicitor, that — " No profession
was of more importance to society; none exercised a wider
influence. Every man's property was at their mercy; and on
their skill and integrity every one relied."

72. — Besides the necessity of offering an ample remunera-
tion to the solicitor of a Building society, it is also essential

TO MANAGEMENT OF A BENEFIT BUILDING SOCIETY.

that the amount of his fees, whatever it be, should be fixed
before hand, at the time of his election to the office.

73. — 2ndly. The Surveyor of the society stands next in
importance to the solicitor, his duties being attended with
great difficulties, and considerable experience and judgment
being requisite to enable him to form anything approaching
to an accurate estimate of the pecuniary value of property.

This value will depend on several varying conditions. The
tenure by which the property is held may be freehold, copy-
hold, or leasehold ; in the latter case the number of years yet
unexpired in the lease must be taken into consideration. The
neighbourhood in which the property is situated may be
likely to rise or fall in public opinion. Any estimate, calcu-
lated on the amount of rent actually paid, is little to be
trusted, as attempts are not unfrequently made to mislead
the surveyor, by letting the property at a nominal rent much
larger than is actually paid for it.

The surveyor, therefore, must not only be able to estimate
the materials and cost of erection, but he must be well ac-
quainted with the locality in which he is employed, and he
must have sufficient experience to enable him to detect the
artifices, by which the vendors of property endeavour to
exaggerate its value.

The false estimates, which are sometimes productive of so
umch loss to Building societies, are not always the fruits of
incapacity or inexperience. Cases have occurred of compacts
between the surveyor and the vendor or the purchaser of pro-
perty, or even some officer of the society, to share between
themselves the profits of an unfair valuation.

To guard against the possibility of such fraudulent practices
as these, a man of high moral integrity should be chosen ;
and he should, as well as the solicitor, be liberally remu-
nerated for his services.

74. — Several expedients have been adopted, with the view

MANAGEMENT OF A BENEFIT BUILDING SOCIETY. 71

of obtaining a check on the estimates of the surveyors of
Benefit Building societies. It has been recommended that
they should be paid out of the ordinary funds of the society,
instead of by the borrowing members individually, so as to
destroy any reciprocity of action or feeling between them and
the mortgagors of property. Some societies appoint a survey
committee to act as a check between the surveyor and pur-
chaser, and a regulation has been proposed to prevent any
subsequent transfer of property, from a member to the sur-
veyor, or to any individual of the survey committee. All
these may be useful as auxiliary measures, but the necessity
for them will be much diminished by a previous examination
into the character of the person employed.

75. — ordly. The Manager. — We have placed the Solicitor
and the Surveyor of a society first in importance on the list of
its officers, because we believe that, provided they are unex-
ceptionable, and the manager be an honest, intelligent, and
active man, little more is wanting to carry on with advan-
tage an institution formed on a correct basis as regards its
rates of subscription. It is, however, essential that any
person proposed as a manager should be thoroughly acquainted
with the fundamental principles of compound interest, and
the practice of tables relating thereto. Much mischief and
inequitable dealing has occurred in several of the existing
societies, from the ignorance of their managers on that subject;
and it were well if some regulation were enforced, requiring
that every person, who intends to become the manager of an
association in which the savings of the poor are engaged,
should first obtain from competent persons a certificate of his
qualifications for the office. Since not a little depends on the
zeal and attention with which the manager performs his
duties, it is but reasonable that he should be paid as his exer-
tions demand. Experience has long sliewn that it is a sorry
and false economy, not to give an adequate remuneration to
men, who superintend the affiiirs of important institutions.

<J^ MANAGEMENT OF A BENEFIT BUILDING SOCIETY.

76. — One duty of the manager must specially be mentioned.
He should make himself perfectly master of the Rules of the
society, and the bearing of each clause upon the various mat-
ters of business, which he will have to submit, from time to
time, to the Board of Directors at their periodic meetings. It
cannot be expected that the Trustees or Directors should be
as cognizant as their deputy of the practical effect of regula-
tions, which they only meet at intervals to carry out ; the
responsibility therefore rests, very properly, on the manager ;
and he should be aware of the duties of his office, otherwise
his society may fall into those positions of difficulty and even
litigation, from the influence of which many of the older
institutions are now suffering.

77. — 4thly. The Auditors of the society occupy also
rery responsible situations. The members entirely rely upon
their careful examination, from time to time, of the accounts
and balance sheets. Not only is it their duty to see that
correct vouchers are produced corresponding to the items of
expenses or receipts, but they should examine strictly into
the formation of the annual or more frequent balance sheet,
purporting to shew the pecuniary position of the society at
the time of audit. Upon the faith of the statements contained
in these balance sheets, it is customary for the directors of
the institution to found their report of its progress. By
erroneously placing sums to the credit of profit, which are
not such in reality, subsequent loss has been created. [^See
the following Chapter.^ For this reason it is of urgent neces-
sity, that the auditors should be careful and experienced
persons, well versed in the practice of book-keeping and the
calculation of interest.

78. — 5thly. The Arbitrators. — By the 27th section of
the statute 10 Geo. IV., cap. 56, respecting Friendly Socie-
ties, which has been extended, in the Act of 1836, to Benefit
Building Societies, members of these latter institutions are
entitled to demand Arbitrators, by whom all disputes shall

MANAGEMF.NT OF A BENEFIT DUILDING SOCIETY. to

be settled, and wliose award is to be final on any matters
referred to them. If the society do not, within 40 days after
application from a member, who considers himself aggrieved,
appoint such arbitrators to investigate his case, he may submit
the matter to any two justices of the peace, who are empow-
ered to give a decision, by which the society will be bound.

79. — The Trustees of the society, though last on our list,
in reality are the most prominent, if not the most active of its
officers. We may judge of this, from the fact of their names
being so frequently paraded as evidence to the public of the
general respectability of the association, and from the popular
impression that they are numbered amongst its responsible
officials. The high and recognized standing of many trustees
leads us to wonder at the readiness with which they accord
their names to uncertain schemes, and at their being so unmind-
ful of the injury caused by such imprudence to the public at
large. [See Art. 42, page 33.] To correct this evil, a know-
ledge of the usual duties of their position, we are confident,
alone is necessary. A slight degree of watchfulness, exercised
in a properly constituted association, will protect them from
sharing in the reprehension that otherwise would justly be
their award. As trustees of the society they should insist
upon a strict adherence to the Rules established for its govern-
ment, and also * upon security being given by those officers,
who act as recipients of the members' money.

* [Benefit Building Societies, we ;ire told in tiiis Avork, which may be con-
sidered the grammar of the system, are mainly intended for the benefit of
persons of very moderate means ; and yet their cash transactions are not upon tlio
footing of that public respectability, which gives security, as for instance, in a
bank. This is the first point to be considered ; for even the wild miscalcula-
tions pointed out in some Terminating Societies will merely involve partial
loss, or carry on their duration beyond the period specified. There nuist be
security for the intromissions of those who arc in any way concerned in
handling the money of the company, or the wisdom with which the plan may
be conceived will be no guarantee against ruinous loss. [ C/iaiubers's Edinburylc
Journal — Extract from Review of First Edition.^^

74 MANAGEMENT OF A BICNEFIT BUILDING SOCIETY.

80. — Turning from the officers of the society to the details
of its ])ractical working, we shall next examine severed points
respecting which there is considerable difference of opinion,
even among persons who are most experienced in building
society transactions.

With reference to the mode of granting advances to mem-
bers, when there are applications for loans exceeding the
amount of money which can be lent, three plans exist ; viz. :
either by Bidding, Rotation (that is seniority on the list of
applicants), or by Ballot. The two first appear to present
more objections than the third, although it is extremely
difficult to decide, what system can be adopted as likely to be
entirely free from inconvenience.

81. — The plan of determining by Bidding who is to have
the preference for an advance, consists in putting the sum
proposed to be lent, up to auction among the members, and
in finally allotting it to that person who offers the highest dis-
count for it. This may be explained by an example : — In a
10 years society, suppose there is a certain sum ready to be
advanced. The chairman puts up, say, one share of £120,
and enquires what discount will be allowed for it. The
members present hand in written biddings to him, and he
declares the highest discount offered ; upon which the bidding
is commenced a second time and the result is again declared ;
and, finally, a third trial is made, and the advance is allotted to
that member who has offered the largest discount. By this
plan, members who had no intention to borrow, have had the
power of raising the discount offered, by bidding during the
first and second trials and abstaining the third time ; the profits
derived by the non-borrowers increasing with the magnitude of
the discount obtained. An attempt has been made to remove
tliis objection by causing the biddings to be made by word of
mouth, as at a public auction, and by only allowing one trial.
The system of bidding, however, may still cause borrowing
members to obtain advances on most unequitable terms.

MANAGEMENT OF A BENEFIT UUILDING SOCIETY. iO

unless a limit be placed to the price, which they can offer.
Cases continually occvir, where discounts, for £120 shares,
are given as high as £70 and even £80 in the first year. By
this means the borrower receives only £50, or even £40, at
the beginning, in lieu of £120, the full amount of his share
at the end of the society. And, as he has to pay lis. a month
for 10 years, or 8/. 85. Od. a year, his advance costs him con-
siderably over 10 per cent, rate of interest.

82. — It is proper to state, that in the country there exist
many associations in which an error of the opposite extreme
is committed, through a desire to make the effect of bidding
less onerous upon the Borrower. We allude to the cases
where the premium to be given is limited to a small per
centage on each share, and the Borrower is allowed to pay it
in instalments over a period of years. This is disadvantageous,
as it delays the realisation of profit, which the society would
otherwise experience, and does not prevent the member from
still imagining that he is paying considerably for his loan.
There is no doubt that it is expedient, for this and other
reasons, to deduct the premium at once from the amount of
the share advanced.

83. — Between the Rotation or Seniority system, and Bal-
loting, it is difiicult to make a choice. By the first a member
puts his name down on the list of applicants, and waits his
turn for an advance. If the society has been some months in
existence, when he joins or wishes to borrow, he may have to
wait a considerable time before he obtains the loan he desires.

84. — By the Balloting plan, the names of all the applicants
are placed together in a ballot-box, and one is drawn out by
lot, to whom preference is given. To this last arrangement
the modern societies seem to incline, because, without the
enormous losses consequent on the Biddiiig system, and the
delay certain to attend that by Rotation, each of the borrowing-
members individually has a chance of being fortunate enough
to obtain the first right to an advance.

70 MANAGEMENT OF A BENEFIT BUILDING SOCIETY.

As the names are drawn out of the ballot-box a list is
formed in the order of which the loans are to be granted. If
there be not money enough to suit all the applicants at once,
those members whose names remain on the list have prefer-
ence at the next advance before any subsequent ballot, provided
they have been six months in the society.

85. — It has been lately imagined that the system of Ballot-
ing is not legal, inasmuch as it might be considered a species
of lottery. Such an impression is entirely without foundation,
since the ballot is merely introduced in a permanent Building
Society for the simple purpose of collecting for an individual
preference the names of the members, who desire to become
borrowers and receive advances, for which each and all have
to pay after the same rate of subscription and interest ; no
favour in respect of repayment being obtained by any. The
ordinary lotteries were very properly prohibited from very dif-
ferent motives, because they encouraged a system of gambling,
by which one man was made rich, while his less fortunate rivals
became impoverished. No analogy exists between the two cases.

86. — If the Bidding or Rotation plan be preferred, there
would be found no difficulty in applying either to a permanent
Building Society, but a clause should be introduced to
obviate too great improvidence of competing borrowers in the
former case, or the disheartening delay of the latter system.

87. — In the general conduct of the society it ought to be
borne in mind, that, at its commencement, a liberal yet careful
outlay is requisite, to give due publicity to its principles in
the districts over which its operations are proposed to extend.
The preliminary expenses may perhaps be large in amount,
but where they have been judiciously incurred, they are sure
to be amply repaid by the future extent and importance of
the institution. In order to effect legitimately and advan-
tageously the main object of Benefit Building societies, care
should be taken that the personal interests of no individual
member arc sacrificed by the adoption of any unjust regula-

tions, which may have been introduci d for the special advantage
of another. As tlie chief aim is to provide a home for those,
who otherwise miglit not be in circumstances to obtain it, the
amount of available funds during each year should be so
apportioned as to supply the greatest possible number with
advances. Where a member has pecuniary means of his own,
he ought readily to apply it towards part of his purchase, so
that his less fortunate neighbour may participate to the fullest
extent in the assistance which the society can afford hiui.

Again, there is in general less spirit of speculation on the
part of a borrower, who intends to occupy the house himself
which he desires to buy, and it is found by experience that
more substantial property is offered for security in such cases.

88. — It is desirable that no meeting of the society should
ever be held at any tavern or public house. The members
may save much money by the adoption of this rule. They
may do more : they may deliver themselves from the temp-
tation to form habits of intemperance and useless expenditure,
which, to view them in no worse light, well nigh counterba-
lance all the advantages to be derived from these institutions.

89. — The Rules should be framed by persons well versed in
the principles and practice of Benefit Building Societies, so
that the advantages of both sound and new features may be
secured. All such provisions, as experience has proved to be
productive of loss or inconvenience, must be excluded. The
set of rules in this work are applicable to the proposed per-
manent plan, which we have prepared of a Building society,
and may be adapted to the circumstances of particular local-
ities. They have been carefully modified in this edition by the
results of uninterrupted experience, and by valuable sugges-
tions communicated by the certifying Barrister ; and we re-
commend them as providing a sound basis for any society,
although we are far from believing, that they should be adopted,
without modification, as fitted to every part of the country.
{See Chapter VII.]

78 MANAGEMENT OF A BENEFIT BUILDING SOCIETY.

90. — The promoters of new societies should carefully
ahstain from engrafting corrections upon the draft rules in
question, which their inexperience may prevent tliem from
perceiving, might have the eifect of utterly destroying the
connected link of principles by which the various clauses
hinge upon each other. That this caution is not unneces-
sary, we may mention, by way of anecdote, that one of
the most flourishing societies at present in Middlesex, had to
go through the expensive operation of a revision and fresh
registration of its clauses, after a great number of copies of
its prospectuses and rules had been printed ready for circula-
tion. This arose from the promoters having adopted the
general characteristics of the set of rules given in the first edi-
tion, upon which they had made such fanciful alterations, that
the system in their hands became a chapter of inconsistency ;
and they were put to that expense in retracing their steps,
which in great measure might have been obviated by a more
legitimate proceeding at first.

91. — In conclusion, a few amendments may be mentioned,
which have been the subject of discussion lately, with a view
to remedy the uncertainty that is caused by imperfections in
the existing Act of Parliament on the points involved.

It is contemplated : —

1st. — That an annual Report of each society, examined by
an actuary, should be required to be deposited with the
Certifying barrister, so that the members may be protected
from errors of mismanagement.

2nd. — That Advances may be made by Building Societies
on lands of any tenure whatever, with, or without, personal
security collaterally.

3rd. — That Mortgages for advances, exceeding £150, may
be specially allowed, so as to remove the doubts, which have
been caused by certain observations of the judges in a recent
case. — [^See Chapter on the Law of Building Societies.^

4th. — That the Interest chargeable in the repayments of

MANAGEMENT OF \ BENEFIT P.UILDrNG SOCTRTY. 79

borrowers sliould be limited, so that a cheek may be put to
tlie usurious terms exacted in many of the old societies.

5th. — That the Repayments of borrowers in societies, estab-
lished upon the Termiiiating principle, should be invariably
limited to the period of years, whicli they were informed
would be requisite, in the prospectus or otherwise, at the time
of their taking the advance ; — and, that the Redemption of
Mortgages should, in all cases, be estimated with reference to
the present value of the unliquidated annual repayments, and
not with reference to the amount of money secured in the
mortgage deed. The said calculation being submitted, if
required by the borrower, to an Actuary of a Life Assurance
Office.

6th. — That facilities should be afforded for Convertins: a
Terminating Building Society into a permanent institution,
on such a principle as we have recommended throughout this
work.

7th. — That a public Registry should be kept of all mort-
gages from Building Societies ; with both the date when the
borrower obtained an advance, and when his property is
released from mortgage.

8th. — That it should be imperative upon the Directors of
all Building Societies, to certify to the Registrar of Friendly
Societies, the appointment, resignation, removal, or change of
any of the Trustees; so as to obviate the difficulties, which,
under the present system, may arise, in future years, to the
purchasers of property.

9th. — That the directors may have power to borrow money
(with the view of expediting the granting of advances,) by
Debentures, bearing interest payable half-yearly, preferentially
secured upon the shares or property of the Society.

Other points will be found referred to in the legal chapter.

CHAPTER VI.

THE BALANCE SHEETS OF BENEFIT BUILDING SOCIETIES.

Art. 92. — We have mentioned before, that it is customary
for all Building societies to produce once a year at least, a
balance sheet relative to the state of their pecuniary aifairs,
which is certified by the auditors as correct, and generally
concludes with an estimate of the improvement in the value
of the shares, attained by the operations of the preceding
year. It is evidently of the greatest importance, that such
statements should be accurate, for, if a fictitious amount of
profit be declared, the directors, not being aware of the error,
are induced to make a corresponding augmentation in the
entrance fee, to be required from any one, who may subse-
quently desire to join the society, and to participate in the
supposed profits ; the eifect of which would be to deter
persons from entering, and the scope of the association would
be curtailed. The existing members also would conceive a
false impression respecting the pecuniary value of their shares ;
and, if any of them should desire to withdraw from the so-
ciety before its termination, they would expect, and the
directors might be led to pay to them, a premium equivalent
to the profit declared, which, if it be overated, must be pre-
judicial to the interests of the general body of shareholders.
Considerable sums are in this manner frequently paid away in
the early stages of societies under the name of bonus, which
create an irreparable deficiency in the accumulated funds at
the epoch of their intended termination. In a variety of
cases, which have come before our notice, this mischievous
circumstance has occurred, and lias been found to have pro-

BALANCE SHEETS OF BEN El- IT BUILDING SOCIETIES. 81

duced a most unfavourable effect on their financial position.*
Moreover, many members who might be disposed to seek for
advances, imagine that, if so large a profit can be made so
soon, they surely would have to pay too high a rate of interest
for the loan desired. They become consequently dissatisfied,
and do not borrow. The pernicious effect of these erroneous
estimates is, also, not confined to the members of the society,
in which they occur. The false experience and superficial
success, thus created, is quoted by the promoters of new as-
sociations formed on the same scheme, and serves both as an
excuse for copying it with all the errors it may contain, without
further inquiry into its safety or practicability, and also as a
means of attracting members eager to participate in similar
advantages.

93. — Such are the evil consequences attending an inaccurate
statement of the position of a society at the end of any year ;
and, yet, in but few instances are the Balance sheets free from
mistakes equally important with those, which are found in
the rules and races of subscription.

The main source of error consists in the practice of insert-
ing the whole nominal amount of a share, for instance £120,
as having been lent in cash to a borrowing member, when
probably he has only received £55 or £60. This is obviously
incorrect, since it matters not what is the nominal value of
the share, but merely what present sum in money has actually
been advanced upon it, in lieu of the full amount, which the
shareholder would otherwise be entitled to claim at the close
of the society, and for which advance he has to pay a monthly
annuity for a certain number of years.

94. — In general, the only profit, which can be apparent in the
annual statements, is that resulting from the interest already

* The case is similar in its effect to that of a bankrupt tradesman, whose
assets would enable him to pay lo^". in the poun<l to his creditors, but who, by
giving 20a". to some of them at first, leaves but 10<;. in the pound to those who
are paid afterwards.

82 BALANCE SHEETS OF BENEFIT BUILDING SOCIKTIES.

obtained through investnig the subscriptions in loans ; and, as
such, is merely what was assumed as probable in the funda-
mental calculations. By the accumulations of interest, year by
year, the expected amount of the shares can alone be realised,
and the yearly profit thus produced is not a matter of congra-
tulation, as if it were unexpected, but simply the means, by
which the suppositions, forming the basis of the society, are
rendered true. Hence, if profit at the end of any year be
shewn, it cannot be carried to the credit of any but the invest-
ing or non-borrowing members, who are making their monthly
payments in the hope of receiving, at the end of a certain
number of years, the promised accumulation of their subscrip-
tions and compound interest thereon, which together are
represented by the shares they hold. The borrowers having
cancelled their shares by the loans obtained, are not interested
in, or entitled to, any portion of the profit or interest realised.
95. — The question, however, may be said to present some
difficulty of conviction, as it is frequently objected by Borrow-
ers, that, whereas in a Terminating Society, they are exposed
to participate in any losses, which may affect its duration, it
would be but fair that they should also share in the pecuniary
prosperity of the association. To this, which is but another
proof of the evil of high-flown balance sheets, it can be only
answered, that, as they have received their shares in advance,
and frequently on very favourable terms, they should not
afterwards claim a part of the profits, by which alone the
non-borrowers can expect to receive an advantage from the
society equivalent to that already secured by the borrowers.
Moreover, practically, the Borrowers are greatly benefited, in
the end, by a 7^o/^-participation in the annual profits; inasmuch,
as the more rapidly the unadvanced shares improve in value, or
progress towards completion, the sooner will tlie society arrive
at its termination, and the sooner they will be entitled to
cease their payments, and to have their deeds returned to
them endorsed with the usual receipt.

BALANCE SHEETS OF BENEFIT BUILDING SOCIETIES. 8-']

96. — The plan, hitherto adopted, of making a Balance
sheet serve to give an estimate of the profit annually realised
on the shares, is productive of the greatest confusion. The
terms Dr. and Cr. tend to mislead, if the figures under their
head are considered relative to profit or loss experienced. A
balance sheet merely supplies information as to the items of
money received, and the mode in vs^hich such receipts have
been disposed of. It can express no opinion, as to whether
any advantage or disadvantage has been derived from the way
in which the money has been laid out, but simply conveys the
facts as they have occurred ; and, as such, it is useful and
necessary for the protection of the shareholders, because it
shews clearly how the pecuniary affairs of the association are
managed. In the other point of view it is not of much value,
as something more is required, than a mere statement of
money received and money spent or invested, to attain a
satisfactory knowledge of the position of the society, as regards
profit or loss incurred. When the Auditors see under the
head of Cr. a heavy item for expenses of management, it does
not occur to them that so much money is sunk and gone from
the society for ever ; the money is accounted for, that is all.

97. — To arrive effectually at the actual value of the shares,
an annual valuation of quite a different character should be
made, on the same plan as that adopted by Life Assurance
companies ; by which, not only the sums received, and then
invested or spent, or paid out on withdrawal, are considered ;
but the present value also is estimated of the profit to be
expected from the advantageous nature of the society's invest-
ments in the advances to the borrowers, relatively with the
present value of its engagements in respect to the shares held
by non-borrowers. This is not the business of a mere balance
sheet, but must be effected by a correct mathematical calcu-
lation, in which the expected duration of the subscriptions,
and the interest actually realised, are taken into account.

98. — This distinction has been overlooked by several writers

84 BALANCE SHEETS OF BENEFIT BUILDING SOCIETIES.

in periodicals treating of this subject, who, in reviewing
balance sheets, appear to believe, that in order to ascertain
correctly the yearly profit or loss of a society, it is sufficient
to form a profit and loss account, placing- on the one side the
various items of receipts from entrance fees, redemption fees,
fines, &c., and on the other side the expenses, and to consider
the balance, whichever it be, profit or loss, as representing
the true value of the shares. The same rule being applied in-
discriminately to every description of Benefit Building society,
without any reference to the essential consideration, as to
whether the rates of investers' subscriptions or borrowers'
repayments are adequate to the originally promised results.
The members, however, can feel no security, respecting the
actual progress of the society and their own future liabilities,
unless an accurate estimate of the profit and loss experienced
by it be made from time to time ; and we would strongly
impress upon them the necessity of insisting on the production
at the annual meetings, of a complete valuation of the
position of the society to that date, distinct from the ordinary
balance sheet. — [See Schedule C, page 93.]

99. — Having mentioned the correct method, which ought
to be adopted, we will proceed to give three specimens of
balance sheets taken at random from a number of similar
reports, for the purpose of shewing how they have hitherto
been prepared ; and to draw attention to the injurious effect
of exaggerated declarations of profit.

100. — It is essential to bear in mind that the mischief, pro-
duced by an erroneous view of the profits of the society, is
even more serious in the earlier stage of its existence than
afterwards, as the loss created by paying away money in the
shape of Bonus to persons withdrawing, is increased with the
number of years yet remaining of the proposed duration of
the association. For example, suppose £500 be declared by
way of Profit at the end of the 3d year of a 13 years society,
which is rcaliziiig an average rate of interest of 7 per cent. ;

BALANCE SHEETS OV BENEFIT BUILDING SOCIETIES. 85

since money doubles at 7 per cent, in 10 years, the £500 profit,
if paid away when declared, would cause a deficiency of £1000
at the end. As no evil is, generally, without a remedy, so im-
mediate steps may serve to restore the association to its sound
position. We would, therefore, urge upon the Directors of all
such societies to have their last balance sheet carefully re-ad-
justed, and the basis of their subsequent statements settled upon
correct and intelligible principles. The matter presents compa-
ratively little difficulty, and a downward course of injudicious
payment of supposed profit out of capital may be stayed.
They would thus be enabled not only to ascertain satisfactorily,
from time to time, the precise value of the unadvanced shares,
but also to determine the probable duration of the borrowers'
mortgage-repayments ; a point in itself of vital importance
to that responsible class of members.

BALANCE SHEETS.

No. 1.

Extract from the first report of the Society. Shares,

£120; monthly subscriptions, 10^. per share (see page 33) : —

" The directors have to congratulate the members on the success which has
attended the operations of the society during the past year — a success which
verifies the correctness of the prospectus issued at its formation.

" The balance sheet shews the superior advantage of building societies over
other modes of investment ; for if the amount received had been placed — say
in a savings' bank, the profit would have been about ^43., or Is. lOld. per
share ; while by the legitimate operations of the society, the profit secured has
amounted to 2738?. 18s. 8d., or 61. Os. d^d. on the £6 per share paid, — making
the present value 121. Os. d^d."

Copy of the balance sheet aimexed to the report, given
verbatim : —
" Br.

Entrance money ,£70 2 6

Subscriptions in advance 10 0

Subscriptions for twelve months 2530 10 0

Forfeited shares 2 0 0

Fines 12 1 0

Transfers 9 5 0

86 BALANCE SHEETS OF BENEFIT BUILDING SOCIETIES.

Postage 2 11 0

Interest 21 12 10

2G4D 2 4

Premiums (or diseount) on 33 (£120) shares

taken up 1916 5 0

Premiums on 12^ shares not taken up, but for

which the society has funds 764 10 0

. 2680 15 0

" Arrears :

Subscriptions 190 10 0

Fines 17 16 0

Interest 2 0 0

Postage 116

211 7 6

^'5541 4 10
" Cr.

By formation expenses, including enrolment of

rules, and deed boxes ,;f25 14 2

Manager's salary 50 0 0

Postage 5 12 0

81 6 2

By mortgaged property 480 0 0

„ „ 240 0 0

„ „ 2040 0 0

„ „ 960 0 0

3960 0 ,0
By arrears of subscription ^211 7 6

Premiums 764 10 0

Cash at bankers 524 0 10

Cash in manager's hands 0 0 4

1499 IS 8

5459 18 8

.£5541 4 10

To balance in favour of the society

brought down ^5459 18 8

Deduct subscriptions on 453^ shares,

at £6 per share 2721 0 0

Net profit realised ^'2738 18 8 = to 6 0 9.i per share

Cash paid 6 0 0

The present value of each share £12 0 9i "

BALANCE SHEETS OF 15Ki\ El-IT BUILDING SOCIETIES. 87

The directors, in the ahove, congratulate the members on
the success of tlie society, which they affirm is manifested by
the profit, 61. Os. d^d. per share, realized in one year beyond
the £6 year's subscription paid, a result equivalent to more
than 100 per cent, interest for the money.

This statement is, however, not correct ; and the error
arises from the zvhole nominal amount of the 33 advayiced
shares, or £39G0, being entered to the Cr. as having been lent
on mortgage, whereas in reality the dijference 2043/. 15^. Oc?.,
(between £3960 and the discount or premiums 1916/. 5s. Qd.
given by the borrowers for the loan) is all that has been ad-
vanced. Moreover, the item 764/. \0s. Of/., respecting the
shares not taken up, but for which premiums have nominally
been given, has obviously nothing to do with the business of
\\ie past year, and ought not to have appeared in the balance
sheet.

These considerations change the result : — The following is

a copy of the preceding balance sheet, arranged as it should

be ; viz. : by placing only the money actually received or

due for arrears on the one side, and the money actually paid

on the other.

"Dr.

Entrance money £10 2 6

Subscriptions in advance 10 0

Subscriptions for twelve months 2530 10 0

Foi-feited shares 2 0 0

Fines 12 1 0

Transfers 9 5 0

Postage (received from members) 2 11 0

Interest 21 12 10

2(349 2 4

" Arrears :

Subscriptions 190 10 0

Fines 17 16 0

Interest 2 0 0

Postage 1 1 n

211 7 6

.e'ISGO 9 10

88 BALANCE SHEETS OF BENEFIT BUILDING SOCIETIES.

"CV,

By formation expenses, includng enrolment of

rules, and deed boxes 25 14 2

Manager's salary 50 0 0

Postage (year's expense to the society) 5 12 0

" ^^ ^ 81 6 2

By 33 shares taken up, value at .;ei20 each 3960 0 0

Less the discount (or Premiums) 1916 5 0

2043 15 0

By arrears of subscription ^£211 7 6

Cash at bankers 524 0 10

Cash in manager's hands 0 0 4

735 8 8

2779 3 8

^2860 9 10

To balance in favour of the society brought down ^2779 3 8

Deduct one year's subscriptions on 453i shares, at £Q per share,

and the £1 in advance 2722 0 0

Difference & 57 3 8''

which, divided among the number of investers' shares, or
those which have not been advanced, will give the dividend
apparently realised per share for the past year.

But the number of unadvanced shares is 4531 less 33, or
420^, and 57/. Ss. 8d. divided by 420| equals 2s. 5d. nearly,
which is the result of the past year's operations of this building
society, as far as the above debtor and creditor account is con-
cerned, and entitles the investers to receive 2s. 5d. per share
at its termitiation, in addition to the £6 paid by each.

The true value of each share can only be ascertained by
the method described in the preceding pages, in which would
enter the various considerations deduced from the particular
nature of the society.

BALANCE SHEETS OF BENEFIT BUILDING SOCIETIES. 89

No. 2.

" The Mutual Association.

Established in . Original entrance fee, 2s. 6d.

Monthly subscriptions, 10^. Redemption, 4*. per share of
£120 each.

In the third annual report of this society, the directors
state, that 85| shares have been advanced during the last
year, vv^hich, added to those in the two previous years, make
a total of 261 1 shares, on account of which securities have
been lodged with the society.

" Since the auditing of the accounts, 5^ shares, not included in that
number, have been further advanced, which will make 267 out of 635 shares
subscribed for ; and the directoi's are under engagements to advance 20
shares out of the fourth year's capital.

" The present entrance fee upon new and additional shares is £6 ; but
upon shares being taken to complete a purchase it is only 21. 2s. Od., at
which sum it was agreed they should continue until after the shareholders'
meeting in January last.

" The minimum premium or discount upon purchased shares has been
fixed by the directors at ^55 per share for the fourth year."

Summary of the financial statements as appended to the
report : —

" General Account, for the Third Year, ending Oct. 14, 1848.
"Dr.

1847. To cash, as per last account £8329 17 1

1848. Subscriptions 3650 16 6

*Interest, entrance fees, fines, rules, transfers, &c 590 0 7

Forfeit on purchased shares 60 0 0

* Arrears of subscriptions, fines, interest, &c 100 10 0

Cash advanced as a loan 4085 0 0

Premiums as per last report 10626 19 5

Premiums for 1848 4938 17 G

^32382 7 1

* I The practice of throwing several items together to account for so large
a sum as £590, as in the third line of the above debtor account, is unfair, and
may justly become the subject of animadversion among the shareholders.]

90 BALANCE SHEETS OF BENEFIT BUILDING SOCIETIES.

" Cr.

Expenses hrlSiQAl ^204 11 3

Interest on loans (2 years) 65 4 0

176 shares advanced in 1846-47 21120 0 0

85i ditto in 1848 10260 0 0

1848. Management expenses 77 18 2

Interest on loans 183 4 4

Ground rent and insurance 11 1 2

Arreai's, as above 100 16 0

Cash with bankers 359 12 2

,^32,382 7 1

Profit Account.
"Dr.

1848. Expenses for three years 282 9 5

Subscriptions, ditto 11361 9 0

Interest, ground rent, and insiu-ance 259 9 6

Arrears 100 16 0

Loans 4085 0 0

Cash with bankers 359 12 2

Profit and bonus 15933 11 0

^32,382 7 1

"Cr.
By account as above .£32,382 7 1

^32,382 7 1

" Shewing :
Profit and bonus brought down, divided between 635 shares

of £120 each £15 2 0

Subscriptions paid 18 0 0

Estimated portion of each share cancelled in three years £43 2 0"

The above account contains various errors, and the items
are injudiciously mingled together. The profit 15,933/, lis.
does not in reality exist, as it is in great measure an imaginary
advantage, supposed to have arisen from the discount given
by borrowers on their shares, and, as such, ought not to have
appeared in the balance sheet.

BALANCE SHEETS OF BENEFIT BUILDING SOCIETIES. Jil

We will not examine what would be found to be the actual
value of the shares, supposing a proper calculation made, but
simply remark, that the above furnishes ample evidence of
the deficiency, arising from the expenses, which must exist
towards the epoch of a society's termination, if they so consi-
derably diminish, even in three years, the interest realised on
the investers' subscription ; for the receipts from interest and
fees, including the forfeited shares, altogether only amount to
6501. Os. 7d., of which 541/. I8s. lid. has been absorbed by
the expenses, leaving 108/. Is. 8d. to be divided between 368
unadvanced shares, which is about 5s. lOd. per share, and is
all the interest obtained for three years' subscriptions on each.

Such a result speaks for itself.

No. 3.
The Society.

Established . Original entrance fee, 2s. 6d.

present one, £1 per share. Shares, £120. Monthly sub-
scriptions, lOs. Redemption fee, is. per share.

In the first annual report published in ,

the directors allude to the success which has attended the
progress of the society : —

"There are 113 members, holding 211^ shares, and the total profits, after
deducting expenses, amount to 1096/. 17s. 9d., being 51. Is. 2d. per share ;
which added to the subscription of 61. paid on each share, shows a profit of
III. Is. 2d. to be the progress made towards the realisation of each share."

The following are abstracts of the financial statements : —

"Dr. "Cash Account.

Subscriptions on shares £1258 10 0

Entrance and redemption fees, fines, rules, &c GO 13 9

^1319 3 9

" Cr.

Expenses *5" " ^

Advances on 19a shares < £2340 0 0

Less premiums thereon 1106 5 0

^ 1233 16 0

Balance with bankers 1^ ^^ ^

£1319 3 9

92 BALANCE SHEETS OF BENEFIT BUILDING SOCIETIES.

Profit Account.
"Br.

To expenses ^66 14 9

Balance or profit of the first year 1069 17 9

£1130 12 6

" Cr.

Premiums on 19^ shares £1106 5 0

Subscriptions and fines in arrear 11 IS 6

1117 18 6
Balance in bankers' hands 18 14 0

^1136 12 6

Profit brought down : —

^£1069 17s. 9c?. divided by 211^ shares, gives ^5 12

Subscriptions paid 6 0 0

Actual value of each share .£11 1 2"

The above result is fictitious in consequence of the discount
or premiums 1106/. 5s. Od., given by the borrowers on the
nominal value of their shares, being entered as actual profit or
cash realised. Instead of any interest having been produced
by the past year's business, we find that the expenses have
even entrenched on the receipts from subscriptions ; —

For the expenses paid amount to £QQ 14 9

Less fees, fines, &c. to be received or in arrear ... 60 13 9

Leaving a deficiency of £ 6 10

which divided among the 192 unadvanced shares, gives a
deficiency of about 7|c?. per share.

BALANCE SHEETS OF BENEFIT BUILDING SOCIETIES. 93

* Art. 101.— "SCHEDULE C.

Form of Liabilities and Assets Account.
Dr.

1. Outstanding accounts unpaid : viz., £

• x*

2. Loans and interest thereon due by the

society: viz., &

3. fTo net subscriptions actually received upon shares

(now actually in existence) of depositing (or non-borrow-
ing) members, from the of 18 ,
to the 18

4. To interest due thereon up to this date and calculated at

per cent, rate of interest, (being the rate obtained
from the borrowers, or that promised to the depositors
by the rules)

5. To reserve for future expenses during years

Total £

Cr.
1. By cash in hand : viz..

.£

2. Value of property in possession, through default, if sold to

produce assets

3. ARREARS due from the existing mortgages: viz.,

Re-pay ment subscriptions £

Fines and fees £

4. f By arrears of fines and fees due from non-borrowers ...

5. Present value of existing mortgages, if redeemed, from

which re-payments for years are to be received.
This present value being calculated at per cent, rate
of interest, or by rule

- Total £

Balance £ "

The above has been prepared by me, ■ Chairman or Secretary,

this of 18 , at

* [Schedules A and B relate to the general business of the Society, and
may be bad on application to the Author.]

f Note. — [The arrears of subscriptions due from non-borrowers must not
be taken into account, as the society is only made debtor to them for the net
Subscriptions received ]

CHAPTER VII.

* RULES FOR A PERMANENT BENEFIT BUILDING SOCIETY.

(Copyright).

[' / have heen led to consider the manner, in which a Benefit Building
Society maij he constituted on a permaneiit basis, so as to be free, as far
as possible, from the imperfections inherent in the terminating system,
and with this object I have prepared a set of Rides for its practical
management? — Preface to first edition.]

• Established pursuant to the Act of Parliament, 6th and Tih IVilliam IV , caji. 32.

Art. 102. — ,£100 Shares. Monthly payments for 10 Years, 13s. per share,
or for 12^ Years, 10s. per share. Entrance fee 2s 6d. per .£100 Share.
Half-shares of £50, or Quarter-shares of £25 each, may also be taken.
The Law Expences advanced to Members purchasing Property.

T/ie First Subscription Meeting ivill be held on ■

■ — • o'clock in the Evening, at ; and sahsequenlly

on the First Alonday in each Month at the same Hour.

I. Name and Object of the Society.
1 03. — That this Society shall be called the

Its object is to raise a fund to enable its members to receive an
advance in full, of a share or shares, for the purpose of erecting or
purchasing a dwelling-house or houses, or other real or leasehold
estate in any part of England.

' * [These Rules, as well as the whole of the work, are copyright, and they
have been confirmed and certified by Mr. Tidd Pratt, the government barris-
ter appointed for such purpose. They differ slightly from those in the first
edition, which were also cci-tified. Copies, with the names in blank, will be
su])plied to jjersons interested in the formation of Benefit Building Societies. It
.should be understood that they would mainly serve as a type of the apparently
best system that can be devised. In parfi(;ular localities some modifications
may occasionally be made with advantage. 1

RULRS FOR A PRRMANENT RENF.FIT BUILDING SOCIETY. 95

['Tf it he intended to make advances on Copi/hold property, it will be
advisable not to specify the same by name, but to consider it as
included in the toords ^^ Real Estate,^'' which belong to the Act. The
majority of existing societies unhesitatingly make advances on either
Freehold, Leasehold, or Copyhold irroperty .''^

II. Time and Place of Meeting.

104, — That the first meeting for the receipt of subscriptions and the
transaction of the ordinary business of the society be held on

at o'clock in the at in tlie city of ; and

that the succeeding meetings for receipt of share-subscriptions, and
advance repayments, shall be held on the first Monday in each
month.

105. — That the ordinary meetings of the society shall be held at the
ofiices aforesaid, on the first Monday in each month, at ■ — o'clock in
the evening. That the directors shall have power, from time to time,
to remove the said offices, and alter the time of meeting as they
may see fit. That notice of any such removal or alteration shall be
given to every member of the society. That the directors shall have
power to hold special meetings of their body, and to adjourn their
ordinary and special meetings, as well as all general and special
meetings of the members of the society, as occasion may require.

That the business of the directors' meetings shall commence at —
o'clock in the evening, unless upon subscription nights, when the
same shall be deferred to — o'clock.

106.— That an annual general meeting of the members shall be held

on the first Wednesday in the month of in each year, at which

the directors shall exhibit a general statement of the funds, eff'ects,
liabilities, and accounts of the society, together with an account of
all and every the sums of money received and expended on behalf
of the society during the past year; such statement to be previously
audited in manner hereafter mentioned, and countersigned by the
manager, and a copy of such statement shall be supplied to every
member on application to the manager.

107. — That a special meeting of the members may be held on a re-
quisition to the manager to convene such meeting; such requisition to
be signed by at least five directors, or by ten ordinary members,

96 RULES FOR A PERMANENT BENEFIT BUILDING SOCIETY.

which requisition shall state the object for which such special general
meeting is required ; seven clays' notice at least of which meeting
shall be given to every member, stating the hour, place, and object
of such special general meeting. That at such special general
meeting no business shall be transacted not mentioned in the re-
quisition calling such meeting.

III. Share Subscriptions.

108. — That the shares shall be of the ultimate value of €100 each.
Each member, on admission, shall pay an entrance fee of 2s. 6d.
per share, and a monthly subscription of 13*'. per share, for and
during the full term often years, or 10s. for 12^ years, to commence
on and from the first day of the month in which he or slie shall be
admitted.

Half and quarter shares may also be issued by payment of an
entrance fee of Is. 6d. & Is. respectively, and a monthly subscription
of half or quarter that required for whole shares.

109. — An allowance of* fourpence in the pound will be made on all
subscriptions paid in advance, for a period of more than six and less
than twelve months. The monthly payments may be compounded
for by a single payment, according to Table 1 : — [^shewing the single
payment which will compound for the monthly payment of one
share for any number of years up to 12^.]]

TABLE 1.

''[The Directors should be cmUious not to offer too much discount 071 shares
])aid in advance. It may he safe to hold out a promise of accumula-
tions from interest., hy the end of a term of years, at even 5 per cent.
or more ; hut it does not follow that it would be e(pudly so, to allow 5
or 4i per cent, discount on money tendered in advance. The distinc-
tion is obvious: — in the one case, the undertaking is simply to give
the result of the interest after it has been realised ; in the other, the
equivalent is parted with at once, and a grave responsibility un-
necessarily incurred of so investing the money received as to recover
the discount ( or forestalled interest) paid in advance.]

RULES rOR A PERMANENT BENEFIT DUILDING SOCIETY. 97

IV. Advances and Re-payments.
\ 10. — The society will make advances to its members for terms of
from 5 to 1 4 years, repayable by monthly or quarterly contributions,
covering principal and interest, at the rates hereafter specified, viz.,

TABLE II.

Repayments for a Loan of ^£100, and interest.

Monthlti.
For a Term of 5 years <^2 0 8

7 „ 1 II 0

„ 10 „ 1 3 9

„ 12 „ 1 1 0

14 „ 0 19 1

Quarterly.

^6 6 0

4 15
3 13
3 4

2 IS

1 1 1 . — When a loan is required for twelve years, not more than three-
fourths of the value of the mortgaged property shall be advanced
thereon : nor more than two-thirds of its value, when the loan is
taken for fourteen years.

[For loans taken out for shorter periods than twelve or fourteen years, it
will be for the Directors, on the advice of their surveyor and solicitor,
to decide what proportion of the value of a property shall he advanced
on the security of it. It is imijortant that they should bear in mind that
the risk of subsequent deterioration in the value of a security increases
with the length of period of the nioi'tgage.l

112. — No member will be allowed to receive an advance of shares
exceeding the number he has previously subscribed for, unless he
pay down the entrance fees, and continue to pay half the subscrip-
tions on the whole number of shares required from the date of his
being placed on the list. (See 146.^

113. — The following commissions shall be deducted from all ad-
vances made to members, and shall be appropriated to the manage-
ment and contingent fund : — namely.

TABLE III.

Not exceedino' in amount

On Loans advanced for 5 years.
10 „

jEIOO.

JL200.

£300.

,£400.

£500.

(fee.

&c.

[The rates tvill vary with the locality in which the society is situated, and
should be regulated by the }irinciple in the Appendix, section 4.j

98 RULES FOR A PERMANENT BENEFIT BUILDING SOCIETY.

And that in consideration of the aforesaid commissions so allowed,
borrowing members shall not be called upon to contribute, after the
date of their advance, in respect to the shares upon which they have
borrowed, any other sums towards expenses or contingencies ex-
cepting such fines, transfer, or other fees, as may be hereafter
mentioned in these rules. (See end of Art. 142. J

114. — Members not being in arrear for subscriptions or fines, and
having made payments during at least three months on their shares,
shall be eligible to apply for an advance not exceeding the value of
their shares, as fixed by Rule 3, provided they apply in writing to
the manager, on or before the 2.5th day of the month, stating the
amount desired, and such member shall receive a notice of all sub-
sequent meetings for advance of money, until they be declared
entitled to an award.

115. — Members, applying for advances for an amount greater than
the value of the shares then held by them, must pay the entrance fee
and half the subscriptions from the time of giving notice upon such
additional number of shares as will be equivalent to the sum
required.

1 1 6. — Any member entitled to an advance shall, within one month
from the date of notice forwarded to him through the post ofiice, find
a good and sufficient security by way of mortgage for the same, and
in case of failure he shall be allowed a further period of one month
to complete the same, provided he pay interest on the advance, at
the rate of — per cent, per annum, to commence with the second
month so allowed him, at the end of which time his right to such
advance shall be forfeited to the next member then on the list,
unless he consent to make his repayments in respect of his awarded
advance from that date.

117- — Members entitled to advances shall furnish duplicate particu-
lars of property proposed as security, in the form to be furnished by
the manager at the offices of the society; and the security being ac-
cepted by the directors, who shall have been previously satisfied by
the surveyor and solicitor, of the sufficiency of the security offered,
and all other preliminaries being arranged, the money agreed to be
advanced shall be paid over to the member. And in case the money
. is applied to the purchase of land, and afterwards to erect buildings

RULES FOR A PERMANENT BENEFIT BUILDING SOCIETY. 99

thereon, tlie same shall be advanced by such instalments as the
surveyor shall advise the Board of directors.

118. — The expenses of enquiry into title, and of survey of property,
shall be borne by the member proposing the security, who shall
deposit with the society a reasonable sum on account thereof, at the
time the security is oflfered.

119. — That the repayment for advances shall be made at the end
of the first calendar month, or of the first quarter, (as may be agreed
upon by the directors) next following the receipt of the advance or
any portion thereof, and shall continue to be so made for the full period
for which the advance may have been originally taken, unless the
mortgage be previously redeemed; and that, in all cases, such repay-
ments shall be due on the first day of each month, and be respec-
tively made thereon, if it be a day of meeting, or on the first
subscription meeting thence ensuing.

120. — That the Board shall have the power to regulate the amounts
applicable for advances, and the time and manner for making the
same.

121. — Members desiring advances before they are declared entitled
to them, may be accommodated, provided they have been members for
at least six months, and provided the society can obtain loans from
members, their bankers, or others, to meet such pxirposes, and upon
their agreeing to pay the additional interest (if any) for a stated period,
or until such advance shall be otherwise awarded to them ; and, in
such cases, preference will be given to members, who shall procure a
loan for the society to meet their advances.*

122. — [^The society will receive deposits of any sum not less than
,£5, allowing interest at a rate not exceeding 4 per cent., payable
yearly. 3 (See Art. 91, paragraph 9 and section 4 Appendix.J

1 23. — In case a larger amount of funds shall be at any time unap-
propriated than the board shall consider advisable, the board shall,
after giving notice of at least 14 days prior to their usual monthly
meeting, have power to cause ths same to be taken by the Investing
members (not under notice of withdrawal, nor having received an
advance), and the sums then so declared by the board to be taken in

[* See Art, 48 for remarks on this point.]

100 RULES FOR A PERMANENT BENEFIT BUILDING SOCIETY.

single shares shall be wholly withdrawn, or be taken by such mem-
bers to whom the same may be advanced upon the security of
mortgages in the usual way ; and subject, in case of a default, to a
forfeiture of their existing shares.

V. Fines for Non-payment of Share and Advance Subscriptions.

124. — Subscriptions for shares and advances shall be payable

at the offices of the society on the first in each month,

between the hours of seven and nine o'clock in the evening, receipts
for which shall be given, on a card or book to be provided by the
society, by one of the directors of the society then present, counter-
signed by the manager ; and no acknowledgment otherwise given or
taken shall be valid, unless the manager be unavoidably absent,
when a minute of the directors shall be duly entered in their journal,
authorising some member of the board to perform the duties of the
manager on that occasion.

125 — The fines for non-payment of share-subscriptions shall be
at the rate of 6d. per share per month for each default, and so in
proportion for half-shares.

The fines for non-payment of monthly advance-repayments shall
be at the rate of Is. in the pound per month on the amount thereof,
and upon quarterly repayments at the rate of Is. 6d. in the pound
for each month's default.

('') When the fines on unadvanced shares equal the amount paid in,
the same shall be forfeited to the society. *The Board shall have
power to allow a member specially to suspend his subscriptions on
unadvanced shares on his making application to the Board for that
purpose, and on his paying half the fines above mentioned.

VI. Security for Advances.
1 26. — The mortgage deed shall contain full powerp of sale, as a
security for so much money as shall be therein expressed to be ad-

* [Sucli a clause is necessary to suit tlio contingency of temporary difficulty
on the part of members in the payment of subscriptions, unaccompanied by a
desire to withdraw from tiie society.]

(a) [These small letters are inserted to assist tlie reference tu sub-divisior>s of Clauses.']

RULES FOR A PERMANKNT BENEFIT BUILDING SOCIETY. 101

vanced and secured. In case the mortgaoor shall fail, neo-lect, or
refuse, for the space of four calendar months, to observe and perform
all or any of his or her covenants for payment of advance-instalments,
according to the terms and conditions of these rules and the said mort-
gage, as well as any fines inflicted for neglect of payment, on his or
her part to be observed and performed, then the trustees named in the
said mortgage, or the survivor or survivors of them, or tlie executors or
administrators of the last survivor, or the trustees for the time being
of tlie society, shall, either with or without the privity or consent
of the said mortgagor, his or her heirs, executors, administrators,
or assigns, have power to take absolute possession of the said
premises, and to let the same, and to appoint a person to be
ap])roved of by the said board, to collect the rents of the premises
thereby mortgaged ; and may at any time or times hereafter,
absolutely sell all or any part of the said premises, either by public
auction or private contract, and either together or in lots, and at one
time or separate times, if desirable, for the most money that can be
reasonably had or gotten for the same; (^) and that every receipt of tlie
trustee or trustees for the time being shall be a good and sufficient
discharge to the purchaser or purchasers, paying his or their
purchase-money, who shall not be obliged to see to the application
of the same, nor be required to see whether any or wdiat monies
shall be due under such mortgage, or whether there has or has not
been any breach on the part of any such mortgagor of the rules of
the society, or of the stipulations of such mortgage deed, nor
whether he or she has failed to pay any of the advance-repayments,
fines, or other payments, either for the said space of four calendar
months or for any other period ; nor whether such trustees or
trustee, or the executors or administrators of the last survivor of
them, or the trustee or trustees of the society for the time being,
have or have not authority for disposing of the premises comprised
therein, but the possession of the title deeds and mortgage deed, and
the written instructions of the board of directors, shall be considered
sufficient authority for the disposing of the said premises by the
trustees ; ('') provided always, that the money produced from such
rents and profits, or such sale or sales, as aforesaid, shall, in the first
place, be applied in payment of all costs and expenses, which may be

mimsuY OF SQuimu California library

10^ RULES FOR A PERMANENT BENEFIT BUILDING SOCIETY.

incurred on account thereof, and, in the next place, to reluiburse the
society in the amount of advance- repayments then due and unpaid,
together with all fines and commissions in respect thereof; and in the
event of a sale or sales, of the then value of the future repayments
in respect of such mortgaoed property, v^ith interest on the aforesaid
amount of arrears and fines, up to the completion of the sale or
sales, and on the then value of such future advance-repayments, at the
rate of 7 per cent, per annum from the date of the first default ; and
that the present value of such future repayments shall be caliiulated
by the consulting Actuary from the date of the completion of the
sale or sales to the end of the term for which the mortgage was
originally taken, discount being allowed at a rate, to be fixed by
the consulting Actuary, not exceeding 3g per cent, per annum on
such future repayments to the end of the mortgage term, and upon
the principle of repayments made at the end of each year ; and, in
case the rents and profits of the mortgaged property, and produce of
the sale thereof, after deducting expenses, be not sufficient to dis-
charge the amount of such repayments in arrear, and the present
value of the future repayments so calculated and interest thereon,
the mortgagor so in default shall immediately pay the balance due
thereon to the society ; but that the trustee or trustees shall pay the
surplus (if any) arising from the receipt of the rents and profits, and
from the sale of such premises aforesaid, to the said mortgagor, his,
her, or their heirs, executors, administrators, or assigns, or as he,
she, or they may or shall direct: ('^) provided always, that in case any
of the mortgagors named in any mortgage deed, or his, her, or their
heirs, executors, administrators, or assigns, having obtained an
interest in such property (so long as the said premises may continue
in mortgage to the society), shall become insolvent, or be imprisoned
for debt, or be made bankrupt, then such trustees or trustee, or the
executors or administrators of the last survivor of them, or the
trustees for the time being of the society, with the sanction of the
board of directors for the time being, shall have full power and
authority immediately to take possession of the premises mortgaged,
and let and manage the same, and collect the rents thereof, whether
such mortgagor, or his heirs, executors, administrators, or assigns, be
in arrear with his, her, or their payments, or not ; and to sell the

RULES FOR A I'ERMAN !;NT BENEFIT BUILDING SOCIETY. 10.':^

said premises, if the rents so received be not sufficient to meet the
repayments falling due in respect thereof; and in case any of the
premises mortgaoed to the society be left incomplete, the trustees or
trustee for the time being, under the direction of the board, shall
have power to complete the same, and the money expended and laid
out in so doing shall be considered as part of, and in addition to, the
original mortgage. And the said trustees shall also, with the sanction
of the board, have the option of selling and disposing of the pre-
mises mortgaged, either in their incomplete state or upon the same
being so completed as aforesaid. That upon payment of all monies
due upon such mortgage, pursuant to these rules, the trustees or
trustee for the time being, shall, at the cost of the member or
person requiring the same, endorse a receipt or acknowledgment for
the same on the said mortgage, in the form annexed to these rules,
according to the act 6 and 7 Wm. IV., cap. 32, sec. 5.

127. — That during the continuance of a mortgage the member
shall become actual tenant to the society in respect of his mortgaged
premises, which shall be chargeable with the repayments in dis-
charge thereof, as ordinary rent, and for any arrears of which
repayments the society shall have power to distrain in the usual
way. And in case the mortgfigor, his, her, or their heirs, executors,
administrators, or assigns, shall at any time fail to comply with any
of the covenants of the lease or deed under which a mortgage
properly may be held, or shall break through or infringe any of such
covenants, then that the trustees or trustee for the time being, shall,
in like manner as aforesaid, have full power to take possession of
and to let and sell the said premises without any previous notice.

128. — That members holding advances upon quarterly repayments
shall be considered to be in arrear of four months, when any quarterly
repayment shall have remained unsatisfied for the period of one
calendar month after the same shall have become due.

129. — That no money shall be advanced by way of a second
mortgage, iinless the prior mortgage be to the society.

VII. Fire Insurance and Ground Rent.
130. — That all property mortgaged to this society shall be insured,
in pursuance of any covenant contained in the lease or deed under

104 RULFS FOR A PERMANENT BENEFIT BUILDING SOCIETY.

which such property shall be held, or as the directors shall deter-
mine ; and the manager shall immediately effect the same in the
names of the trustees of the society, in conformity with written
instructions to be furnished to him by the solicitor ; and, in case of
neglect, the manager shall be fined twenty shillings ; and he shall
pay all premiums for insurance of mortgaged property as the same
respectively shall become due, or be fined twenty shillings for each
insurance left unpaid; and the members on whose account such pre-
miums for insurance shall be paid, shall, on demand, refund the
amount so paid. (See end of 131. J

131. — That the manager shall pay all ground rents chargeable on
property mortgaged to the society immediately on the several
amounts res])ectively falling due, or within such period as the ground
landlord may stipulate, or he shall be fined twenty shillings for each
neglect; and the member on whose accoimt such ground rent shall be
so paid, shall immediately refund theamount thereof, with and in addi-
tion to his next monthly advance-repayments, and in default thereof,
pay a fine of one shilling in the pound on the amount thereof; and
until such ground rent and fine be paid by the member, the same
shall be deducted from the amount of advance-repayments already
paid by him, which shall be liable to fines the same as if the portion
advance- repayments had not been already paid ; and the same rule of
deduction shall apply to the non-payments of fire insurance premiums.

132. — Whenever any property mortgaged to this society shall
receive any damage from fire or any other cause, for which the insur-
ance company may be liable to give compensation, the trustees for the
time being of the society shall receive the amount of damage so sus-
tained from the insurance company, unless by the power usually
granted to certain insurance companies, ihe insurance company, by
which such property has been insured, shall cause the premises so
destroyed or damaged to be rebuilt or repaired ; and in such case, the
surveyors of the society shall insitect the premises so rebuilt or
repaired, and furnish to the board of directors their report of the
sufficiency or insufficiency of such re-erection or repairs by the in-
surance company, and in case the same be not completed to the
satisfaction of the directors and the surveyors, the board of directors
shall be empowered to take the necessary steps to have such re-

RULES FOR A PERMANENT BENEFIT BUILDING SOCIETY. 105

erection or repairs of the said preiui^us peifeetcd by the insurance
company, to the extent of the insurance effected in the ])olicy of
insurance. But in case the trustees for the time being shall receive
the amount of such damages in money from the insurance company,
then the board of directors shall cause the said premises to be rebuilt
or restored, under the superintendence of the surveyor of the society,
at a cost not exceeding the amount of such monies so received from
the insurance company, unless the member interested in the property
shall furnish additional funds requisite to cover any further outlay
he may require.

VIII. Power to sell, redeem, and exchange mortgaged proi?erty.

133. — That if any member who shall have obtained an advance
shall be desirous to sell the property mortgaged, it shall be lawful for
the purchaser, on becoming a member of the society, to take the pro-
perty subject to such mortgage, and thenceforth to become answerable
for the payment of all advance-repayments in arrear, and fines then
due thereon, as well as for all future advance-repayments and fines
thereon, from time to time, falling due in respect of such mortgaged
property; an account of all which advance-repayments and fines then
due and unpaid, shall be made up and acknowledged (in writing)
by the jjcrson proposing to receive such liabilities and property in
mortgage, which said account shall be duly signed by the person so
becoming a member, in the presence of the manager, solicitor, or one
of the directors of the society ; and, provided the sanction of the
directors be given to such transfer, the trustees for the time being
shall, at the request and cost of the member so transferring his
interest in the mortgaged property, then release him from all future
responsibilities in respect of such property so transferred.

134. — That a transfer fee of five shillings for each advanced share
shall be payable to the society after a mortgage has been made.

135. — That if any member shall be desirous of having his property
discharged from the mortgage, under which it may be liable to the
society before the expiration of the full term for which it was
originally taken, he shall be allowed to do so ou giving a notice of
two clear calendar months prior to the ordinary meeting at which
the redemption of such mortgage is proposed to be completed ; and

106 RULES FOR A PERMANENT BENEFIT BUILDING SOCIETY.

that, on payment of all advance-repayments, and any fines due in
respect tliereof up to the time of the redemption of such mortgage,
and of the present value of the future repayments calculated by the
consulting Actuary upon the same principle as in Rule 6, to the end
of the original term, and discounted after a rate of interest to be fixed
by the consulting Actuary, not lower than 3^ per cent , together
with a redemption fee of 5s. per cent, on the balance so due, the trus-
tees for the time being shall, at the request of the directors, and at the
cost of the member, cause to be endorsed on the mortgage deed, a
receipt or acknowledgment for the full payment of the amount
secured in such mortgage in the form annexed to tliese rules, accord-
ing to the act, 6 and 7 Wm. IV., cap. 32, g. 5.

136. — That the fee for the consulting actuary be paid by the mem-
ber for whose benefit, or by whose default, he is consulted by the
Directors.

137. — That members giving notice of a redemption of a mortgage,
shall be liable to the usual fines for nonpayment of the advance-
instalment up to the time such redemption shall be completed.

138. — Members may, on payment of the expenses of survey, and
other necessary charges, and a fee of 5s. for each advanced share, ex-
change a mortgage already taken to any other property of adequate
value, provided no alterations be made in the original mode of repay-
ments; and with the consent of the directors, members may also
discharge any portion of a property from the liability of a mortgage.

IX. Members transferring or ivithdraunng shares.
139. — Members not having obtained advances may, on giving
notice to the manager, of at least seven days prior to the first and
third Monday in each month, be at liberty to transfer his or her shares,
and the entire interest therein, on payment of a transfer fee of 2s.
per share to the society ; but in case any award of advanced shares
has been made to the member, a transfer fee of 205. per share shall
be chargeable thereon ; but in such case the transfer must be made
to an existing member of the society.

[_Iii consequence of memhers sometimes making it a practice to
apply for advances (tchen llwy have no intention of purchasing

RULES FOR A PERMANENT P.ENEFIT BUILDING SOCIETY. 107

property ) in the, hope that^ if succeaxful in their application^ they
may make a profit by transferring the right of advance to another
member, it is expedient to apply a check to such a practice, by
charging a fee of proportionate amount to the party transfer ring. "^

]40. — The agreement of transfer shall be made and executed by
the member, and duly attested to the satisfaction of the directors.

141. — In case of the death or insanity of a member before receiv-
ing an advance, and upon the application of the wife, widow, or legal
representatives of such deceased or insane member, to withdraw
from the society, the wife, wudow, or such representatives, shall be
entitled to a preference before ordinary members, and to withdraw
at any time, and to receive back, at the time fixed by the directors
for such repayment, the amount of subscriptions or shares which
such deceased or insane member may have paid to the society, less
all fines due and unpaid by the insane or deceased member at the
time of his seizure or death, with accumulations tliereon, as herein-
after provided.

142. — Members not having received an advance, who may be de-
sirous of withdrawing from the society, must send a written notice to
the manager of their intention so to do, at least 21 days before the
first in each month, and such withdrawals will be regu-
lated as follows : — No withdrawals to be permitted, unless in case of
death or insanity, under twelve months from the date of each mem-
ber's admission respectively; provided always, that payment of any
debts due from the society shall, if required, be made, before any share
can be withdrawn ; and that, under all circumstances, the sums paid
for withdrawals shall in no case exceed the income derived from the
repayments of shares already advanced to members ; and that with-
drawn shares (not wholly subscribed for) shall be paid out according
to the number of applicants on the list kept for that purpose, each
member receiving the due proportion of his subscription paid in, so
that all such members shall be simultaneously accommodated with
a portion of their shares. ('') And that in case the Expenses of the
society and any loss sustained by it, exceed the monies appropriated
to the management and contingent fund, all withdrawn shares shall
be chargeable with a due proportion of such excess according to the

108 RULES FOR A PF.HMANENT BENEFIT BUILDING SOCIETY.

number of 3^ears such shares shall have been in force — and that this
rule shall equally apply to members cancelling their unadvanced
shares previously to their taking a loan from the society.

143. — That next after payment of withdrawn shares to deceased or
lunatic members, the persons holding unadvanced shares paid up for
the subscribed term shall have the preference, who shall be paid
out in full and in rotation, according to their respective subscriptions
being fully discharged, subject, however, to the aforesaid deduction
for excess of expenses or losses (if any) ; and that interest, payable
annually at a rate not exceeding 5 per cent, per annum, be allowed
to such members holding paid-up shares, on the amounts respec-
tively due to them, such interest to commence from the date of the
realization of their shares respectively.

144. — That subject to such provisions aforesaid, the sums payable
on tvilhdrawn shares (upon which all subscriptions and fines shall
have been duly paid) shall be according to the following table; and,
provided a member voluntarily withdraw his shares in the course of
a year, the sum set down at the close of the last year shall be payable,
with interest thereon according to the following table, and also any
monthly subscriptions subsequently paid ; and so in proportion for
half, or quarter-shares; (*^) Or the half or quarter of a share only
may be withdrawn.

TABLE IV.

[We recommeiicl this table to be calculated on the principle of an ascending
rate of foni[)oiiiid interest, so that a member may be induced to abstain
fi-om withdrawing from tlie society, through the prospect of increasing
advantage held out to him.]

14.5. — When any subscriptions or fines shall remain due and unpaid
on any withdrawn shares, or parts of shares, at the end of a year, for
a period not more than four months, the amount of such unpaid sub-
scriptions and fines shall be deducted from the sums set down in
the above table, and the balance thereof shall be payable to the

RULES FOR A PERMANENT BENEFIT BUILDING SOCIETY. 109

member, sucli fines to be calculated up to tbe first clay of tbe month
on which the applicant for withtlrawals is placed on the list kept for
that purpose. But, where the subscriptions or fines shall be in arrear
for more than four calendar months, the deductions, as aforesaid, shall
be made, but no further interest shall be allowed on the previous
pjiyments, until the arrears are settled.

146. — Members on receiving advances may continue to hold their
shares or cancel the same; in which latter case, the sum then due in
respect thereof will be passed to the credit of their loan account, and
security will be taken only for the balance.

147. — After the society has been seven years in existence, the
directors shall have power (with the advice of the consulting
actuar}) to alter the rate of interest allowed on withdrawal of
unadvanced shares.

X. Members Dying, becoming Lunatic, or Insane.

1 48 — That no benefit of survivorship shall be claimed by the mem-
bers of this society; but u23on the death of members during the term
of their subscription, their legal representatives shall succeed, accord-
ing to law to their shares and interest in their property mortgaged to
the society, (if any), and shall enjoy the same privileges, and be
subject to the same payments, fines, &c., as the deceased shareholder
would have had to pay, had he been living (^) But in case such shares
or interest in mortgaged property devolve upon more than one legatee,
or more than one executor, or administrator, the right of voting of
such legatees, or executors, or administrators, as members of this
society, shall be restricted to one of them respectively, either to be
agreed upon by themselves, or, in case of dispute, to be determined by
the board of directors.

149. — That in the event of any member being declared lunatic, or
of unsound mind, no fines shall be payable for arrears of subscriptions,
fines, &c., until a committee or guardian of such afflicted member be
legally appointed, or until some relative or friend shall undertake to
discharge his said subscriptions, fines, and other payments to the
society ; provided, nevertheless, that on an application being made
by the directors to some relative or interested friend of tlie afflicted
member, to see to the due paj^nient of liis or lier subscriptions.

110 RULF.S FOR A PERMANENT BENEFIT BUILDING SOCIETY.

advance-instalments, and other payn7ents, such application shall be
deemed a reasonable cause why such fines should be thenceforward
enforced, and that the directors shall then be fully authorised in
talcing the ordinary steps for the recovery of all arrear payments
whatsoever, which may be then due in respect of the shares or
mortgaged property of the afflicted member, and if requisite, to
proceed to the sale of such property, in the usual way; and that upon
the legal appointment of a committee or guardian of the afflicted
member, the society shall, if so required, but at a time fixed by the
directors, pay over to the committee or guardian of such afflicted
member, the amount of actual share subscriptions paid by such
members, less the fines due up to the time of his lunacy, or unsound-
ness of mind, and the usual deduction towards the expenses of
management as in the case of an ordinary withdrawal of shares; and in
case such afflicted member may have received an advance of shares,
the committee or guardian may be allowed to dispose of such pro-
perty, or to redeem the mortgage thereon, or exercise any other
privileges thereof as may pertain to the said member ; and in case
of a transfer of shares or mortgaged property, or of a redemption of
such property in consequence of such lunacy or unsoundness of
mind, the transfer and redemption fees, chargeable in respect thereof,
shall be reduced one-half the usual rates.

XI. Expenses of Survey, Mortgages, ^-c.
150. — Tliat the expenses of every survey, valuation, mortgage, and
supervision by the surveyor of the society of any buildings erected
upon property previously mortgaged to the society, shall be borne
by the members respectively applying for or receiving an advance, and
excepting the cost of stamps, registration, and other monies paid out
of pocket at the time by the solicitor or surveyor, the expenses of
mortgage may be repaid by an additional and proportional monthly
subscription extending over a period not exceeding twelve calendar
months, provided the member agrees to allow a fee of \s. in the
pound on each additional monthly subscription ; aud in case of a
failure of their due payment, the same shall be chargeable on the
mortgaged property, and be deducted from the advance-instalments.

RULF,S FOR A TEUMANKNT BENEFIT BUILDING SOCIETY. Ill

XII. Management and Contingent Fund.

151. — All fines, fees, and commissions whatsoever mentioned in
these rules, shall be passed to a management and contingent fund,
and so also a deduction at the rate of five pounds per cent, per annum,
from the amount of income derived from the repayment of advanced
shares. '[jSee the Appendix^ for the explanation of the principle of
this and similar deductions^ also sec. 4 for the Expense and Con-
tingency Theorem., hy which the per centages should he regulated.

152. — That the expenses of management, and any losses that may
be incurred by the society, shall be defrayed out of the management
and contingent fund ; but if such expenses or losses be greater than
the sum of such management and contingent fund, the excess shall
be borne by the holders of unadvanced shares, not wholly paid
up in proportion to the number respectively held by each, and
according to the numher of years the same shall have been in
force; and by those members who have paid up the whole or part of
their shares in advance, and received discount thereon; [[and by those
members, who voluntarily leave their realised shares as a deposit in the
society's hands, and receive interest for the use thereof] (See 122.J

153. — That at the end of the first three years, and every subsequent
year, an estimate of the management and contingent fund shall be
made, and if, after all losses and expenses shall have been satisfied,
any surplus profit remain, the same shall be appropriated thus : —

One-third to a permanent guarantee fund to meet future contin-
gencies ;

And the other two-thirds to the holders of all unadvanced shares,
not then in arrear for subscriptions and fines, in proportion to their
shares held, and to the number of years they have been respectively
in force, such bonus to be paid to the members on the completion of
the monthly subscriptions on their shares. No portion of this
bonus to be paid to members withdrawing previously unless the
withdrawal is compulsory pursuant to Rule IV, No. 123. (See
sec. 4 Appendix. J

154. — After the society has been 9 years in existence, it shall be
lawful for the members, at a special general meeting summoned for
the purpose, with the advice of the consulting actuary, to alter the
above proportion in the division of surplus profits.

112 RULES FOR A PERMANENT BENEFIT BUILDING SOCIETY.

155. — That the expenses of all special meotinp^s of the members
shall be borne by the members subscribing the requisition, unless
the directors determine the importance of the occasion to be such as
to render their payment by the society just and reasonable.

156. — That each member on admission shall pay one shilling for
a copy of these rules.

XIII. Registers of Members, Shares, ^-c.

157. — That a register be kept, in which shall be entered the chris-
tian and surname, profession, trade or business, and the place of abode
of every member of thesociety, and as often as anymember shall change
his or her place of abode, he or she shall within 14 days give a notice
thereof to the manager, or forfeit Is. 6d. for each neglect. That, on
such notice being given, the alteration will be duly entered in such
register; and all notices shall be deemed duly given by putting the
same into the post office, addressed to the member according to the
last entry on the register.

158. — That a register of every member of the society be also kept, in
which shall be entered the number and numerical order of the shares
held by him, her, or them, the date of entry, transfer, or cancelling
of the same, and any other details deemed necessary.

XIV. Audit of Accounts and Consulting Actuary.

159. — That at the first meeting of the society, two auditors shall
be chosen, one by the directors and one by the members present, for
the purpose of auditing the accounts and watching over the expenses
of the society, prior to the annual general meeting. That the future
appointments of auditors shall be made at the general annual meet-
ings, except in the case of death during the year, when the vacancy
shall be filled at the next monthly meeting by the directors and
members respectively present. That the auditors attending shall
receive 2\s. each, as a remuneration for tlieir services, (s) That a
consulting actuary shall also be engaged to make an investigation
of the accounts of the society at the end of each year, to whom also
all questions, as they arise, relating to the value of shares, redemp-
tions of mortgages, Sic, shall be specially referred. That the report
of the Auditors sliall be countersigned l)y the Actuary, and shall be

read at the annual meeting. Tliat be appointed

Consulting actuary at an allowance of £ a year.

RULES OF A PERMANENT BENEFIT BUILDING SOCIETY. 1 13

XV. Arbitration.
160. — That In case of dispute arisino- between the society and any
member thereof, or the legal representatives of any member, reference
shall be made to arbitration, pursuant to 10 Geo. IV., cap. 5(j, sec.
27, unless such dispute can be amicably arranged by the directors
and the member, or his legal representative, within fourteen days,
from the time such disputed matter shall be formally brought before
the board. At the first meeting after the enrolment of these rules,
five arbitrators shall be elected by the members present, none of tliem
directly or indirectly connected with the society ; and in case of
reference to arbitration, the names of all the arbitrators shall be
written on separate pieces of paper, and placed in a box, and the
three whose names are first drawn by the complaining party, or
some one appointed by him or her, shall be the arbitrators to decide
the matter in dispute, whose decision shall be final; provided always,
that the award of the arbitrators shall be made within one calendar
month next after a notice of the reference shall be given by the
manager to each of the arbitrators ajipointed to adjust the matters
in difibrence, unless a consent in writing be given to both parties to
an extension of the time. Each of the arbitrators so drawn and
attending shall receive a remuneration of one guinea ; and the costs
of the reference shall be paid as the arbitrators shall direct. The
party requiring the arbitration shall deposit with the treasurer 30s.
towards tlie arbitrators' remuneration,

XVI. Officers.
161 — That for the conduct of the btisiness of the society, the
following officers shall be appointed: — namely, three trustees, at most
ten elected directors, a treasurer, consulting actuar}^, surveyor,
solicitor, two auditors, and a manager.

XVII. Qualification of Members.
162. — That the holders of a share, half-share, or quarter-share, (ad-
vanced or otherwise) shall be deemed members, and, as such, be entitled
to vote at all general meetings. Females and minors may be members,
but shall not be eligible to hold any offices; nor shall minors, during

114 RULES OF A PERMANENT BENEFIT BUILDING SOCIETY.

their infancy, be entitled to vote on any qnestion, or be eligible to
receive an appropriation of advanced shares.

XVIII. Receipt of Subscriptions.
163. — That all subscriptions for shares, advance-repayments, fines,
and other monies whatsoever becomino- due and payable to the society,
shall be received only at the usual subscription meetings, during the
hours of seven and nine o'clock in the evening, or at such other
times as the board of directors may hereafter fix for that purpose.
That all monies so received at such subscription meetings shall be
delivered to the treasurer, and, on the following morning, be paid by
him to the bankers of the society for the time being; and the book
in which the entry of monies so paid, or the bankers' receipt in lieu
thereof, shall on that day be deposited with the manager, wdio shall
cause the same to be produced at the next meeting of the directors.

164. — That all subscriptions for original shares shall become pay-
able monthly, in advance, from the first day of each month; and all
repayments for advanced shares, retrospectively due, monthly or
quarterly after the date of advance, — such dates to be restricted, as f;ir
as possible, to the first day of each month.

165. — That the Banking account shall be opened in the names of
the trustees for the time being. That all cheques must be signed by at
least one trustee, and countersigned by the chairman of the board of
directors and the manager. That all payments exceeding five pounds
be made by cheques on the bankers ; and that for the payment of
current petty expenses, the manager shall, from time to time, receive
a cheque of ten pounds, which shall be duly renewed on a proper
account of his former payments, to the amount of the last cheque
received by him, being made to and allowed by the board.

XIX. Mode of Voting.
166. — That all elections and questions shall be decided by a show
of hands, or by ballot, if demanded. No member to have more than one
vote ; and in all cases of equality of votes, the chairman shall have
an additional or casting vote. But no member shall be allowed to
vote on any question affecting his individual interest or conduct.

RULES OF A PERMANENT BENEFIT BUILDING SOCIETY. 115

XX. Dissolution of the Society.
107. — That no dissolution of this society shall take place, unless
its affairs be deranged, or its principles prove inadequate to promote
its objects, or its funds be insufiicient to meet tlie claims upon
them, or from any other such cause, rendering the dissolution abso-
lutely necessary, and then only in pursuance of the provisions of the
Act 10 Geo. IV., cap. 56, sec. 26; and any member in any way
attempting to promote a dissolution of the society, but for the
causes before named, shall forfeit all his monies, benefit, and interest
therein, and be forthwith expelled the same,

XXI. New Rules and Alteration of Rules.
168. — No rule herein contained, or any rule hereafter to be made,
by virtue thereof, shall be altered, rescinded, or repealed, unless pur-
suant to 10 Geo. IV., cap. 56, sec. 9, at a general meeting, convened
for that purpose ; nor shall such new rule affect the fundamental
principles of the society, but shall apply only to an explanation of
the present rules, or to facilitating the operations of the society.

XXII. Construction of Rules.
169 — That in the practical application of these rules, or any rules
hereafter to be made by virtue thereof, the construction put upon
them by the board of directors shall be final and conclusive. That
a word in the singular number shall be applicable to the plural ; and
the term " his" or " her" shall apply to a female as well as
male., unless there be something in the subject matter or context
repugnant to such construction.

XXIII. Manager.

1 70. — That , be appointed the manager of this society.

171. — That the manager shall receive whatever salary the directors
may think proper, provided the same do not at any time exceed
c€ a year.

172. — That if the manager shall neglect to attend any meetings of
the society at the time named for the commencement of such meetino-,
without shewing sufficient cause to the directors then present, he
shall be fined five shillings. He shall enter minutes of all resolu-

I 2

116 RULES OF A PERMANENT BENEFIT BUILDING SOCIETY.

tlons in the rougli minute book ; the same shall be fairly copied
into another, to be read as part of the business of the next meeting ;
and both to be signed by the chairman. He shall keep the accounts in
order, in proper books to be provided for the purpose, shall send all
circulars, and conduct all the correspondence of the society.

XXIV. * Trustees.
[* See page 73 for remarks relative to trustees.]
1 73. — That the trustees shall be ex officio members of the board of
directors, but in no wise interested in the funds, effects, or property
of the society, and that they shall continue in office during the
pleasure of the board of directors. That in case the trustees first
appointed, or any or either of them, or any future trustee or trustees
to be appointed, as hereinafter provided, shall die, or be desirous of
resigning, or be discharged from, or shall become incapable of acting
in the trusts in him or them reposed by these rules, or be guilty of
any gross neglect or improper conduct (of which the directors shall

be the only judges), or shall remove from to a distance

of more than ten miles, or cease to have a place of business or resi-
dence in , so that the performance of their duties may become

inconvenient to" them, or that if a difficulty of access to them shall
impede the business of the society, or if they shall become bankrupt
or insolvent, the manager shall convene a s]>ecial meeting of the
directors, and the directors shall hear and determine thereon, and
may thereupon remove such trustee or trustees; {}") and as often as any
new trustee or trustees shall be elected or appointed, the trustee or
trustees so removed shall cease to be a trustee or trustees, and shall
be incapable to act after such removal, or after the appointment of a
new trustee or trustees shall have taken place ; and after every
fresh appointment of a trustee or trustees, the resolution of appoint-
ment shall be signed by the chairman of the directors for the time
being, or of the chairman of tlie meeting at which such appoint-
ment shall be made, and l)y two members and the manager, and the
same shall be duly entered on the minutes of such meeting; and
the estates, monies, securities, funds, deeds, jiapers and property of
tlie society shall at once become vested (without any assignment)
in the continuing and newly appointed trustee or trustees ; or

RULES OF X PERMANENT BENEFIT BUILDING SOCIETY. 117

should tlio trustee or trustees so resigned, incapacitated, or discharged,
be out of the kingdom, or no means of communication can be had
witl) him or them, then the removal of him or them by the board of
directors, and the appointment of a new trustee or trustees in his or
their stead, shall be likewise sufficient to vest all such estates,
monies, securities, funds, deeds, papers, and property of the society,
and all other matters pertaining thereto, in the continuing and newly
appointed trustee or trustees. (') In case of a vacancy of office from
any cause whatever, by any trustee or trustees first appointed, or
to be hereafter appointed by virtue of these rules, the appointment
of a new trustee or trustees shall be made at the next monthly meet-
ing by the members then present, providing a notice of such intended
appointment can be sent to every member seven clear days before
such meeting, or at the annual general meeting, if such vacancy
take place within fourteen days previous to the same. (J) That all
deeds, writings, and securities to and from the society, shall be made
and taken in the names of the trustees or trustee for the time being, and
shall be deposited with the bankers of the society, to be appointed by
the directors, or with such other persons as they may deem fit, in a box
furnished by the society. And no document whatever shall be allowed
to be removed from such box, unless by an order of the board,
signed by at least three members thereof then present. {^) The
manager shall furnish to the trustees an inventory of the contents of
such box, and retain a duplicate thereof for the use of the directors.
1 74. — In case it shall be necessary or expedient to bring or defend
any action, suit, or i^roseciition, at law or in equity, touching or con-
cerning the property or assets, rights or claims of this society, or
touching or concerning the breach or non-performance of any of the
articles, matters and things herein contained, or of the conduct of
any member or officer of this society, the same shall be brought or
defended by, or in the names or name of the trustees or trustee for
the time being, and he, or they shall be indemnified from all loss or
damage to be by him or them sustained in consequence thereof; but
no such proceedings shall be taken or defended, until the appro-
bation of a majority of the directors present at a special meeting, to
be convened for that purpose, shall be first had and obtained. (') The
trustees for the time being may, at the request of the directors,

118 RULES FOR A PERMANENT BENEFIT BUILDING SOCIETY.

borrow and take up at interest any sum of money from any banker,
or otlier person, as occasion may require, to procure which tlio
trustees may give their own personal security, and they shall be
indemnified in respect thereof out of the future receipts of the
society. That the trustees or trustee for the time being, shall do no
act in their official capacity, but by the written order of the board of
directors, such order to be signed by the chairman of the meeting
at which such order is made, and to be attested by the manager.

175. — That ■ , be hereby appointed trustees of

this society.

XXV. Directors and Treasurer.

176. — The elected directors shall be shareholders, one third of whom
shall go out of office after the first two years, but be eligible for re-elec-
tion. The future election of Directors shall take place at the annual
general meetings, except in case of death during the year, when any
vacancy shall be filled up by the board. ("') That if any director shall
become bankrupt, be declared insolvent, or resign, his office shall
become vacant, and if, during the year, the vacancy shall be filled up
by the board, as in case of death. (") The directors shall annually ap-
point, out of their body, a chairman, deputy-chairman, and treasurer;
and, in the absence of either chairman or deputy-chairman, the directors
shall appoint a chairman for the several meetings. That one of the
directors (in rotation) with the treasurer and manager, shall attend
the meetings for the receipt of money, within the hours specified in
these rules, or at such other times as the directors may think fit.

177' — The qualification of a director shall be the holding of at least
one unadvanced share. * Each director shall be paid 6s. 6d. for each
attendance at an ordinary subscription meeting ; and the chairman
shall, in addition, be allowed 5*. extra, (°) That the Treasurer attending
the receipt of subscriptions shall receive 5*. each time for his services.

178. — That the directors may divide themselves into rotas, or com-
mittees, for the conduct of the business, as they may think fit, (such

[* Instead of paying the dii-cctors monthly, the clause may be thus varied:
" The members at an annual general meeting shall have power, with the
advice of the society's consulting actuary, to vote a sum of money to be paid
to the directors and officers for their past year's services."]

RULES FOR A I'KKMANENT BLNEFIT BUILDING SOCIETY. Ill)

coimiiittecs or rotas to bo open to tlic other members of the board);
provided, however, no rota shall continue longer than three calendar
months at one time, without some change of members. That for the
transaction of general business, three elected directors shall form a
quorum. The Board shall meet at least twice every month, and the date
and place of the last meeting having been read from the minute book,
the bank book shall be exhibited, (or in lieu thereof, the bankers'
receipt), and the amount deposited, since the last meeting, declared,
and entered as the first minute. The Board shall, from time to
time, inspect the books kept by the manager; and the directors, or
three of them, shall have power to call a special meeting of the
board at any time, by giving two clear days' notice, and stating the
object for which it is called. In case the requisite number of
directors shall not attend, the manager shall have power to adjourn
the meeting to some other time. In case of equality of votes, the
chairman shall have an additional or casting vote. No director shall
be present during the discussion, or at the decision of any question
affecting his own interest or conduct. Any director failing to
attend his rotation at the receipt meetings, or to procure a substitute,
shall pay a fine of 2s. 6d., or if he fail to be present within ten
minutes after the appointed hour, he shall forfeit one shilling.

179. — That the Board of directors shall consist of trustees, and
of not less than six, nor more than ten, elected members.

180. — That the Board of directors shall have power to appoint
agents to receive applications for shares, and to pay them such com-
pensation by way of commission on all shares introduced by them
as the Board may deem fit.

181. — That the following gentlemen be directors of this society
for the ensuing year, with power to increase their number within
the before-mentioned limits : — namely, Messrs.

XXVI. * Architect and Surveyor.

182. — That , be hereby appointed architect

and surveyor to this society.

*[With respect to a system of Fines adopted for neglect on the part of
the Surveyor, the first question is, what ri^^ht has the Society to impose them ?
The mere fact of the rules giving the power to fine,, docs not sulfice until the

120 RULES FOR A PERMANENT BENEFIT BUILDING SOCIETY.

183. — That for every valuation and survey of property within
three miles of , the following fees shall be allowed : —

Where the sum advanced does not exceed £150, one guinea; and
above that sum at the rate of 10*. 6d. for each additional £100
borrowed. And if the distance exceed three miles, but not more
than ten miles, one shilling per mile (one way only) extra shall be
charged; where, however, any greater distance be required, such
additional charge shall be allowed as shall be agreed upon by the
board and the surveyor.

184. — In all cases where the architect and surveyor is required to
supervise the erection of any buildings on behalf of the society, the
remuneration shall be specially agreed upon by himself and the
board.

XXVII. Solicitor.

185. — That , be hereby appointed solicitor to this society.

186. — That the solicitor shall transact all the legal, equitable, and
conveyancing business of the society; and if any dispute arise with
reference to his charges, the case shall be referred to two members of
the legal profession, one chosen by the board or member interested,
and the other by the solicitor ; such referees, before proceeding to
arbitrate, to appoint an umpire, in case they should disagree ; the
award of such arbitrators or umpire to be final and conclusive.

XXVIII. Removal of Officers.
Wy^]. — That neither the solicitor, surveyor, consulting actuary, nor
manager be removed from their respective offices, except for miscon-
duct or inability; and then only by a majority of at least three-fourths
of the members present at a meeting specially convened for that
purpose, and who, in case of a removal or resignation of such officers,

party to be fined has consented to be bound by them. The appointment of the
Surveyor should therefore be made in writing, and be expressed to be imder
and by virtue of the rules of the Society ; and he shoidd be required to accept
the appointment on the same terms. Under such an appointment there would
be no difficulty in enforcing the fines. Without it, or some implied agreement
to be bound by the rules on the part of the Surveyor, the Society could not
legally impose or enforce them. — Thompson, on the Law of Benefit Building
Societies.^

UULES Foil A I'F.RMANKNT BKNI'riT BUILDING SOCIIOTV. 1 li 1

shall authorise the directors to proceed to elect other and fit persons
in his or their stead.

XXIX. Indemnitij to OlJirers.
188. — That the trustees, directors, and all other officers of the so-
ciety shall he, and are hereby, indemnified and saved harmless out of
its funds and property, from and against all losses, costs, charges,
damages and expenses, Avhich they may incur or be put unto, in or
about the execution of their respective offices, trusts, and services ;
and none of them shall be answerable for any act or default of any
other of them, or for the insufficiency or deficieney in the title or
otherwise of any security whatsoever whicb shall be taken for the
repayment of any advance, unless the loss, arising by such means,
shall happen through their own neglect or default ; nor shall they
be liable for any banker, broker, or other person with whom the
trust monies shall from time be deposited for safe custody, invest-
ment, or otherwise, nor for any involuntary loss, misfortune, or
damage whatsoever, which may happen in the execution of their
respective offices, services, or trusts, or in relation thereto.

^ Members.
Manar/cr

SCHEDULE OF FOKMS.

189— To the Manager of the BLMiefit Buiklitig Society.

Sir, — I send you the following partieulai's of certain premises which I am
desirous of purchasing, according to Rule IV., page 6.

Name

Address

No. of Certificate ___^_

Date

Situation and extent of propertu, number of rooms, extent of garden, ^c.

Is the property freehold or leasehold ?

If leasehold, the number of years unexpired ?

If original lease, underlease, or assignment of lease ?

Ground rent per annum ?

122 RULES FOR A PERMANENT BENEFIT BUILDING SOCIETY.

Wlu'ii payable ?

To whom, name and address ?

Taxes, rates, &c., their amonnt respcetively ?

Does the tenant or landlord pay the rates and taxes ?

Insm'ance, date of payment, name of office ?

Gross rental per annum ?

If unoccupied, what is the fair rent ?

Is the rental paid weekly, monthly, quarterly, or held on lease ?

Amount of advance required ?

Is the property subject to prior mortgage ?

If so, to what amount ?

Is the applicant solvent ? Ever been bankrupt ?

Is the applicant free from any judgment or other encumbrance likely to

effect his real estate ?
Is the title good of such premises ?
Have any of the covenants in the lease been violated ?

To the Manager of the — Benefit Building Society.

Sir, — I send you the following particulars of certain buildings which 1 am
desirous of erecting.

Name

Address

No. of Certificate ^

Date

Description of huilding, to he accompanied with jdans.
Where to build ?
Leasehold or freehold ?
Ground rent per annum ?
Covenants of lease ?
Amount required ?

By what instalments, and how often ?

Has the applicant ever been bankrupt or insolvent, or has he any encumbrance
registered so as to affect his estate ?

To the Manager of the Benefit Building Society.

Sir, — I send you the following particulars of freehold land which I am
desirous of purchasing.

Name

Address

No. ijf Certificate
Date

KULES FOR A PERMANENT BENEFIT IJUILDINO SOCIETY. 12'>J

Description and extent of property.
Where situate, — parish, count}', &e ?
The value per annum ?
By wlioin is the land held ?
To what use is the land to be applied by applicant ?

Receipt to he endorsed on mortgage security.

We, the undersig-ned, the trustees for the time being of the vvithiu-

UMsntioned Benefit Building Society, do hereby acknowledge

to have received of and from the within-named his heirs, executors,

administrators, and assigns, all monies intended to be secured by the within
writt(>n deed.

As witness our hands this day of ■ 18 — .

E
Form of transfer.

I, , one of the members of the Bciuiil

Building Society, in consideration of paid to me by , do

hereby assign and transfer • , to the said ■ — — , his (or her)

executors, administrators, and assigns, subject to the payments, rules, and

regulations, prescribed by the society. And I, , sanctioned by

the board of directors, do hereby agree to accept the said share (or shares)
subject to the same payments, rules, and regulations.

As witness our hands and seals, this day of 18 — .

Barrister's certificate.
190. — I hereby certify that the foregoing rules are in conformity to law, and
with the provisions of the statute G and 7 Wm. IV., cap. 32.

The Barrister-at^Law appointed to certii'y

rules of savings' banks.
London, 24th June 1848.

Copy kept, pursuant to 9 and 10 Vict., cap. 27, sec. 12.

Actuary's certificate.

191. — I hereby certify that the rules and rates of the

Permanent Benefit Building Society are founded upon equitable and sound
jjriuciples, and may safely be adopted for its use.

Actuary.

CHAPTER Vlll.

ON LIFE OR FIDELITY ASSURANCE APPLIED TO
BENEFIT BUILDING SOCIETIES.

SECTION I.

As regards Borroiving Members.

Art. 192. — There remains one circumstance in connexion
with the operations of Building Societies, which more particu-
larly deserves the serious consideration of those members, who
have borrowed money for the purpose of purchasing a house
or other property. It has been explained that, when an
advance is obtained by a member, a mortgage of the property
purchased with it is given by him to the society, for a specified
number of years, as security for his making, during that time,
certain fixed periodic payments, by which the loan is to be
repaid with interest.

If the borrower survive the term of his mortgage and
complete the redemption of his property, he will, in most
cases, have thus secured an unincumbered provision for his
family, and all is well. But if he die before this satisfactory
result is attained, unless his successors can continue the re-
demption payments, for whatever number of years remain in
the agreement, the Building Society is under the necessity of
foreclosing the mortgage and reselling the property, in order
to recover tlic remainder of the debt. The late borrower's
family, consequently, find themselves suddenly deprived of a
provision on which they had calculated ; and whatever sum
they may recover from the sale of the house, after complete

ON LITE ASSURANCE. 125

payment of the society's claims, it would, under such ciiTuni-
stances, he but small in comparison with the advantage, which
had naturally been expected by them before his death.

This difficulty in the position of the borrower can only be
surmounted by the application of Life Assurance, which alone
affords the certainty of monetary payments adapted to the
contingencies of human life. It is exactly one of the cases
that Life Assurance is specially prepared to meet. The con-
tingency to be provided against being : — the chance of a given
life dying before the expiration of a given number of years.

Were the borrower's debt to remain undiminished until the
end of the specified time, and were that time a Jixed number
of years, then by taking out an ordinary Temporary policy on
his life for that period, equal to the amount of his debt, he
would secure the necessary sum payable to his family in the
event of his decease at any intermediate time. But, in con-
sequence of the claim on the property diminishing every year,
and in fact every month, the policy can, at the option of the
assured, be made of such a kind as to adapt itself to the
decrease, in various ways more advantageous to him, and
suited to each particular case.

To persons unacquainted with life assurance transactions,
it may be explained that policies are generally denominated
ivhole-life or temporary. If the policy be effected for the
whole of life, the assurer pays, during that time, a certain
annual premium, varying with his age at entry, in considera-
tion of which the company undertakes to pay the amount
assured, whenever his death takes place; so that, some day or
other, his family are sure to be thus benefited. In temporary
policies, the society merely guarantees the payment of the
amount assured, provided the assurer die within the number
of years for which it is taken out. As, however, the risk of
the assurance company from the chance of such an event is,
for most ages, considerably less than in whole life policies, the
temporary annual payments are also considerably smaller.

126 ON LIFE ASSURANCE

But, on tl\c other hand, if the person assured survive the
period for vvliicli tlie assurance was effected, he receives from
it no further benefit beyond the satisfaction which lie may
have experienced during the past, arising from the certainty
that his family has been completely protected during the then
existing chance of loss.

Before examining the various modes of assurance which
have lately been suggested, we may remind the reader that, in
the preceding sections of this work, it has been explained,
that in most terminating societies there exists considerable
unwillingness on the part of the directors to allow the
redemption of mortgages, from the great inconvenience which
arises in the latter years of a society, if a sum of money be
returned on its hands, for which a re-iiivestynent may not be
easily found. If, therefore, in consequence of the death of
a borrower, or from any other cause, a redemption be per-
mitted, it is required to be on such terms as will secure the
association from loss; and the amount which, according to the
rules of compound interest, would be considered a fair com-
position for the remainder of the debt of a deceased borroAV-
ing member, might not always be accepted as sufficient by
the directors, who would have to take into account the loss of
interest likely to be produced by the absence of re-investment
for the money returned ; which loss, if not obviated, must
prevent the realisation of the results anticipated in their fun-
damental calculations.

This practical difficulty, among others, renders it impossible
for a borrower to know, beforehand, the precise sum, which
might be required from his family, after his death, for the
redemption of his mortgage ; although, of course, he would be
justified in expecting that it would be less than the amount
originally borrowed. Again, another obstacle to the accurate
determination of a borrower's liabilities arises from a cir-
cumstance peculiar to the mortgages effected in terminating
societies, caused, as we have before mentioned, by the special

APPLIED TO 1!I',NRFIT lUIILDING SOCIF.TIF.S. 127

provision, tliat tlie payments of the members shall not ter-
minate, until the promised amount of eaeh of the tmadi^avced
shares held by non-borrowing members lias been realised ;
and that, if from any cause there exist a deficiency in the
accumulated funds of the association at the end of the specified
term of its existence, all the subscribers, borrowers as well as
non-borrowers, shall continue to make their payments, and
the mortgages on property shall remain in force, for the
necessary additional time, of which the duration cannot be
calculated until the deficiency is discovered.

\\\ permayient societies, these obstacles to the ready appli-
cation of life assurance do not exist, as they are free from
the practical objections above quoted ; and in some instances
also of the terminating societies, where they are formed on
accurate and sound principles, arrangements can be made, by
which a borrower may avail himself of the advantages oficred
by life assurance. In the present confused state of the affairs
of most of the existing associations of this kind, it is impos-
sible, of course, to offer any advice on the subject, which can
meet each individual case ; but attention may be drawn to
several plans prepared by some of the well-established assur-
ance companies.

These plans appear to be of two kinds : — either the policy
secures a single sum of money, to be paid at the death of the
assured, and sufficient to clear ofi' the debt; or the assurance
company undertakes to continue the suhscrij^tions of the bor-
rower after his decease, until the period of the expiration of
his mortgage.

In the first plan, three varieties of policy are suggested : —
First, that the borrower, if he can afford it, should eflect
an assurance, equal to the amount of his loan, by a whole life
policy. He thus, not only makes his family secure during
the period over which his mortgage to the society extends,
but, in the event of his surviving, also creates a further pro-

128 ON LIFE ASSURANCE

vision for them, payable at whatever subsequent time liis
death may occur. This phxn is undoubtedly the most advan-
tageous for his family, but it is generally found too expensive,
as the borrower, in most cases, finds it nearly as much as he
can manage, with his limited means, to pay his share sub-
scriptions. The Half -premium system for seven years might
be useful, by which only half the whole rates are charged for
that term, the remainder standing over as a small debt upon
the policy.

Secondly. — It is proposed that he should effect a temporary
policy on his life, which shall commence at the time he
obtains the advance, and be equal to the amount thereof.
The term of its existence also to be equal to (or perhaps, if
thought safer, a few months longer than) the number of years
over which the mortgage is expected to continue. It is then
arranged, that at the end of each year the assurance company
should allow him to diminisli the amount of his policy, by
a sum equal to the diminution effected in his debt to the
Building Society, during each past year ; thus maintaining it,
nevertheless, large enough to meet its purpose during each
coming year. By this arrangement the annual payments
would of course receive a corresponding diminution, and the
amounts, by which the policy is to be reduced from time to
time, would be left undetermined, and at the will of the
assured, in consequence of the impossibility of his ascertaining,
beforehand, the sum which might be required, in the course
of the society's existence, to pay off the remainder of his loan
in the event of his death ; and, although the extent of his
debt at the close of each year, depends on practical contin-
gencies, undeterminable by theory, yet it is in the power of
the assurer to ascertain the correct amount, relatively with
the actual circumstances of a Building Society, by applying
annually to the manager ; moreover, as the rates of premium,
on policies of tliis kind, diminish every year, they become

APPLir.D TO IJENKFIT lUHl.DlNC SOCi I'.TI r>:. l;,'l)

rapidly very small, and appear to be within the reach even oi"
persons of very limited incomes.

193. — Thirdly. — Some Life Assurance Societies have of-
fered to issue temporary policies, diminishing by an unvarying
fixed amount every year ; the rates of premium decreasing
accordingly.

For example: — Suppose that in a 10-years Building Society
a member has borrowed £800, — he is recommended to effect
a temporary policy for £300, for the period of 10 years,
diminishing by the fixed reduction of £30 a year.

This plan, however accurate in principle as a mere life-as-
surance question, is not at all applicable to the case of mortgages
from Building Societies, whether examined theoretically or in
its practical bearings : for the policy, during more than half
the period of its existence, would be insufficient to cover
the debt.

When it was first put forth, two or three years ago, by the
life assurance companies alluded to, its unsoundness was very
ably proved by some of the periodicals which treat of these
subjects, although not with the complete success of cavising
the directors to suspend its detrimental action. As, however,
the subject is one of considerable importance, on account of the
loss and future injury entailed on persons, who may be tempted
to assure from the simple form and apparent cheapness of
the policies, we shall here examine it by an example : —

A man borrows £300 from a Building Society which is
expected to terminate in 10 years, and whose shares are
£120 each, — for this loan he requires 5 shares, supposing the
present value of each share to be £60, and he has to pay a
monthly subscription of five times 14a'., or SI. \Qs., in all £42
a year. To secure the family of the borrower from liability,
in case of his death before the expiration of the ten years,
the assurance society recommends him to effect a temporary
policy of assurance for ten years on his life, according to u

130

ON LIFE ASSURANCE

scale given in their prospectus. By this scale the amount of
the policy is diminished £10 per cent, every year, so that —

If tlie borrower died between the beginning and
end of the 1st j^ear, the policy would secure the
payment of „ £300

If he died between the beginning and end of the

2nd year, the sum payable would be 270

Within the 3rd year 240

4th year 210

And so on, diminishing £10 per cent, annually — the diminu-
tions in the policy taking place at the end of each year.

To this circumstance attention must be given, as the object
of these remarks is to prove, that the amount so secured, pay-
able in the event of the death of a borrower, is not sufficient,
the fixed diminution in the amount of the policy being too
great during the first half of the years of existence of the
policy and the debt to the building society. It has been
explained in Chapter III., that the rate of interest involved
in the calculations of a building society such as this, is 7 per
cent , so that the current account of the borrower relative to
the society will stand thus : —

First year — Principal or debt £300 0 0

Interest at 7 per cent 21 0 0

Total 321 0 0

Deductpaid. 42 0 0

Leaving a balance due at the end of the

Istyear 279 0 0

Second year. — Interest 19 10 0

Total 298 10 0

Deductpaid 42 0 0

Balance of debt at the end of 2nd year... £256 10 0

APPLIED TO BENEFIT nUILDlNG SOCIETIES. 1 .'J 1

And so on, year by year, the balance clue can be annually
ascertained. The fact of the payments being monthly instead
of annual will not materially affect the results.

Now, if the amount of the debt at the end of each year be
compared with the corresponding remaining amount of the
policy, it is seen that, at the end of the first year, the former
amounts to £279, while the latter is only £f^70, being too
small by £9 to meet the debt. Similarly at the end of the
second year the policy is deficient by 16/. 10*. Qd., and so on
during more than the first half of the debt ; hence, although
as far as the assurance companies are concerned, policies may
be safely granted, decreasing every year by the same fixed
sum, yet they are evidently inapplicable to the case of the
borrowing member of a building society, who ought himself
to have the power of determining, year by year, the amount
by which his policy is to be diminished.

194. — The Second System of life assurance adapted to the
requirements of a borrower in a Building Society, by which, in
the event of Ids death, the Assurance Company takes his place,
aiid continues his monthly subscriptions, we suggested in con-
sequence of the strong objections which exist to the effecting
of life policies for single sums of money, from the practical
difficulties, that constantly arise, in the equitable adjustment
of the remaining amount, which the Building Societies are
entitled to claim in repa^'ment of a debt.

In the j)olicy recommended in their stead, the assurance
office undertakes, in consideration of a fixed diminishing, (or,
binder certain conditions, equal,) annual premium, paid to it hi/
the borrower, to continue, from the time of his decease, the
monthly subscriptions for which the house or property is liable,
until the mortgage is cleared off. The term of the annuity is
taken as ending with the 3^ear, in which the society (if termi-
nating) is expected to close, or for a few years longer. This

K 2

132 ON LIFE ASSURANCE

plan, which has been adopted under the name of the " Gua-
rantee temporary annuity policy^'' appears to offer additional
security to the Benefit Building Society, at the same time
that it renders the family of the borrower entirely free from
liability or trouble of any kind.

To illustrate the application of the diminishing payment,
we will take the same example as before : — Suppose a person
aged 30 borrows, in order to purchase a house, £300 at the
commencement of a Building Society, which is calculated to
close in 10 years, and whose shares are £120. He requires
for this loan 5 shares, and has to make during the 10 years
an annual payment of £42.

Now, if the borrower die before the 10 years are expired,
the house is liable to be seized for the remainder of the
mortgage unpaid, unless his family can continue the monthly
instalments, — but if he effect, at the same time with his loan,
a guarantee temporary annuity policy on his own life for 1 0
years, securing the annuity of £42 a year, or 3/. 10^. monthly,
payable in case of his death, from that event until the expira-
tion of the 10 years, his family is rendered free from any
liability by a comparatively small annual outlay, which at his
age 30 is as follows : viz.

1st year's payment £5 0 0

2nd „ 4 7 1

3rd „ 3 19 2

4th „ 3 10 5

5th „ 3 1 8

Gth „ 2 12 1

7th „ 2 2 11

8th „ 1 12 ()

9th „ 1 2 1

10th „ 0 11 3

From this it is seen that if, for example, the party die in
the 4th year, he will have purchased an annuity of £42 a year

APl'Lir.D TO HKNKIIT BUILDING SOCIETIES. 133

for the 6 reiuiiining years, by four payments amounting to
16/. I6s. Sd.

It is evident the principle of such assurances is the same
whether the payments of the Building Society are 10*. a
month during fourteen years, or any other amount ; and it
matters not whether the loan be eifectedat the commencement,
or in any other year of the existence of a Building Society.
All that the borrower has to consider is the amount of his
annual payment, and the number of years he expects they
will run over : with these facts he can ascertain what premium
and what amount of policy will suit his purpose.

195. — The principle of making the annual pi-emiums dimin-
ish annually with the risk, to which the assurance company is
exposed, is obviously the correct one, and it has been since
widely adopted ; but, in order to meet the requirements of the
industrious classes, the policy is frequently desired at an aver-
age equal premium, so as to lessen the heavy expense at first.
This, without some limiting condition, is disadvantageous to
the office, and yet it has lately been undertaken by some
assurance companies. For instance : one of the prospectuses
states that a reversionary temporary annuity of £10 will be
guaranteed, in case of the death of a person aged 30 before
the end of 10 years, in consideration of the equal annual
premium of 135. lOd. a year, and that at the age of 35 the
same annuity, for 5 years, may be obtained for 8s. a year.

A few words will suffice to point out the error of such an
arrangement. In charging the same annual payment through-
out the duration of a diminishing risk, the office is virtually
substituting for payments, which ought to diminish year by
year, their average amount. Thus, by the rates above given,
the borrower aged 30, might assure the reversionary temporary
annuity of £42 a year for 10 years by an invariable annual
premium of 21. \8s. 2d. payable throughout the term of the
assurance. It is obvious, therefore, that during the Jirst half
of the existence of the j)olicy, or the first five years, the office

134 ON LIFE ASSURANCE

is receiving a premium much too small, to be in proportion
with the risk incurred (which can be seen by comparing it
with the rates in the example before given of diminishing
premiums), and during the second half of the period, the
converse takes place.

If the assured then die in the first half, the life office must
experience a serious loss, since it will have to pay an annuity
for the remaining number of years, towards which it will
not have received an adequate amount of premium. And if
he survive the first half of the period, it is clear that a direct
incentive is offered to him at once to drop his assurance,
because the premium he would have still to pay exceeds the
advantage yet offered by the policy in case he should die
during the remaining half of its existence ; for, in the re-
maining 5 years the annual premium secvu-ing £42 a year is
still ^l. 18^. ^d. But the same prospectus which we have
quoted above states, that at o5 (his then age when 5 years
have elapsed) a reversionary annuity of £10, can be purchased
for 8^. a year, or the borrower can take out a new policy,
securing £42 a year for 5 years, by an annual payment of
\l. \os. 8rZ. In other words, supposing the borrower survive
the Jirst five years, he would find that by dropping his old
policy, and taking out a new one, he could effect an annual
saving of 1 /. 4s. 6d. ; a matter of some consideration to persons
whose means are limited.

Hence, the plan of an unvarying annual premium during
several years exposes the society to loss, and then holds out
an inducement to the assurer to abandon his policy, as he may
effect another at rates considerably reduced for the remaining
term of his mortgage, a circumstance which it would be idle
to expect him to overlook.

1 96. — The simplest mode that we can suggest of obviating
this practical difficulty would be to charge for the first year a
larger premium, than for the lemainder of the term : — Such
as two years' payments to be made in advance on taking out a

APPLIED TO BENEFIT liUlLDING SOCIETIES. 135

policy. For example: The first payment would he 51. IGs. 6d.
and the 8 remaining premiums each 21. I8s. ^d. The policy,
being still for 10 years.

197„ — In preparing tables on the above system for the assur-
ance of a diminishing risk, it has perhaps been imagined that,
because the analytical investigation produced a correct mathe-
matical formula, by which the premiums could be calculated,
it would still be sound if applied to practical purposes. Such
is far from being the case in this instance, or, indeed, in many
others of a similar kind ; and a neglect of sufficient examina-
tion of the effect of practice applied to theory is probably the
cause of the many unsound features of Life Assurance, which,
from time to time, are met with in the prospectuses of
different companies.

Section 2.
Life Assurance applied to Invesfers.

198. — The preceding plans of life assurance have all had refe-
rence only to the requ.irements o^ Borrowers in Benefit Building
societies. The advantages to be derived from its application
can, however, be extended in a most beneficial manner to the
Tnvesters or non-borrowers, in such associations as are formed
on the permanent principle suggested in Chapter IV, accord-
ing to which an invester pays a certain monthly subscription
for a given number of years, and, at the end thereof, receives
the amount of the shares he holds.

If he die previously, his family are entitled to claim from
the building society merely the amount of his past subscrip-
tions and whatever interest may be due upon them, according
to the regulations usually contained in the rules.

Now it is possible, supposing the shareholder to be an
insurable life, to make his shares payable in full, at the end

13G ON LIFE ASSURANCE

of the specified term of years if he is alive, or sooner to his
family, in the event of his previous death. In the specimen
of a permanent society given in Chapter IV, it is stated, that
by the payment of 13 shillings monthly for 10 years, an in-
vester can realise a share of £100 to be received at the end of
that time. If the principle of temporary life assurance be
applied, which can be done with safety in a permanent Benefit
Building society, the members of which increase in number
every year, it is found that, in consideration of a mere trifle
extra per month (at some ages even less than one shilling per
cent.) in addition to the 13 shillings, the Building society
itself would be able to undertake to pay at once to the family
of a non-borrowing member his sliare in full, should he die
before the 10 years have expired. Such an arrangement
would be a most important boon to the industrious classes,
whose families suffer greatly from the pecuniary loss occa-
sioned by their unexpected death. And by a careful medical
examination of the parties proposing to avail themselves of
this privilege, and by a resolute rejection of all objectionable
lives, the society might with great safety imdertake the risk
of a member dying in the space of 10 years, or a similar
short term.

199. — In the presence of the existing Act of Parliament re-
specting these associations, by which their action is much re-
stricted, and in the absence of all superintendence on the part
of government over their financial and general operations, the
plan above suggested cannot be adopted ; nor would it be
prudent to do so, even if the act permitted this or other
modifications in their system, until some regulations are
enforced to act as a check to the practical errors, which daily
arise in the working of many of these societies. But it is
probable that a permanent Benefit Building society of
unexceptionable respectability might secure the co-operation
of a Life assurance office, which would undertake the risk.
In any case, it is greatly to be desired, tliat, if ever the other

ATI'LIED TO BENEFIT BUILDING SOCIETIES. 137

objections and deficiencies in the Act undergo revision, some
step will be taken for introducing, as far as may be practicable,
into their operations the important benefits of Life assurance.
Should that be done, to make the application equitable, the sys-
tem of Life assurance adopted hy the Building society should
be strictly mutual; otherwise, the limited membership of the
subscribers, in a permanent association, would deprive them
of a fair participation in the Pi'ofits, which would probably
accrue to the later members. There would arise no unneces-
sary risk therefrom, any more than in an ordinary Mutual Life
office ; and even the extra risk contingent upon the first few
years might easily be averted by the purchase, at a small per
centage, of the Temporary protection of an established com-
pany. In general the mutual principle is also recommended, be-
cause it must be considered as combining all that was wanting
to make Life Assurance perfect ; inasmuch as it removes the
only selfish objection to which that beneficent invention of
science was formerly open : viz., that those, who live, pay for
those who die beforehand ; since the periodical allotments of
Bonus, if calculated upon safe principles, tend continually to
restore the balance of advantage to those members, who
survive each division of Profits.

Building Society shares as security for Fidelity in situations of Trust.

200. — Instead of making the shares payable at death, in the event of a
member's dying before the completion of his subscriptions, another valuable
modification might be introduced.

In consideration of a small extra payment beyond the monthly share sub-
scriptions, the members of the Building society might mutually guarantee the
fidelity of each other, if employed in situations where such security were
required. Provided always, that, previously to affording such a guarantee to
a member, due care were taken to make strict enquiry respecting his past and
present character.

The rates of contribution for Fidelity assurance may be ascertained from
statistical data, which can be rendered as complete as the corresponding data
representing the laws of mortality ; and it is plain that the payments of a
member might be so combined, that the amount of a share could be made
payable, at the end of the given number of years, to himself or his family, if

138 ON LIFE OR FIDELITY ASSURANCE

he continued lionest ; at the same time that it might be made payable to his
employer for the time being, in case he should, in the mean time, commit a
breach of trust ; in which latter case he himself would forfeit all claim upon
the society.

201. — Guarantee societies have been established within the last few years
solely to obviate the defects of suretyship by private bondsmen, a practice
which was found to be attended with various inconveniences and objections ; —
instances having constantly occurred in which persons of great respectability
were obliged to forego excellent situations, from either the great difficulty of
obtaining security, or a repugnance to place their relatives or friends under
the obligations involved therein. A Fidelity society, commonly called a Gua-
rantee society, undertakes, on the annual payment of a small sum, to make
good, in case of default by fraud or dishonesty, any losses which may be
sustained to an amount specifically agreed upon ; and by such means obviates
the necessity for private sureties as well as the obligations arising therefrom,
which often prove as prejudicial to the best interests of the employers as to
the employed.

To the employer the guarantee of such a society is much more valuable
than the bond of any individual, inasmuch, as it is not liable either to doubt or
depreciation. In large establishments, both public and private, where the
securities are numerous and the sureties often resident in many different
parts of the country, and kno^vn only by repute, it becomes almost impossible
to watch over their continued existence and solvency ; and cases of default
have frequently occurred when, upon investigation, it has been found that all
the sureties have been dead or gone away for many years.

By these means, security has been provided only for the fidelity of the em-
ployed : but the plan of a Guarantee society is still defective, in consequence
of its being considered virtually not to offer a sufficient discoui'agement to
dishonesty. It has been felt that a pure Fidelity-policy does not even, in point
of morality, possess the advantage afforded by private suretj^ship, — inasmuch
as the son, to whose nature it would be repugnant, by his misconduct, to
bring disgrace and ruin upon his relations or friend, might feel little anxiety
as to the pecuniary loss inflicted upon a guarantee society. In other words,
it is conceived that a cUsposition to fraud is not effectually checked, — the
reflection arising, that as the rates of a guarantee society pre-suppose the
existence of such a disposition on the part of, at least, one out of every two
hundred of its selected assurers, the loss sustained by the society through
such defalcation would be but the result of the "Average.''

202. — In the plan here suggested, which would be equally applicable, if not
more so, to a Life Assurance or other Investment society, the subscribers, while
satisfying the requirements of their employers in respect to their honesty and
good conduct, woidd receive an additional stimulus from the reflection, that
all their subscriptions would become forfeited in the event of their acting
dishonestly. Hence, the greatest moral benefits might be expected, as the
members of such an association would serve as a mutual check on each other.
A new incentive to honesty would be gained; and while a sum of money
would guai'antee the fidelity of the Invester, the mere fact of his admissibility
to such an assurance would be a strong testimonial to his character. At the
same time various practical regulations would, of course, be requisite to secure
the judicious working of this suggestion.

APPLIED TO nENKFIT BUILDING SOCIETIES. ] ,'J9

0(1 the joint combbiatlon of Life and Fidelitij Assurance in co-operation luilh
the ordinary jyrinciples of Building Societies.

203 — The methods of Life assurance and Fidelity f^uarantce suggested above,
may be either adopted separateli/ for the convenience of different members of
the same society, or combined togetiier in such a manner, that, wiiile on the one
hand, a non-borrower might subscribe, with the view of receiving his share in
full at the end of a given term of years ; yet, in the event of his previous death
or committing a breach of trust, the amount of his share might be made pay-
able to his family or to his employer, whichever happened to be the case.

In the system of a permanent building society, combining the tlu-ee advan-
tages alluded to, the rates of monthly subscription per share can be calculated,
so as to enable the association witli safety to undertake the payment of an
invester's share in full at the end of the specified term of years, if he be alive ;
at the same time, that the same amount of share would be payable to his
family in the event of his previous death, or to his employer should he commit
a breach of trust. Great care being taken, of course, to examine his state of
health, to see that he is a sound life, and to ascertain that his past and present
moral character is free from stain or reproach.

204. — The adoption of the important considerations, which form the subject
of the latter articles of this chapter, would necessarily introduce some compli-
cation into the affairs of a Building society ; but it should be borne in mind,
that the scope and consequent prosperity of all institutions of this kind depend
upon the variety of the cases, to which their provisions are adapted; and
that, while a society might off^er all, or any of, the advantages we have enu-
merated to those among its members, whose situation might render them
desirable, there is no reason why the adoption of either guarantee or life
assurance should be made compulsory on other members, who have no occasion
for them. One man may A\dsh to assure his life ; another may stand in need of
security for his honesty ; a third may require both the one and the other ; and
a fourth may be so circumstanced as to have no occasion for either. The
several cases we have supposed are, in reality, those not of individuals but of
separate classes, to each of which the same society may offer the advantage
suited to their own peculiar requirements, and, by thus multiplying its mem-
bers, increase its stability and diffuse its benefits.

[The suggestions, advanced above respecting the Combination of the risks of
Life and Fidelity Assurance in one Policy, have been recently adopted
(without reference to the Building Society question) by several new Compa-
nies, which have been formed specially for that object. J

CHAPTER IX.

THE ACT FOR THE REGULATION OF BENEFIT BUILDING
SOCIETIES. 6 & 7 WILLIAM IV. Cap. 32. 14th JULY, 1836.

With ohservatio7is and legal decisions.

Art. 205. — Whereas certain societies, commonly called Building
Societies, have been established in difiFerent parts of the kingdom,
principally amongst the industrious classes, for the purpose of
raising by small periodical subscriptions a fund to assist the mem-
bers thereof in obtaining a sma\\ freehold or leasehold property ; and
it is expedient to afford encouragement and protection to such
societies and the property obtained therewith. Be it, therefore,
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 autho-
rity of the same. That it shall and may be lawful for any number
of persons in Great Britain and Ireland to form them-
Societies sclvcs iuto and establish societies for the purpose of

may be es- . . ...

tabiished for raising, by the monthly or other subscriptions of the

the purchase b-> J J ^ ^ r

or erection of Several members of such societies, shares not exceeding

dwelling

houses. the value of one hundred and fifty pounds for each

share, such subscriptions not to exceed in the whole
twenty shillings per month for each share, a stock or fund for the
purpose of enabling each member thereof to receive out of the
funds of such society the amount or value of his or her share or
shares therein, to erect or purchase one or more dwelling house or
dwelling houses, or other real or leasehold estate to be secured by
way of mortgage to such society, until the amount or value of his
or her shares shall have been fully repaid to such society with the
interest thereon, and all fines or other payments incurred in respect

Tin: ACT roR benefit building societies. 1 11

thereof, and to and for the several members of such society from
time to time to assemble together, and to make, ordain, and consti-
tute such proper and wholesome rules and regulations for the
government and guidance of the same as to the major part of the
members of such society so assembled together shall seem meet, so
as such rules shall not be repugnant to the express provisions of
this act and to the general laws of the realm, and to impose and
inflict such reasonable fines, penalties, and forfeitures upon the
several members of any such society who shall offend against any
such rules, as the members may think fit, to be respectively paid to
such uses for the benefit of such society as such society by such
rules shall direct, and also from time to time to alter and amend
such rules as occasion shall require, or annul or repeal the same, and
to make new rules in lieu thereof, under such restrictions as are in
this act contained ; provided that no member shall receive or be
entitled to receive from the funds of such society any interest or
dividend, by way of annual or other periodical profit upon any
shares in such society, until the amount or value of his or her share
shall have been realized, except on the withdrawal of such member,
according to the rules of such society then in force.

If. And be it enacted. That it shall and may be

Bonus, &c , •'

not to be lawful to and for any such society to have and receive

usurious. •' •'

from any member or members thereof any sum or sums
of money, by way of bonus on any share or shares, for the privilege
of receiving the same in advance prior to the same being realised,
and also any interest for the share or shares so received or any part
thereof, without being subject or liable on account thereof to any of
the forfeitures or penalties imposed by any Act or Acts of Parlia-
ment relating to usury.

III. And be it further enacted. That it shall and
Te^mad^Vo ^^^Y ^^ h'^wful to and for any such society, in and by
form's of ^^^^ rules tlicrcof, to describe the form or forms of con-

coiiveyance, vcyancc, mortgage, transfer, agreement, bond, or other

instrument which may be necessary for carrying the
purposes of the said society into execution ; and which shall be spe-
cified and set forth in a schedule to be annexed to the rules of such
society, and duly certified and deposited as herein-after provided.

142 THE ACT FOR THE REGULATION OF

IV, And be it further enacted, That all the i^rovi-
Provisions of glons of a Certain Act made and passed in the tenth year

Fneiialy So- ' •'

lir Get'''4 t ^^ *^^^ ^^^»^'^ of ^^^^ ^^^^ Majesty King George the Fourth,
w'Tt*4o^ intituled. An Act to consolidate and amend the Laws
thif ittf '° relating/ to Friendly /Societies, and also the provisions of
a certain other Act made and passed in the Fourth and
Fifth years of the Reign of His present Majesty King William
the Fourth, entitled. An Act to amend an Act of the tenth year of
his late Majesty King George the Fourth, to consolidate and amend
the Laws relating to Friendly Societies, so far as the same, or any
part thereof, may he applicable to the purpose of any Benefit
Building society, and to the framing, certifying, enrolling, and
altering the rules thereof, shall extend and apply to such Benefit
Building society and the rules thereof, in such and the same
manner, as if the provisions of the said Acts had been herein
expressly re-enacted.

V. And be it further enacted. That it shall be lawful
Receipt en- for the trustecs named in any mortgage made on behalf

dorsed on ... , . • j^ i

mortgage to of sucli societies, or the survivor or survivors of them,

be sufficient

discharge or for the trustccs for the time being, to endorse upon

without re- \

conveyance. any mortgage or further charge given by any member
of such society to the trustees thereof for monies ad-
vanced by such society to any member thereof, a receipt for all
monies intended to be secured by such mortgage or further charge,
which shall be sufiicient to vacate the same, and vest the estate of
and in the property comprised in such security, in the person or
persons for the time being entitled to the equity of redemption,
without it being necessary for the trustees of any such society to
give any reconveyance of the j^roperty so mortgaged, which receipt
shall be specified in a schedule to be annexed to the rules of such
society, duly certified and deposited as aforesaid.

VI. Provided always, and be it further enacted,
thorizetn- That nothing herein contained shall authorize any
lumisTif °^ Benefit Building society to invest its funds, or any part
Bank!'* tlicrcof, in any savings bank, or with the Commissioners

for the reduction of the national debt.

BENEFIT r.UILDING SOCIETIES. 143

VII. And be it further enacted, That all Building
Act to*ex- societies established prior to the first day of June, One
societkJ'es- thousand eight hundred and thirty-six, shall be entitled
priol^o June, ^^ ^^'^ protection and benefits of this Act, on their

present rules being duly certified and deposited as
directed by the said recited Acts ; and no such society
shall be entitled to the benefits of this Act until their rules shall
have been so certified and deposited ; and that no such society shall
be required to alter in any manner the rules under which they are
now respectively governed.

VIII. And be it further enacted, That no rules of
Exemption ^ny sucli society, or any copy thereof, nor any transfer
duties. Qf jj^py gliare or shares in any such society, shall be

subject or liable to or charged with any stamp duty or
duties whatsoever.

IX. And be it further enacted, That this Act shall
Public Act. be deemed a Public Act, and shall extend to Great

Britain^ Ireland^ and BerwicJc-iipon-Tweed ; and be
judicially taken notice of as such by all judges, justices, and other
persons whatsoever, without the same being specially shown or
pleaded.

General Observations.

206. — The preceding Act contains many imperfections,
which may be stated briefly thus : —

I. The limit of the shares is fixed, without any apparent
cause, at £150, and of the subscriptions at £1 per share per
month, although, as far as the members are concerned, the
correctness of the ratio of their subscriptions to the amount
of the shares is all they have to do with ; and there is no
reason, why the amount of the shares should not be at dis-
cretion, provided the subscriptions are fixed in corresponding
proportion.

Some doubt lias arisen as to whether it may not have

144 OBSERVATIONS ON THE LAW OF

been intended by the Act that a member's interest in a
society should be limited to £150 ; but this seems improbable,
as in that case no society would be of any practical service,
since it would scarcely enable a member to purchase a house by
means of an advance. For, in general, the greatest present
value advanced on shares of the amount of £150 in ter-
minating societies would be only £75 or £80, and with so
small a sum scarcely a hovel could be purchased.

In the case of Morrison v. Glover, 19 Law J. Rep. (N.S.)
Exch. 20, 21 Nov. 1849, it was held that a member may
hold more than £150 worth of shares.

207. — There is no provision in the Act for societies
horroivlng money ; and, although the Registrar, until lately, has
certified Rules with such a power ; yet it has been considered
that it was not the intention of the legislature that societies
should pledge the credit of their members for money bor-
orw^ed, even for the extension of its business.

There is no reason, however, why the shares of the same
society should not be of various amounts ; and the following
clause, which we have prepared, enables Deposits to be re-
ceived, whereby loans would be rendered unnecessary: —

" The shares shall be of the ultimate value of £ each,

realizable by a monthly j)ayment of , and of such other

amounts, and realizable in such periods of years, and in consideration
of such single or periodic payments, as the Board of Directors may,
from time to time, deem fit."

It will be observed that the deposit receipts, being in the
form of Paid-up or Realized shares, the restriction of Section
1 of the Act, Kxt. 205, as to the payment of dividends, is met.

By way of example : — Suppose £25 to be tendered to a
Building Society on deposit for the term of three years at 4^
per cent, interest, the Society would issue a Paid-up Share
Receipt for £25, reciting that it was withdrawable at the end
of the agreed period, but bearing interest in the meanwhile at
4^ per cent, by way of Bonus.

BENEFIT BUILDING SOCIETIES. 145

208. — By the words " freehold or leasehold property, or
other real estate," inserted in the introductory part of this
statute, it follows that copyhold property, which is compre-
hended in the term " real estate," may be acquired and
enfranchised through the instrumentality of Benefit Building
Societies. We recommend our readers to examine the plan,
which we have devised for the Enfranchisement and improve-
ment of Copyhold and Church leasehold property, by the
formation of Copyhold Enfranchisement Societies, registered
under the Building Society Act. (See Division III. of
the Treatise, new edition, advertisement at back of cover of
this work.)

209. — Mortgages to a society are free from Stamp Duty. —
By section 37 of the 10th G. 4, c. 56, Bonds and other secu-
rities and assurances, given to or on account of any Friendly
society, and any instrument or document required, or autho-
rised, to be given, or made, to or by any Friendly Society, are
expressly exempted from any stamp duty whatever ; and by
the combined operation of this clause and the 4th section of
the Building Societies Act, all mortgages made to the trustees
of Benefit Building Societies are freed from stamp duty.

210. — Income Tax. — A society is liable to pay income-tax
upon its profits, that is to say, on the interest part of the re-
payments of borrowing members, but not upon the other
receipts, as they form the working capital of the association.
It should be remembered, however, that if a society pay
income-tax on such of its receipts as arise from interest, a
corresponding deduction must be made, at the close of the
society or a person's membership, from the amount of his
share then due ; the deduction affecting that portion of the
full share which represents the accumulations from interest.

211. — Minors. — From the circumstance of the 32nd sec.
of Stat. 10 Geo. IV., cap. 56, authorizing minors to become
members of friendly societies, infants may also become members
of societies established under the Building Society Statute,

146 OBSERVATIONS ON THE LAW OF

6 & 7 Wm. IV., cap. 32, and enjoy all the advantages derivable
therefrom, as investors or depositors, but they cannot enter into
obligations as borrowers or mortgagees, until they attain their
majority. And "although an infant hath capacity to pur-
chase, yet, at full age he may agree thereunto, and perfect
it, or, without any cause to be alleged, waive or disagree with
the purchase."

212. — Building societies may lend money for the purpose
of redeeming existing mortgages, or to meet any other
exigencies of a member, on the security of a house or property
already in his possession. Such security would be within the
21st section of 10 Geo. IV., c. 56, and, therefore, vest in the
trustees or treasurer for the time being, although the property
was in his possession long before the date of his advance.
(See cases of Cuthill v. Kivgdom, 1 Exch. Rep. 494; 17 Law
J. Rep. N.S. Exch. 177; and Morrison x. Glover, 19 Law J.
Rep. N.S. Exch. 20, 21 Nov. 1849.)

213. — It is expedient that the Rules should provide
that, on the death or removal of any Trustee, the resolution,
appointing a new trustee should be duly enrolled with the
Registrar. Unless this be done, it will be very difficult to
prove to the satisfaction of a purchaser, in case of any future
sale or raising of money by the member, that the persons who
signed the receipt on the mortgage deed were the then
trustees of the society.

214. — The Redemption and Foreclosure clauses should be
framed with great care, so as to define the exact mode, in
which the amount to be claimed of a borrower in redemption
of his mortgage shall be calculated, and as to whether he is to
participate in the profits of the society. Nine out often of the
law suits of Building Societies have been in connection with
disputes as to the amount to be charged on redemptions.
The remarks on this subject of Vice-Chancellor Wood, in
the case of Fleming v. Self (April, 1854), and those of the
Lord Chancellor Cranworth, before whom the case afterwards

BENEFIT BUILDING SOCIETIES. 147

came (July, 1854), are full of instructive information. They
confirm the views we have advanced in Art. 50, as to liability
of borrowers to continue their subscriptions in a terminating
society, until the investors' shares are realized.

215. — A Joint Stock Company cannot become a member
of a Building Society (Dobinson v. Hawks, 16 Sim. 407, 20
Nov., 1848), where it was held that a number of persons
forming a Joint Stock Brewery Company could not be
members of a Building Society.

216. — The course of 'proceeding necessary to he ado2)ted to
obtain the Enrolment of the Rules of the intended Society, is
as follows : —

Two copies of the rules, written (or printed) on paper or parch-
ment, signed by three members and a clerk or secretary, must be
sent (with the fee of one guinea) to the registrar of friendly societies
in England, Scotland, or Ireland, as the case may be, for the purpose
of ascertaining whether the rules are calculated to carry into effect
the intention of the parties framing them, &c., and are in conformity
to law, and the provision of the statutes in force relating to such
societies ; and the registrar is to give a certificate on each of the said
copies, that the same are in conformity to law, and to the provisions
of the statutes in force relating to such societies, or point out in
what part or parts the said rules are repugnant thereto. The regis-
trar is to return one of the copies to the society, and keep the other,
and the rides may. he legally acted upon from the time when the same
are certif.ed by the registrar. (4 & 5 W. lY., c. 40, s. 4; and
9 & 10 Vict. c. 27, s. 12.)

If any alterations or amendments are at any time made in such
rules, the same course must be pursued ; and an affidavit of the clerk
or secretary, or one of the officers of the society, that the provisions
of the Acts under which the rules have been enrolled have been
complied with, must also be transmitted. The affidavit should be
in the following form : —

/, , of . the clerk {or secretary, or one of the officers)

of the society, held at , in the county of , make oath

148 OBSERVATIONS ON THE LAW OF

and say. that in the inaJcing the alterations^ {or amendments) in the
rules of the said society, the provisions of the Act under ichich the
rules of the said society are enrolled have been duly complied with.

Sicorn this day of , 18 — , |^

before me i

A Justice of the Peace acting for

217. — The fee payable to the registrar for his certificate is one
guinea, but he is not entitled to a fee in respect of any alteration or
amendment of any rules upon which one fee has been already paid
within the period of three years, nor for any certificate to rules, &c.,
which are copies of any that have been certified by him, and duly
enrolled. (4 & 5 W. IV , c. 40, ss. 4, 5.)

218. — Besides being exempted from the operation of the Joint
Stock Companies Registration Act, a Benefit Building society, by
having its rules duly enrolled, derives many other benefits ; for —
1st. — The rules are binding, and may be legally enforced. — (10
Geo. IV, c 56, s. 8.)

2nd. — Protection is given to the members, &c., in enforcing
their just claims, and against any fraudulent dissolution of the
society, (s. 26.)

3rd. — The property of the society is declared to be vested in the
trustee or treasurer for the time being, (s. 21.)

4th. — The trustee or treasurer may, with respect to property of
society, sue and be sued in his own name, (ib.)

oth. — Fraud committed with respect to property is punishable
by justices, (s. 25.)

(Jth. — Disputes, in certain cases, are to be settled by reference
to justices, or arbitration, whose order, as awarded, is final.
(«. 27.)

7th. — Priority of payment of debts, in case an officer, &c., of
the society become bankrupt, insolvent, has an execution, &c.
against his property, or dies. (4 & 5 "Wm. IV., c. 40, s. 12.)

8th. — In case of death of members, payment may be made of
sum not exceeding £20, without the expense &c., of obtaining
letters of administration. (10 Geo. IV,, c. bQ, s. 24.)

BENEFIT BUILDING SOCIETIES. 149

9th. — Members arc allowed to be witnesses in all proceedings,
criminal or civil, respecting property of the society. (4 & 5 Wra.
IV., c. 40, s. 10.)

Lastly. — No re- conveyance of the mortgaged property is neces-
sary on the termination of the society, or on repayment of the
money advanced. (6 & 7 Wm. IV., c. 32, s. 5.) It is also
exempt from the operation of the Joint Stock Companies Winding-
up Act, 1848, the 11 & 12 Vic, c. 45, for, by the second section
of tliat Act, it is enacted, " That all Benefit Building societies,
other than such as are duly certified and enrolled under the
statute in force respecting such societies, shall be liable to the
operation of this Act.

219. — Respecting Arbitration see Art. 78.

220. — In addition to the power given to the members to alter,
amend, annul, or repeal the rules, and make new rules, the 10
Geo. IV. c. 56, s. 9, enacts, " that no rule shall be altered, re-
scinded, or repealed, unless at a general meeting of the members,
convened by public notice, signed by the secretary, or president, or
other principal officer or clerk of such society, in pursuance of a
requisition for that purpose, by seven or more of the members of
such society ; the requisition and notice to be publicly read at the
two usual meetings to be held next before such general meeting ; or
unless a committee shall have been nominated for that purpose at a
general meeting convened in manner aforesaid, in which case the
committee may make such alterations or repeal ; and unless such
alterations or repeal shall be made with the concurrence of three-
fourths of the members present at the general meeting, or by three-
fourths of the committee."

AS TO VOTING FOR MEMBERS.

221. — As rcfjards the qualification to Vote for Memlers of Par-
liament^ the 8 Hen. VI., c. 7, limited the right of
Counties'^ voting for counties to persons possessing free land or
tenement of the yearly value of 40^. It is doubtful whether

150

OBSERVATIONS ON THE LAW OF

before this statute the right extended to all freemen, or only to free-
holders. Dalton says, that " by the common law, all
FreehoLiers. '"'' freemen of England had a voice in the election of these
" knights within the counties where they dwelt." And
Prynne says, " every inhabitant and commoner in each county had
*' a voice in the election of knights, before 8 Hen. VI., whether he
" was a freeholder or not." That statute ordains and establishes
that knights of the shires, or Members of Parliament in England,
shall be chosen by people, whereof every one of them shall have free
land or tenement to the value of forty shillings hy the year at theleast
above all charges.

This enactment is the foundation of the present law, as regards
the right to vote by 40s. freeholders in counties.

222. — The words free land or tenement^ mean an estate in lands or
tenements of /ree/wM tenure. It is something more than a, freehold.,
•which includes any estate of* an uncertain determination, and may
exist in lands subject to customary services, and therefore of a hase^
and not freehold tenure., although a freehold interest. It was not
until the passing of the Reform Act, 2 Wm. IV., c. 45,
Copyholders. that copyholders and customary freeholders had the
right to vote. By the 1 9th section of that Act, per-
sons seized of land or tenements of copyhold, or any other tenure
whatever, are entitled to vote; but the estate must be of the clear
yearly value of ten ponnds.

By the same Act, the right of freeholders to vote
Freeholders jg continued, witli the reservation, that if the claim is

for hfe. '

in respect of any freehold lands or tenements, whereof
such person may be seized for his own life, or for the life of another,
or for any lives whatsoever, he shall be in the actual and bond fide
occupation of such lands or tenements, or the same shall have come
to such person by marriage settlement, devise, or promotion to any
benefice or office, or the same shall be of the clear yearly value of
not less than ten pounds above all rents and charges.

223.— The 7 & 8 Wm. III., c 25, s. 7, enacts that no person
Trustees or gj^all be allowed to have anv vote in elections, for or by

Mortgagees. " ■> j

reason of any trust estate, or mortgage, unless such
trustee or mortgagee be in actual possession or receipt of the rents

HliNl'.FIT JiUILDINC; SOCIETIES. 151

and profits of the same estate ; but the mortgagor, or ccstuique
trust, in possession, shall vote for the same estate, notwithstanding
such mortgage or trust ; and all conveyances of any messuages,
lands, tenements, or hereditaments, in any county, city, borough,

town corporate, port, or place, in order to multiply
Conveyances voices, or to Split and divide the interest in any houses or
voices void. lands among several persons, to enahle them to vote at

elections, are declared to be void, and no more than one
single voice shall be admitted for one and the same house or tene-
ment.

224. — The 18 Geo. II. c. 18, s. 5, enacts, that no person shall
vote in such election, without having a freehold estate in the
coimty, of the clear yearly value of 40s. over and above all rents and
charges, payable out of or in respect of the same ; or without having
been in the actual possession, or in receipt of the rents and profits
thereof, for his own use above twelve calendar months, unless the
same came to him within that time by descent, marriage, marriage
settlement, devise, or promotion to a benefice in a church, or by
promotion to an ofl&ce ; or in right of any freehold estate which was
made or granted to him fraudulently on purpose to qualify him to
give his vote ; or should vote more than once at the same election

under penalty of 40Z. and costs of suit. The 6 Vic. c.
Mortgagee. 18, s. 74. enacts that no mortgagee of any lands or

tenements shall have any vote in the election of a
Member of Parliament, at which freeholders have the right to vote,
for or by reason of any mortgage estate therein, unless he be in the

actual possession or receipt of the rents and profits
Mortgagor. thereof; but that the mortgagor in actual possession or
„, ^ in receiiit of the rents and profits thereof shall and mav

Inistee. i r

vote for the same, notwithstanding such mortgage ; and
that no trustee of any lands or tenements shall in any case have a
right to vote in any election for or by reason of any trust estate
therein ; but that the cestmque trust in actual possession or in
receipt of the rents and profits thereof, though he may receive the
same through the hands of the trustee, shall and may vote for the
«ame, notwithstanding such trust.

152 OBSERVATIONS ON THE LAW OF

The 2 Wm. IV. c. 45, s. 20, provides that persons
Leasehokieis. having a leasehold interest of the annual value of 10/.

for the term of sixf.^ years ; or of the annual value of
50/. for the term of tiveniy ycars^ are entitled to lie registered as
voters.

225 — By the same section, it is enacted that every person who

shall occupy as tenant, any lands or tenements for
Occupiers. which he is hova fide, liable to a yearly rent of not less

than 50/. shall be entitled to vote.
226. — The foregoing is a short summary of those qualifications to
vote for Members of Parliament for counties, which are likely to be
obtained through the instrumentality of Benefit Building, Freehold
Land, and other similar societies. -As, however, qualifications to
vote for JMembers for cities and boroughs may be obtained through
the instrumentality of those societies, it will be as well to state the
nature of the qualification which can be so obtained.

The right to vote for cities and boroughs under the 2
Voters for Wm. IV. c. 45, is, by s. 27, given " to every person of
boroughs! "full age, and not subject to any legal incapacity, who

" shall occupy, either as owner or tenant, any house,
" warehouse, counting-house, shop, or other building, being either
" separately, or jointly with any land occupied therewith by him as
" owner, or occupied by him therewith as tenant, under the same
" landlord, of the clear yearly value of 10/."

The elective franchise is possessed and obtained by other means,
which need not be described here, because these societies will not be
affected by those provisions.

227. — In conclusion, we may remark that, in the event of
a nev/ Act for Benefit Building Societies being introduced
into Parliament, the following points are deserving of consi-
deration : —

1. — Power for Building Societies to amalgamate with
each other, or lor one society to transfer its business to
another.

2. — Provision for the Registrar, or other suitable party
selected by the Society, to act as Receiver of the Re-

BENEFIT BUILDING SOCIETIES. 153

payments of tlie unexpired mortgages of any Society,
which it is considered desirable should be dissolved.

S. — The restriction of £1 a month and £150 amount of
shares to be rescinded.
Powers are also required : —

4. — To permit of a Society changing its seat of business
from one county to another.

5. — To allow of advances being made on security, which
consists collaterally, or in part, of personal sureties, or
of Policies of Life or other Assurance.

6. — To permit of Land being bought in the gross by a
Society, for division at wJwlesale prices among the members,
— see remarks in Chapter II., Part 2, of this Division, on
Freehold Land Societies. As such buying of Land is not
contemplated by the Building Societies' Act, the Directors
of Land Societies are obliged to incur the personal risk
of purchasing themselves, and of trusting to subsequent
allotments among the members ; thus opening the door to a
strong temptation to the Directors to make a personal
profit by adding a margin, before division, to the wholesale
cost.

7. — To permit of Suburban Villages being erected on
Land so purchased, for allotment among members desirous
of purchasing Freehold Cottages ; and to permit of
school-rooms, &c., being erected at a cost to be divided
proportionately among such members.

The reader who is desirous of more detailed information on
the Law of Benefit Building Societies, should consult the
three admirable Legal Treatises hg William Tidd Pratt,
Esq., and John Thompson, Esq., Barristers-at-Law, and
William Stone, Esq.. Attorney -at- Law.

PART II.

(hi the general principles of Associatioiis for Land Investment exemplified
in the cases of FREEHOLD LAND SOCIETIES, BUILDING
COMPANIES, and SUBURBAN VILLAGES, d-c, d-c. ; also on
the application of LIFE ASSURANCE and the TO'NTI'NE principle to
the purchase of FREEHOLD ptroperty at Home and in the Colonies;
with suggestions for the establishment of BENEFIT EMIGRATION
SOCIETIES.

CHAPTER I.

FREEHOLD LAND SOCIETIES.

Art. 1. — The same principle of co-operation and mutual
assistance, upon which we have shewn Benefit Building-
Societies to be based, may be applied, in various ways, to
the formation of other institutions, tending to improve the
condition of the industrious classes, or presenting profitable
modes of investment both for the savings of persons of limited
income, and for the capital of great money holders. In this
and following Chapters it is not our intention to notice,
categorically, the numerous schemes which have lately been
formed, or are now in contemplation, upon this principle, nor
to enter fully into their merits and defects ; but, we hope
that, by selecting from among them a few specimens, and by
embodying, in the description of each, the general character-
istics of the class to which it belongs, there will be sufficient
to enable the reader to apply the reasoning adduced in Part 1,
and to judge for himself of the merits of any new institution,
the features of which are not exactly enumerated.

2. — In every Land Investment Society, there are usually
the two classes, as in the Benefit Building Societies, who

158 FREEHOLD LAND SOCIETIES.

have in view distinct objects, which, diversified perhaps in
their smaller details, form the basis of each association.

Among the candidates for attention, stand first in import-
ance, numerous associations, which have recently come into
existence under the name of *' Freehold Land Societies ;" at
the same time that they tacitly subjoin the more modest
appellation of Benefit Building Societies, and adopt similar
Rules in their formation, for the purpose of being registered
as participators in the privileges of the Act of Parliament
relating to the latter institutions. Their chief object is
acknowledged to be the extension of the elective franchise*
within the present limits of the constitution. The purchase
of property, until quite lately, being merely a secondary
consideration, or rather a means to the attainment of the
political end.

3.-^These institutions have, therefore, as might be expected,
received the support, and occupied the attention of some of
the most active political economists of the present time. In
consequence, however, of the difference between their mode
of operation, and that of Benefit Building Societies, they can
hardly be said to have any right to come within the provisions
of the Act of Parliament by which the latter are regulated ;
and, by several leading authorities, it is held that serious
legal difiiculties are still likely to arise in the completion of
their political purpose. They are, nevertheless, daily becoming-
more and more important, and increasing in popularity.

4. — Their object is simple enough, and easily understood.
Proceeding on the princi^^le, that land, when sold in the gross,
fetches a lower price, per acre, than when sold in small portions,
particularly in the vicinity of large towns, these societies
purchase, with money obtained from external sources, succes-
sively, considerable estates, and divide the same among the
members in allotments sufficiently large to constitute 40*.

[* See Chapter 9, Part I, for details relating to the Law of Voting]

FREEHOLD LAND SOCIETIES. \')9

freeholds. They undertake in this manner to enable persons
with limited means to become county voters at a moderate
expense. The estimate, upon which they proceed, is, that 40^.
freeholds may thus be acquired at a price, which any skilled
artizan in steady employment may accomplish in the course of
5 or 6 years (the time usually mentioned) by laying aside 1*. 6d.
a week out of his wages for that purpose. It is obvious that,
if this assumption be correct, (into which w'e will shortly
examine,) a number of persons contributing to a joint stock
fund would speedily raise sums large enough to purchase
considerable estates ; and the members might, from time to
time, be put in possession of freeholds, on paying up the
whole price, if they are able to do so out of their previous
savings, or by giving a mortgage on the property, to be paid off
by their periodical subscriptions as instalments. The scheme
was first tried in Birmingham in a society formed by Mr. J.
Taylor of that town. The workmen there had heard of the
efforts of the Anti-Corn Law League to carry South Lanca-
shire by registering as many of their members as could be
persuaded to purchase 40^. freeholds. The average price of
such freehold was separately £70 ; and it occurred to them,
that, by combining the principles of accumulating a consider-
able fund through moderate weekly subscriptions, with that of
buying land at a wholesale cost, and by dividing it in allotments
to subscribers at the same price, 40^. freeholds might be
brought within the reach of workmen, or at least of the sober
and steady members of the skilled artizan class. Persuading
others to join them, and securing the countenance and co-
operation of several members of Parliament, the first Freehold
Land Society was founded in the town of Birmingham in
1847.

5. — Its very first purchase has been referred to as an
instance of the advantage of co-operation. The whole of an
estate, for a portion of which, of sufficient size to be suitable
for a single house, the owner declined to take less than 2s. Ad.

IGO FREEHOLD LAND SOCIETIES.

per yard, was actually bought for a sum, which enabled the
society to convey it in lots to its members at Is. Id. per yard.
These lots are said to have, thus, cost the new owners about
£19 each ; and many have erected dwelling houses upon them,
while others are stated to have let theirs upon building leases,
at a rent more than sufficient to give them the franchise.
The rules of the society were certified on the 27th of
December 1847, and at the end of the first year, its report
announced, that the society had established six indepen-
dent associations, tnz., in Dudley, Stourbridge, Coventry,
Worcester, Wolverhampton, and Stafford, in which 2,108
members had subscribed for 2,887 shares ; and that in
Birmingham alone the subscriptions amounted to £500 per
month. It was added that, the society had purchased an
estate for £3,700, which had been allotted to 195 members ;
and " that the directors were proceeding to purchase others,
which would give a preponderating influence in the elections
of South Staffordshire and North Warwickshire."

6. — The impulse given by this remarkable success was so
great, that, ere the termination of the second year, it was
found advisable to hold a great conference at Birmingham, in
order to organise a plan of general union and co-operation
amongst the numerous associations which had sprung up.
At this conference there were present numerous members of
Parliament, and delegates from societies in London, Coven-
try, Wolverhampton, Leeds, Doncaster, Wrexham, Barnsley,
Darlington, Halifax, Hertfordshire, Gloucester, Bradford,
Stourbridge, and Derby, &c. It now appeared that in
Birmingham alone £15,000 had been subscribed, and four
estates purchased; £2,500 being taken up by 1,800 sub-
scribers.

In Derby 1,000 shares were reported as subscribed for by
700 individuals, chiefly of the working classes ; and £700
paid up. In Leicester, although the society was only three
months old, there were 400 subscribers for as many shares.

FREEHOLD LAND SOCIETIES. IGl

A National Freehold Land Society was reported as established
in London, having 750 members subscribing for 1,500 shares,
with £1,900 already paid up. Li Marylebone 830 shares had
been subscribed for since July 1849. In Wolverhampton
they had 750 members, and had purchased two estates at a
cost of £10,780, by wliich, in their eagerness to join, the
shares had gone up to £10 premium (with how little just
cause the reader can easily imagine). In Stourbridge, with a
population not exceeding 8,000, the society had already 250
members subscribing for 298 shares.

Such were the facts laid before the conference, testifying
the extraordinary rapidity with which these societies were
spreading ; and up to the present time they manifest unabated
increase.*

7. — The business discussed at the meetings of the con-
ference was the construction of the rules of the associations ;
the formation of a central association of members and friends
of the movement, irrespective of tlieir societies ; and the
publication of a paper under the name of the " Freeholder," to
be devoted expressly to the advocacy of the object in view,
and to be a record of legal decisions affecting their interests,
and of other details relating to its progress. Considerable
discussion arose with respect to the formation of a central
committee ; it was at once evident, that no national machinery,
by which the various local societies would be regulated and
governed, would be possible even if desirable. The practical
experience of one of their most able supporters, Mr. Cobden,
M.P., suggested the formation of an executive committee with
a paid secretary, to whom questions could be communicated

(^* From the time of the first conference at the cntl of 1849, fifty new Freehold
Land Societies were formed, in less than six montlis, in other leading towns.
The total number of members, in all the associations, amounted to 14,281
subscribers, for 20,475 shares. A later return, to October 1850, states, that
there were then eighty societies in operation, with numerous branches ; and
that the sura of ,;ei70,000 had been contributed upon 30,000 shares of the
ultimate value of nearly one million of money. J

162 VREEIIOLD LAND SOCIETIES.

and information addressed ; and by whom meetings would be
organised, lecturers appointed, and the publication of the
paper superintended ; and, in fact, who would discharge all
duties analogous to those performed by the executive com-
mittee of the late League.

It was therefore decided, that a committee of the Bir-
mingham Society, with power to add to their number, should
form the central executive ; the functions of which should be
strictly confined to giving information and aid to local
societies, and to the promotion of the general progress of the
movement by the dispatch of skilled emissaries.

These interesting details are adduced as evidence of the
energy, with which these associations are being conducted ; and
the source, whence they are collected, is such, that there exists
no reason for doubting their accuracy.

8. — Apart from other considerations, if the basis of each
society were carefully constructed, the movement might be
productive of good ; and, if extensively taken up by the class of
small retail dealers, employes, and the superior class of work-
men, it will not only add to the county constituencies a large
number of independent voters, but it will bring within the
pale of the Constitution, and reconcile to it an important
class of the people. The principle of co-operation adopted
may transfer to the body of members the advantages, which
single proprietors have hitherto possessed, and may, thus,
enable the many to participate in benefits, which have been
hitlierto enjoyed by the few. It will also occur to every
reflecting person that, whatever be the peculiar political tenets
of the individuals who thus obtain the right of voting, incal-
culable advantage cannot fail, by reaction, to accrue to tlie
country at large, from the vast increase, which will ai'ise, in the
number of men, who will be personally interested in the
preservation of order and tranquillity in the land, in which
they will have acquired a pecuniary interest ; nor should the
moral influence be overlooked, which the movement is likely

FREEHOLD LAND SOCIETIES. 163

to exert, in its tendency to create and foster systematic habits
of sobriety and self-denial.

In the words of a distinguished writer in reference to
another class of associations, it may be said, that there can bo
no doubt of the soundness of the policy, which would en-
courage every class to seek to obtain a share in the artificial
system of property upon which this country depends. At
present the property of a labouring man is all tangible, and
immediately at hand. It would not be a great wonder, if he
were found to have no clear opinion of the rights of a land-
lord, a fundholder, a mortgagee, or an annuitant. But, if he
were himself in possession of any of those claims, which, by
means of the Law, can be created, enforced, or transferred, in
virtue of the possession of a bit of paper ; still more, if the com-
fort of his old affe were connected with the legal tenure of his
past earnings, he would, then, be interested in the continuance
of that system by the share of it which belonged to himself.

Other eminent men* have remarked to a similar effect,
that the object of increasing the number of freeholders at a
county election is not an object against law, or morality, or
sound policy ; on the contrary, that the increasing of the number
of persons, who enjoy the elective franchise, has been held
by many to be beneficial to the Constitution, and certainly
appears to have been the essential object of the legislature in
passing the late Act for Amending the Representation of the
People. Also —

That a conveyance of land by a vendor to one or more
vendees for a bona fide consideration is valid, although the
avowed object of the vendor is to multiply, and that of the
vendees to acquire, the right of voting.

Again, " When a working man has saved sufllcient to buy
a freehold, surely there is no person, who will not say, that

* Lord Chief Justice Tindal, in jiul'i^ment — Court of Common rieaa, 2'Jth
Januari/, lS4(j.

164 FREEHOLD LAND SOCIETIES.

he is glad to see him thus employing the fruits of his industry
and frugality."*'

9. — But, though the promoters may be sanguine as to the
ultimate results of their scheme, on account of the present
apparently flourishing position of many of the existing
Freehold Land Societies, when measured alone by the great
number of shares subscribed ; yet care does not appear to be
exercised, to prevent them from falling into the serious errors
of reasoning and practice, that have, unfortunately, too often
characterized the workings of their prototypes, the Benefit
Building Societies. The mode of allotting the funds of the
association differs, but little, from that of the latter insti-
tution, while the principle involved is not identical. There
is one distinction : the Freehold Land Society is expressly
formed to avail itself of wholesale prices in land ; and yet,
under the Building Society Act, it has no authority itself to
purchase estates and divide them ; and it is powerless, unless
a loan can be procured from some external source in sufficient
amount. Hitherto, the movement has been kept up by the
liberality of political supporters, who provide the necessary
funds in each case ; and the rapidity of the extension of
these associations proves how little importance is attached to
the contingency, that, not only will the price of land, in all
probability, rise by this increase in the number of purchasers,
but, in many cases, freehold property will not be obtainable,
at all, in such convenient situations and of such suitable maer-
nitudes, as to meet the object desired.

10. — The Rules, which have come under our notice, con-
tain no definite understanding, as to the 'adjustment of the
duration of the payments of the members, and no real
principle by which, whatever be the time of entry, the profits
can be equitably divided among the shareholders, nor any
sufficient provision, by which a member, who may wish to

* Speech of liord John Russell, 5th June, 1849.

FREEHOLD LAND SOCIETIES. 165

withdraw, may be secured from the k)ss of his right to some
benefit from the past success of the association ; although, in
many of the societies, in addition to the weekly contributions
of Is. Gd., or thereabouts, by which the positive wholesale
cost of the land is to be repaid, an extra payment by way of
interest is now being required from the allottees, varying
from 5h to 6h per cent. Yet the rules do not seem to guard
against an inequality in the advantages that may be obtained
by the members, according as they have their land allotted to
them at once, or after several years, such as ten or twelve, from
the period of commencing their subscriptions; and it is far
from improbable, that the ultimate cost to each member of his
little property will be widely different. This could only be
obviated by the adoption of some more systematic and
tabular scale of subscriptions than is at present in use, so as
to regulate the duration and amount of the payments by a
fixed standard of years and rate of interest, (as in chap, vii.,
part 1,) and by paying strict attention to the importance of
making the association perfectly mutual, so that the profits on
cheap wholesale purchases may go to the general fund, and not
to benefit incidental members to the detriment of their suc-
cessors. The main secret of the prosperity of institutions of
this kind consists in the correct adjustment of the relative
position of each member to the exclusion of every attempt
at favouritism ; and this depends upon a clear understanding
existing between the board of directors and the shareholders.
We fear that it is too rashly stated, that a freehold qualifi-
cation for a county can be obtained at the small and definite
sum of £20. Such promises should rather be limited to a
statement, that while the directors remain responsible man-
agers, all the wholesale property, which is bought, shall be
divided without reservation of profit to those persons who
primarily advanced the money, and that the members of
the association shall have its refusal at cost price. For
whether the cost is to be £20, or to range up to £50, and

166

FREEHOLD LAND SOCIETIES.

(a J even £60, is a matter of vital importance to the success of
the principle. It has happened that at Birmingham several
persons obtained sufficient land to give them a qualification
for so little as £20, but that arose, in all probability, from
accident, and should not be put forward, as it is constantly,
as the standard of the price of future purchases.

1 1. — To the majority of members the pecuniary advantage
will rank above the political privilege, and to them the most
important question will be, what it will practically cost to

[(a) The following figures from M'^ Culloch's "British Empire" are ap-
plicable in reference to the expectations of these Societies. The average
price of land is thirty years' purchase.

Rent per acre in 1842-3, as determined by the Assessments under the
Property and Income Tax Acts : —

England.

£ s. d.

Somerset 1 12 7

Southampton 0 14 11^

Stafford 1 9 1^

Suffolk 13 8

Surrey 0 17

Sussex 0 18

Warwick 1 11

Westmoreland 0 11

Wilts 1 3

AVorcester 1 10 11.^

York ; 1 1 4A

£ s. d.

Bedford

15 5

Berks

1 4 8.1.

Bucks

1 5 3.^

Cambridge

1 8 23

Chester

1 8 7

Cornwall

0 18 21

Cumberland

0 12 4.^

Derby

1 5 8i

0 18 9f

Dorset

0 19 0^

Durham

0 15 4

Essex

1 6 3i

Gloucester

1 7 10

Hereford

1 2 9^

Hertford

1 1 85

Huntingdon

1 6 2k

Kent

16 7^

Lancaster

1 8 11^

Leicester

1 14 lOi

Lincoln

18 0

2 2 11

Monmouth

0 18 3^

Norfolk

1 6 4=1

Northampton 19 1

Northumberland 0 13 llh

Nottingham 1 G 5

Oxford 14 1^

Rutland 1 7 5J

Salop 1-15

0^
4i

Average

1 3 5i

Wales

Anglesea 0 14 lOJ

Brecon 0 5 9

Cardigan 0 7

Carmarthen 0 10

Carnarvon 0 8

Denbigh 0 14

Flint 1 4

Glamorgan 0 10

Merioneth 0 5

Montgomery 0 9

Pembroke 0 11

Radnor 0 7

Average 0 9 Hi

FllEEIIOLD LAND SOCIETIKS.

167

buy such a quantity of land, as will produce, by being leased
out or otherwise, an income of £2 a year, or, what will be
the annual pecuniary profit arisint;- from the purchase. They'
will calculate that, if even £30 be the average price of such an
income, £100 would give 61. I3s. 8d, a year. This alone, over
and above the abstract result of a vote, would be so great an
attraction, as an advantageous investment, that it would be by
far the best the market would afford, more especially with such
excellent security as that of land. In the extreme case, where
the Birmingham Society bought land, wholesale, which only
cost £20 for the £2 a year, the rate per cent, of annual

Leinsteb.

Carlow ,
Dublin,.

£ s. d.
1 0 Ih
1 2

Kihlai-o 0 18 7

KilUoimy 0 15 G

King's 0 14 5

Longford 0 15 8A

Louth 1 7 iT

Meath 1 14 5

Queen's 0 11 11

Westraeath 0 18 0

Wexford 0 18 7

Wicklow 0 12 5

Avenifje 0 17 6

Cultivated 4,092,701 acres.

Mountain and Bog 731,880 „

MUNSTER.

Clare 0 9 3

Cork 0 13 1

Kerry 0 7 2]

Limerick 1 3 5.^

Tippcrary 0 19 lOi

Waterford , 0 15 2A

Averat/e 0 14 0

Cultivated 4,019,721 acres.

Mountain, &c. ..*.... 1,893,477 „

Ireland. — 1846.

Ulster.

£ s. d.

Antrim 0 18 4i

Armagh 1 0 9i

Cavan 0 14 8^

Donegal 0 5 1§

Down 0 19 ll.i

Fermanagh 0 11 \\

Londonderry..., 0 11 GJ

Monaghan 0 17 3^

Tyrone 0 9 GJ

Awrage 0 12 10

Cultivated 3,490,112 acres.

Mountain 1,704,370 „

CONNAUGHT.

Gahvay 0 8 3i|

Leitrim 0 8 9

Mayo 0 0 1§

Roscommon 0 13 4

Sligo 0 11 4

Aveviuje, 0 8 8^

Cultivated 2,273,177 acres.

Momitain 1,900,002 „

TOIAL,

Acres.

Cultivated 13,881,711

Uncultivated 0,295,735

£ s. d.

Average Rent 0 13 5}

Average of Cultivated.. 0 19 3

168 FREEHOLD LAND SOCIETIES.

profit was a perpetual income of £10 a year. The improba-
bility of such good fortune recvirring ought to be sufficient
to rouse the industrious classes into making further enquiry
into the practicability of these new candidates for popularity.
The more so, when the member is required to pay for
this enormous advantage by such easy instalments as 3s. or
4,5. a fortnight for five or six years. If the principle be
good, when abstractedly considered, it is unnecessary and
unwise to expose it to suspicion.

12. — Again, when the land is purchased, it will be utterly
useless, in a pecuniary sense, to its owner, vmless four or five
can join together to let their fractions of territory to one
tenant, or unless the purchaser contemplates building thereon
for his own purposes. A mechanic in a manufacturing town
cannot make any use himself of his land.* He is ignorant
of its management, and can only make a profit from his pur-
chase by letting it to others ; and, even then, the expense of
employing an agent, with tlie uncertainty of collecting his
small rent regularly, would diminish the advantage of his
purchase.'}- Hence, it appears probable, that much discontent
will shortly arise among the poorer members of these societies,
who have entered under the impression, that, in addition to
the influence to be acquired by the possession of a county vote,
they would be making a highly lucrative profit from their

* [The remarks in chap. 3, of this part, will suggest to the reader how
serviceable Freehold Land Societies might be made in the establishment of
Suburban villages, and in the furtherance of what is now denominated
" Home Colonization," or the reclaiming of the extensive uncultivated, but
excellent, waste lands in the United Kingdom ]

f [With the existing law there is much uncertainty always attending the
investigation of titles and conveyance of landed property, and considerable
expense, which does not decrease in proportion to the diminution in the value
of the allotment. The uncertainty, on the one hand, migjit, perhaps, be
removed by a system of Title Guarantee Assurance, which, if adopted by
the societies collectively, could bo effected at a moderate premium ; and, on
the other, the expenses should, like the pi-ofits, come from the general fund
of each association, in such a manner, however, that the allottees should pay
the greater part tliereof.j

FREEHOLD LAND SOCIETIES. 169

savings. The comparatively rich member, who can take up
six or seven shares or more, will reap benefit not only from
the greater certainty of being able to turn his land to account,
but, also, from the increase in the general profits of the
association, that nuist accrue through the forfeited shares of
those members, whose means of existence are too precarious
to enable them to be regular in their payments.

13. — In the establishment of Freehold Land Societies their
political object has been considered essentially before the
question of their capabilities as an advantageous investment
for money to the industrious classes ; hence, it may fairly be
expected that, as soon as the political excitement, by which
they are now supported, has subsided, the directors and
others will cease to be so ready to incur the risk of themselves
purchasing wholesale tracts of land, for a re-sale of which, to
the members, by the strict letter of the Benefit Building
Society's Act, they can have no security whatever ; and any
attempt to mix up the pecuniary operations of the society,
with their own voluntary engagements, will not fail to expose
the association to litigation, expenses, and loss.

14-. — To provide against these difficulties, as ftir as may be
practicable, the operations of a freehold land society should
be made more analogous to those of the permanent benefit
building society, for which chap, vii., part 1, contains a draft
set of rules ; so that the monetary payments, or contributions,
may be for fixed periods independent of the duration of the
institution, and its scope may be extended by rendering
it, as the point of greatest importance, safe and attractive to
pure Investers, or members who may not care for allotments,
and also to others, who may, perhaps, by a change of mind,
contemplate buying a house for their occupancy, from which
a vote, though not for the county, would be afforded. The
subscriptions would, thus, increase so rapidly as to render the
purchase of wholesale land feasible even out of the funds of the
association ; and the legal objection to an aggregate purchase,

170 FREEHOLD LAND SOCIETIES.

on hehalf of the society, would disappear on the requisite
number of members declaring themselves candidates for an
advance of money on security of an allotment of the land to
be purchased. To this might be adapted still greater ex-
tension by the establishment of Endowment Funds for young
people, for which rates of weekly or monthly subscriptions
might be so graduated, according to age at entry, independent
of any law of mortality, that, on attaining the age of twenty-
one they should come into a freehold qualification. The money
could be received, by a similar machinery to that of the
Savings' Banks, in small sums from pennies upwards, according
to the means of the parents, or, even of the children or
youths themselves contributing.

15. — In other words. Freehold Land Societies must be
modified, so as to give to them more of the character of
Investment Associations for non-borrowers, and the advances
of money should not be limited to the procuring of the mere
land, but might be extended with advantage to aflbrding to
the new proprietor the means of stocking and improving his
freehold, so as to render it reproductive and fit for occupation.
Were such a modification introduced, and some satisfactory
and equitable principle adopted in the distribution of profits
among the members, which, to judge by their recent dis-
cussions, is not the case, then a Freehold Land and Investment
Society would constitute one of the best mediums for indus-
trial savings that this country could present ; and they would
flourish, long after their fictitious popularity, as political
instruments, had ceased. The draft rules in part 1 would be
perfectly suitable to a freehold land society, if the investing
shares were made £25, the payments weekly or fortnightly,
and the repayments upon advances calculated at about 5 per
cent, interest.

16. — Respecting the increase in the suffrage, we may
remark, that the creation of county votes by the purchase of
¥)s. freeholds, is applicable to England and Wales alone ;

FIIKEIIOLD LAND SOCIETIES.

171

tliougli the principle of co-operation employed might be
easily adapted to Scotland or Ireland.

The following is an analysis, according to their various
classes, of the County qualification, extracted from the
Parliamentary Return, 23rd July, 1847 : —

a> 2 °

B -s a

^ -^i ^ r

172 FREEHOLD LAND SOCIETIES.

* Of these 512,376 electors, many were inhabitants of large
towns, and imbued with various shades of popular opinion,
and many in the agricultural districts independent of the
influence of landlords. Against this must be placed upwards
of 108,795 tenants-at-will, who, in consequence, as a class,
have no choice in the expression of a political opinion.
The desire of the promoters of the new movement is, of
course, to counterbalance this large influence by the creation
of a number of small freehold voters equal to that of the
tenant voters, especially by exertions in those localities where
the numbers are not so disproportionate but that the balance
may be turned.

17. — The fact should, nevertheless, not be overlooked, that
although the mere purchase of such freehold j)roperty on
moderate terms may be feasible, yet that the qualification for
the franchise obtained is, in reality, for several years, fictitious,
inasmuch as, until the cessation of his payments, the member
of the Freehold Land Society has not a bona fide interest to
the extent of 40^. in the land, and is not, in law, entitled to
vote. And the mere circumstance of his seeking to become
the proprietor of a perpetual income of 40^. from the land,
which he is purchasing, is evidence that the annual pay-
ments during the term of his membership must far exceed
that sum.

* [A more recent return is published, entitled " An Abstract of the
Numbers of Parliamentary Electors in Great Britain and Ireland, according
to the Registrations of 1848-9 and 1849-50." We learn from it that the
total number of electors on the register for 1849-50 is 1,050,187. For the
cities and boroughs, 471,502. For the counties, 578,085. The numbers last
year were 1,041,203. For the cities and boroughs, 451,534. For the counties,
589,669. This shows a gain in the cities and boroughs of 19,968 and a loss
in the counties of 10,984; making the increase in the whole constituency,
8,187. The County constituency in England in 1848-9 was less than in 1847,
and numbered 466,060 votes. This year the number is only 461,413, or 4,060
votes less than last year; so that nearly one-half of the total loss in the
counties is in England where the system of Forty-shilling Freeholds prevails.
The Forty-shilling Franchise does not apply to Ireland or Scotland.]

CHAPTER ir.

DESCRIPTION OF THE TONTINE PRINCIPLE

AND ITS

APPLICATION TO ASSOCIATIONS FOR LAND INVESTxMENT.

Art. 18. — We will now proceed to describe, briefly, the
mode of speculation commonly called the Tontine, and to
examine both its present application and its further extension
to the purchase of property. The constitution of a Tontine
Company difl^ers from the plans considered in preceding
chapters, as, instead of each and every member reaping an
equal benefit from the association, the ultimate main ad-
vantages of a Tontine, whether in the acquirement of a
large capital or other property, are obtainable only by one
member, or by that limited number of individuals, out of a
large body, who may prove to be endowed with extreme
longevity.

19. — A few words respecting the origin of the principle,
and the tone of the public mind at that time, may not be
uninteresting.

In the year 1644, a Neapolitan, named Lorenzo Tonti,
came to Paris, and, during a scarcity of money which then
prevailed, proposed the formation of a kind of Life Rents
or Annuities, which subsequently were designated, after him.
Tontines, although the principle itself was in operation in
Italy before his time. The Tontines, so proposed, differed
from the afterwards ordinary popular lotteries in the con-
tingency of the increasing, and maximum, advantage being
deferred for many years, with the assurance only of a
moderate profit beforehand, beginning at a definite rate.
After tedious disputes in regard to his original proposal,
which was at length rejected for a time, he substituted, in its

174 DESCRIPTION OF THE TONTINE PRINCIPLE AND ITS

stead, a new plan for a large Blanque or Lottery, which, in
1656, obtained the rojal approbation.* It was to consist of
50,000 tickets, each at two Louis d'Ors, so that the whole
receipts would amount to 1,100,000 Livres (the Louis d'Or
at that time being only eleven Livres) ; from this sum 540,000
Livres were to be deducted for building a stone bridge and
an aqueduct. The expenses of the Blanque were estimated at
60,000 Livres, and the remaining 500,000 Livres were to be
divided into prizes, the highest of which was 30,000 Livres.
This lottery was never carried out. After some delays, by
which the matter was retarded until after the peace in 1660,
a Lottery was finally opened, and the tickets, at a cost of one
louis d'or, were drawn publicly under the inspection of the
police. The highest prize was 100,000 Livres, and was won
by King Louis XIV. himself, who objected to receive it, and
left it to the next Lottery, in which he had no ticket. Several
other lotteries followed to such an extent, that, in the year
1661, it was ordered that all private lotteries should be for-
bidden under severe penalties, and this prohibition was re-
peated in 1670, 1681, 1687, and 1700. Since that time no
other pure money lotteries have been allowed, but the
" Loteries Roy ales," the profits of which were, in general,
nominally, applied to pi.blic buildings, as was the case in
regard to the magnificent Church of St. Sulpice in Paris.

20. — The first actual Tontine upon Lives was created in
the month of December, 1689, and was practically an
Annuity association. It was divided into 14 classes of an
annual revenue, in all, of 1,400,000 Livres. The Shares
were 300 livres a-piece, and the proprietors, without regard
to sex, were to receive a yearly dividend, commencing at 10
per cent., with benefit of survivorship by way of increased
income in each class. The first class contained children under
5 years of age ; the second was composed of others between

* [See aiv interesting;- account of Lotteries and Toritincs in the History of
Inventions by Professor Beckmann of Gotlin;^;f>n J

APPLICATION TO ASSOCIATIONS FOR LAND INVESTMENT. ITo

5 and 10; the third from 10 to 15; and so on for the other
classes.

This Tontine was very imperfectly filled up; for, into the
first class, there entered only 202 members, and equally few
persons into the others ; yet many other French Tontines
wei-e formed, subsequently, in 1696, 1709, 1733, 1744.

In the year 1726, the French King united the 13th class
of the first Tontine, with the 14th of the second, all the
shares of which were possessed by one person, Charlotte
Bonnemay, the widow of Louis Barbier, a Surgeon of Paris,
who died at the age of 96 : this lady had ventured a stake of
300 Livres in each Tontine, and, in the last year of her life,
she had for her annuity 73,500 livres, or nearly £3,600
a year for about £30.

~1. — The last State Tontine in France was in 1759 ; after
which an impression arose, very justly, that, as the lives did
not die off so speedily as was expected, the rate of annuity
allowed, in redemption of the capital subscribed, with interest
thereon, was very onerous; hence, in 1763, the Council of
State decided, that this sort of financial resource for the
creation of capital for governmental purposes should not again
be resorted to.

22. — In England and Ireland, as well as in France, various
Tontines were established in the last and present century,
some of which are still in existence. The object, originally,
in France, was (as we have seen) to raise large svuias of money,
as a species of loan, to be repaid, principal and interest, by
periodic dividends, which were to continue until the death of
all the lives, the whole existence of which represented the
duration of the loan. Such was the case where Tontines
were created for the benefit of the state, when they were
divided into classes, according to the respective ages of the
members. The whole periodic income of each class was
divided among the survivors of that class, vnitil, at last, it fell
to one, and, upon tlie extinction of that life, reverted to the

ITC) DESCRIPTION OF THE TONTINE PHINCIPLE AND ITS

power by which the Redemption Ton due was created, and for
which it became security for the due payment of the annuities.
In this kingdom, however, the system has rarely been adopted
as a measure of finance, and the speculation has generally been
of a private character, to effect some commercial enterprise ;
in which latter case the whole capital invested, or the result
thereof, whether property purchased or otherwise, fell to the
lot of the last survivor. The lives, previously existing, having
participated in the increasing dividends of the comj)any.

23. — Of the State Tontines in England and elsewhere we
have authentic records and *statistical details, deduced to a
comparatively modern date. The last was opened in 1789,
which was to consist of about 10,000 shares of £100 each,
and the benefit of survivorship on which shares W'as pro-
mised to the subscribers. But only 3,518 lives were put
in by that body, the other contributors having soon afterwards
preferred a long annuity to the tontine. To keep faith with
those who held to the original contract, the Treasury was
obliged to take the remaining shares, and to appoint a nominee
for each, who were thence called " Government nominees^
They were chosen as follows : — the" class under twenty con-
sisted of the children of the nobility and gentry whose names,
age, parents, and resi<lence were returned by the clergy of
the several parishes ; the other elder classes consisted of
well known freeholders of property, persons assured in the
Amicable Life Office, and so on.

Among the 22,352 nominees altogether registered by Mr.
Finlaison, there was only one instance of a person passing the
age of 98; an old lady at Wimbledon, who lived to be 100 years
old, and who, as it chanced, was in the first Tontine of 1693.
On this point, he remarks, that when, in statistical statements,
many instances arc set down of old people passing their 100th

* 1. Report to the Lords Commissioners of H. M. Treasury, by John Fin-
laison, Esq., of the National Debt Office. 31 March, 1829.

2. W. Kci'sseboom on the Life Annuitants in Holhind. 1748.

APPLICATION TO ASSOCIATIONS FOR LAND INVESTMENT. 177

year, and sonic dying- at much more advanced periods, there
is reason to suspect very great error, from the well known
propensity of octogenarians, and the impatience of their
relatives, to exaggerate their age, and to persist in the same
story, until, by the decay of their faculties, they believe it
themselves.

The ^following facts are interesting : —

1. Of the 1002 nominees in the English Tontines of 1G93,
the last died in 1789.

2. Of the 2552 lives in the Exchequer annuities granted
1745, 174G, 1757, and a few in 1766, 1778, and 1779, 156
still survived at January 1826.

3. Of the 3557 nominees in the 3 Irish Tontines begun in
1773, 1775,and 1778, respectively, 1564 survived January 1826.

4. Of the 3518 nominees of contributors in the Great
English Tontine in 1789, 2203 survived January 1826.

5. Of the 4831 nominated (by lot) by Government in the
Tontine of 1789, 3008 survived the same date, 1826.

24. — Tontines are separated into simple and compound :
the Simple are those in which the dividends of the shave-
holders, who have died before a period of participation, are
distributed among the surviving members of their class ;
Compound Tontines are those, where a portion, only, of the
dividends belonging to the lapsed shares is carried to the sur-
vivors ; the remainder ceasing with the death. An example
of this is afforded by the french Tontine of 1734, in which
one-fourth of the periodic dividend on each share ceased with
the death of its possessor. In subsequent Tontines, other
varieties existed, where even half, and more, of the dividend
lapsed with the life, a portion of that, which had accrued
before a death, being presented to the families of the de-
ceased as a slight alleviation of their pecuniary loss. In the

* [III each case the lives selected were pi-incipally chiUlren, and iiiori'
especially girls, although some few contributors nominated lives oven of
advanced age, up to 50 and GO.j

178 DESCRIPTION OF THR TONTINE PRINCIPLE AND ITS

celebrated tables of *Deparcieux, calculations have been
given of the duration of life among the Tontine members of
his time. They tend to show how little the desire to nomi-
nate select lives availed the speculators of that period.

25. — Since that epoch, France has become noted for the
extraordinary popularity of the Temporary Tontines usually
denominated " Banques de Prevoyance," which have been
established in Paris and the leading provincial towns ; the
term of the Tontine being short, and divided generally into
cycles of 5, 10, 15, and 20 years. The members, on entry,
pay for each share or policy a sum down, varying with their
age, to be invested in public or real securities ; and they
speculate upon the chance of their receiving as one of the
survivors, at the close of the cycle into which they have
entered, a large return for the money subscribed, consisting
not only of the accumulations from interest upon their own
shares, but of a portion arising from the death of less fortu-
nate members. Many men, especially of the military pro-
fession, who had, perhaps, no relations to whom they were
particularly attached, on receiving prize money for their
services, placed it in a temporary Tontine. They felt in-
different to the chance of loss, should they die before the end
of its term, by the fortune of war, or by the ordinary law of
mortality, and were willing to stake that risk against the more
agreeable prospect of reaping a magnificent profit from the
popular speculation. fFrom the returns of 18 of the leading
societies we find that, even at the present time, they are con-
sidered so attractive, that, at the close of the year 1849
395,446 Policies were in force, involving shares subscribed to
the enormous extent of £15,957,444 \2s. (or 398,9.36,114
francs) which had been purchased at a cost, proportioned to
the age, of £4,988,252 5s. 6d. (or 124,706,307 francs),
each share or policy entitling the possessor, if he survive his

* Essai sur les Probabilites de la duree de la vie humaine, 174G.
•j- Revue des Assurances. J. Dubroca, 1850.

APPLICATION TO ASSOCIATIONS FOR LAND INVESTMENT. 17fi

particular cycle, not only to receive its amount,, but also to
participate in a proportionate part of the other accumulations
arising from death. The aggregate capital is stated to pro-
duce, annually, an average income of £230,591 4*. lOd.
(or 5,764,781 francs), merely from being invested.

Of these ' Associations Tontinieres,' one of the most flourish-
ing appears to be " La Caisse Paternelle," which numbers
57,276 Policies or shares in existence, to the extent of
£3,107,792 8s. (or 77,694.810 francs).

Another, ' La Prevoyance, cree par ordonnance royale du
28 Avril, 1820,' in its printed returns of 1848, stated that
shares amounting to 70 millions of francs were subscribed for,
at a cost of 31 millions of francs paid in. A cycle having
been recently completed, M. Dubroca gives the amount of
its engagements, on the 31st December, 1849, at 58 millions
of francs, nearly.

The following are illustrations of the profit lately divided
(ages not given) by " La Prevoyance" : —

A.B.

Governess.. .1831

paid in..

Francs.
,. 200 for.,

•• 5,

yrs., & then
received.

Francs,
■ 1448

CD.

}}

Brewer 1828

.. 100 „ .

..10

}}

,. 590

E.F.

))

Priest 1837

,. 6000 „ ..

,. 5

}}

.. 0064

G.II.

Councillor ) , qo ■
of State. ^ ^^--^

„ '

..10000 „ .

..20

..39213

IJ.

Captain of) ,qqi
Artillery. 5 ^^"^^

.. 500 „ .

..15

,. 2071

The professions suggest the probable ages of the parties,
and shew that the investment has been highly lucrative, more
especially if we remember (Art. 32., Part 1.) the time it
usually takes for money even to double itself. Many causes
have tended, in France, to make the result of their Tempo-
rary Tontines very profitable to the survivors ; the principal
were, undoubtedly, the increased rate of mortality in that
country for 30, out of the last 60, years, through revolutions,
war, and other contingencies, and the high rate of interest
which, during that time, could be obtained for money.

26. — The older form of Tontines has lately been revived in

180 DESCRIPTION OF THE TONTINE PRINCIPLE AND ITS

England with various modifications. New societies have
sprung up, stimulated by the very great profits that have
been reaped by surviving members of old associations, and
principally designed by their promoters for the disposal of
freehold or long leasehold property, for which a single pur-
chaser, of sufficient means, could not be found. The object
is, consequently, to procure the necessary capital for the
purchase of the estate, by creating a large number of Shares,
of small amount, among which the net rental may be peri-
odically divided. The duration of each proprietor's interest
in his share, or shares, is thus made to depend upon the
existence of some life, nominated by himself, of an age to be
selected within given limits.

27. — In some Tontines, the minimum age is 10 or 15; in
others it ranges up to 50 or 60, and even 80 ; sometimes the
mention of any limit is omitted, in which case discretion is
left to the shareholders to nominate young lives, at such ages
as appear to them, or which experience has shewn, to give
the longest expectation of life. With the falling of the life
of the nominee, the share becomes cancelled in the ordinary
way, and the income of the Tontine is divided among the
survivors ; year by year the number becomes smaller, and the
dividends greater ; *until the last life, unless it has been other-
wise provided, comes into the whole of the property. The
application of the Perpetuity Tontine system to land, or, rather,
of Land investments to Tontines, obviously requires great
caution. Apiece of land is bought at a cost absorbing the greater
part of the fund, which is formed by the subscriptions of the
members ; and, if necessary, according as the situation is
urban or rural, it is built over with houses, or converted into
farms, and let upon lease ; the rents received forming the
income of the society. The chief point, therefore, in this,
as in all land investments, is, whether the estate proposed

* [That constitutes the difference between a State, or Rcdoniptictn, and a
Private 'J'ontino.]

APPLICATION TO ASSOCIATIONS FOR LAND INVESTMENT. 181

is capable, from its situation or its nature, of being let at the
required rent ; as it occasionally has happened, that societies
of this kind have been " got up" by the owners of land, for
the express purpose of ridding themselves of unproductive
property.

28. — The principle of a Tontine is, in its essence, a de-
cided sj)eculation, but of a kind that may be made most
beneficial. There exists no moral objection to the union of
individuals, who are willing to risk small sums in the hope of
augmenting their fortunes, without the customary efforts of
labour, intelligence, or skill, but by the lucky selection of
healthy and lasting lives. In one case only, can such an
association be open to censure, as involving a species of danger-
ous gambling, viz : — where the shareholders nominate other
lives than their own. *"When, however, they speculate wholly
for the benefit of the life nominated, the application of the
principle is excellent. It becomes, in reality, a game, in
which the stakes are laid, as to which of the players is likely
to live the longest. The person, who collects the money and
undertakes to pay the dividends, being regarded in the light
of the banker to the game, and as one who is the responsible
agent for investing the funds confided to him. So that,
while reaping a per centage for himself, he holds an account
with the players, as to the profits of the speculation, and
hands over to them, at the end of each year, or other fixed
period, the proceeds of their capital, which may be considered
as interest realized since the last day of settling. In the
majority of games of chance, the main advantage is to the
banker, the loss to the players, who, in the excitement of
gambling, are exposed to lose, even, the very means of their
existence. In a Tontine, where tlie shareholders nominate
their own lives, or the nominees are the parties pecuniarily

* Hamilton, in his History of tho Public Revenue, remarks that Tontines
seem adapted to the passions of human nature, from tho hope every man
entertains of lonj^evity, and the desire of ease and affluence in old age.

182 DESCRIPTION OF THE TC/NTINE PRINCIPLE AND ITS

interested, the speculation affords to them an increasing in-
come, and the money involved is continuously reproductive.

29. — The existing Tontine Companies present little variety
in tlieir object. We have said that they are mainly designed
to purchase large freehold estates, w^hich are considered pecu-
liarly suited, Ly nature and position, for some important
commercial enterprise ; leasehold tenures being usually re-
jected, from their limited character. When a particular
estate has been selected by the promoters, in the conviction
that, by improvement thereon, it can be made productive of
considerable profit, they proceed to form a Joint Stock Com-
pany, under the provisions of the Acts of Parliament relating
to such associations (7 and 8 Vic. c. 110 and 111 ; 8 and 9
Vic. c. 116 ; 10 and 11 Vic. c. 107.), with a license to pur-
chase or hold land, which is to be obtained from the Privy
Council for Trade. The capital of the Company, for
example, say £100,000, is divided into 1000 shares of £100
each, to be held upon lives, of ages within selected limits.
The Shareholders may nominate different lives for each share,
or exercise their own discretion in concentrating their stakes
upon a single life. At the end of 3 or 5 years, and at fixed
intervals afterwards (the Company being in full operation),
the rents from the houses upon the estate, or the profits from
the commercial enterprise, whatever it be, after payment of
expenses, are divided.

30. — To persons who are desirous of speculating, with,
perhaps, less apparent pecuniary advcintage, though, in the
long run, greater security, the best Tontines are those in
which the capital is invested in the purchase of well-situated
Agricultural Freeholds, or in Government Stock and other
public securities, and not in associations created for effecting
building operations, which are conceived under the idea of
the growing importance of the locality contemplated for
investment. To those, however, who prefer the greater
attraction of larger annual returns, such as are offered by
the latter speculation, we would recommend the introduction

APPLICATION TO ASSOCIATIONS FOR LAND INVESTMENT. 183

into the Deed of Settlement of their company of a special
clause to secure compensation to the holders of those shares,
the life nominees of which may die about the time that the
company has experienced a loss, through the falling off of its
rents, or other source of income, which, in investments on
such security, must, from time to time, be expected. The
object of the clause would be to guarantee to the proprietor
of a share, that has lapsed by death at such a period, a pro-
portionate part of the profits that may subsequently be
obtained through a prosperous reaction in the company.
For example : — suppose that in a Tontine, of which the rent
income is about £5000 a year, and the periods of division
are quinquennial, there occur, for two or three years, a
failure in its receipts, so that, instead of there being a sum of
£25,000 upwards to divide among the survivors at the next
division, there be only £10,000 or £15,000. Then, if the
original intention were to confine the speculation to the
chance of survivorship, and not to affect it by any fluctuation
in the proceeds of the property, it is clear that the share-
holders, whose life-nominees die anterior to a revival of pro-
perty at a subsequent division, should receive some com-
pensation for their loss. The mathematical principle of such
a clause is interesting, and should be taken as the basis
thereof.

31. — In most of the cases of the present application of the
Tontine system in this country, it is customary to select a
limit of minimum age for nominees, and then leave it to the
option of the shareholder to nominate a life of equal or
higher age, as he may think fit, when the limiting age is
young. The establishment of any Tontine would be facili-
tated if a reduction in the cost of each share were made, in
case of a life, several years older, being nominated ; since it
must be extremely difficult, in an extensive Tontine, for the
members to find a sufficient number of select lives of the
lowest specified age ; and each would be unwilling to risk his

181< DESCRIPTIOK OF THE TONTINE PRINCIPLE AND ITS

cliance vipon the expected longevity of an older life. A
diminution might safely be permitted, in the sum paid for the
purchase of a share, provided it be proportionate to the
diminished expectation of life of the nominee, and calculated
b}^ a sound table of mortality, with a margin in favour of the
general fund. The said share, nevertheless, to convey to the
purchaser a right to equal privileges v^ith any other share.

32. — The speculation becomes much more interesting when
the periods of the divisions of profits are at wide intervals 5
the effect of mortality at the end of periods of 5 or 10 years
becomes sensible, and the accumulated income to be divided
increases the attraction of the investment.

Referring to the *table at the end of this work, we find that,
supposing the age at entry to be 15, the lives to consist of
1000 males, and the periods of division of profits to be quinquen-
nial, the survivors of each period receive a rapid increase
in their income. Suppose, as in a preceding example, that
the shares be £100, and the annual returns of profit arising
from the £100,000 invested be £5000, which, re-invested dur-
ing the quinquennial period, would, at 5 per cent.,' produce
£27,628, there would remain, after setting aside, say, £2,628 for
expenses, &c., £25,000 to be divided. Then, if deaths occur
in a ratio such as that of the mortality table referred to, there
would be, to partake of it, at the end of 5 years, or at age 20,
963 members; or the dividend would be

£25 18^. lOd., nearly.
At the end of 10 yrs., or at age 25 ,,

Dividend £27 Os. 10c?., nearly.

„ 35 „ „ age 50 „

Dividend £36 Ws 6d., nearly.

„ 45 „ „ age 60 „

Dividend £46 0^. Od. nearly.

55 „ „ age 70 „

Dividend £73 2^. 0^/. nearlv

924 members

676

544

342

* English Life Tabic, 5th Report of the Registrar General.

APPLICATION TO ASSOCIATIONS FOR LAND INVESTMENT. 185

And so on, up to age 90, when the number, still existing, would
be about 14 or 15, and the dividend per share £1756 16s. 3d.,
or about 17^ times the original sum paid. At 95 there
would be, probably, but 2 alive to partake of the £25,000
dividend, and a few months longer would transfer the £100,000,
or the property which represents it, to the last survivor, for
his heirs for ever. (See also Section 4, Appendix).

33. — Moreover, when the intervals are distant, the applica-
tion of Life Assurance may serve to protect the parties interested
in those lives, that fail in the intervals between two successive
divisions, from losing, altogether, their expected share of the
profits. That is to say, it may, after a few years, suit
their views to diminish the excitement of the speculation, by
taking out a temporary policy on the life of the nominee, on
the same principle which is so generally adopted by policy
holders in the Equitable Life Office, who, at each approaching
recurrence of the periods of the decennial divisions of profit
in that society, effect temporary assurances on the lives in-
volved, in order to guard, by a trifling outlay, against the
total loss of the large Bonus which is usually declared. This
expense, however, would, probably, not be entered into,
until the Tontine had been some time in existence, and unless
the lives selected had been originally young. We have met
with recent prospectuses of Tontines on Building property,
where it is proposed to arrange with a Life Office, that, out
of the income of the company, from the very beginning
(after a dividend at 5 per cent, has been set aside for the
shareholders), premiums should be paid for assuring the
return, on the death of each nominee, of the original sum itself,
invested in the purchase of the share. This undertaking, if
actually carried out, must, in effect, withdraw from surviving
members the great profits, which are expected as likely to
accrue from deaths. A simple calculation, founded on the tables
of any Life Office, would shew that such a system of assurance
would, as might naturally be anticipated, reduce the Tontine

186 DESCRIPTION OF THE TONTINE PRINCIPLE.

(the very essence of wliicli is, that it is a speculation on the
longevity of lives), to a mere investment association, in which
the capital of each member is only to be engaged to produce
a moderate rate of interest, as long as he, or his nominee, is
alive. Life Assurance can be properly and advantageously
adopted, when the Tontine has been a long time in operation,
and the nominee has survived several years of the company's
existence, or when the rate of profits upon each share
has become so large as to make it worth a member's while
to sacrifice a sinall portion to assure against the chance of
total loss by death.* Such an assurance should, nevertheless,
be left optional to the party concerned, and not be made a
feature of attraction, put forth by the company itself.

34. — One of our motives for thus entering upon the
question of Tontines, is to suggest, to the consideration of our
readers, the excellent application that may be made of the
principle to the furtherance of Home Colonization and
Systematic Emigration, by creating a capital, of which free
use can be made without its being exposed to be withdrawn,
or to be required for very many years ; and we shall return
to tlie subject in the 5th Chapter of this part of the Treatise.

* [It has been suggested, that a plan of increasing Policies of Assurance,
or of returning a larger proportion of the cost of each share, might form part
of the features of a Tontine company ; the increase being regulated by the
number of periods of division that the deceased nominee has survived.
This, to our mind, would neutralize the benefits of a Tontine, both for the
reason adduced in Art. 30, and from the possibility of fluctuations in the
epochs of moi'tality of the nominees. The following remarks of Mr. Finlaison
are judicious, and bear upon such application of Life Assurance: ■ — "When
the number of lives in a society, tontine or community, are not very consider-
able, aberrations will happen. From a series of sickly seasons, with, it may
be, a prevailing malady affecting more severely some particular stage of
existence than some other, the deaths may occasionally be in clusters, all signs
of which would have disappeared or become submerged in an observation on
greater numbers and over a greater length of time ; vice versa, it may chance
that for some years, in early hfe more especially, during a course of healthy
seasons the mortality runs so low as to bo quite incredible, as a measure of the
rate happening to larger masses through a greater variety of years."]

CHAPTER III.

Section I.~BUILDING COMPANIES AND SUBURBAN VILLAGE
ASSOCIATIONS ; THEIR NATURE AND OBJECT.

II.— REMARKS ON THE RURAL DISTRICTS.

III.— THE NECESSITY FOR HOME COLONIZATION OR
SYSTEMATIC EMIGRATION.

Section I.

Art. 35. — At the commencement of Benefit Buildinsr or
Freehold Land Societies, such as we have described in pre-
ceding chapters, a notable difficulty has been found to exist,
in the absence of sufficient capital, through the slow and
gradual mode by which the funds are collected, and of proper
legal authority, whereby the erection or purchase of houses and
land may be effected, upon a wholesale principle, and a profit
may at once be secured to individuals in their part of the
same. The advantages of aggregate purchases, or of building
operations upon a large scale, are, however, so important, that
the promoters of many institutions, with such an object, have
found it desirable to forego the privileges of the Act of Par-
liament relating to the Benefit Building Societies, and have
sought a legal constitution under the provisions of the Acts
for Joint Stock Companies, referred to in a preceding page.
In the place, therefore, of the Investors' su^bscriptions of a
provident association, they have adopted the plan of the
Capital-Stock of a company, and have combined therewith,
in respect to the reproductive use of the money, the facilities
of Advance-repayments afforded by Building Societies.

188 BUILDING COMPANIES AND SUBURBAN VILLAGE

36. — Building Companies and Suburban Village Associations
have thus been formed with a capital, that serves to purchase
land wholesale, and to erect a large number of buildings upon
it, which, when finished, are transferred to purchasing-tenants,
under security of a mortgage, for a specified term of years ;
the payments of the tenants, during that time, being monthly
or quarterly, and calculated so as both to afford a liberal rate
of interest on the capital invested, and to purchase the house
from the company. Referring to the set of Rules given in
Part 1, for the purpose of illustrating our meaning, instead
of the plan adopted in clause 108, page 96, the proprietary
capital is fixed at a nominal sum, from £100,000 to £250,000,
divided into shares of £5 or £10 each, to be paid up in 2 or
3 instalments, within a short time ; upon these shares, peri-
odical dividends are declared at 4 or 5 per cent., or at such
other rate as may be realized out of the profits upon the
advance-repayments, which are received from the purchasers
of the houses built by the company, and are calculated in the
same way as Table 2, Art. 110, in the Rules above referred
to ; with this difference, that, instead of the money being
advanced in cash to the tenant to enable him to erect or
purchase for himself, the whole transaction is conducted
under the superintendence of the Directors of the company ;
and the purchase-repayments are regulated by a table ac-
cording to the wholesale cost, which is generally so moderate
as to allow of a fair margin of profit in favour of the Stock-
holders, whose capital has thus been made use of. The ad-
ministrative provisions of the Company's Deed of Settlement
differ but little from the clauses in Benefit Building Society
Rules, but the legal position of the proprietor is essentially
dilferent. Under the existing law of partnership, to which
some modification is confidently anticipated ere long, the
liability of a Shareholder in a Joint Stock Company is not
subject to any limit, as regards the public with whom the
company has trading operations, but only in respect to his co-

associations; their nature and object. 189

partners in tlie concern. Hence, building companies have
advanced but slowly in public favour ; although the actual
amount of risk is very small, when the operations of the
association are directed to the extension of rising towns, by
building in the suburbs or other improving localities, or to
the establishment of habitations upon new and desirable sites,
to which the tastes of the affluent or the necessities of the
industrious have directed public attention. For this latter
case. Building Companies, under the name of Suburban Village
Associations, have been mainly designed, and they have met
with the sympathy and support of all who are interested in
the welfare of the poorer inhabitants of our crowded cities.

37. — In this country there is an element which, indepen-
dent of the attractiveness of a good investment, and despite
apparent partnership liability, may be relied upon, in
carrying out plans designed for the improvement of the
condition of the industrious classes. This element is a feel-
ing of benevolence, mingled with a sense of the duty, which
devolves upon the possessors of larger property, to protect
and succour those who are placed beneath them, perhaps, in
position and fortune, but through whose agency a great por-
tion of their own wealth is created. This duty is felt to be
the more stringent, because it is almost impossible for the
poor to do anything, themselves, towards bettering their con-
dition in respect to their dwellings.

38. — Were this feeling wanting, it is considered that
parishes and unions might do much towards improving the
condition of mechanics and rural labourers, with their fami-
lies, by taking the matter into their own hands, and by erect-
ing comfortable dwellings, as Suburban Villages, to be let at
a rent that would merely repay the cost ; not, perhaps, indis-
criminately to any one, but to those who, by their general
good character, should seem most entitled to a preference.
There is arising an opinion, that with such a system carried
to some extent, there would be less occasion for Workhouses

190 BUILDING COMPANIES AND SUBURBAN VILLAGE

upon their present scale, and the morals of the lower orders
would he greatly improved. The difficulty in the way of
improving the dwellings of the labouring classes, whether in
town or in the country, lies in a small compass, as it is
purely a financial one ; and there is nothing to be done,
but what every one must perceive to be necessary, and what
any ordinary builder can execute.

39. — Of the necessity of measures for the accomplishment,
in a systematic manner, of the object aimed at by associations
of the nature of those referred to in this chapter, the public
mind has been sufficiently convinced by the disclosures lately
made concerning the condition of the metropolis. The
recent metropolitan improvements, considered in conjunction
with the data furnished b}' the v/eekly bills of mortality, de-
monstrate, to conviction, the very great extent, to which the
debased condition of the poorer classes of the population
arises from the insufficiency and wretchedness of their habi-
tations. Much sympathy has been excited and has been
called into active exertion by these disclosures, and not with-
out good result. But, of all the pernicious influences, to
which the poor of the metropolis and other large towns are
exposed, there is not one which has so direct an effect in im-
peding the efforts of charity in their behalf, or in neutralizing
the result which may, by constant exertion, have been effected
by that charity, as their dense and promiscuous agglomeration
in large numbers in filthy and insufficient dwellings. Nor
can we reasonably hope that the strenuous endeavours of
those benevolent persons, who seek to promote the education
of the rising generations of the industrious classes, can be
adequately recompensed, while the objects of their solicitude
are, by the circumstances of their condition, compelled to
live among scenes of disorder, along with crowds of adults
congregated together in a manner which precludes any
attention to decency or comfort, and coming into continual
contact and intercourse witli the most lawless and depraved

ASSOCIATIONS; TIIKIR NATURE AND OBJECT. 191

individuals. No wonder that, under these circumstances, vice
is rendered so familiar to the youthful mind, that it becomes
almost incapable of recognizing its evil. The associations in
question desire to lessen the mischief, and to benefit the com-
munity at large, by building villages at a moderate distance
from the metropolis.

40. — Although the class, for whose immediate welfare they
are mainly intended, can hardly be expected, at once, to accept
the advantages held out to them ; yet the gradual removal of
those whose circumstances permit, viz. clerks, artizans,
and others of limited income, for whom the associations desire
to erect dwellings in the first instance, will afford to others
the opportunity of obtaining superior habitations on more
favourable terms, and less exposed to the malignant influences
peculiar to their former localities. It is hoped that the force
of example, combined with educational and other remedial
measures, will, ultimately, induce the poorer classes to avail
themselves of the benefits held out by such Suburban Soci-
eties. In accordance with this plan, the formation of villages
is suggested at distances of from four to eight miles from
London or other important towns provided with Railways,
and in the immediate vicinity of Stations. " These villages
" to consist of houses built in pairs, averaging six cottages
*' to an acre, and combining all the advantages which the ap-
" plication of practical science can confer, as to construction,
" ventilation, drainage, and architectural arrangement, and
" with a good garden to each."

41. — In the last paragraph we have, to illustrate the prin-
ciple, referred to a prospectus, in which it is stated, that to
erect two such villages, with suitable public buildings, an
estimated capital of £250,000 would be required ; and, in
order to bring the shares within the means of those for whose
benefit the association is principally f ;rmed, the amount is
divided into 50,000 shares of £5 each ; upon which, after the
deposit of 6d. and a call of 4*. Gd. per share have been paid,

192 BUILDING COMPANIES AND SUBURBAN VILLAGES.

the remaining £4 155. may be made up by instalments,
suited to the progress of the works, at the rate of not less
than £1 per share per annum.

42. — Suburban Village Associations do not hold forth the
prospect of a large return, in the shape of profit, to the share-
holders, but rather invite support to undertakings having for
their object the amelioration of the sanitary condition of pei'sons
of restricted income ; at the same time, it is felt that, in order
to ensure a proper extension of the plan, a reasonable rate of
interest should be secured to the members for their in-
vestments. It is proposed, therefore, that the rents should be
sufficient, after providing for all disbursements, contingencies,
&c., to return a dividend of about five per cent, per annum,
on the capital of the association.

The provisions of these societies are chiefly adapted to
the requirements of the industrious inhabitants of towns,
who derive from their labour small incomes, upon which
they ma}' fairly reckon, and are thereby enabled to join in
transactions, which require the continuation of periodical
subscriptions for a certain number of years.

Section 2.

Remarks on the Rural Districts.

Art. 43. — With country dwellers, however, the case is some-
what difierent ; the distance at which they are separated from
each other prevents them from joining, in great numbers, in
mutual association ; and they have neither the experience nor
the busy habits which belong to the inhabitants of tovpns.
Besides this, the establishment of land investment societies

REMARKS ON THE RURAL DISTRICTS. 19;]

in agricultural districts is much impeded by other causes.
The growing tendency to accumulate wealth in the hands ot"
a few persons is traceable in the division of landed 2)ro-
perty, all over the country. The many thousand small free-
holds which might be found a century and a half ago,
scattered over the length and breadth of our island, have
been gradually collected into large estates, the property of a
few wealthy individuals.

44. — A corresponding change has taken place in the cha-
racter of the agricultural classes. The old Yeoman, with his
few paternal acres of land, his high spirit and independence,
has given place to a class of tenants sometimes farming on a
greater scale, but holding, by leasehold tenure, the lands
which were formerly divided into separate freeholds. The
larger ninnber of field labourers employed by them, and, in
some cases, by the owners of the soil, have, in general, no
real property, but dwell in small cottages, pay their rents in
frequently recurring instalments, or are liable to be ejected
upon very short notice.

45. — Many persons, who are not practically familiar with
the rural districts, imagine that the once existing mutual
footing between labourer and employer yet subsists. *Such
now, is not the case, at least, in most parts of the kingdom. In
Scotland, perhaps, the agricultural labourers are a less distinct
and separated body than in England, as regards their employ-
ers. In this country, the great bulk of the favm labourers form
a distinct class, inhabiting the outskirts of the small towns
and villages, which they have almost entirely to themselves ;
and, as they have neither capital nor any resource beyond
their daily labour (for which also there is no certainty of con-
tinued employment), they earn a most precarious existence.
In some cases, the sites of the vilhiges belong to a few pro-
prietors, sometimes to only one, but it by no means follows

[* See the valuable repoi-ts, in 1849-50, of the Commissioners of the
Times and Morning Chronicle on this subject.]

194 REMARKS ON THE RURAL DISTRICTS.

that they are employed, either on the farm of wliich a village
site may form a part, or even on the property of which the
farm may be but a portion. Their labour is at the command
of any one w^ho is disposed to hire it, so that, what with un-
certainty of employment, and the fluctuation in the amount of
their wages, they pass their lives in constant oscillations be-
tween their cottages and the workhouse, with no alternative
beyond, but starvation or the grave. Such is the general sys-
tem which prevails through England. With the causes which
have concurred to produce this system, we have, at present,
nothing to do. It appears, however, that they are still in
action, and country residents may, even now, observe that the
tendency of large estate-holders is to extend their boundaries,
and absorb the small freeholds which may yet be left around
them.

46. — The effect of this concentration of property may be
regarded as, generally, unfavourable to the lower classes.
It has the effect described by * Archbishop Whately : —
*' Where a large proportion of the wealth of a community
consists of the enormous and overgrown fortunes of a few,
that community has by no means such promising prospects in
respect to the intellectual and moral advancement of the rest
of the people, or even of the possessors of those fortunes,
with one which enjoys a greater diffusion of wealth."

The landlord, speculating upon the fluctuations in the value
of landed property, is unwilling to grant long leases upon
terms which, though they may appear equitable at the time,
may, afterwards, give, what he considers, an undue advantage
to the tenant, as the land improves or the value of its pro-
duce rises in the market. The farmer, on the other hand,
is, naturally, unwilling to toil for the good of others, and he
refrains from making those improvements in the land, of which,
though it may ultimately increase its value, he himself may
never reap the fruits ; besides this, although a large quantity
* Lectures on Political Economy, No. 8.

RKMARKS ON THE RURAL DISTRICTS. 195

of land is still waste and uncultivated, yet the trade of a
farmer, like almost every other calling in this country, is con-
siderably over-stocked ; the number of farms required being
greater than the number of farms to be had, and competition,
with all its unfortunate results, ensues ; the farmer agrees to
pay an unreasonable rent, rather than be cast idle upon the
world ; to maintain his family and pay that rent he has recourse
to a system of strict economy ; and, in this system, the first
and most obvious step is to diminish the wages of his farm
labourers. Upon the latter class, the casualties incident on
agricultural pursuits, fall with greatest severity ; every unfa-
vourable change in our uncertain climate ; every fall in the
value of the produce of the soil, arising either from a glut of
the market or from legislative measures, compels the farmer to
shorten the wages, or, more generally speaking, to increase the
misery of his labourers.

47. — The example thus set by the lease-holding farmer,
which is only justifiable on the ground of absolute necessity,
is, too often, eagerly followed by the landed proprietors.
The labouring classes are thus reduced to a condition of
great poverty, many of them being dependent on private
benevolence for their support during a great part of the
year; on the other hand, it too frequently happens that
farmers in the present day take more land than they have
capital to manage. Hence, when a bad season arrives, they
are driven to their wit's end to know what to do. Their
labourers, at most times, are incompletely employed, and,
when dismissed, are driven on the parish. This, in the shape
of an increased Poor-rate, recoils on the farmers themselves.

196 the necessity for home colonization or
Section 3.

The necessity for Home Colonization or Systematic Emigration.

Art. 48. — Of the necessity which now exists for an imme-
diate, extensive, and practical scheme for the amelioration of
the condition of the labouring portion of the population,
agricultural and mechanic, there is no need of much de-
monstration. At no former period in the history of this
kingdom has such extreme misery existed, as at present ;
for, although it be true that the general condition of the
people has vastly improved during the last 200 years, yet it
cannot be doubted but that there is, now, a class absolutely
much more numerous than at any former period, which suffers
to the extreme limit of j)hysical endurance ; the class com-
posed of those who, in the excessive supply of labour, which,
owing to the redundancy of population, exists in the present
day, are unfortunate enough to be placed at the bottom of
the scale. Besides this, the over-stocked state of the libera]
pi'ofessions ; the severe competition among tradesmen ; the
precarious employment, scanty food, and low wages of the
agricultural labourers in many parts of the kingdom ; the
deplorable physical condition and social abasement of immense
numbers of the artizans who inhabit our larger towns ; together
with the fact that there exist multitudes, who habitually work at
sedentary and unwholesome occupations for 13 or 14 hours a
day, but whose toil is so ill requited, that they ai'e never free
from the care and hopeless anxiety whicli cannot but attend
on a state of poverty, only one degree removed from the com-
pletest destitution ; and who immediately sink, irretrievably,
to the lowest condition, when sickness, which is constantly
hovering over their debilitated frames, at length arrests tlie
efforts of their feeble hands ; all, categorically elicited to the
minutest detail, by the enquiries which have been set on foot
during the last 20 years, and fearfully confirmed by the facts
which are continually brought to our notice, with horrible

SYSTEMATIC EMIGRATION. 197

vividness, in the mere perusal of the daily papers, must, collec-
tively, be considered as the consequences of one leading cause:
viz. the continual increase of the population, without a simul-
taneous increase of the means of employment ; and, taken to-
gether, afford an argument (than which no stronger could be
adduced in proof of any assertion), that, in reality, there docs,
now, exist an urgent necessity for taking immediate and syste-
matic measures towards greater improvement of their condition.
49. — This can only be effected by laying open a wide
field of employment, in order to lessen the competition of
capital with capital, and labour with labour, which is the
permanent cause of distress. The ancient saying still holds,
that when a parent is unable to make suitable provision
for his offspring, it is time that the needy children should
quit the parental roof and seek elsewhere for their daily
bread. It has been suggested, that the furtherance of this
object might be assisted by systematically endeavouring to
reclaim the available tracts of uncultivated land in the United
Kingdom. *These, in Ireland, occupy an area of nearly four
million acres, of which one million and a half are reclaimable
for the spade and the plough (with promise of great fertility),
and about two millions and a half more are suitable for
pasture. But a more adequate remedy would be found in
the successful colonization of the distant territories of the
British Empire. These include vast tracts of land of the
the most exuberant fertility, only wanting capital and labour
to cover them with abundant harvests, but, wanting these, are
now covered with useless vegetation, and give shelter and
sustenance to beasts. We may here be allowed to quote a
striking remark of the distinguished economist, Mr. Mill —
" The art of Colonization is but to carry the superfluity of the
" one part of this Empire to repair the deficiency of the other ;
" to cultivate the desert by applying to it the means that lie

* [See note to page 167; only two-thirds of the uncuUivated mountain and
boglands arc considered available.^

198 HOME COLONIZATION AND SYSTEMATIC EMIGRATION.

" idle at home; in one word, to convey the plough to the field,
" the workman to his work, the hungry to his food." It may be
affirmed, with this author, that Colonization, in the present state
of the world, is the very best affiiir of business in which the ca-
pital of an old and wealthy country could possibly be engaged.

50. — The following Chapter contains a description of a
plan for effectually accomplishing the reclamation of the
waste and half-cultivated lands in Ireland, by purchasing
those estates, and working them with English capital ; and,
while raising up a body of independent yeomanry in that
country, to diminish the competition for farms, and give
increased employment to agricultural labourers. The same
plan is, also, equally applicable to the systematic Colonization
of our foreign possessions, and thus affords a practical
method of improving the condition of the industrious classes;
while, at the same time, it offers a lucrative mode of invest-
ment to those, who may be willing to advance the requisite
capital. The pressure we have described can, in our opinion,
be continuously alleviated, by a well-organised and vigorous
system of emigration and of colonization combined with it,
the only certain S3'stem of relief; unless, as has been said in
reference specially to Ireland,* " we wait for the operation of
famine and pestilence, to remove that, now, super-abundant
population, which presents an insuperable obstacle to ultimate
improvement. Even in a purely economical view of the
matter, let any one compute carefully the annual cost of
maintaining a given number of persons, to say nothing of
their probable increase, for whom no profitable employment
can be found ; then let him estimate the outlay necessary,
once for all, to settle, as colonists, the same number of per-
sons, in such a way as to enable them to support themselves
in plenty; and let the annual jpermanent burden of the former
procedure be compared with the interest of the sum required
for the other ;^' conviction must follow.

* Archbishop WhateJij, App. D. to drd Ed. of Lectures on Political Econonuj .

CHAPTER IV.

FREEHOLD LIFE ASSURANCE AND INVESTMENT APPLIED
TO SYSTEMATIC COLONIZATION.

" It is no longer a question whether emigration should he encouraged. Emi-
gration is, now, indisputahlg shown to be the great outlet for these Islands.
As surely as Niagara relieves the inland seas of America, emigration is
the door of safety for our human redundance. But wo to the state that
watches unconcerned the spontaneous remedies and escapes of a miserable
crowd. As it values its oum safety, it must take the matter in hand,
direct the method, aiod guide the issues of the mighty operation. Future
ages may rice the present neglect.'" — Times.

Art. 51. — In this and the succeeding chapter there are
three leading principles under review, in reference to the
important question of systematic emigration and colonization.
The first is the basis of the plan of Freehold Life Assurance
which, at last, is attracting so much attention, and was advo-
cated by its originator, Mr. William Bridges, as far back as
1842,* in a very able exposition of his views, now out of
print, upon the subject of colonization. The second principle
is involved in the well-known system supported by Mr.
Wakefield, of fostering and raising the status of emigrants,
by transferring colonial land to a superior class of per-
sons, not gratis, as heretofore, but on payment of a mode-
rate purchase-money, and in applying the proceeds to pro-
viding the colonies with healthy labourers, dispatched, to a

* Freehold Assiu'aiice ; or, the Extension of the pi-inciple of Life Assurance
to Tenaiu'v and Colonizatiun. — By William Bridges. 1842.

200 FREEHOLD LIFE ASSURANCE AND INVESTMENT

certain degree, at the national expense.* The third is as yet
untried, and we accept the responsibility of the recommen-
dation. It consists in the establishment of Benefit Emigration
and Colonization Societies, which, by the instrumentality of
the co-operative association of the industrious classes, can be
made to supply that which is most essential, and yet wanting
in the first two principles : viz., to create the necessary funds
to enable emigrants, entirely through their own efforts, to
become purchasers of land and other colonial requisites.

52. — The nature of a Freehold Life Assurance Company
may be easily and concisely explained. Suitable tracts of
country being purchased from the existing proprietors, would,
unless already in the desired state, be drained, fenced, and
otherwise adapted for immediately profitable cultivation, at
the expense of the company, and, so improved, be divided into
small allotments, furnished with the requisite buildings, &c.
These allotments would then be disposed of, by conveying the
fee-simple thereof to chosen persons (who could, at once, enter
upon and profitably cultivate the same), subject to a terminable
rent charge, a part of which would consist of the interest of
the capital expended, and would be, in point of fact, a rent like
that which, in the usual relation of landlord and tenant, is paid
for the hire of land ; while the remainder would consist of the
premiums, which would be paid by the allottees, on the ordinary
principles of Life Assurance, in order to secure, for each, the
payment at his death of a sum equal to the estimated value of
his particular allotment. On the death of one of these
original Allottees, the sum assured would not be paid to his
devisees or representatives, but, in lieu thereof, they would

* [The Emigration commission, ajjpointed in 1840, has power to devote the
proceeds of Laud- Sales to emigration, in the ratio of free passages for five
adults in respect to every d£100 worth of land jrarchased ; but the purchaser
himself and family cannot receive a passage under this privilege. The Poor-
law Board have also a restricted power to sanction allowances towards free
passages out of parochial money. — {See 4 & 5, W. IV. c. 70 ; 11 & 12, V. c.
110 ; and also Land-Sales Act, 6 & 6 V., c. 36.)J

APPLIED TO SYSTEMATIC COLONIZATION. 201

become the possessors of an unincumbered Freehold Estate;
The payment of the annual rent charge to the company
during the life of the first occupier wovdd be secured by a
mortgage on the property.

53. — This scheme is considered to be peculiarly fitted,
not only for the improvement of our distant possessions,
but also for Home Colonization, more particularly in the
amelioration of the present condition of * Ireland, as in that
country extensive tracts of land might be purchased at so low
a rate (as has been determined by actual investigation), that,
if they were adapted to the proposed purpose with proper
skill and due economy, the rent charge, estimated as above,
need not greatly exceed the sum which, under the present
system of Landlord and Tenant, is frequently paid as rent
alone, for even temporary occupation ; while it would, at the
same time, be sufficient to realize a large interest for the capital
originally expended, f The plan, no doubt, offers a means of
bringing about a complete change in the social condition of
that portion of the kingdom, by creating independent
yeomen, possessed of the strongest inducements to industry :
viz., that the fruits of their exertion would be all their own ;
while a very high state of cultivation might be expected in
the course of time, from the concentration of the care and
diligence of each farmer on a limited acreage. With refer-
ence to the last observation, we will here insert some judicious
remarks of an observant and experienced traveller, Mr. Laing,
although they form rather a long digression.

54. — " If we listen to the large farmer, the scientific agri-
culturist, or the political economist, good farming must perish
with large farms ; the very idea, that good farming can

* [" "Were the security of property and the empire of the law as well estab-
lished in Ireland as in Britain, land would certainly sell higher in the former
than in the latter. Most Irish estates are, comparatively, in a state of nature,
and afford capacities for the profitable outlay of capital that are all but
unknown in England." — Me CuUoch's British Empire]

f See also Note to Art. 12 re Freehold Land Societies.

202 FREEHOLD LIFE ASSURANCE AND INVESTMENT

exist, unless on large farms cultivated with great capital,
they hold to be absurd. Draining, manuring, economical
arrangements, clearing the land, regular rotations, valuable
stock and implements, all belong, exclusively, to large
farms, worked by capital and by hired labour. This reads
very well ; but if we raise our eyes from their books to
their fields, and cooly compare what we see in the best dis-
tricts farmed in large farms, with what we see in the best
districts farmed in small farms, we see (there is no blinking
the fact) better crops on the grounds in Flanders, East
Friesland, Holstein, in short, on the whole line of arable
land, of equal quality, of the continent from the Sound to
Calais, than we see on the line of British coast opposite to
this line, and in the same latitudes, from the Frith of Forth
all round to Dover. Minute labour on small portions of
arable ground gives, evidently, in equal soils and climate, a
superior productiveness, where these small portions belong
in property (as in Flanders, Holland, Friesland, and Dit-
marsch in Holstein), to the farmer. It is not pretended by
our agricultural writers, that our large farmers, even in
Berwickshire, Roxburghshire, or the Lothians, approach to
the garden-like cultivation, attention to manures, drainage,
and clean state of the land, or in productiveness from a
small space of soil not originally rich, which distinguish the
small farmers of Flanders, or their system. In the best
farmed parishes of England or Scotland, more land is
wasted in the corners and borders of the fields of large
farms ; in the roads through them, unnecessarily wide,
because they are bad, and bad because they are wide ; in
neglected commons, waste spots, useless belts and clumps of
sorry trees, and such unproductive areas, than would maintain
the poor of the joarish, if they were all laid together and
cultivated. Bnt large capital applied to farming is, of
course, only applied to the very best of the soils of a
country. It cannot touch the small luiproductivc spots,

APPLIED TO SYSTEMATIC COLONIZATION. 203

which require more time and labour to fertilize them, than
is consistent with a quick return of capital. But, although
hired time and labour cannot be applied beneficially to such
cultivation, the owner's own time and labour may. He is
working for no higher returns, at first, from his land than a
bare living. But, in the course of generations, fertility
and value are produced ; a better living, and even very
improved processes of husbandry, are attained. Furrow
draining, stall-feeding all the summer, liquid manures, are
universal in the husbandry of the small farms of Flanders,
Lombardy, and Switzerland. Our most improving districts,
under large farms, are but beginning to adopt them. Dairy
husbandry even, and the manufacture of the largest cheeses,
by the co-operation of many small farmers ; the mutual
assurance of property against fire and hail-storms, by the
co-operation of small farmers ; the most scientifie and ex-
pensive of all agricultural operations in modern times : the
manufacture of beetroot sugar ; the supply of the Euro-
pean markets with flax and hemp by the husbandry of
small farmers ; the abundance of legumes, fruits, poultry,
in the usual diet of the lowest classes abroad, and the total
want of such variety at the tables even of our middle
classes, and this variety and abundance essentially connected
with the husbandry of small farmers — all these are features
in the occupation of a country by small proprietor farmers,
which must make the enquirer pause before he admits the
dogma of our land-doctors at home, that large farms, worked
by hired labour and great capital, can alone bring out the
greatest productiveness of the soil, and furnish the greatest
supply of the necessaries and conveniences of life to the in-
habitants of a country."

55. — AVe will not, at present, enlarge on the beneficial
results, which must obviously ensue from the application, on a
large scale, of the system we have described, if properly
carried out. A few remarks and suggestions present them-

204 FREEHOLD LIFE ASSURANCE AND INVESTMENT

selves with reference to its practical working. In the first
place, it appears that the system of pure Life Assurance for
the whole term of life might, in some cases, be conveniently
modified. The adoption of the principle of payments for
a fixed term of years, independent of life contingency,
might sometimes be preferable ; as, for instance, in the case
of a person whose life would not be accepted at the ordinary
rates of life assurance, but who, from skill and knowledge
of farming, might be so desirable as one of the allottees,
that it would not be advisable to exclude him from partici-
pating in the benefits offered by the association. It may,
likewise, be remarked that the attraction of Benefit Building
Societies has been found to consist in the fact, that they hold
out a prospect of gratifying the desire, which is so universal,
to acquire, during life-time, possession of property, unincum-
bered by charges of any description.* These considerations
induce us to suggest, that the tenants should be allowed by
the company the option of 3 plans : viz., —

1st. To pay an Annuity, including repayment of principal,
with interest in advance, for the whole life ; or —

2nd. To pay the same for any term of years, to be selected
at will by them, independent of Life Contingency. The
property, passing to their heirs in case of death, with the re-
mainder of the encumbrance, for the unelapsed number of
years ; or —

3rd. To allow the payments to be made upon a princi-
ple combining Life Contingency and Terms Certain, so that
if the life assured live over the term of years, which he will be
at liberty to select as most suited to his means and wislies, he
may have the property free of all encumbrance ; and, if he
die beforehand, it may pass in a similar state to his heirs.

56. — These three main distinctive plans admit of a great
variety of adaptation. One, however, will be specially advisable.

* [Refer to Chapter viii. in Part T ., relative to Life Assurance applied to
Benefit Buildiiipf Societies.]

APPLIED TO SYSTEMATIC COLONIZATION. 205

It is to make the payments as small as practicable for the first
two or three years, so as to allow the farmer to get settled,
and then that the rates should be increased. We would leave
it at the option of each farmer to select his term and mode of
payment, provided he offered satisfactory security.

57. — Example 1 : — A life aged 30 might be assured for
£2. 4*. Sd. per cent, on the half premium system, for the first
two years ; that is, during that time half the premiums might
stand over on credit, as a trifling debt on the policy, to be paid
off when convenient, and, if the first year's interest on the
loan be permitted to stand over until the end of the same
period, the farmer would have ample time to get his land
in order. His payments to the company to liquidate a
debt of £100, with interest at 6 per cent., within his life-
time, would be £2. 4^. Sd. at once and £8. 4^. 8(i. afterwards,
with this further advantage, that, on his death occurring, early
or late, all claim of the company upon the property would cease.

Other varieties of whole Life Policies might be effected, on
ascending or decreasing scales.

58. — Example 2 : —

If the farmer, on account of his age, do not care to avail
himself of Life Assurance, he can make his repayments by
a table for a limited term of years, leaving his heirs to finish
the same, should he die beforehand.

Thus, if the advance be made for 19 years, the rate of
annual repayment per £100, principal and interest, at 6 per
cent, would be £8. \ds. 3d. at the end of each year.

If the repayments do not begin until three years are expired,
his repayments will be £10. Is. i<d., for a term of 19 years,
as the debt to be liquidated would be then £112. 6s. 2d, in-
stead of £100, from the arrears of 2 years interest. Similarly
for other periods and rates of interest.

59. — Example 3 : —

If it be desired, he may combine the principles of Life
Assurance and Terms Certain. Thus, at age 30, a healthy

206 FREEHOLD LIFE ASSURANCE AND INVESTMENT

life may effect an 'Endowment-Assurance' policy for £100,
payable in full at death, or at 55, whichever happen first, in
consideration of a yearly payment of 31. 19s. lOd. To liqui-
date an advance of £100 his first payment would be 31. I9s. lOd.
and 9/. 19a'. lOd. afterwards until the age of 55, if he should
live thereto ; all debt ceasing if he die previously.

60. — In like manner, the premiums may, also, be paid half-
yearly or quarterly, at will.

61. — It ought to be remarked, however, that, as very many
of the lives assured (on account of the necessity of centra-
lization of the company's mortgagors or borrowers into as
few localities as possible), would be co-existent under the
influence of the same foreign climate, or of the effect of other
contingencies, no precaution would avail to protect the Life
department against the loss, which a calamity, such as a fatal
epidemic, might occasion ; and, consequently, for some of
our colonies, the objects of the plan proposed, w'ould possibly
not be attainable at the ordinary average rates of premium.

62. — A few general objections have been offered by those,
who have been unwilling to believe in the practicability of the
scheme. Amongst others, it has been urged that the principle
of Freehold Life Assurance creates an immoral tendency, by
giving to the heirs of a farmer an interest in his death. But
the same objection applies, and with equal truth, to general life
assurance, to many cases of life annuities, and even to the
law of hereditary succession, and is, in point of fact, founded
on a gratuitous assumption not borne out by experience ; as it
is only in some instances of Burial Societies among the most
ignorant and degraded peasantry, that pecuniary interest in the
death of an individual has become a regular incentive to crime.

63. — It has also been said, that, when the Redemption annuity
extends throughout a man's life, every involuntary omission of
the payments, which must be expected under the nature of the
engagement, will either forfeit the policy, or cause a heavy
debt to be added, with accumulated interest, to his other

APPLIED TO SYSTEMATIC COLONIZATION. 207

payments, thereby increasing bis difficulties, and rendering
the recurrence of omissions more and more probable.

This trifling obstacle can be surmounted by a properly ad-
justed table of fines for irregularity of payment, and by a
provision for the gradual liquidation of any extra debt, caused
through unintentional neglect.

64. — Again, some fear has been manifested lest an unsuit-
able quality of land would fall to the company in the locality of
its operations. This contingency can ordy be averted by the
careful discrimination of the parties employed in the wholesale
purchase of land to be allotted. There are, undoubtedly,
many acres of land in Ireland, in this country, or in the
colonies, which could not be cultivated with advantage ; but
there are also many, which require but the plough to give
proofs of their fertility. Before concluding a purchase, it
is to be expected that the company would avail itself of the
experienced opinion of practical farmers, and other persons
of judgment, both in and out of the neighbourhood, as to
its probable capabilities. There are, generally, certain leading
points which would scarcely be overlooked : viz.,

1st. An enquiry into the nature of the soil, its chemical
composition and capabilities for drainage.

2nd]y. The various peculiarities of climate, by which the
land would be influenced ; whether the situation be too hiffh,
and thus unfavourably exposed to bleak winds or strong sea
breezes.

ordly. The facilities which the locality offers to the trans-
fer of the produce of the soil to a good market.

^^. — Leaving aside theoretical discussion, we have evidence
of increased disposition on the part of the public to en-
courage, by the aid of these principles, systematic emi-
gration and colonization, in the various associations which,
under the names of emigration and colonization assurance
companies, have lately been established, for the purpose of

208 FREEHOLD LIFE ASSURANCE AND INVESTMENT

carrying them into effect. They state that, formerly, colonial
lands were given away to emigrants, who were left to their own
scattered, irregular, and imsupported efforts ; no means being
provided to advance their interests at home, or to supply
labour to the settlement. This was Emigration without
Colonization,

That, latterly, this evil has been partially remedied by the
formation of companies in England, which, having obtained
colonial land, retailed it to emigrants at various prices ; ap-
plying the proceeds, after deducting expenses and profits, to
providing a limited quantity of labour, and effecting other
important objects. The main value of this improvement
" consisted in the agency of the companies in the mother
country, promoting and guiding emigration, directing enter-
prise, opening trade, representing grievances, combining
efforts, and removing obstacles and difficulties beyond
individual power to overcome." The capital of emigrants
was, however, the fund by which this was effected. It was
Colonization by Emigrant Capital alone.

66. — The new companies contemplate not only emigration,
but systematic colonization, by introducing a new element,
viz. by bringing, not only the capital of the emigrant, but
that of England, together, to bear upon the wilderness ; so
as not to require the emigrant to pay for land entirely out of his
capital, but out of the profits to be realisedby the joint operation
of his own labours and of the company's fostering exertions.
They desire to effect Colonization by English and Emigrant
capital united.

67. — The first inducement to emigrants is presented in the
adapting for them wide tracts of land to productive agricultu-
ral enterprise, through arterial and thorough drainage ; by the
erection of convenient farm-houses and cottages ; and by
the laying out of settlements, divided into such allotments,
as may be found expedient for the purpose of sale and dis-
posal. Wlien the land has been so prepared, it would be let

APPLIED TO SYSTEMATIC COLONIZATION'.

209

out, with other requisites, to the emigrating colonist who has
but small means, that he may, by the payment of a rent
charge, during a specified term of years, at the end of the
period, become absolute possessor of the land for ever. This
rent charge being calculated on the freehold assurance prin-
ciple of affording to the shareholders of the company a fair
rate of interest for the use of their money, and of re-placing
the capital expended.

68. — The companies to which we allude are not all confined,
in their operations, to one locality ; for it is generally acknow-
ledged, that the principles both of freehold life assurance
and freehold investment may be advantageously adapted to
the facilitating of an extended scheme of colonization of the
vast tracts of country which, in almost every part of the
globe, form appendages to the British empire. The unprece-
dented extent to which emigration takes place in the present
day is well known ; the number of persons* annually leaving

*[The following figui'es are extracted from the 10th Report of the Emigra-
tion Commissioners : —

"Emigration from the United Kingdom during the 25 Years,
FROM 1825 TO 1849 inclusive.

Years.

United
States.

British rr. . ,
Colonies. ^°*^^-

,T United
^^^''- States.

British rp . 1
f^ , . iotal.
Colonies.

1825

5,551

9,340

14,891

1838 14,332

18,890 33,222

1826

7,063

13,837

20,900

1839 33,536

28,671 62,207

1827

14,526

13,477

28,003

1840 40,642

50,101 90,743

1828

12,817

13,275

26,092

1841 ! 45,017

73,575 118,592

1829

15,678

15,520

31,198

1842 ; 63,852

64,492 j 128,344

1830

24,887

32,020

56,907

1 1843 28,335

28,877 57,212

1831

23,418

59,742

83,160

1844 43,660

27,026 70,686

1832

32,872

70,268

103,140

1845 58,538

34,963 ' 93.501

1833

29,109

33,418

62,527

' 1846 82,239

47,612 129,851

1834

33,074

43,148

76,222

1847 142,154

116,116 258,270

1835

t 26,720

17,758

44,478

! 1848 , 188,233

59,8.56 248,089

1836

37,774

37,643 ! 75,417

! 1849 219,450

80,048 299,498

1837

36,770

35,264 72,034

Tota

1... 2,285,1 84, viz. United Stat

es, 1,260,247, Brit. Cols. 1,024,937.

Average Annual Emigration from the United Kingdom for the ) q, ,q-,
last twenty-five years ) '

^2\0

FREEHOLD LIFE ASSURANCE AND INVESTMENT

the shores of this kingdom being now of very great magni-
tude. It is, however, an old remark, that emigration, to any
extent, in so far as it is casual and unsystematic, does not
form one step towards colonization, properly so called ; nor,
indeed, we may add, can it be of much advantage to this
country, as it cannot permanently diminish that disastrous
competition both in labour, and capital, which, as before
stated, is the origin of distress. On the one hand, the

A comparison with the rate of increase of the population is interesting : by
the Census of 1821 the population of the United Kingdom was... 21,193,458

1831 24,306,719

1841 26,916,991

The apparent average annual increment of population in the 10 years from
1821 to 1831 is 1.40 per cent.; that in the next period only 1.02 per cent ; we
observe, therefore, the important effect, which Emigration has produced on
these results.

2. From the Colonies of Great Britain, alone, irrespective of the United
States, whither a large number proceed, it is stated that a sum of upwards of
a million and a 'quarter sterling is annually sent through Liverpool houses
from persons who have emigrated, to enable poor relatives at home to pay
their passage to the same quarter of the globe.

3. The following memoranda, relative to those localities to which Emigrants
mainly resort, are valuable : —

" Country.
Australia, Western

New South Wales ,

Van Diemon's Land.

Acres.
21,000,000

about 9,500,000 of
grazing land is
in occupation.

Contains 23,437
square miles.

South Australia 1 92,000,000 acres.

liemarks.

Amount purchased in fee and in
occupation, about 1,500000 acres .
The climate is temperate and has
been generally found to be
healthy to Europeans. There
are no droughts like other parts
of Australia.

About 200,000 acres have been
cultivated. Victoria, lately made
a separate colony, contains about
63 or 64 millions of acres, and
presents many attractive features
for an Emigrant. The soil is
about thebcstin the whole Island.

Has attained a higher perfection, in
an agricultural point of view,
than any other of the Colonies.

The only results that have occurred
there of any note, have been the
discovery of some valuable mines.
This division, for the most part,
has been unexplored. About
600,000 acres have been the
amount of land sold.

APPLIED TO SYSTEMATIC COLONIZATION.

211

capitalist (speaking generally), will not divert his attention to
colonial investment, while the supply of labour which would
alone make such investment profitable, is insufficient or
fluctuating. On the other, the poor labourer, who is un-
able to find continuous employment in this country, and who
is, therefore, willing to emigrate, and carry the energies, which
are superfluous at home, to any part of the world, where he

" Country. Acres. Remarks.

„ „ The demand for labourei's in Aus-

tralia is yet even great ; also for
mechanics, such as blacksmiths,
carpenters, and bricklayers; but
for artizans and mechanics of a
high order there is scarcely any
demand.
New Zealand Islands 60,000,000 Perhaps in the whole world there

is not a superior climate. Soil
admirably adapted for Coloniza-
tion.
Cape of Good Hope, Climate good. Presents much at-

and Natal 15,000,000 in Natal traction for small capitahsts. The

alone. cultivation of coffee, cotton, su-

gar and even indigo andricehave
been attended with good results.

Canada, Upper 64,000,000 There are about 4,000,000 acres

available. Soil fertile. Climate :
cold of winter not so severe as
in Lower Canada. In addition
to indigo, cotton, and tobacco,
its mulberry trees are cultivated.

Lower 137,000,000 Nearly 10,000,000 acres available

for settlement. "Winter severe.
Climate generally favourable, but
there are many mihealthy dis-
tricts.
New Brunswick 18,900,000 12,300,000 vacant, 6,600,000 grant-

ed, only 50,000 cleared.
Newfoundland 2,300,000 Soil productive, if properly culti-

vated ; but emigrants, and the
colonists themselves, pay more
attention to the fisheries."
The whole of the British provinces in North America are calculated as em-
bracing 4,000,000 square miles.

4. The return also gives an account of the persons and vessels employed by
the Emigration Commissioners, and of the receipts and disbursements for the
last three years. The funds at the disposal of the commisssioners have been
£96,254, voted by Parliament; £517,011, contributed by the colonies;
£27,050, deposits made with the commissioners for the purchase of land ;
£76,580, contributed on behalf of emigrants; and ,£8,298, miscellaneous,
including profits by investment— total £725,194. The disbui'semcnts balanced
against these amount to £677,459. J

P 2

212 FREEHOLD LIFE ASSURANCE AND INVESTMENT

may turn them to account, is compelled, by the circumstance
of his poverty, to remain where he is and suffer a life of de-
pendence and distress. In this view, it is plain that the majo-
rity of emigrants must consist of persons whose means, though
too scanty to shelter them from tlie pressure of competition
at home, are yet sufficient to pay the cost of their passage
and to maintain them for a time on their arrival at their
destination ; a preliminary outlay which absorbs a large pro-
portion of their means, so that they have little left for pro-
spective improvement. Emigration, therefore, did not promise
to be of much utility in relieving the distress of the labouring
classes at home, or in furthering the colonization of our
foreign possessions, until Mr. Wakefield proposed a system
of colonization, the main principles of which, viz., the sale
of colonial lands at a uniform price, and the application of
the proceeds of such sales to the carrying out of young and
healthy labourers of both sexes, deserve general approbation.
The scheme was, indeed, evidently calculated to obviate the
defects which have been indicated as attaching to unsyste-
matic emigration, as its application would obviously tend to
relieve the pressure in the labour market, and, at the same
time, offer to capitalists a good prospect of advantageous
investment in colonial land, giving assurance of the certainty
of obtaining the supply of labour requisite to make it pro-
ductive and profitable. Its practical application, however,
is open to several objections, which have given rise to
various modifications that have been under discussion. Thus,
on considering the circumstances of a colony to be constituted
according to Mr. Wakefield's theory, it is evident that the
necessity for a plentiful supply of labour would be urgent at
the beginning of its existence, when, nevertheless, the land
sold would probably be of so small extent, that the sums arising
from such sales would be inadequate to furnish that supply.
Hence, it has become a question of importance, whether it might
not be expedient for the infant colony to raise a fund for the

APPLIED TO SYSTEMATIC COLONIZATION. 2\ii

importation of labour, })y means of a loan, ncgociated on the
security of future land sales ; it being supposed that, with a
guarantee from the mother country, such a loan could be
obtained at a moderate rate of interest. The expediency of a
])roceeding, under the above circumstances, has been indicated
with great clearness by the late Mr. C. Buller, whose opinion
must be always entitled to respect: —

" No doubt, great caution would be requisite in thus fore-
stalling the resources of a colony ; but, on the other hand, a
debt contracted for such a purpose is not an unproductive
waste of capital, such as the national debt, nor is it to be
likened to the debts of individuals, contracted for the enjoy-
ment of the moment. It is rather to be compared to those
debts which wise landlords often deliberately contract, for the
purpose of giving additional value to their estates, or to the
loans by which half the enterprises of trade are undertaken,
and which are to be regarded as resources of future wealth,
not embarrassment."

We shall not occupy our space by making any reflections
on these jvidicious remarks, but shall proceed to indicate,
briefly, the advantages which the principle of Freehold Life
Assurance offers in respect to Colonization.

69. — It is plain that Mr. Wakefield's system, in its original
shape, only offers the means of advantageous emigration to la-
bourers, and holds out, thereby, an inducement to capitalists to
direct their attention to the colonies. But it is not of equal bene-
fit to that numerous class, so eligible as colonial emigrants, who
are possessed of a small amount of capital, and whose intelli-
gence and activity fit them for a situation above that of the
hired labourer. The necessary outlay in the purchase of
land for improvements thereon, and of the implements of farm-
ing, is, moreover, not unfrequently, so large, compared with
the means at their disposal, as, for some time, to cjipple
their exertions.

70. — The true Art of colonization consists, therefore, not in

214 FREEHOLD LIFE ASSURANCE AND INVESTMENT

the creation of over-grown farms, in the hands of a few capital-
ists, with hired labourers, whose condition is not much better
than it would have been in England ; but in the affording of
facilities to the emigration and subsequent well-doing of the
medium class of persons, who are, even at home, by dint of in-
dustry and prudence, accompanied with the possession of energy
and fore-thought, and no inconsiderable share of information,
able to live on and effect small savings ; and who, naturally
enough, would be glad to emigrate to a new country, where
their lot would be somewhat less arduous. The object of a
parental government should be, not to get rid of the ignorant
and poor who, for that very reason, are not fit to become the
basis of a new colony, of which they would be in preponde-
rance of number, but to supply the younger country with
individuals possessing those qualities of intelligence and
moral character, which are even more required from them
abroad than at home. Let this be done, and, the pressure
from above of over-population being removed, even the worst
class of those who remain, would speedily rise to the level,
and improve both in their nature and worldly condition.

71. — For this purpose, no legislative facilities have yet ever
been accorded, or even contemplated ; and it is left to the
union of private enterprise and capital, to supply those means
for systematic emigration and colonization, which are daily
more and more felt to be required. This is the object of a
Freehold Life Assurance Company and a system of Benefit
Emigration Societies, of which details are given further on.

By the aid of a company at home, the emigrant of the
superior class, we have alluded to, could obtain a loan from the
time of his emigration, of sufTicient additional capital, to give
scope to his exertions and energy ; and he would, probably,
in a few years, be able to repay the money with liberal
interest, suitable to the risk incurred by the lenders and the
advantage derived by himself. The money would (as in the
former instances of the application of Freehold Assurance), be

ATPLIED TO SYSTEMATIC COLONIZATION. 215

lent upon the security of the land, with the deposit of a policy
of insurance on the life of the emigrant ; or it might be found
expedient, in some instances, to take personal security. We
shall conclude this chapter by quoting some* remarks upon
the subject, which are well worthy of a reprint, and refer
to the succeeding chapter for the developement of a prin-
ciple of Benefit Emigration Association, which may serve
as the basis of an extensive application of the systems ad-
vocated by Mr. Bridges and Mr. Wakefield.

72. — " Say that the emigrant commences in his adopted land
the cultivation of his little farm ; at the end of the first year
he reaps his crop and sells the produce, which is sufficient, we
will imagine, for the support of himself and family, and also
affords the means of raising another crop. As, however, if a
demand were made upon him for interest on the advance, he
would, in all likelihood, be unable to answer it ; no re-pay-
ment should be expected from him in that shape till the lapse
of at least tw^o years from tlie date of his entry.

" Let a case be supposed that may occur, viz., that in the
course of a few years the emigrant dies, leaving a widow and
one or two young children ; It cannot be expected, in their
circumstances, that the survivors will be able to meet a de-
mand for the principal or interest of the debt; but by the opera-
tion of life assurance on a large number of transactions, the
parties advancing the money would lose nothing ; while the
widow could retain her farm, the price, which was contracted
for its purchase, having been paid during lifetime. It matters
not at what age a particular emigrant may die, as such a
sum would be paid by each as would, one with another,
make up the sum advanced with interest.

" The advantages of such a system to the emigrant hardly
require to be pointed out ; from a situation of penury and
dependence in this country, he is removed to one of comfort

* Bridges on Freehold Assuranec.

216 FREEHOLD LIFE ASSURANCE AND INVESTMENT

and respectability in the colonies. While the rent-charge is
unredeemed, he is in the same situation with a farmer in this
country, having also the great additional advantage, that he
cannot be turned out of his farm so long as he pays that rent,
and that at whatever time he may die, he transmits to his
heirs a valuable inheritance, free from all future pecuniary
burden ; he may also redeem his land during his lifetime, by
paying up the sum due ; and, considering the rapid accumu-
lation of wealth in colonial countries in the hands of the
frugal and industrious, there is no delusion in supposing that
in the course of a few years the emigrant may raise himself
to the position of a free owner of an unburdened estate,
under his own cultivation. The happy prospects thus opened
up to men struggling in this country with undue competition,
and unable, with all the aids of mechanical skill and industri-
ous perseverance, to earn a just reward for their exertions —
' a fair day's wages for a fair day's work' — it is unnecessary to
enlarge upon.

" On the other hand, the same system, with nothing more
than the preliminary advance of capital, might be carried on
to the same extent every year ; for it is obvious, that, so soon
as the third year of the emigrant's settlement had commenced,
the annual returns would immediately show, either that the
system was likely to do well or to prove a failure. If the
rents were punctually paid on the average, capitalists would
have no hesitation in advancing money on such security, to be
applied in the same way. It is in the outset of such a
scheme that all the risk lies. When once fairly organized, it
acquires a self-supporting power, which insures success. It
is obvious that the base upon which it rests, landed security,
is the most solid foundation of credit, when the land is culti-
vated and productive ; and that it must become so in a few
years, under the vigorous exertions of men working for
themselves, for their wives and families, who have so noble a
reward for theirlabours always before them, cannot be disputed^

APPLIED TO SYSTEMATIC COLONIZATION. 217

73. — " It may be said that the scheme will possibly fail,
because the emigrants, secure in the possession of their farms
and houses, will refuse to pay the annual demands when due,
trusting to their numbers and the weakness of government in
a distant colony ; that, even though the government have the
power, it would be unwise to exercise it ; from the general
disorder into which the colony would be thrown by so many
forcible ejections. We must confess that we see no sufficient
grounds for entertaining such fears. If we take the instance of
Ireland, a country more unfavourable to the expectation of
tenants performing their engagements to landlords, on many
accounts, such as difference of religion, mutual exasperation,
and too high rents, we* find that the payments, so far from
being refused, are made as punctually as in England. If
proper care be exercised in ascertaining the habits and
character of the emigrants, and in sending out only such as are
recommended for sobriety and industry, there can be no great
fear as to success ; if the executive were unable to enforce the
law in the colonies, as well as at home, there would be an end
to all government. This has not been the case hitherto, in any
British colony, if we except the, now. United States ; but that
arose from the attempt to impose an unjust and arbitrary tax-
ation upon the colonies, and is altogether a dissimilar case.
With regard to the danger of disturbing the country by an
extensive series of ejectments, there is no reason to believe
that any such resistance would be offered to a government both
able and resolved to maintain the law against every offender.
In the very unlikely event, therefore, of any such combination,
a few examples would demonstrate to the refractory class the
hopelessness of any such contest.

74. — " It is also to be considered that, at the utmost, the

* [This was written by Mr. Bridges in 1842, previous to tJiose critical
changes and misfortunes, wliich have since so pressed upon the ability of the
renting farmers, that they have found it difficult to redeem obligations con-
tracted under more favourable conditions.]

218 FREEHOLD LIFE ASSURANCE AND INVESTMENT.

danger, it" danger there be, would occur only with the first
emigration, and during the first fewyears; and that such a class,
scattered in the midst of a numerous and already settled
colony, would be in no situation to combine their efforts for
any purpose of opposition. In any such attempt, the moral force
would be on the side of the government, and a power that
enabled the United States to emancipate themselves from an
unjust and arbitrary dominion, would certainly, when linked
with the strength of government, be sufficient to maintain
order, and enforce obedience to law. Once these few years
of trial were passed, the danger would be for ever annihi-
lated ; and the system, incorporated with the institutions and
habits of the colonists, would acquire the same degree of firm
consistence as the relations of landlord and tenant in this
country."

CHAPTER V.

ON THE FORMATION OF BENEFIT EMIGRATION AND
COLONIZATION SOCIETIES.

Art. 75. — We will now consider the elements of the third
principle alluded to at the beginning of the preceding Chapter.
It appears to us, that *Societies under the above title,
might be formed for the purpose of carrying out, with the
view to systematic colonization, the principle of Freehold Life
Assurance, in union with that of the ordinary Benefit Build-
ing Societies. Of the advantages to be derived from a system
of Freehold Assurance, enough has already been said. That
it has not yet come into any very extensive operation can be
attributed only to the difficulty which exists in creating the
lai'ge capital requisite for the purpose. The capital of an
ordinary joint stock company cannot, at all times, be collected
with facility, as it has to be furnished by a comparatively
small number of persons in instalments, within one or two
years ; and it is sunk for a length of time, generally equal
to the duration of the company. Where the investment is
permanent, or similar to that of railways or canals, the
shareholder cannot recover his money, except by throwing his
shares into the market, and exposing himself to sell them at
a heavy loss. If the capital be only engaged for a time, the
operations of the society would either be much limited or
soon cease altogether. This would be more particularly the
case with a Freehold Assurance Joint Stock Company for
colonization, as the withdrawal of its capital would, at once,
put a stop to any further progress. To obviate this difficulty,

* ( Tlic recent Friendly Societies Act of August, 1850, 13 & 14 V. c. 115,
contains an express provision, inserted at the eleventh hour, for the en-
couragement of Benefit Emigration Societies. |

220 ON THE FORMATION OF BENEFIT EMIGRATION

we propose, that, in co-operation with such a central com-
pany to be possessed, intentionally, of but a small capital itself,
there should be adopted the system of the Investing share-
holders of a Benefit Building Society ; or, in other words,
that the requisite funds should be created by small instalments,
payable by way of periodic subscriptions to Branch Benefit
Emigration and Colonization Societies, to be established in
all parts of the kingdom.

76. — The money subscribed by the investing shareholders
could be applied, through the agency of the central company,
to the wholesale purchase of land in a small number of se-
lected localities in the colonies, to be mortgaged in allotments
to such of the *branch members as desired to become
colonizing tenants. The available means of each Benefit
Society would be continually increasing, by the taking up of
new shares by fresh investers, and by the repayments of
colonists, which, together, would come in so rapidly as to
regenerate continuously the lending fund. Many persons
would join such a society for a limited period, as 10 or 12
years, either to obtain possession of small allotments of
colonial land, previously improved by sufficient preparation

* [That admirable lady, Mrs. Chisholm, has tested, by experience, the
safety of according advances even to emigrants of the poorest class. In a
notice relative to the benevolent Loan Colonization Society, which is under
her auspices, we find it recorded "that loans, made on a very extensive scale,
in aid of passage money, on the joint security of successive bodies of emi-
grants, have been, with inconsiderable exceptions, repaid with honourable
punctuality." The principle of that society is to help the poor man by enabling
him to help himself. By careful and excellent arrangements its ships afford a
passage to an adult for only £12 ; to a child below 15 for £6. Of this he is
required to pay down one-half; the society then lends him the remainder, and
has agents in Australia who secure repayment of this loan within 2 yeai's after
his arrival. Thus the poor man's own frugality and self-denial are called
into play, and the society makes them available for his emigi'ation. " Up-
wards of 200 poor people, who have been paying their little weekly in-
stalments for nearly 2 years, have now subscribed, in this way, .£'1,500,
which is more than their quota. The loans, when repaid, go to equip another
sliip, and then another; so that £10, in the course of time, may send out
many emigrants, saving them from probable starvation at home, and, at the
same time, bringing into action their own viilucs of pruil'/noe and industry." |

AND COLONIZATION SOCIETIKS. 221

thereon, in the nature of drainage, roads, &c., (which could be
effected by the central company at a moderate cost in the gross,
andyet, when subdivided, yielding to it a handsome profit,) or to
receive at the end of that time, counted from the month of their
entry, the amount of the subscribed shares in full, equivalent
to the accumulation of their subscriptions, at a reasonable rate
of compound interest, not lower than that of the public funds,
77. — The Central Company would thus act as the agent of
numerous Benefit Societies. It would, in fact, be the super-
association of separate groups of associating individuals, and
would be able to perform, or cause to be effected, all that
would be out of the power of one branch society. The
company would be essential to them, and they would give
vitality to it. Hence, undiminished power would be secured
for carrying out, for evei', tlie object for which the colonizing
company was originally formed; even though the membership
in the local benefit society of each investing shareholder,
on the one hand, and of a borrowing tenant, on the other,
would be limited. The surplus profits of the central asso-
ciation would be periodically divided among the shareholders
thereof, a portion being reserved to be carried to the
credit of the shares of the branch societies, as an encou-
ragement to persevere, and it might be made payable to the
subscribers at the expiration of their membership. The profits
to be divided would be materially increased by the power,
which a permanent institution has of benefitting by that
augmentation, in the value of the reserved lots of land, which
would be consequent on the general improvements introduced
on the property. Practically, the position of the tenants
would be the same in either case, but by the aid of Branch
Benefit Emigration Societies, that main difficulty would thus
be removed, of obtaining the desired capital, Avhich, in all
enterprizes, has been found to consist in the natural unwil-
lingness on the part of the public to sink, as proprietors of a
Joint Stock Company, large sums at once, for an indefinite

ON THE FORMATION OF BENEFIT EMIGRATION

number of years. By the plan proposed, the necessary funds
would speedily be obtained, through the small contributions of
the multitude of provident persons who exist in this country.

78. — We do not apprehend that there would be any ob-
stacle to obtaining investers for the Benefit Emigration So-
cieties, since the agency and protection of the Central Company
would ensure to them as good, if not better, security, as in the
ordinary mutual associations which swarm in such numbers, and
of which the *pecuniary resources have attained to such large
amounts. The security offered, being freehold land, would
inci'ease every day in value from the improvements which the
tenant farmer would introduce upon it ; and, from his repay-
ments being made in gradual instalments, the risk of each
branch association would be gradually on the decrease.
Also, from its being a subscription society, the managers, at
all times, would have the power of extending, curtailing, or
putting an end to its operations.

79. — For unity of design and simplicity of working, the
freehold mortgagors should have their lands, as much as
possible, situate in the vicinity of each other, so that the
collection of rents may be facilitated, and the expense of the
same kept within a small limit. It is evident that such a com-
bination would give rise to many settlements. Half-a-dozen
emigrants from each of 100 associations would at once constitute
an important nucleus of 600 individuals co-operating together.
The nature of such Benefit Emigration Societies is such as to

* [In recent statistical papers it is stated that there are 10,433 enrolled
Friendly Societies, numbering 1,600,000 members, who subscribe an annual
revenue of ^2,800,000, and have accumulated a capital fund of £6,400,000.
There are also a vast number of unenrolled societies. Of the Manchester
Unity there are also 4,000 societies, with 264,000 members, who subscribe
jt'400,000 a year. In addition, there are the unenrolled Foresters, Druids,
Rechabites, Old Friends, and others. The total is taken at 33,223 Societies,
with 3,052,000 members, who subscribe £4,980,000 a year, and have a capital
fund of £11,360,000. The whole adult male population of Great Britain and
Ireland was, at the last census, 6,300,000 ; therefore nearly half the adult
male population, without distinction of rich and poor, are actually members of
these societies.]

AND COLONIZATION SOCIETIES. 22S

ensure tlicir legal existence by the power reserved in the
clauses of the new Friendly Societies Act of 1850, and if
Life Assurance contingencies were also undertaken, that
department would be singularly benefited by the other pri-
vileges appertaining to that Act. The operations of the
central company and the branch benefit societies should
be kept perfectly distinct, both as regards the deed of the
one and the registered rules of the others. The only con-
nection between the two consisting in the protection, in-
fluence, and assistance which the centre would afford to
the branches ; in the watchful attention to their rights,
both at home and abroad; in the securing for them all the
advantages that would accrue from the purchase and sale of
land, with other requisites, at wholesale prices; and in facili-
tating, by the power which an important company alone can
possess, the progress of the emigrant from his native country
to the spot of his selection, without the regrets and dis-
comfort that have, too often, been, hitherto, experienced by
those who have endeavoured, single handed, to better their
fortunes in another land.

80. — Moreover, the agreement of a number of benefit
emigration societies, to make use of the agency of one cen-
tral company for the furtherance of their objects, would
justify the expense, on the part of the latter institution, of
appointing Labour Referees in the leading towns of the
colonies, whose duty it would be to keep up constant com-
munications with the head quarters in England, upon the
state of the labour market in each seat of colonization, in
order to procure, not only information of the probable chances of
tliose emigrants who do not purchase land, obtaining employ-
ment, but even to secure it for them on their arrival ; and, in
fact, to provide the benefit societies in the United Kingdom,
through the instrumentality of their centre, with periodic
authentic details, upon every colonial subject that is likely to
interest the members.

224 ON THE FORMATION OF BENEFIT EMIGRATION

81. — Colonists of European extraction would probably
associate themselves for the purpose of lending aid to their
fellow counti'ymen, not to meet their pecuniary wants, but to
furnish them with counsel and guidance, and, by information
transmitted from time to time, to assist in preparing the emi-
grant with a knowledge of his prospects and difficulties on
arriving at the colony of his selection.

82. — Of the constitution of the Company itself, it is not ne-
cessary for us to speak. The numbers of them, that have been
lately formed, and the activity with which they are promoted,
manifest sufficiently that, to the grand cause of systematic
emigration, neither the support of the wealthy, nor the ability
of men of business, is wanting. If they have not yet proved
successful, it can be attributed only to a lack, on the part of
the managers, of that special acquaintance with the habits
and tone of mind of the industrious classes, which alone could
enable them to secure their confidence. Such deficiency
will, however, soon be remedied.

83. — The rules of all the Branch Societies might be simi-
lar in their leading details, which may be shortly resumed
thus : — They should be formed on a principle analogous
to that of a Benefit Building Society ; the only real differ-
ence being in the purposes to which the funds of the society
are to be applied ; instead of advancing the money towards
the purchase of houses or land in England, the object would
be to gratify the desire of emigration. Intending emigrants
would join a Benefit Society as investers, and perform the
conditions attached to that position ; after they have acquired
sufficient standing by rotation or by ballot they would become
eligible to be sent out as colonists ; that is to say, land and
other requisites would be supplied to them at a price, either
to be paid for at once or by gradual instalments.

84. — The following extracts from a set of rules that we
have prepared, as suitable for the object under consideration,
will serve to illustrate the principle ; — viz. : —

AND COLONIZATION SOCIETIES. 225

« BENEFIT EMIGRATION AND COLONIZATION SOCIETY.

£50 Shares. "Weekly payments, jicr share. Entrance Fee

2s. 6d. per £50 Share. Half-shares of ^625 may also be taken*

I. Name and Object of the Society.
That this society shall be called the

Benefit Emigration and Colonization Society. Its object is to raise a
fund to enable its members to emiorate, and, if they desire it, to
receive an advance in full, or in part, of a share or shares, for the
purpose of purchasing land and other requisites in any part of the
Colonies dependent on Great Britain (or of the United States of
America), on a system of purchase, as is hereinafter laid down ; also
to enable provident persons, who may have no immediate desire of
emigrating, to invest their savings, at interest, in subscriptions upon
shares to be received in full, out of the funds of the society when
realized.

II. Time and Place of Meeting. — See Rule 2, Page 95.

III. Power of Investment.

That the Directors of this Benefit Emigration and Co'onizatio
Society shall have power to invest the whole or part of the sub-
scriptions collected, from time to time, from the members, either in
public securities or to deposit the same on the security of debentures

bearing interest, not lower than per cent., to be given by the

Emigration Company of London. The said debentures to be

undertakings on the part of the said Emigration Company, that

it shall be liable for all monies so invested, imtil the same be either
repaid, with the above rate of interest, or be accounted for, pursuant
to agreement, in land and other colonial requisites, provided for such
members of this Benefit Societ3% as may become emigrants, on such

terms as the boards of directors of the Emigration Company

of London, and of this Benefit Emigration Society, may severally
and jointly agree.

IV. Share Subscriptions.

That the shares shall be of the ultimate value of j650 each, to bo
paid to each member, at his option, in money, or in general requisites
for emigration, in allotments of land, &c. &c.

226 BENEFIT EMIGRATION AND COLONIZATION SOCIETY.

CLASS 1.

Entrance Fee 2s. 6d. Subscriptions ■ per week until

the said subscriptions, with a proportionate part of the profits of
the society (to be estimated yearly), shall amount to £50. With-
drawals will be allowed on giving weeks' notice, according

to the terms of Table 1, rule • , further on.

CLASS 2.

Endowment Shares.

Entrance Fee Weekly subscription, varying with the

age, according to Table 2., to amount, with a share of the profits, to
£50, on the child attaining the age of 18 or 20. The whole of the

amount paid in to be returned with interest, at per cent., to

the parent, in the event of the previous death of the child, or in

case of his desiring to withdraw, by giving weeks' notice.

TABLE 2.

CLASS 3.

Tontine Shares.

Entrance Fee Weekly subscriptions, 1^. The aggregate

of each year's subscriptions shall be collected into classes, according
to the then age of the nominee, and credited with compound interest.
At a specified age, 18 or 20,* the accumulated results of each year's
class shall be divided among survivors of that class.

That no new nominees be admitted exceeding the age of 11 years.
That the interest, yearly allotted to each class, from the proceeds
of the society's investments, be proportionate to the already accu-
mulated amount of money in that class. There shall bo, in all, 1 1

[* Tables 13 and 14 are interesting, as shewing the number of infants under
1 year of age, who survive to 18 or 20. If 1000 infants of both sexes were
enrolled in a Tontine, and dElOO staked upon each of them, the survivors at
20, supposing the money to have been, meanwhile, invested at 5 per cent,
compound interest, and their number to be 660, would receive a part of
.£265,320, or jC402 each for the £100 originally invested. This remarkable
increase in the value of money, contingent upon lives, may, evidently, be
adapted with advantage. — See also Chapter 2, Pari 2, on the Tontine principle.']

BENEFIT EMIGRATION AND COLONIZATION SOCIF.TY. 221

classes. Into any class, the nominees in which have attained to a
given age, new nominees of the same age may be admitted, on
paying afterwards a proportionate rate of subscription. The pay-
ments shall cease in case of the death of a nominee or nominees,
and the past subscriptions become forfeit to the society. A subscriber
may purchase the right to two nominations, for which the weekly
payment, somewhat more than for one, shall be estimated by an Ac-
tuary, so that, in the event of the death of one noiulnce, he may
nominate a second, out of his own family, or by the sale of his no-
mination right to some other person. The new nominee partaking of
all the privileges of the first.

Single deposits will be received in composition of future weekly
payments.

TABLE 3.

Age next

Week's i)ayment for a

birthday, j

Single Nomination.

Double Nomination.

Half-shares may also be issued on payment of an entrance fee of
Is. 6d., and half the weekly subscriptions for whole shares. An
allowance, to be fixed, from time to time, by the consulting actuary,
will be made on all subscriptions paid in advance, for a period of
not less than twelve montlis.

V. Advances and Repayments.

That sums of money, from £25 upwards, may be advanced to
those members, who have paid, at least, one year's subscriptions, ac-
cording to the scale of repayments in Table 4, with such security as
the directors shall consider adequate and sufficient.

228 BENEFIT EMIGRATION AND COLONIZATION SOCIETY.

TABLE 4.

Provided, that a certificate be obtained (in the case of money being
advanced to a member vi^ho has purchased therewith land, through

the Emigration Company of London), that the land, so purchased,

is adequate security for the same. That the sum for which security
by a mortgage on the allotment of land shall be taken, shall be the
diflFerence between the amovint of money advanced and the total of
the net subscriptions paid up by the borrowing member. Provided,
that such net subscriptions be first charged, with all necessary
declarations for arrears of fines, fees, &c., and with a proportion of the
past expenses and losses (if any), of the society; provided also, that,
towards the liquidations of his repayments, the borrower be credited
with his proportion (if any), of the profits of the society, that may
have been realized, in the opinion of the consulting actuary, previous
to the time of his (the borrower) obtaining an advance. That, in
no case, shall the amount of money advanced exceed two-thirds of
the cost of the land which the borrower purchases.

That, in consideration of the aforesaid repayments so agreed,
borrowing members shall not be called upon to contribute any other
sums after the date of their advances, towards expenses or contingen-
cies, excepting such fines, transfer or other fees, as may be hereafter
mentioned in these rules.

That, any member for whom an allotment of land shall have
been procured, shall, within a period previously agreed upon, be
ready to proceed to the place where it is situated, and to occupy the
same, subject to the forfeit of a sum not exceeding one half of his

paid-up subscriptions, unless the board of directors of the

Emigration Company of London shall give an extension of time,
or unless he succeed in procuring another member to go out in

his place, in which case a transfer fee of shillings shall be paid

by him to the general fund of this benefit society.

That the expenses of legal enquiry into the purchase of the pro-
perty, and of the survey, shall be borne by this benefit society from
its general funds.

BENEFIT EMIGllATION AND COLONIZATION SOCIETY. f^^9

Tliat the repayments, in case of advances made upon lands in the
colonies (to a value exceeding the net amount of a member's sub-
scriptions), shall be made at the end of the first year, next following
the arrival of the ciuigrant to the seat of his allotment, and shall
continue, after that, to be made for the full period for which the
advance may have been originally taken, unless the mortgage be pre-
viously redeemed ; and that, in all cases, such repayments shall be
due on the 1st days of January, April, July, and October in each
year, and be respectively made thereon.

That the directors of this society shall have power to make

arrangements with the Emigration Company, that

all Rents, and other payments due to this society, may be duly col-
lected and received on its behalf, by the instrumentality of tha
Emigration Company, at such remuneration, by com-
mission or otherwise, as may be found advisable.

That this society shall receive deposits of any sum not less than £5,
allowing interest at a rate not exceeding — per cent., payable yearly.
VI. Security for Advances.

QThis, and additional rules, will be required, similar to those in
the draft set of rules for a permanent benefit building society. (See
page 94^. The mortgage and conveyance deeds must be settled ac-
cording to the laws of the colony or state where the land is situated.] "

85. — *The directors of the central company, by means of a
debenture or otherwise, can give an undertaking that the
company shall be liable to the branch society, either for a
return of the money received, with interest, or to provide its
equivalent in kind, that is, in the shape of land, buildings
thereon, or other requisites.

86. — The funds of either company or society should, in
the event of more money being subscribed than there is re-

* [It may be thought, with some justice, that the jjlace of such a central
company should be taken by a parental government, as having all the means
and appliances ready at hand to carry out the desired object. In our opinion,
however, an ordinary joint stock company, with sufficient privileges and
powers obtained Iroin parliament, suitable to the vast national importance of
its operations, would find its advantage in undertaking the business, as a sim-
ple commercial speculation, where the profits would be large, and the risk
inconsiderable. 1

230 BENEFIT EMIGRATION AND COLONIZATION SOCIETY.

quired for immediate use, be at once invested in government
or other good securities, so that they may be always realiz-
ing, at least, a moderate rate of interest.

87. — In the above it is seen, that the investers who become
emigrants will either complete at once the purchase of the
land,* at wholesale price, through the central company, with
their own money, when they have saved enough for the pur-
pose ; or the benefit society will grant them an advance
to complete the purchase of the land and colonial requisites,
provided the emigrant can himself pay down a portion (say
one third), of the total cost thereof. The remainder being
secured by a bond for a short period of years, or, perhaps, in
select instances, for life, with the aid of a fpolicy of assurance.

* [The following is a summary of the modes of sale and prices in the prin-
cipal land-selling colonies on the present system of land-sales and emigration.

COLONY.

Mode of Sale.

Piice per Acre.

North American
Colonies — •
Canada (West)..
Canada (East) ...

Nova Scotia

New Brunswick .
PrinceEdwardls.
Australian Colo-
nies—

8s. currency.

6s. & 4s. ditto, according to situation.

Is. 9d. sterling.

3s. currency upset price.

5s. or upwards, according to situation.

Lowest upset price, £1 sterling.

Lowest upset price, 8s. sterling.
Ditto 6s.

Ditto £1.

Ditto

By Auction.

Country Lands not
sold at the public -
sales may afterwards
be bought at the
upset price as a
^ fixed price. J

Auction, ditto, ditto.
Auction, ditto, ditto

Port Phillip

Western Australia.
South Australia . .
New Zealand ....

Other West In- )
dia Colonies. )
Cape of GoodHope
Natal

Ditto

Ditto 2s.
Ditto 4s.

Ditto iDitto £1.

Hong Kong

( Do. only leases )
( granted )

Rent to be ascertained by auction.

The system of sale, whether that adopted by the Government of selling
waste lands at an upset price, or that of the New Zealand and other Com-
panies, of selling the land, including prospective institutions, at a uniform and
greatly enhanced figure, is obviously susceptible of immense improvement.]

•j- [The allusion in Article 41 to the possible aberrations in the law of mor-
tality, upon which, as a basis, the assurance of colonists would be graduated

BENEFIT EMIGRATION AND COLONIZATION SOCIETY. 231

88. — The debt would be cleared off by periodic instalments,
calculated to bring in an advantageous interest to the com-
pany. It is clear, that if a benefit building society can realize
a handsome accumulation on its funds, by enabling some of its
members to purchase property, there is no reason why land
should not be bought abroad by emigrants. Through the
credit afforded to an emigrant member being, in general, not
more than two-thirds of the marketable value of the property,
although with the money which he has already paid in as an
invester it would be sufficient for his purpose, the benefit
society, at once, will secure a salvage ; inasmuch, as if the colo-
nist should, at any time, even after the first year, neglect his
repayments, the margin of the value of the property will pre-
vent any loss. The society would also serve as a kind of Savings'
bank for provident people and intending emigrants; whilst the
endowment and tontine classes would prove a great convenience
to parents and relations, who may desire, at some future day, to
send out a son or brother, and are willing to begin subscriptions
on his account, at an early age, on the scales of those classes.

89. — For greater security to the branch society, we recom-
mend that one or two of the directors, or some efficient person
on their behalf, should (ex officio), be entitled to be present,
and to vote at the general meetings of the central company.

90. — Any hesitation, relative to the security of their sub-
scriptions, that might exist in the minds of those members of

by the emigration company, brings us to the question of how far a properly
adjusted system of extra premiums might provide against such contingencies
as those referred to, or against the increase of mortality whicli might be con-
sequent upon a change of climate, or upon the absence of that sound medical
advice and other resources for ill hcaltli and accidents which are so accessible
in Europe. Our own impression is, that the change of occupation and scene,
and the feelings of content, which prosperity in the new country would bring,
are likely to counterbalance the effect of all other contingencies. Hence, the
application of the principle of extra premiums, to be strictly equitable, should
be effected on the mutual system of assurance ; so that, in the event of this lat-
ter view proving correct, the colonists may have returned to them, by way of
bonus in cash or colonial requisites, that portion of the extra rate which was
charged in excess. A mutual system of extra premiums would be all the more
advisable, in the case of an extensive amount of colonial business, as the present
rates charged by most of the European offices are entirely empii-ical, and have
no real relation to any law of colonial mortality.]

232 BENEFIT EMIGRATION AND COLONIZATION SOCIETY.

the benefit emigration societies, who do not contemplate emi-
grating, would at once be removed if the central colonization
or emigration company were to undertake the granting of
guarantee assurance policies, against the risk of loss upon
advances to colonists. For a very small premium upon each
transaction, paid by the benefit society to the company, and
previously charged to the colonist, the latter institution might
safely imdertake to guarantee, collaterally with the mortgage
upon the property, the benefit society from loss, in case of a
colonist becoming, intentionally or involuntarily, a defaulter.
The losses, that occur in extensive loan transactions, are
within an average limit, which can be determined with suffici-
ent approximation ; and a scale of premiums for loan con-
tingencies may safely be adopted; reference being made to the
contingency theorem, in Section 4 of the Appendix.

91. — *Such a system of Loan-repayment guarantee would
fall within the range of most legitimate business for which a
company might even specially be formed, and the rates of pre-
miums would be trifling. The guarantee, being protected by
the collateral mortgage upon the colonist's land and property,
would be in this advantageous position, that every succeeding
year would see the intrinsic value of the mortgaged security
increasing from the improvements effected by the colonist
upon the land, and from the influx of emigrants into the
neighbourhood ; whilst the out-standing amount of the debt,
yet to be repaid, would be regularly diminishing.

* [The Loan Guai'antee System, above suggested, is widely different, in its
operation, from the recent plan denominated Rent Guarantee, which is in-
tended to assure landlords against defaulting tenants. For it is plain, that in
the rent guarantee, the society has no tangible security upon which to recover
its payments to a landlord in case of a tenant taking his departure from a
house without settling his rent ; hence the premiums must be heavy. If, how-
ever, the rent assuring society undertake to make proper enquiries into the
responsibility of the tenants, relatively to whom policies of guai-antee are to be
granted; and, if the rates be sufficiently high, such a company might do a safe
and profitable business, and be of great public advantage.]

APPENDIX.

The following pages contain the elementary propositions of
Compound Interest, which relate more particularly to the
system of Benefit Building, and other Investment, Societies,
together with* several theorems, which have been specially
deduced as bearing upon the subject. In Section 4 will he
found articles referring to financial clauses in the Rules or
Deeds of Industrial Associations, and suggestions for the ap-
plication of a Deposit System of Subscriptions, and of Life
Assurance, to the extension of their operations.

SECTION I.

ON THE ACCUMULATION OF A SINGLE SUM AT COMPOUND

INTEREST.

Art. 1. — To find the amount 8 to which a sura P will accumu-
late in n years at compound yearly interest i per pound.
Since i is the interest on ^1 for one year, or
P . ^ „ „ <£P for the same time.
.*. The amount of P with interest in one year is P . (1 + i).

Again the amount of P with interest in two years will, of course,
be equal to its amount, at the end of o?«e year, re-invested
for a second year; or, to the amount of P (1 + i) with
inteiest in one year; that is, it will be equal to

P . (1 + i) + i • P • (1 + I)

= P . (1 + 0'

Similarly the amount of P with interest in three years is

= P . (1 + i/
and so on for n yeais, where n is any integer,

...S = P.(H-if (1)

In the above the time is expressed in years, but, from the
nature of the reasoning, equation (1) will represent the amount

* [The theorems and articles marked thus f have a special relation to each
other.]

234 APPENDIX.

of P at the end of an integral number of any intervals of time,
at the end of each of which interest is due after the rate of i per
pound.

It is, however, not applicable when n is a fractional number of
the form n = n^ -\- —r, where n, is an integer and -r a fraction of
a year, as the interest was supposed only due at the end of suc-
cessive equal intervals of time, and, theoretically speaking, no

a
allowance of interest can be made for the broken portion -r-i

consequently, this hypothesis must always be remembered, and
if results be deduced from equation (1) relative to n, n must
always prove to be a whole number (see Art. 12). In com-
mercial questions, nevertheless, it is usual in such cases to calculate
by equation (1) the amount due at the expiration of the last full
period, and to add to it simple intei'est for the fractional remainder
of the time; so that

The amount of P in f w, + -r- ) years

= amount of P in n^ years + simple interest on that
amount for the portion -y- of a year.

= P.(l + 0^^ + ^x P(l + i)^''

= P.(1 + ^)^(H- y) (2).

2.— If the interest be due, in equal instalments — , at the end of
each interval of time equal to the mth part of a year, the amount
at the end of mn intervals will be

s=p-(i+^r-" (3)-

This result can be adapted to the case of interest being paid, or
due, half-yearly, quarterly, or monthly, by making m = 2, 4, or 12
respectively.

APPENDIX. 235

3. — If the interest be supposed due momentaneously, or at the
end of each moment of time, in equal portions — , m being inde-
finitely large, then the result in equation (3) assumes a peculiar
form.

For, expanding by the Binomial Theorem,

I 1 m 1.2 vf (

ice the terms con-

taininfj — , — ;, vanish when m is indefinitely larjre.

m m

.-. S = Pe'** (4).

e being the base of the Napierian or Hyperbolic logarithms, and
= 2-71828 nearly. (See any Treatise on Algebra.)
To this equation we will return further on.

4.— Since (1 + t)^can be put under the form (1 + ?"/^'-(l + if^''
where w, + ^3:= n, we Imve Theorem 1: — That the amount o^£].
at the end of w years by the accumulation of Compound Interest is
equal to the products of its amounts at the end of n, and Wj years
respectively.

This property serves to make Table 3 give results, which are not
contained within its limits.

Example.
Let n = 30

The last number in the table is 25, let w, = 25, then n^ = 5
And the amount at the end of 7i years = £3.3863 x .£1.2762

at 5 per cent. = £4.3216.
Similarly, if n = w, + /?2 + + "r

(1 + if = (1 + if} (1 -1- ,-)"^ . (1 + ifr

236

APPENDIX.

5. — From the preceding expressions it is seen that :

When interest is payable more frequently than once a

year, there is a difference between the nominal annual

rate of interest, and the true rate or actual annual

interest realised.

For Mi = the nominal yearly rate of interest per pound, and it

be payable in m periodic equal portions — in the course of a year,

then supposing each instalment to be invested and to bear interest

after the same nominal rate,

The true rate = the amount of ^1 at the end of one year — ,£1.

.VI

= (i+i) -1 (5)-

If the interest be realised momentaneously, then

The true rate of interest becomes = e — ] ... (6).

Hence a table may be formed showing the true rate per pound
for various values of m.

If m = 2, the true rate for interest paid half-yearly
m = 4, the true rate for interest paid quarterly,

m = 12, the true rate for interest paid monthly,

( i V- 11 55

= l^ + T2J -1 = * +24*" + 432-^'"'^'^y-

m = 52, the true rate for interest paid weekly,

( , i Y' 51 425 .

= U+52J -1 = ^ +104 • ^^ + 2704 ^^"'^'•^^-

»» = a , the true rate for momentaneous interest,

i -, . *■ ^^
= e — 1=^-^- — -\- — nearly.

The two last results shew that the weekly and momentaneous
rates of interest differ but little.

APPENDIX.

237

Table 4 lias been formed by giving, in the above, to i different
values for successive rates of interest, and it is accurate to three
places of decimals.

6. — In equation (6) let ^ = e — 1.

Taking Hyperbolic logarithms,

i = Loge {I + k) (7).

and this equation gives the nominal annual rate of interest i,

realised momentaneously, which corresponds to a yearly rate of

5
interest k. Example : Let k = jr--r

.-. i = Log, (1 . 05) = .04879

or j64.879 per cent, per annum momentaneous interest is equi-
valent to 5 per cent, per annum paid yearly. (See Table 5.)

7. — The general result in equation (1) can be put under the

form

S = P ( 1 + ^ ^ I "^

Hence, Theorem 2 : — The amount at the end of n years, arising
from the accumulation of interest yearly at the nominal rate of i per
pound, is equal to the amount at the end of ( — j years, arinng
from the accumulation of interest m times a year at the nominal
rate {m.i) per pound:

Or, in other words, -f Theorem 3: —

The amount of a given sum, at the end of any number of
periods of time, does not depend on the length of time in each
period, but only on the number of them, and the quantity of
interest due or payable at the end of each.

238 APPENDIX.

Example : Let m = 2. f n\

or the amount of P in ra years at i per pound nominal rate of
interest payable once a year, is equal to the amount obtained at
the end of — years at 2 ^ per pound rate of interest payable half-
yearly.

Referring to Table 6, if w = 50, and z = .04 payable yearly,
the amount of £\ in 50 years is 7*10668, which is the amount
that would be realised in 25 years at 8 per cent, rate of interest
payable half-yearly.

8. — If the amount A of a sum P at the end of w years be given
by the tables at yearly interest, the amount Aj can be deduced
when interest is payable m times a year.

m ^ n

For A, = p|i + -ir*'=p(i + *mOj|1w_|

i 771 (7)1 — 1) t2 n

) 7)1 1 .2 7n- I

( nh S

^ 6--) f

I 1-2 i

neglecting the higher powers of i, which, as i is a decimal fraction
of the order — , may be done when w is not very large, we have

nearly, and

., = A<: + — ^ 2i£.ic ^nearly (1).

APPENDIX.

239

9. — Remark. The preceding equations contain all the for-
multe necessary for the determination of any qnestion connected
with the accumulation of a single sum from compound interest.
Several results can be deduced from them, which are worthy of
notice.

Tt is seen that the hypothesis of raomentaneous interest con-
sidered in equation 4 introduces the base of the Napierian or
Hyperbolic logarithms, which possesses many important pro-
perties. Although that hypothesis is not generally used, yet it
gives rise to various theoi'ems, which can be adapted with suffi-
cient exactness to the actual conditions of practice.

ni
10. — Equation (4) gives S = Pe , .*. taking logarithms and

denoting as before by Logg the logarithm to the base e, we have

S
n . i

= I^Oge(p) (1).

= a constant :

or, supposing interest realised momentaneously, f Theorem 4
ai'ises : — The product of the nominal yearly rate hy the number of
years, in which a sum P 7vill amount to S, is constant, or the same
whatever be the rate of interest : in other words. If V amount to S

in N, years at i, per pound interest, then P would amount to S in

N . ? i

— 5J_J years at i^ rate of interest, or in q.^ years at — rate of

interest.

Example: By Table 6, £1 will amount to £7-38906 in
50 years at 4 per cent, momentaneous rate of interest.

Hence, £1 ought, by this theorem, to amount to the

. 50X-04 __ ^^

same sum m — -— — years, or 25 years, at b per cent.

momentaneous rate ; which is also shewn by Table 6
to be the case.

240 APPENDIX.

11.— Let S =/. P in equation (1) .-. rij . i = Log^ /

•■• ^^"^ ~1~ ^ ^'

or, -^Theorem 5 : — The number of years, in which, by the accu-
mulation of momentaneous interest, a sum will become f-fold its
original value, is equal to the Log^ f divided by the nominal
yearly rate per pound.

LogeS

If/ =2,

^
.693147

(3).

See the extract from Tables of Hyperbolic Logarithms con-
tained in Table 12.

If/ =3, »,= ^°''3

■I

L098612

(4).

And so on for other values of f.

If for '/ we put — -, I being the interest per cent., we have,

from eq° 3. The num,ber of years in which money will become
doubled at I per cent, rate of interest realised
momentaneously is equal to 69 3] 47, divided by
the rate of interest I.

from eq° 4. The number of years in which money will become
trebled is equal to 1098612, divided by the rate
of interest.

12. — Respecting the Time of doubling at yearly interest.

If in Equation (1), Art. 1, or S = P (1 + i)" (1)

we suppose S = 2 P, then 2 = (1 + «')" (2)

which shews that n cannot be an integer, as 1 + i is a fraction.

APPENDIX. 241

But, as we have stated before, Art. 1, equation (1) can only be
applied when n is an integer, hence it will not serve to determine
the time of doubling when interest is paid yearly ; nor can any
equation do so, as, theoretically speaking, there can be no time of
doubling for interest expressed by a commensurable fraction, and
paid at the end of finite intervals.

Most writers have overlooked this consideration, and have

Loo-e2

erroneously given the values of n deduced from n = ^ -^ — :r

•^ *= Loge(l^-^)

for various values of i, as being the corresponding times of
doubling at yearly interest (see Table 7). This amounts to sup-
posing the money to accumulate cont'uiuously by a compound
momentaneous interest Log^ (1 + i) throughout the whole time,
in which on such an hypothesis it would double, instead of in-
creasing as it does per saltum at the e7id of each year; or that the

n n Loge (1 + 0

expressions (1 + ^) =2 and e =2, which represent

different hypotheses, are interchangeable.

The results thus obtained are of no mathematical value, althoufrh

they differ but little from those that might be deduced from the

commercial view of the question, see Equation (2), Art. 1, which

supposes a proportionate amount of the yearly rate of interest to

be paid, when there is a fractional number of days over.

13. — When interest is payable w- times a year. Equation (3)
. m n
Art. 2 gives S = P(1-1 j , where m . n is an integer.

••• I^oge - = m.n. Loge (l + ^)

Lets =/.P
then we may still assume the equation to hold approximately,
whether m . n remain an integer or not, provided the intervals of
conversion of interest be frequent.

m .rtf =

1-oge,/'

\ in I

..(1).

242

APPENDIX.

— &C.

And when /"is not very large we have with sufficient approxima-
tion, \Tkeorem 6: — The number of finite intervals of time (each
equal to the m^^ part of a year), at the end of which money will
accumulate to /-fold its original value, is

I^Oge / Logp f , /o\

— 054- — __ — J J ^^^ nearly. .(2)

per pound in each interval > O •' v. /

rate of interest per pound

i
since i is a decimal of the 2d order, and the higher powers of —

may be neglected.

* [The reciprocal of Log (1 -f-a:) can in general be expanded in a series
by the following method : —

Let

= 0 + a, X 4- «„ ^^ + +1 *'' -\- &c.

Log^(l+ a:)

^ = I "„ 4- "1 ^ + «2 ^- +• • • • }• Log^ (1 -f x)

= ja^ + a,. x + a,.^+.. .. jjx-^ + l~&c. |

«„ *■ + "i ^"^ + %

^ 3

a'3 +....+ a^

r -t- 1

Whence o^ =1, a, = y, a^ - ^

1 2^
1

r+1

'+&C.

12
1 —19

24' '^■« ~ 720 ^"*^ generally o^ is given by the equation

r — 1 j^ r — 2

(-ir

r-f- 1

o....(l)

■ Log- (I +i) "^2 12 ~^ 24 720 "^

Log, (1 + I)

APPENDIX. 243

14.— Let/ = 2 then Log, 2 = -693147
.*. The number of inter-
vals of time (equal to

m'h part of a yeai-) ^ '^93147 + -3465
at the end of which ( — ^
money will double ^ *'* ^

= 69-3147 + -3465 nearly. .(3)

rate of interest per cent, in each interval.

15. — The results in Table 7, and Equation 3, shew that,

generally, as regards the integral part of the time of doubling, we

may assume for the sake of memory, -^Theorem 7, that the

70
Time of doubling = nearly,

rate of interest per cent. *

70 being the whole number next above 69"3147.

Or, " The number of years in which money will double itself
at compound interest is, in round numbers, equal to that rvhole
number, which is nearest to the quotient obtained on dividing 70
by the rate of interest per cent."

When i is greater than .10, a higher dividend than 70 must be
taken. In the generality of commercial operations, however,
interest does not exceed 10 per cent., and this approximate rule
will suffice for all practical purposes.

1 1 1 i; .t" 19 a

When X is a fraction, as in the case of r == i rate of interest per pound,

then the series converges rapidly.

1
Also if for X we put —

Log,(l+-^)

this form we shall make use of afterwards.

It will be noticed, by such of our readers as may be familiar with the higher
branches of analysis, that the coefficient a^, as determined from equation (1), is
equal to the value of the definite integral

''J_ jy-l g(l-5) {2-t) (r-l-z)dz

where % is integrated between the limits z =^ o and z = l.j

244 APPENDIX.

16. — In simple interest there is a corresponding property. If
N = number of years in which a sum P will double itself at
simple interest I per cent.

100

N.I

100

.'.

100
I

17. — On the successive Stages of Accumulation of Capital.

In Art. 13 we have deduced eq° (2) a simple expression for the
value of rif, or the aggregate number of years that are required
to make a single capital become ^-fold its original magnitude ;
and Art. 15 affords an easy rule for memory when/ = 2; we will
now proceed to deduce an approximate relation between the suc-
cessive quantities a, a^ a/_, a^, or between the additional

numbers of years, or multiples of equal intervals of time, which
are required to make a single capital P pass through the suc-
cessive stages of accumulation, by compound interest, from 1-fold
to 2-fold, from 2 to 3-fold, from /-fold to (/ -h l)-fold.

Thus, representing generally by 0j '' the process of accumulation,
at interest (yearly, m"''>', or momentaneous), by which the capital
P passes from r-fold to (?• + 1) -fold, we have

2P = P.^i"' .-. a. .Log,^; = Loge2

3 P = 2 P . 0,°^ .-. a, . Loge <p, = Log, ?-

(/ + 1) P =/. P . </'."•' ••• «/ . Loge 9i = Loge (l + j)

or the quantities a, Oj . . . are to each other in the ratios of the
logarithms Log, - Loge 5 ^oge (l + jj respectively.

Hence the Mates of Velocity of arithmetical augmentation of
capital are in the inverse ratios of those logarithms; or

APPENDIX. 245

■\-Theo7'em.8: — If the s^^ec'iRc \e\oc\ty of doubling be represented
by unity, the relative velocities of attaining successive units of
capital would be represented by

Loge 2 Logeg Loge 2

I^Oge^ I^Og,- L0g,(l+-)

or by the logarithms of the number 2 taken to the successive

bases ^ • o) \ 1 + T- \ or,* very nearly by

1, 1.70, 2.40, 3.10, 3.80, &c.
which are the terms of an arithmetic progression of which the
common difference is .70, a number which has already been used
in Art. 15. (See forward, Section 4.)

* [These terms are obtained thus: by note to Art. 13
Loge(l4-j^ ^ -^

= |ri+(/— l)X.7o] -px. 00685 -.04657 -.y|^^J + &c.(

= I 1 4- (/— 1) X • ''0 j nearly (1).

if we neglect the other terms, which are small until / is very large, and in the

Log^ 2
aggregate do not affect the first decimal place of the value of -; r— >

Loge (l + j)

a degree of approximate accuracy sufficient for the determination of ratios, and
agreeing with the results obtainable from the Table of Hyperbolic Logarithms.
The results above are in deficit, while/ does not exceed 5, and the converse for
subsequent values.]

246 APPENDIX.

SECTION II.

OF PRESENT VALUE AND DISCOUNT.

Art. 18. — When money is calculated at compound interest, the
present value, or sum to be given at present, instead of a payment
due at the end of a certain number of years, must be such that, if
laid out at interest for that time, it would become equal to the
amount due. The problem of determining the p7-esent value is
consequently the inverse of finding the amount, to vv'hich a sum
of money vpould accumulate at compound interest. The principles
adduced in Section I. will apply here.

The discount on a given sum is the difference between its amount
at the future time when it will be due and its present value.
Let P = the present value,

S = the sum due at the end of n years (called the
amount in Section I.)

i = the yearly rate of interest per pound,
then P invested at compound interest * for 7i years must become
equal to S, .-. by Art. 1,¥.{1 +if = S

.-. P = — A__ = S (1 + i)-"" (1).

(1 + ir

where n is an integer.

And if D = the discount,
D = S - P

= S[l-(l+0-^| (2).

If the value of D be expanded by the Binomial Theorem,

D = S il - (l-n.i +^-^^ .i'- kc. .. )

= S .ni — &c.
shewing that the common rule in practice of taking T> = S n i \s
found by neglecting the other terms of the series.

If « be not a whole number, then equation (2) Art.l, must be used.

APPENDIX. 247

19.-Since P = ?

(1 + if'

if we have a table shewing the amount (1 + i) to which ^1 will
accumulate in n years at compound interest, the present value of
any sum S due in n years will be equal to the quotient of S
divided by (1 + i) .

Example: To find the present value of ,£30 due at the end of 5
years, supposing interest to be compound at 3 per cent. : —

Now Table 3 shews that the amount of ^1 in 5 years at 3 per
cent, is £1-1592,

.-. the present value of £30 = ^^ = £25-8799

20. — If the interest, instead of being supposed payable only

once a year, be payable, in m equal portions — , m times a year ;

m n

then, as before, P/'l+-!-^ =S

.•.P = S.(l + ±\ (3).

21. — If the interest be realised momently or 7?i = a, then,
by Art. 3, P . e"^ * = S

.-. P = Se~"^* (4).

D = S (l-.-^O

It will be observed, that the problems connected with present
values differ from those relating to the amount of money by the
introduction of — n for + n.

248 APPENDrx.

— n — w, — Wj

22.— Since (1 + i) = (1 + i) . (1+0

where n = Wj + n^, we have for present values

a property corresponding to that in Art. 4, viz. Theore^n 9 : —

The present value of £,\, due at the end of n years, is equal to
the product of the present values of ^1 due at the end oi n^ and n^
years respectively.

Similarly where n =: n^ -\- n^ + n^ + &c.

23. — It has been shewn that, when interest is supposed pay-
able once a year, the present value of a sum due n years hence is

= S . (1 + i) , but when interest is supposed payable m times
a year, the present value = S . ( 1 H )

Now ( 1 H ) is greater than (1 + i), which can be seen at

once by expanding ( 1 H ) •

/ i \^^ f \^

Hence, (l4 J is>(l+ij

•■■ (1 + 0 ■•'>(i + ™)

— n

.-.8.(1 +;) is>S(l + -)

Or, The present value of any sum S due n years hence, is
greater, if interest he sujiposed payable only once a year, than if
it be supposed payable m times a year.

Similarly : The present value is less in proportion to the greater
frequency of the intervals in each year, at which the interest is
supposed payable.

APPENDIX.

249

24. — If the present vduc P of a sum S duo n years hence be
given by the tables, supposing interest payable once a year, the
present value P, can be deduced when interest is payable w times
a year.

— m n — n ( r i \ \

= p

= p <

i m . (vi — 1) . P
1 4- ?;i . — + \-^ — <- — , + &c.

, . \ m /

i- + i + T o + &C.

1 .2

1 + i

c ^1 ^-^

= P i 1 + " ^^^ .i^i nearly, wh
(. 1.2 3

ence ne^lectino;

higher powers of?*, which, i being a decimal fraction of the order
-^^, may be done provided n be not very large.

», = P > 1 _ \ m J . P > nearly

( 1.2 3

(1).

Example : Table 8 shews that, when interest is payable yearly,
the present value P of ^10 due 4 years hence at 5 per cent, is
= 8-227.

If interest be payable half-yearly, or m = 2

Then 71 . (l--) . i. _ 4 . {^^^j}^ ' ^S)-^
1.2 2

= • 0025
.•. P, =8-227(1 —-0025)

= 8-227 X -9975 = 8-2064.

250 APPENDIX.

25. — Respecting the difference between the present values of the
same sum S due at the end of?? years, according* as it is calculated
at compound interest ?', per pound or i^ per pound ; or on the mode
of ascertaining the surplus jivojit in discounting hills, or shares,
2)ayable at a long date : —

Let p. = present value at the rate of interest i,

P. =

If interest be realised only once a year,

P - P = S (1 + ^0~"- S (1 + i.,)-''

h '2

If interest be realised m times a year,

— VI n — m n

If interest be realised momently,

P. —P. = S Je""^''— e~^''^j (3).

From these equations we have TheoremlO: — That the difference
between the present values of a sum of money S due in n years, esti-
mated at different rates of interest, increases up to a certain point
with the value of « and then diminishes. That is to say, if one pei'son
A obtain a present loan P. from another person B, in return for
which he is to pay S at the end of n yeai's ; and A, out of the
money he has received, lend a sum P. to a third party C, for

which at the end of the n years he is also to receive S, wiiich will
enable to pay off his debt to B, then there is some value of «, such
that the immediate profit derived by A is greatest. {Vide Sect. 4:).

[Note to Art. 25. — When the interests are momentaiieous, or
the expressio7i is a continuous function of the variable n, the
maximum value can he determined at once by differentiation.

Taking equation (3), let

S — n ij — 11 12 \

_n z= \ e — e J=a maximum.

j'l being less than ij.

Difterentiating with regard to n, we get by the property of maxima and minima :

(see any Treatise on the Differential Calculus),

— — — e '.Ji-fe ^ . hi= 0

APPENDIX.

251

" ('2 — »i) _ h_
.: e j

« • ('2 — «:) = Loge H — Loge M

Loge h — Loge 'l ('^)-

To determine whether this result gives a maximum or minimum, wc nnist
differentiate a second time :

d^tt — nil . - — « >i ■ ^
= e ■ i\ — e .12

e-« l2 ./ f 1 _ ^n{i, - ;,) Ji! ^

— W '2 • ^ ^ I '2 '>^ ^

(by substituting in the bracket the value of n found above),

= — e • i2 I '2 — «i ^ ,

which is negative, since fj was assumed to be less than /o ;

.•. the value of n in equation (4) gives the number of years, for which the

difference of the present values is a maximum.

Example: Let ij = "05 22 = "06.

Loge 6 — Loge •'

n :=

6 — 5

100

= 100 (Loge 6 — Loge 5)
= 100 (1-791759 — 1-609438) see Table 12.
= 18-2321 years,
That is to say, the diflerence, between the present values of the same sums
discounted respectively at 5 and 6 per cent, momcntaneous interest, is greatest,
when they are due at the end of 18-2322 years,

The above process will not serve (or yearly interest, as the function of n varies
hyjinite yearly increments in the value of n, and Difterentiation does not apply.
The very definition of a ditterential co-efficient has, by a strange oversight, been
overlooked by several skilful writers on Interest, who have, probably through
want of consideration, applied the differential calculus. But the time may be
deduced indirectly from equation (4) by substituting, for the yearly interest, the
equivalent momentaneous rate.]

252 APPENDIX.

SECTION III.

ON ANNUITIES.

Art. 26. — To find the amount of a yearly annuity of £\, payable
for n years, supposing compound yearly interest at i per pound.

Unless the contrary be mentioned, annuities are supposed pay-
able at the end of each year; and on this hypothesis tables are
usually constructed. It will hereafter be shewn how such tables
can be adapted to find the amount or jiresent value of annuities
payable at the beginning of each year or otherwise.

The motive for the analytical investigations in this section, pro-
ceeding on the supposition of the annuities being payable at the end
of each year, or other interval of time, consists in the simplicity
attending the reference of annuities to that Sum, which would pur-
chase them, or to that of which the annuity is the Interest; as, in
either case, whether it be purchased, or payable as interest, each
instalment is due at the end of each year.

Let A be the symbol of the amount of an annuity of £1 for 7i
years.

The expression can at once be found from that of the amount of
a single sum ,£1. Art. 1.

For (1 + i) = the amount of a single sum ,£1 at yearly interest
i per pound in n years.

.*. (1 -|- ?') is the accumulated amount of a single sum £ —

"^ . 1 '

at yearly interest £1 on the sum — in n years.

(1 + 0 1

Tlie difference -. ~7 is therefore caused solely by the

APPENDIX. 253

accumulations of the yearly £1 during tliat time, or it = the
amount of\£l annuity in 71 years.

.■.A^, = (\+4^ (1).

So that an ainiuity- tabic can be calculated at once from a tai)lo,
which gives the accumulation of a single sum and its compound
interest foi- any time. {Vide Table 3.)

27. — Aliter. Again, A = the sum of the amounts, to which
each periodic instalment of the annuity, separately, accu-
mulates at compound interest.

Now the/i/'i;^ instalment accumulates during (« — 1) years, and

therefore amounts to (! + ?") '. The second instalment bears
compound interest for one year less, and therefore amounts to

(1 + i) ", and so on. The Just instalment being paid at the
end of the ?^^'' year bears no interest, and its amount therefore is
merely ^1.

.-. A,^ = (1 + 0''~' + (1 + 0"""' + . . + (1 + 0 + 1

_^ (by the principle of geometric
series.)

£1.
£1,

\ (1 + if'

-1

■ (1 + 0-
(i+.:f-

-1
-1

.'. For an annuity of £,a the expression is

g. ('+')"-! (2).

In this equation the duration of the annuity is represented by n
years, but it is obviously true whatever be the finite intervals of
time, of which w is an integral number, and for each of which
interest after the rate of i per pound is due. When solved with
regard to any of the quantities which enter into it, any one of
them can be found in terms of the rest. It may be mentioned,

254 APPENDIX.

that the solution required for determining i presents peculiar diffi-
culties, from the equation for solution being of the w"' order. — (See
Art. 45 in this Section.)

28. — Equation (1) will admit of many varieties of form accord-
ing to the different conditions affecting the quantities which enter
it : — As, whether the annuity or the interest are paid in more fre-
quent intervals than once a year ; or, whether the periods at which
the annuity is supposed payable are the same, or differ from those
at which the interest is due. In this Section we shall, however,
notice only those cases, where the periods are the same for the in-
stalments both of annuity and interest.

Let the annuity and interest be both payable m times a year in

equal portions — , — respectively, i being the nominal yearly rate
m m

of interest per pound ;

a
m
during m . n intervals, each equal to the m*'^ part of a year,

making the calculations at — rate of interest. Hence equation

(1) at once gives, putting — , — and m . n, for a, i and n re-
in m

spectively,

(1+-) -1
".-. A'„= a . A^ ^^^_ i....(2)

And by making m = 2, or 4, &c., wc have the amount of annui-
ties supposed payable half-yearly, quarterly, &c.

Then we have to find the amount of an annuity — payable

APPENDIX. 255

29. — If the annuity and interest be both supposed j)ayable at
monientaneous intervals, then,

-^(/■'■-l) (3)

•¥) ^- A (1 + if + ' - 1

= (L+ if- 1 + (1 + .;/

= A„ + (1 + i)

.-. A„+ , - A„ = (1 + if (4)

= Araountof a single sum at interest inwyears.
Hence, inversely, ■\Theoj'em 11 : —

A table of the amount of a sin/jle sum can be deduced, if re-
quired at once, by taking the differences of an Annuity Table.

31. — To find the present value of a yearly annuity of £X for n
years, payable at the end of each year.

Let P„ = present value required.

By a simple demonstration, as in Art. 26, since the present value
of £\ due in n years = (1 + ^)

The present value of the periodic instalments of tnferesi i on the
£1 must alone = 1 — (1 -i- ?) "~ ^*

(Since the diminution of value is ])roduccd by the interest de-
ducted.)

.•. Dividing both sides by i

.■7-n

P„ = the present value of an annuity of ,£1 = >;-_JL_LL. ... (1)

And an annuiti/ table of present values can be deduced at once
from a given table of the present value o{ single sums.

256 APPENDIX.

32. — Aliter, — again, P„ is tlie su7n. of the fresent vabtes of each
of the annuity payments discounted at compound interest.

Now the present value of the 1** annuity payment of £1,

discounted for 1 year, is

1 + i

„ the pi-esent value of the 2"^

discounted for 2 years, is

(1 + if
„ the present value of the 3''''

discounted for 3 years, is

&c. &c.

Similarly the present value of the last or w*^ annuity payment

of £1 disounted for w years is «

^ (1 + if

(1 + i) (1 + if ' (1 + ^)"

And this is true whatever be the value of n.

Summing this series by the rule of geometric progression,
1

And for an annuity of £a the expression is

= a{l-(l. + ')""} (2)

Tables 9, 10 and 11 give the value of annuities at various
rates of interest.

33. — The result in Art. 32 might have been obtained directly
by observing, that the present value of an annuity for ?i years is

APPENDIX. 257

equal to the present value of the avioiint of the annuity at the end
of n yeai's discounted for tliat time.

(1 + i)''
_ 1 f(l +0^-1

(By Art. 2G.)

(1 + ir '

.-. p = (i-q + Q-^O

• • A „ \ -y J

as before.

*«''^-£=^ ^^^^')-

Hence f Theorem 12 : — The difference between the Reciprocals
of the present value and amount of an annuity of £1 is equal to
the rate of interest allowed per pound.

Example: The p?-esent value of an annuity of ,£11 "72 a year
for 10 years, at 3 per cent., is £100; then, if the amount were
desired to be known at the end of 10 years, eq" (2 bis) would give
it at once equal £1 1 '4 nearly.

Again, eq" (2 bis) gives

1 J 1_ J_ ,^ .

or f Theorem 13 : — The difference of the reciprocals of the pre-
sent values of an annuity is the same as that of the reciprocals of
the corresjwndiny aimuity amounts.

Qi c- -D 1 — (1 + i)~ "~'^
o4. — oinccP,, ,= ^h '

1 - (1 + 0 • (1 + i)~ ''

'-zi(i+jr''-a^^

= p„ - (1 + 0"

.•.(l + 0~ =P«-P«-. (3)

* [This equation (2 bis) presents a property, that may be made of the greatest
practical service, in deducing, without reference to tables, the present value of
an annuity when the amount is known, and the converse. See also Section 4.]

258

APPENDIX.

i. e. the present value of a single sum due in n years = the
difference of the present vahies of an annuity for 7i and (w — 1)
years.

Whence, inversely, -f Theorem 14:: — A table of present values
for single sums can be deduced from a table of annuity-present
values by taking the differences.

35. — If the annuity and interest be payable in m equal portions
each year, the present value becomes

. — 7n n

i-(i + ±)

= T-{1-C + W) } W

And by putting m = 2, 4, &c. we have the present value of
annuities payable half-yearly or quarterly, &c.

36. — * If the annuity, as well as the interest, be payable mo-
mently, then

-^ ^ /i — ni\ ^-N

* [The results given above and in Art. 29 for momentaneous interest can be
found at once thus : —

Let the time, during which the annuity is payable, be represented
byT;
(It = an element of time ;
a i be the rates of annuity and interest respectively payable in

each unit of time ;
.". u dt = the rate of annuity in the time dl

,•. Amount of the annuity =^ J a^.e dt ^ a^ . — ^—

0 \

Also

~'i • "^
,.T — i| t 1 _ e

Present value of the annuity = / a .e dt = a^ . :

0 I

the integration being effected between tlie limits t = o and t = T.]

APPENDIX. 259

37. — To determine the relations between tlie amounts of a yearly
annuity of £\, according as it is supposed payable for n years, at
the end or at the hegmning of each year.

Let A = the amount of annuity for n years, payable at the
end of each yeai- ;

Then A = do. for {n -\- 1) years, &c.

Also let A" = do. for n years payable at the hegin-
ning of each yeai*.

Then, as in Art. 27,

A^ + , = (1 + if + a + *f "'+....+ (1 + 0 + 1

and a;; = (1 + if + (1 + if-' + . . + (1 + i).

This value of A" is found by remarking that the^rs^ instalment
of the annuity is improved for n years, and the last instalment for
one year.

.-. A- = A„^,-l (1)

This formula is important, as it enables the amount of yearly
annuities, payable at the beginning of each year, to be determined
from a Table for annuities payable at the end of each year.

38. — To determine the present value of an annuity of ,£1 a year
for n years, payable at the beginning of each year, from a Table
giving the present value of the same annuity, supposing it to be
paid at the end of each yeai-.

260 APPENDIX.

Let P = the present value of an annuity for (« — i )
years, payable at the end of each year ;
P" = the same for n years, payable at the beginning of
each year.
Now, by Ai't. 32,

P = 1 + . +

''-' (1 + i) {\^iy ^ ■" ' (1 + If-'
P" = 1 + — \ + \ + . + ^

^* (1 + ■/) (1 + 0' (1 + 0''~'

.-. P" = 1 + p (-2)

Example (see Table 10).

We find that £'4-5797 is the present value of £\ a year pay-
able at the end of each year for 5 years, calculated at
3 per cent, rate of interest.

Therefore <£'5-5797 is the present value of £\ a year payable
at the beginning of each year for 6 years.

39. — In the preceding propositions we have determined the
amount and present value of annuities. We shall now proceed to
examine the practical application of the formulae.

A given sum P is borrowed for n years. To determine what
annuity a, paid for that time in m equal portions — every year,
will pay off the principal and interest thereon also supposed due
VI times a year, m . n being an integer.

Here P = ^—^, (Art. 32.)

o =

m I

p(±)
1 - (1 + i)"

(1).

APPENDIX. 261

40. — Let the time n be siieh that the sum P, if unpaid, would
accumulate at compound interest to /-fold its original value. See
Art. 13.

Then /. P = P M + -If.

t "^ s

: From Art. 39 above, (—) = ^-^ . P ( -) (2).

V VI / J — 1 \ 711^

oi', a =

P-^ • (3).

WewcCy^Theoreni 15: — If a sum of money be borrowed for such a
time, that, if unpaid, it would amount to /-fold i(s original
value, then the annuity which would pay it oft", principal
and interest, in that time is equal to — - — - times one
year's interest on the debt.

The accuracy of the theorem requires that the intervals, at
which the instalments of the annuity are paid, should be aliquot
parts of the whole period, over which it extends. When the interval
is small, as in the case of monthly payments, the formula (2) may
be applied without reservation, and differs by an inappreciable
quantity from the truth; and even for yearly payments the error
in (3) is practically of no importance.

In proceeding to apply this theorem, we shall consider f as
given, and equal to some whole number, in which case m . n is
always fractional, but this circumstance, for the reasons above
given, will not interfere with the practical accuracy of the solution.

41. — Let _/ = 2, or the time be tliat in which money would
double at comj)ound interest. — See Art. 13.

.-. From equation (3), the annuity = 2 P . / (1)

or, t7V<^o;'<??« 16: — If a sum of money be borrowed for such a
number of years, that if unpaid it would by yearly compound
interest double itself, then the debtor can liquidate his debt with

262 APPENDIX.

interest in that time by a yearly annuity equal to twice one
year's interest on the sum borrowed ; the last payment of the
debtor being a fractional portion of the year's annuity propor-
tionate to the fractional number of days.

42. — If the payments be made monthly, as in Building So-
cieties :

The monthly payment = twice the interest for one month.

Example 1.— In a 14 years' Building Society, calculated at
5 percent, monthly rate of interest, the shares are ^120, of which
the present value is ^60, because money doubles itself in nearly
14 years at 5 per cent.; to find the monthly payment -^ for

14 years, which will pay off a debt of ^60, including principal
and interest thereon as it accrues.

Here P = 60

i =-05

j_ _m

12 ~ 12

(a \ '^ i

— ) = V X 73= <£*5.

= 10^"^

That is to say, 10^"^ a month for nearly 14 years will pay off a
debt <£60 borrowed at the beginning.

This explains the principle of those Societies that charge 10*''
a month for that purpose.

Example 2. — In 10 years' Societies formed on a basis of 7 per
cent.

As before, P = 60, but ^ = -07.

.'. the monthly payment C^) = P x —

•14
= 60 X ~ = £-7

= 14*h

APPENDIX. 263

Therefore a monthly payment of 14"'' for about 10 years will pay
off the debt £60 with interest. Hence the charge of 14'*'' a month
in such Societies.

43 — The theorem in the j)i'eceding articles, wliich has been so
investigated to bring forward certain points in the working of
Benefit Building Societies, may also be proved thus, and put
under another form.

If a single sum ,£1 accumulates in a certain time to £/

.*. The periodic interest i on the £1 has amounted to £(/" — 1)

(since it is by the interest that the result is produced).

.-. Dividing both sides by i, we have

■fTheorern 17: — The amount of an annuity of £1

(in the time in which a single sum becomes /-fold its oi-iginal

value,) is equal to £ '^-^-

0,. = £ipO_(/^i).

rate of interest per cent.

Ex. Let/= 2, then,

f Theorem 18 : — The amount of £1 a year, in the * exact time in
which a single sum would double, is equal

44. — If P be a present sum borrowed, and it be determined to
set aside every year a certain proportionate amount (as c per
cent.) in the shape of a repayment annuity to repay principal and
interest at the nominal yearly rate of i per pound: — To determine
the number of years n in which the debt would be cleared off.

Here the annuity repayment is — . ^

XT T> C"P ^1 — (1 + i)-" ?

Hence F = . > > — ■ — ^ i

100 t i y

=. 1 - (1 +0~"

(i + 0~''= 1 - ^^'

* [Tlic reader will notice this word "e.iaf(,"as it is not intended to introduce
two approximations into the theorem.]

264 APPENDIX.

~n.Log.(l + i) = Log. ^1 - ^-2^*)

.-. n=— ~ (1).

Log. (1 +i) ^ ^

45. — To determine the rate of interest at which a given annuity
will amount to a given sum in a stated number of years:

then A„= — {1 + i — H

.-. (1 + ?) = -!i t + 1
a

No complete method has yet been discovered for solving this

equation of the n"' degree; several modes of approximation have,

however, been given by various eminent writers on this subject,

which serve to determine the value of i with great exactness,

although they are rather complicated in their application. The

formulae are obtained by expanding (1 + i) by the Binomial

theorem, and deducing a result by neglecting terms involving

powers of i above the third. The following appears to give the

nearest approximation :

Let d

L a . n )

The.i= {^'i + (n + l).d}d

12 + 2 (u + l)d ^ ^

46. — For ordinary practical purposes a value, which can be
corrected by logarithms, may be deduced in the following manner
from a table giving the amounts of annuities at successive rates of
interest.

Let A^ = the amount of j61 a year in n years at «", per

pound late of interest ;

A,; , > = the amount at ( /, — ) per pound rate
('i - lid) V 100/ ^ '

of interest :

APPENDIX. 265

Then supposing; the amounts for consecutive rates of interest to
ascend by equal differences, we have, whether i be greater or less
than ?^, as the signs will rectify themselves:

'■.-('■,- rJ.) ^:,-^',-,!.)

a *■

i = ^•. + ;;.w. — r (2)

100

(A. -A(. ..._))

l'\ \ ' 1 100'

This result will be slightly in excess, because in reality the dif-
ference between successive amounts of annuities increases moi'e
rapidly than the corresponding increments of interest.

Example: Let £6 a year amount to ^120 in 10 years at i per

A
pound yearly interest, then — = 20, 7i = 10.

To obtain the nearest approximation, we will take i^ equal to the
highest rate in Table 9, which is 10 per cent., whence

A.,0 = 15-9374
A. 09 = 15-1929

• = -10 4- 20 — 15-9374
" * 100 {15-9374 — 15-1929}

= -15 nearly.

One or two trials by logarithms, on substituting this value in the
equation

10 Log. (1 + i) = Log. (1 + 200
give the correct value i = -145
or the rate per cent. = 141.

47. — To determine the value of i when the present value, the
annuity, and the number of years are given.

The equation for solution is P = a . ^ ^ ^^ which

266 APPENDIX.

presents the same difficulty as that in Art. 45. The nearest ap-
proximate formula is :

i = {12- (n-l)d}.d .o^

12 — 2 (w — 1) fZ ^ ^

where d = < — >
I P i

n + 1

— 1

48.— For practical purposes let, as before, Pfj, P(,, - ^l) be the
present values of an annuity of £1 a year at the two highest rates
of interest given by the tables. Then assuming the present value
of an annuity to decrease uniformly as the interest increases, we
have

p._ - z

i — i, a

*' — (*i — ^o) P(i, - jig) — Pi, )

P;^ _ P

.-. i = «\ + — ^ (4)

100 (P.. ,,— P,)

which will give i greater or less than ?', according as P^- is greater

or less than — . The true value can be obtained thence in one or

a
two trials by logarithms.

49. — If the annuity be deferred, or do not commence for w,
years after the time at which it would otherwise have begun, (that
is, the first payment is at the end of tlie (/f, + 1)*'' year) and then
last for the term of n years, the formula for P„ can be easily
modified. Thus, v. Art. 31, the jwesent value of the deferred

P„

annuity will of course be

(l+if
(1 + i) - ''^ -(1+ i)-^^'H^^i

APPENDIX. 267

SECTION IV.

PRACTICAL CONSIDERATIONS RELATING TO INDUSTRIAL ASSOCIATIONS.

Art. 50. — In a permanont Building Society the Investors sub-
scribe with the view of receiving, at tlie end of a given time,
certain shares, whicli are equivalent to their payments, with com-
pound yearly interest, after the rate of i per pound. The sub-
scriptions are, however, lent to borrowers at ?', per pound rate of
interest, i^ being greater than i. The payments of the Borrowers
are made at the end of each year, so as to repay principal and
interest in a given term of years, which is the same for all. To
determine the advantage derived by the society by the yearly
diffei'ence (/, — i) in the rates of interest, or in other words, 7vhat
po7-tion of the repayment income may be annually written off as
surplus profit.

Let a = the yearly income received in repayment of various
loans amounting to P.

X = the annual profit.

n = the term of years for which P is lent.

P =

1-(1 + *.)"''

h
Now at i per pound rate of interest (a — x) would have been
the annual repayment.

P^(a-x) l^nR+jr

^ ^ ■ 1 - (1 + O

... .^ a.\l-±.\^=JL±l^l^l (1).

t '. 1 _ (1 + i) - n S

When the society lends f{»r various periods, or different values

of w, then x also varies; and the portion of the repayment in-

268 APPENDIX.

come, which may be annually written off as profit, diminishes
slowly as n increases, passes through a minimum, and then steadily
increases. For the tvvo rates 5 and 7 p. c. the minimum is upon a
loan for thirteen years, at all other periods the difference is greater.
In clause 12, art. 151,* in the set of rules given in Chapter VII.
for a permanent Building Society, we recommend only a portion of
the surplus income to be carried to the Management and Contin-
gent Fund.

51. — A member borrows ^P for n years at — per pound

viontJdy rate of interest. This loan he is to repay by periodic in-
stalments including principal and interest. To find the diffei-ence
between the requisite payments according as they are annual or
monthly.

If he pay annually, let a = annual payment.

monthly, — = monthly payment.

... p = / - (1 + '.)~:! (1).

^-O+Fi)

12.71

«"'^=il--V^ '''■

12
•. 0 = a . f

— \2n

^h-(i.,-,)-»|-.|:-(i+f,) -•]

?, = a.'-(l+'.)~"

A . — I'Zn

a + '■.)-"-(! + i,r'"*

... a — h = a ^A (3).

. ^ . — 12 n

* [Although the repaynient-diflPerence passes through a minimum, the per
centage of advantage shown by comparing the difference with the repayment is
always increasing.]

APPENDIX.

269

In the pei'iiianont society described in Chapter IV. tlie repay-
ments are calculated by equation (1). If it were practically
possible to invest the money of the society every month as soon
as received, then the value of & given by equation (2) w^ould cover
the repayment of the loan P with interest, and there would be a
yearly gain, in the receipts, represented by (a — b).

52. — To determine the excess of Accumulation obtained at the
end of n years, by the receipt and immediate reinvestment of the
monthly subscriptions at monfhhj interest after the rate of ?', per
pound; when the Investers aie only promised the accumulation
of their subscriptions, as if paid yearly and invested at compound
yearly interest / per pound.

Let A = the amount at -^ per pound monthly interest,

B = the amount at / per pound yearly interest,

-— = the monthly subscription,

••■^ = 12 — I — r

I 12 )

{^^^}

12 n

(1 + p) -1 (1+0-1
B=a 1^ ^ -. J..(i).

53. — If the repayments of the Borrowers be deferred ?«, years,
the annual instalment for n years, to liquidate the debt with the
an-ears of interest thereon, will be given by the equation

P.(l + /,f' =a

a = P . /, . -LL:!1A^_: (2)

(1 + if - 1
whence the values of n can be obtained with fncility by means of
one table, viz. T;(l)le 3.

-(l+i.)-''

?', .

(1 + /.)"''•"'

270 APPENDIX.

54. — Note to page 49. On the adjustment of the amount of
contribution per share to be paid by Borrowers in a terminating
Building Society, as their quota towai-ds making up a deficiency
in the amount required at the epoch of its expected termination, in
order to enable the Investers to receive their shares in full.
Let D = the deficiency,

m = number of Investers' (or unadvanced) shares,
f =^ totalmonthlyincome from subscriptions on the same,
g = total monthly income from Borrowers' repayments,
M'here the payments on each share are not neces-
sarily the same: —
Then: — 1st. If the society's existence, and consequently the
members' subscriptions, were continued for the purpose of making
up D ; as no new Borrowers would be found, the money received
must remain idle or be invested in the public funds.
Let X = number of extra months' subscription,

i = the average monthly interest obtained per pound,
and suppose the existing assets to produce, through interest, just
sufficient income to cover the current office expenses during the
extra months.

•.D = (/+,).{(l±if^l}

,:x = -l^ f + 9^ (1).

Log. (1 + i)

2dly. If, instead of continuing the society for the additional

months, the holders of unadvanced shares consent to waive their

right to receive them in full, and be willing to put up with some

loss, in order to receive whatever money they can at once ; the

Borrowers must contribute their share of the present value of D,

or of

D(l +0~^ 01" 1 + P^'
f + 9

APPENDIX. 271

Hence tlie unit of contribution from all members, both Investers
and Borrowers, will be
B

' + !> V + TT-J

And the Borrowers must contribute g units, or a sum

_ (2).

of which each Borrower contributes respectively in proportion to
his units of monthly repayment to the society on his loan.
The remaining loss on each Investor's shai-e will be

R. Ji_ 0 . I (3).

55. — If a valuation be made prior to a deficiency being dis-
covered, and it be sought to ascertain the probable future duration
of the association, then

If A = clear cash assets over and above outstanding debts,
accounts, loans due to bankers, &c.
e = average monthly expense that may be expected,
X = number of future months' duration,
s = amount of each investing share,

m.s = A. \'^ + i\ + \f-\-9—e \ (^ + 0 —^. .(4).

"^ ^ ^ A.i + (f+g-e)

T ill i . (m . s — A) 7
.-. X = Log. I 1 + - — . , _c , -—^ C

Log. (1 + i)

This equation is very simple in application, and depends on
only one assumption respecting the future, viz. That a rate of
monthly interest i per pound may be counted upon to the very
end of the association. The practical judgment of the Actuary
will know how to modify it when required.

272 APPENDIX.

56. — If no interest be expected, to be realized, the result would
l)e obtained either directly,

or by putting « ^ 0 in equation (4)

.-. m.s = A.l^ + ^f + g — e j — - —

= A+ |/+^-e| . £ (6).

To determine the limiting value of the fraction — r to which

^ "^ ^^ is equal when ^ = 0, we must expand, or differen-

tiate. Whence

T- v f(l+if—l\ T ; fx (l + i)'~'\
Lmiit < i — 2—1 y = Lmiit < — ^^ ! — '' >

I « J I 1 J

^ -^1 = 0 ^ ^i=0

Hence substituting in equation (6) we have

m , s — A
f + 9-e

(7).

57.— In framing the Liahility and Asset account referred to in
art. 101, part 1, care must be taken to avoid giving an erroneous
estimate of the present value of the mortgages. The difficulty
consists in the circumstance, that their present value is greater, in
favour of the society, the less the rate of interest assumed in dis-
counting the repayments which they produce. The best way is to
discount at the higher rate of intei'est ?', , which is charged fun-
damentally from Borrowers. But it will be necessary to add a
caution to the Managers, that the smaller present value, thus
afforded in the making up of the society's assets, is merely the re-
sult of a proper precaution to avoid producing a fictitious amount
of present profit, and that Redemptions should not be allowed
upon such terms.

APPENDIX.

273

58. — Note to rule 3, clause 109. Re Paid-up Shares.— In
calculating the single payment P to be required from a member
in place of the monthly subscription for n years, the present value
of the monthly annuity should be discounted at a lower rate of
interest ?'., than that which the investers are credited with towards
the realization of their shares, and the payment should be treated
as due at the beginning of each half year, as a half-yearly an-
nuity.

If ii
12

P =

the monthly subscription,

-0 + t)

rs 1 - ij ^

1 +

(!)•

Sometimes the societies, instead of using this formula, content
themselves with discounting the sha7'e s itself (when it is proposed
to pay it up) at i^ interest, and not the monthly payments. This
is not just when % is < ?*, because although the member paying
up his share should only receive discount, after i^ interest, for the
time which would elapse before his subscription become due, yet
he should be credited with the higher rate afterwards. In other
words, Managers use the formula :

Single payment =

(1 + h)
instead of the equitable one given by (1), viz.:

(1 + /) - 1

1 +

-(■»4) 1

. (2).

which is just as easy to use, since a is already known.

We have said that i^ should be always <, i, for which see 7iote
in page 96 ; it will also be regulated by the consideration as to
how far Paid-up Shares are to participate in any surplus expenses
or losses, over and above the management and contingent fund,

274 APPENDIX.

that may afterwards be discovered. Occasionally an arrangement
is made, that, while partaking of the profits, they shall not be
called upon to contribute to any excess of expenses or losses. This
is a matter of arrangement, according to circumstances. It will,
perhaps, in general suit the purposes of a society to covenant that
a member paying up the whole of his shares shall be required, in
case of future loss, to contribute after a rate proportional to half
the number of years for which he has paid up. (See Rule 12,
page 111.) *

Too frequently the Managers are willing to discount at the
higher rate i, which is taking the other extreme, and would be

depriving the society of proper margin, or they charge ;— .

(1+0"
The correct principle, however, is to adopt the formula (2), which

is a value between the two extremes, ^ and

(1 + Ly (1 + ly

In reference to this Article, the reader should consider Art. 25
of this Appendix, which contains an interesting point in the
operations of discounting shares.

59. — Note to clause 144, page 108. Re Withdrawals of unad-
vanced Shares. — Referring to the rule, we pi'opose that, according
to the number of years' subscriptions paid, the rate of interest
allowed on withdrawals should be raised.
Let a = one year's subscription,

71 = number of years in which the shares are realizable,
i = the rate of interest, at which the subscriptions are
credited, on the average, so as to amount to a
shai'e s in n years.
Let no interest be allowed on withdrawal until the end of the

second year, when it shall be at the rate of per pound per

annum, and let the interest allowed per annum ascend by equal
differences, until it becomes i per pound, at the end of the last
year for which the subscriptions are payable. Then the amount.

APPENDIX. 275

that might be paid to any member withdrawing at the close of
the ?••'■ year, would be represented generally by

(l+'-Szli)-!

W, = a.^ ;Z\ (!)•

n — 1

and by giving to ?* the values 1, 2,. . . .7i, a table of vvithdrawals
would be formed from the corresponding values of TF, W^. . . TF„.
It will be noticed that TF„ must be = a, and that Wi is a fraction

of the form — , but that expression reduces itself to TF, = a, on

expanding, or differentiating by the usual rule in such cases.

60. — Note to Rule 12, page 111. On the apportionment of
any surplus irrojit, expenses, or losses, which may be ascei'tained
to exist after a periodic valuation of the society' s ajf'airs, at the
end of any number of years n. In the case of expenses or losses,
it would be supposed that they exceed the management and con-
tingent fund and so leave a margin to be made up by the holders
of unadvanced shares according: to the terms of the clause 152.

Let P = the surplus profit or loss to be divided.

mi = number of existing unadvanced shares which were
issued in the first year, or counted as of n year's
standing.

m„ = number of existing unadvanced shares which were
issued in the second year, or counted as of {ji — 1)
years standing.

tn,^ = number of existing unadvanced shares which were
issued in the n"' year, or counted as of 1 year's
standing.

In which are included the paid up shares (see preceding article).

Then the aggregate units, among which the apportionment is to
be made, are

= n . vii + {n — 1) . m^ + (^n — 2) . m.^ + .... + 2 . ?«„_ , + ;»„ .

276 APPENDIX.

Thestandard unitU. = ^^,„^^ ^(^^_i),^^ ^ , . . . + 2.m„rr+ m„ .

So that a share taken out in the r"" yeai-, or of {n — r + 1) year's
standing, has a right to receive in the way of profit, or is bound
to contribute if it be loss that is apportioned, a sum

= (w — r + 1)U. (1).

Ex. : Let P = £27. AOs. surphis profit.
n = 3
7??,= 125

w?2 = 50
77?3 = 75
ThenU,=£-05or Ish

or the shares issued in the first year are entitled to 3s. per share,
those in the second year to 25., and those in the third to Is.

If the apportionment be so made, as to have relation to the
interest which the member is supposed to have acquired in the
society, or to the then value of his shares, on the principle adopted
in many Life assurance offices, the standard unit would become

^ mi A„ + m^ A„_ , + + w„_ i Aa + w.„' "^ ^'

wu A (1 + ^y - 1 11

Where A, = •^^- -. generally.

The past payments being treated as made at the eiid of each year,
and improved at i per pound interest (see Arts. 47 and 58, part 1).
Hence a share taken out in the ?•"' year would bear A„^,_r • Uj
as its apportionment. Such a mode of calculating, at all events,
the division of surplus profits, would, perhaps, be very desirable,
as it would correspond to the principle of accumulation by which
the unadvanced shares themselves are realised ; but it would
involve such an amount of trouble and consequently expense in
the calculation, that it would be injudicious for any industrial
association to incur it.

APPENDIX. 277

Note to Arts. 63, 113, 151, Part. 1. On the Contributions to he
required from Borro7vci'S towards the Management and Con-
tingent Fund.

61. — The rate can be determined by the following considera-
tions : —

In the articles referred to it has been sufficiently explained, that
a fund must be formed to provide for unforeseen contingencies,
which occur in Building and other similar institutions, and entail
pecuniary loss, either through some investments turning out to
have been made upon bad security, or by the legal and other ex-
penses incurred in seeking the recovery of the unliquidated amount
due by a borrower. The probability of loss does not arise from
any inherent defect in the security itself usually accepted by these
associations, but rather in the want of sufficient skill on the j)art
of the officers, (who are employed to estimate its value or its
goodness in a legal point of view,) or of proper attention in watch-
ing, afterwards, that the mortgagor does not in any way infringe
tlie covenants which are involved in the tenure of the property.
As, however, in the settling of the rules or deed of constitution,
care must be taken that the investers (or those members who sup-
ply the money for advances) may not be unprotected in case of
such error in judgment or inattention ; and as, from the restricted
means of the peculiar class from which the borrowers usually
proceed, comparatively little, if any, protecting margin can be pre-
served between the saleable value of the property and the sum lent
by the society, it is clear that an equitably adjusted contribution
must be required, by way of commission or otherwise, from each
borrower, that a Management and Contingent Fund may be formed
with it, to which would be added the difference in the rates of in-
terest I'eferred to in Art. 57, Part 1 ; so that, on the average of
investments, no positive deficiency of money may arise in the assets
of the association.

If all the loans were of equal magnitude the rate per cent, could
be adjusted by the results of the past experience of other similar
institutions; but the case in practice is one of advances of every
variety in amount within given limits; and the contingency of

278

APPENDIX.

pecuniary loss is not dependent upon the Amount of the advance,
but is rather a function of human skill, experience and attention ;
hence, when a borrower seeks for an advance exceeding the mag-
nitude of the majority of the loans for which a rate of contribution
has already been settled, he entails, with an equal chance of loss,
greater money risk; and he must pay to the contingent fund some-
what more than after the rate per cent, for smaller loans. For
example : suppose that the majority of the advances are to the
extent of 1001., and the proper per centage on each were 1/., then
for special loans of 200/. or 3001. a higher contribution than 21.
or 3/. would be requisite ; since, in the event of that individual
security, upon which the larger sum is advanced, becoming a
source of loss, there would not be sufficient money supplied by the
other loans to make it up. For further illustration : let 10,000Z.
be advanced, not in 100 loans of lOOZ., but in 98 of that amount
and one of 200; if the rate from all of the contingent contributions
were one per cent., the 1001. thus received would be sufficient only
in case of loss arising from one of the 98 loans, consequently the
rate for the 200Z. should be so adjusted that the society may be
paid, for speculating to its extent, in a rate proportioned to the
money risk.

Instead of deducing a scale from the law of probabilities, based
upon a fundamental assumption for the average of loans, we pro-
pose to meet the necessity of a fund, and to diminish the pressure
upon the borrowers, by availing ourselves of the consideration that,
as the society is essentially established to benefit both classes of its
members by the operations of compoimd interest, and as its dura-
tion is of unlimited extent, the indemnity rate upon a loan, say,
= f. A, may with propriety be proportioned to the restorative
power of compound interest; or, upon each successive unit A of
the capital advanced, the contribution may bear a relation to the
velocities of arithmetical augmentation, by which a single capital
A passes through the successive stages of accumulation from one-
fold to two-fold, two-fold to three-fold, and so on, of its original
magnitude ; since it is thus that can be measured very accurately
the advantage derived by a borrowing member, in being enabled
to commute his otherwise unproductive rent payments to a land-

APP15NDIX.

279

lord into the piircluisie-inoney of valuable property, which is all

the more profitable to him, that the original payments converted

are larger. Hence, referring to Art. 17 in this Appendix, the

commission upon advances should be proportioned to the quan-

Log.2
titles represented by ^ ~y ]7^ for successive values ofy, in

Log. (] + y)

this manner, viz. : ^ •'

Let the commission on a sum of <£A, supposed to be the gene-
ral amount of loans, be = c, then, upon a loan of 2 A, it should

be =: c upon the first unit A, and c

or together,

Lof

upon the second A,

1 +

Log. 2
Loe:. -r

Again, upon a loan of 3 A, it would be c -< 1 +

Loot. 2

2 A, and c <

( Lost. 2

Locf.

upon the 3rd A ; or upon the whole 3 A

the commission should be = c ^

T , Log. 2 . Loff. 2 \
Log.^ Log.-g

And generally, upon a loan of/. A, the commission should be

Lose. 2 1

1 , Log- 2 , Log^

^ 3 ^ 4

Log. 2" I^og- -3

Log. (1 + --)

•70

= c.f. J 1 + 4y (/— 1) [ "early. . . .see note (a) (1).

when f is an integer.

[(a) The remarkable logarithmic series, from which this result is deduced,
can only be summed with difficulty when the number of terms is considerable ;
as it requires transformations similar to those by which the summation of

280

APPENDIX.

62. — If it be desired to create an annual income to the fund, and
the probable amount of loan business each year be ascertained, an
equation can at once be deduced for determining the proper value
of c to start witli,

logarithms of numbers in arithmetic progression is effected, such as in the case
of the eulerian integral usually designated by the letter r. The process depends
upon the well known formula for integrating the function u : viz.

^' -^ ^ 2 ^ 1.2 dx 1.2.3.4- di^ ^

B d3 » - ' ?/

^^ ^ 1.2.3 .... (2«) da2»-»

1 1
where B, B, ....B„ , are Bernoulli's numbers equal to -zr> ^,

/_ T V"*" • ^°g- (1 + A) , 2 »

respectively.

Putting N, = f— — r -\ ^ -\ 3- + .... +

Log. ~ Log. ~ Log. (^1 + — ^

/ Log. 2 ' ^ 3 ' 4

we can deduce

N =^' +/-Zl^^-C L. + -J2_ + &C (2)

^/ 2 -^ 12 12/ 720^2^ ^

in which the numerical calculation gives C = "00063.

Hence, referring to the text,

N^. Log. 2 =/(4" + V ■ ^^^^*'' "early.

=/ { / X -34.057 + . 693117 I

= / J 1 + . 03972 4- (/— 1) X . 346-57 I

i -70 )

= / f 1 + ^ (/— 1) 5 ^'^'■y nearly.

This arithmetic progi-ession holds up to/ = 21 within several thousand parts
of unity ; and for all practical purposes the terms of N , after the two first may
be neglected. The same appro.iimate result might have been obtained from equa-
tion (1), vote to Alt. 17.

It will be noticed that (2) gives for N , or the summation of the rfci'pj-oca/s of

logarithms of the form log. ( 1 + "Tt ) a series, one part increasing with /, the
other decreasing, analogous in form to the Stun of log./ = Log. (1.2.3..../.)

-ogV2 w +(/ + -1\ Log./— /+ -i-. 1 • 4 + &c.]

APPENDIX. 281

63. — In gcneial, although c is deducted at once from tlie advance
A, it is made to depend u])on the duration of the mortgage, or it
is taken = 71 . k . A, when the loan is for n years (k being a
fraction).

Example: Let /« . A = 4^^ p^,. annum upon a loan A = £200,
granted for ten years, or the commission be £1 per cent, upon
advances of <£200, then the deduction upon a loan of £600 for

ten years would, by equation (1), be = £2 x 3 | 1 + -^ 2 J
= £10.2 or £10 : 4^., which is £1 : 145. per cent, on the £600 loan.

64.— ^is treated in the arithmetic progression (1) as an integer,
but the application can be modified without difficulty to calculate
the deduction on advances not multiples of A,

The Deposit System.

Respecting Single Deposits.

Art. 65. — To extend the operations and benefits of Industiial Asso-
ciations, Sums of money might be received as deposits, for a nominal
period of years, at interest, with power of withdrawal on demand, or
with very short notice, of a portion thereof. Such a system would
afford to the depositors the usual convenience of the savings banks,
in respect to the withdrawal of their money ; while they would
obtain the advantages of a much more remunerative interest, pro-
vided the agreement were, that the interest already due upon any
portion withdrawn (if that should happen) should remain over
with the rest of the deposit, as an investment to be received at the
expiration of the originally agreed term of years. On such an
liypothesis, the withdrawable part of the principal should be con-
sidered as producing a less periodic interest, than both the other
part of the deposit and the general instalments of interest them-
selves do when reinvested ; or it should be treated as laid out in
readily convertible securities, such as the public funds, exchequer

282 APPENDIX.

bills, &c., which produce but a moderate rate of interest. The
remainder of the deposit, and the instalments o^ interest from time
to time accruing on the withdrawable portion, (not being liable
to unexpected demand,) can be laid out in much less available
security, such as mortgages on land or houses at a higher rate of
interest, or in fact they might be engaged in the society's operations.
For example, if £10,000 were the amount of numerous deposits
on such terms for an agreed period, and £2000 were withdrawable
on demand, that sum should be invested in ready security, say
at 2| or 3 per cent., and the remainder £8000 in more lucrative
investment at 5 per cent., or even more, with the periodic annuity
instalments of £50 or £60 a-year on the £2000, as from time to
time they come in.

QQ. — We have said that the rvjht of withdrawal might he on
demand, as the floating income of the society would much exceed,
under ordinari/ circumstances, the average amoimt of applica-
tions. A power, nevertheless, could and should be reserved, to
the committee of management or directors, to suspend withdrawal
payments, if an unexpected pressure caused too great inconveni-
ence or menaced the stability of the society. As the institution
would be based upon principles of co-operative mutuality, such a
power would be strictly equitable.

67. — Let D„ = the amount payable in return for a deposit P, if
invested and not withdrawn for n years,

— = the portion which mav, if I'cquired, be withdj'awn on

demand.

. P .

i' = the rate of interest at which — is invested.

i ^ a higher rate, at which . P, and the periodic in-

P . i' . P

stalraents — '— of interest at ^' per pound on — , can be invested
m m

during the n years.

APPENDIX.

283

Tlicn it is plain tliat D„ is the amount of P at i per pound for

P
n years, less the amount of a small annuity — (* — ^')> ^ccu-

mulatcd at i interest, arising from the lower rate at which —

is invested ; or

D.^P^(l+0--^^-<^ + '^'-n.-.(l).

This equation contains results afforded by known tables such
as those at the end of this work, so that a single deposit table can
be readily calculated.

An identical result, but in another form, might be obtained, by
a different mode of reasoning, in which

68. — Let the whole be withdrawable on demand, then m = 1 in
equation (1) or (2),

.-. d; = p ^(1 + ly - {i- i') . ^l±-^Iiii j . . . .(3).

d; = P {

l+..(li^lril> (4).

69. — Let the m^^ part of P not be withdrawable for /it years,
which is the more general case, n > fi, then

In practice, fx might be taken with advantage equal to 3.

Example: — Let £10,000 be deposited for 10 years with the
understanding that, after 3 years, £2,000 may be withdrawn on
demand. — Let 3 per cent, be the annual rate of interest allowed

284 APPENDIX.

upon the ^2,000; and 5 per cent, be that upon the ^8,000, and
upon the annuity £60 a year. — Then by eq° (5),

i 10 -OQ 105 — 1 )

D,,3 = 10,000 .>(l-05) - -^ • --^^^<

^ 10,000 5 1-6288 — . 004 x 8-142 §
= J15,962. (See Tables 3 and 9).

70. — To determine a relation between Dp and D^ any two
terms in Art. 67, p K. (I-

Then, referring to the mode of investment,

p n -I- i)i-i' 1

D, = D, . (1 + iy-" - -(^ - i') . L_LJ__zz_ . .(6).

If q = ]) -i- 1, the relation between the successive terms is
given by

Bp^,= B,.il+i)-^ii-i^) (7).

a form suitable for the calculation of the table.

71. — Referring to Art. 69, to determine a relation between
two terms D^ , and D^i^, where ]? and cj are both greater
than fj..

Since the /z years have elapsed, the relation will be identical
in form with that (6) of the preceding article, or

p n 4- i^i-P 1

13,,^ = D,,^. (1 +,:>-'' --0--i')>—^ .-(8).

Let q = ]J + 1.

••• D.+.i^= D^,^- (1 + -'•) - ,^c^- - n (9)-

72. — The case, wheie ;? is < jj. and q > fx, need not be consi-
dered, as the formula would be of no advantage in constructing a
table. — Until J3 > /j. the equation will be simply D^, = P (1 + iy;
after which equation (9) will serve.

APPENDIX. 285

73. — To determine in Ait. 69, tlie remainder of tlie depositor's

p
claim to be i-eceived at the end of the n vears, if he withdraw —

when ??, years (/?, < )i) have just expired.

As by the agreement w, must be greater than j.i, tlie effect pro-

P .

duced by the withdra\val of— in reduction of tlic oricfinal amount

D„|^ will be equal to that amount, which by eq" (4) — would

produce if deposited, for withdrawal on demand, for (ji — /?,) years.

.*. The remainder 7 -^ "D' ricw

of the claim j " ' *" w" ("-"0 v /•

A simple formula to ascertain the outstanding liabilities of the

society upon those deposit shares of which a portion — has been

withdrawn.

If the Table represented by D„ should not be ready at hand,

The remainder of ) _ p_,

the claim may UfD - - (1 + 0"-"' •• (H).

be calculated as J L '^ wJ

74. — Again, Art. 69, suppose that the ??i,"' part only be with-
drawn after n, years, where ?n, is > m. ; then the Beviainder of
claim as regards eq° (10) will still be of the same form, viz.

But, in respect to cq" (11), it would be represented by the ex-

g + 0""'-l ^12).

Where D„ is a value given by the table used by the society

to calculate D„ I ^, and the expression is deduced by considering,

P
according to cq° (1), that D„ |^ is a sum of money invested

286 APPENDIX.

for (w — n^) years, with the understanding that a portion of it,

/P P\

equal to ( ■ ), shall be withdrawable on demand.

If the withdrawal, in the preceding articles, take place in the
course of any year, and not exactly at the end thereof, the pre-
ceding results would require to be modified with an allowance of
simple interest for the fractional part of a year.

Annuity Deposits.

75. — Instead of a single deposit, as in Art. 69, let the contract
be for a series of periodic deposits, each equal to P, during the
n years, with the understanding that, after /j. years have passed,
the m*"^ part of tlie aggregate deposits invested may be withdrawn
on demand, the remainder of the claim standing over to the
end of the term. Then, representing by AD„|„, the amount to
which, if not withdrawn, they would accumulate, we have, since
by the hypothesis of the question, the m*'^ part of all the deposits
made, once fi years have elapsed, are liable to withdrawal on
demand.

+ {D„_^ + D„_^_, + .... + D, + D,} (13).

AD„|u, thus will be readily found, if the general tables for
D„ I „ and D„ happen to have been calculated for the society.

76. — If not, the expression can be reduced by eq" (1) and

(5), to ^^ ^^^

AD„_^ = P S^l + i + I + i ' + + 1 + i| —

r- K— u. ^ n—fA )i— f*— 1 , —,"1

_ iZli. • At.l+^ +(1 + ^ +1 + ^ +.. + 1+0— nl
m ■- i J_j

= P ["(1 + i) I +i — 1 _ i — i' 5 fx . 1 + i'~^ + 1 + i .
i nri

1 + ^ — 1 — w> , which results contain only quantities,

APPENDIX. 287

that can be easily obtained from the ordinary Amount and Annuity
tables 3 and 9.

77. — From the preceding equations, we liave, when /) > //,
I'elation between AD^, ^i| and AD^, | ^.

AD, + ,,^=: (AD,,^+ P) . (1 + i) - (p + l)^(i-i')..(15).

'Ill

78. — If a withdrawal take place at the end of ?2, years, and

n, . — be withdrawn, the Remainder of the Claim (if no further

payments be made),

= [aD,,,^-.^..^^(1 +i)"-"' (16).

79. — The preceding principle of adopting two rates of interest
as the basis of a Savings Fund presents many advantages ; on the
one hand, greater inducements would be offered to the industrious
to strive to effect savings, through the higher interest they may
thus obtain ; at the same time that the absence of power to with-
draw, in a hurry, more than a small portion of their deposits
would act as a check upon subsequent extravagance. Whilst, on
the other hand, the goveinment or private company which under-
took the investment of the money I'eceived would be less exposed
to inconvenience or loss through Withdrawals.

On the Purchase of Annuities.

Art. 80. — Let it he desired to calculate the price P of £l a year
for n years certain, so that the annuity may pay the purchaser a
high rate of interest ifor his money, and yet he sufficient, over and
above, to replace the capital P expended at the expiration of the
term, by investing a portion of the annuity to accumulate at a
moderate rate of interest i' per pound. This problem is important,
as it not unfrequently happens that a purchaser desires to I'calize a
liigher rate of interest for the use of his capital, than he could ob-
tain if he tried to reinvest a portion of the annuity ; for instance,
he may wish the annuity to pay him 6 or 7 per cent., whilst he
might not himself be able to reinvest at more than 3 or 4 per cent.

288 APPENDIX.

Let ^1 a year for )i years amount to A^i when accumulated
at i^ interest.

Then . is an annuity, which would amount to ^1 in the
same time at the same rate of interest.

.-. -~ do. P do.

.'. The annuity of ^1, which is purchased at a cost of P,
should be sufficient to give the purchaser P ^ a year, and leave

P , •

- — to be invested.

' = ^'^1

— 1

••• p = 0 + j^) m-

and P can readily be calculated by the aid of a table which con-
tains the general amounts of annuities A (see Table 9). The
same could have been deduced from the remarkable property in
eq" 2 bis, Art. 33.

81. — The result in (1), whilst it practically pays the purchaser
only i interest for his capital, through his want of power of re-
investing at a higher rate than i\ (i' < ^), yet in reality is a
charge upon the grantor of the annuity of a higher rate than i.
For if the rate allowed by him to liquidate a loan of ^P were
only i per pound, P would equal

or the purchase money that he would receive for granting £1
a year would be more than is shown by equation (1), since
A^

"•«

82.— The actual rate i^ that it costs the grantor, who sells £1
a year at the price afforded by (1), would be obtained from

APPENDIX. 289

On Deposit Life Assuratice and Tontines.
The formulae for the system of Deposit Life Assurance, wliich we have
previously mentioned, [Art. 35, chapter 2, page 25,] are simple and easily de-
termined. As it presents another feature of provident investment for the savings
of the industrious classes, a few words upon the system will not be out of place
in this Appendix. The advantage offered consists of the Savings Banks'
facilities of withdrawal of the whole or part of the deposit premium, whilst the
benefits of an ordinary life office are secured. Adopting the now general
notation.

Let I = number of lives in existence at age x by the table of mortality adopted.

r = thepresentvalueofj£l,atiperpound, tobereceivedinoneyear = .

a = the present value of an annuity of £1 payable at the end of each year,
and to continue during the existence of a life aged x.

or o = Sum ^^-^^ summed between V = 1 and y = the number of

years of extreme age in the table.
.'. 1 -\- a = value of £1 annuity during life, of which the first instalment is

payable at once.
.•. £1 = present value of a similar annuity of -— - — a year.

Let Pj: = the mathematical annual premium to assure the sum of £1 to be re-
ceived at the end of the year in which the life x may die.
■jr = the office annual premium =f{p )

1. — Then p^- may be determined from a table of Life Annuities a^ in the
usual way, or thus : — A person borrowing £1 at once for the term of his life
could repay it with interest by an annual payment at the beginning of each
year, consisting of the premium of assurance to restore the principal at his
death, and annual interest i per pound, which if paid yearly in advance would

I
be reduced to , — , — ; •

I 4-t

.-. £1 would be repaid by, and is therefore equivalent to, an annuity payment

^fp^ + Hfi-

But £1 (as we have said in the definition of a J would buy an annuity of
on the same life involving the same rate of interest. These two values

1 -f a

must be equal

• • Px +

1 + i 1 4- </;,

290 APPENDIX.

2. — Into the value of a.r, which is made use of in the preceding formula, enter
the considerations depending on the table of mortality (see Table XV). That
formula itself is identical, as it should be, in form with that, by which would be
determined the requisite annual payment at the beginning of each year, or the
sinking fund, to accumulate to j£l at the end of a term certain of ,r -|- 1 years,
in terms of the present value P^- of an ordinary annuity £1 for x years, where

(see Art. 31, Appendix), and
1

1 i
Annual payment or sinking fund = - ^ ^ ^ , (1 bis)

3. — We may mention here, incidentally, that, if for Ox were substituted the
values of an annuity for the whole duration of two or more lives, the formula
would bear the same relation with regard to them, as it does to the single life,
and the symmetrical form would be preserved.

4. — Let P = the single deposit money to purchase a life assurance policy
Dx to be received at death, with the understanding that, after twelve months

have elapsed, a sum equal to — may be withdrawn on demand, or at very brief
m

notice ; then it would be requisite for the safety of the company to invest the
withdrawable portions at a much lower rate of interest, or in immediately con-
vertible securities, if it be desired to be always ready to meet all withdrawal
demands. The chance of early repayment of the whole deposit, from being
deducted through death, does not enter into that consideration, as, on an average
of lives, supposing the general funds of the company to be invested in the usual
manner, the payments and receipts would follow the law of mortality.

The calculation of D^ will therefore be analogous to that for determining the
single premium for the assurance of £1 ; with this difference, that our plan con-
sists in keeping the rates of interest allowed upon P or ^ P and — \

independent of the rate of interest and margin originally adopted in the deter-
mination of TTj. , and in making a table containing the values of itj. the basis for
calculating Dx ,

Let an ordinary whole life annual premium table be in use by the company.

i = the highest rate of annual interest that the company can afford to

m — 1

credit upon • 1 .

i' = a lower annual rate allowed upon -.

From the moment P is deposited, the assurance risk represented by Dx
connncnces, although, according to the usual theoretical hypothesis (contrary

APPENDIX. 291

to the occurrence of actual practice), D^: is not payable until the end of tlie
year in which the life (r) may die. Proceeding, however, on that supposition,
the sum assured D, will be equal to the deposit P and a sum (Dj; — P) arising
from the interests upon P. Now P, deposited, is credited with annual interest

„ (m — 1) i -|- i" , • , • • ,

= P. due at tlie end ot each year, wluuli is cnuivaiont to

VS(m—l)i, i' ^ , , . .

- 1 — ; — j — h ; — ; 1 at the beginninjr.

»n t 1 4- » ' 1 -|- i' '

Hence, since the annual premium w^ paid at the beginning of every year of

life would assure £1 payable at the end of that year in which the life may die,

the deposit P may be considered by the company as producing at the beginning

» , . P ^ (m — 1) i , V 1

01 each year a premmm = - i — + , >

■' '■ m t I + I ' 1 + t' \

-P-fl + M^'-^^'+^^i-l (2).

L ~ ml 1 4- j "^ 1 + i' i TT,. J ^ ^

5. — By this equation, a table of deposit assurances can be deduced from an
ordinary life table on substituting the values of w^ at various ages ; and the
Deposit- Policies will be with or without profits, according to the hypothesis
relative to Wx. In practice, it would be generally expedient and reasonable
not to allow any withdrawals until after a small number of years /w, greater than
one, in which case, the eq" (2) should still be used, as it is not worth while to
complicate it by the consideration that during {y, — 1) years the rate of inte-
rest i might be credited on the whole of P. The advantage would be in favour
of the company. When /a, is not less than 3, we consider that i' may be taken
= "025 and i = *035. This will be understood by the consideration that in
all investments 'of this kind accepted by Assurance Companies, or Benefit
Building and other similar Societies, tlie larger the portion of his deposit over
which the depositor has power of withdrawal on demand, the greater will be
the capital which must be kept by the company in immediately convertible
securities to meet budden withdrawals; and the lower will be the average interest
derived on the aggregate of its funds. If six months' or a year's notice were
required of intended withdrawal, the case would be different.

6. — If Wj = Pj-, i' = « = the same rate involved in /),-, and m = 1, D = 1,
eq" (2) reduces to

i=F. {!+-;-•, -i; m.

the ordinary formula expressing the relation between the single premium P and
the annual premium ;)j to assure £1.

292 APPENDIX.

7. — As regai-ds assurers, eq" (2) gives the amount of policy which an occa-
sional deposit would assure upon his life. To the industrious classes one or
two smaller policies, created by single deposits, are more convenient than the
general system hy which a fixed premium is required at regularly recurring
intervals, without their having, in most offices, any protection against the loss of
the policy, in the event of the assurer's means not enabling him to keep up his
payments. The advantage of an ordinary Savings' Bank is also presented,
since a portion of his deposit money may be withdrawn on demand. Such
policies would thus serve as negotiable commodities in commercial transactions.

8. — Suppose an ordinary Annual Premium Policy of Assurance to be taken out
by a life aged .r years, and, after a certain number of years y, the assurer desire
to suspend all future payments, and to obtain, for his acquired interest in the
company, a Deposit- Policy ; then the amount thereof

' =3 (office value of old policy) x fl + — ( ^'", ~ ^.^ ' + r-7^, T —^1 • -C^)
(the jn"" part of the office value of the old policy being withdrawable).

P . . ....

9. — If after y years, - be withdrawn on a deposit policy, the diminution in
m

the policy, (found by reducing eq" (2) to the case of the whole of the deposit

being withdrawable on demand, and applying it to the effect produced by with-

P\ P t , 7l 1 1 ,r^

drawing — ) == — i 1 + , — . — r. • [ ('>)>

an endorsement upon the original deposit policy would then be made stating
that it is diminished to the extent represented by (5).

10. — The Society should always get the benefit of the difference between the
office and real age of the depositor, both at the time of entry and at that of
withdrawal, with the distinction that x in (2) should be taken at next birthday,
but (x -J- y) in (5) at last birthday.

11. — By way of further illustration of the analogy between functions of an-
nuities for Terms certain and for the whole duration of a life or lives, we will
refer to Art. 30, and will show how the property — =i....(l) will

Pn A„

serve, in the case of a life annuity, to determine the single premium S^ to assure
£1 at the death of a life aged x. [In No. G of these notes P stands for S^;.]

For the present value of an annuity of £1 payable at the end of every year,
that the life 1 may enter, is a^ -|- S^, this corresponds to P„ in equation (1).
Again, the accumulated amount of such an annuity by the end of the year in

APPENDIX.

293

which life (a) may die would be 1 -f ^ ; since it would consist of the last an-
nuity payment -+- the improved amount of o,, at the close of the duration of the
life, which by proportion would be -f-; so that 1 + -^ corresponds to A„ in

1 1

Then, since the analogy should subsist, the equation

must hold,

whence S^- = — ; — '^ (6)

which is the ordinary formula.

12. — The property in (1) can be remembered by the consideration that it
expresses merely that

(The annuity for n yeuis, {The sinking fund to create __ (One year's
which £1 would purchase) £1 at the end of n years) interest.)

Notes to the Tontine Chapter.

The principles referred to therein are simple : —

13. — Let Tj = number of persons alive at age x in the Tontine at an epoch
of division,

l-c = number at same age in the table of mortality adopted for tlie
calculation,

l^+,.<j = at age (x + r . j/j,

a = gross sum to be divided at each division after y years.

Then, by the mortality table, it is probable, that, at the age of x -]- r .y, there

will be Tj . ^"1"^' ^ alive to partake of tlie dividends ; and the share of each

a
would be then rf The present chance of a single person surviving to

i-x + r .y

. 'j- + r.y

partake of the r"' division is — -,

Example : To determine the chance of a male aged 15 living to the age of

60. By Table 13, of 34574 males alive aged 15, 18808 live to be 60 years old.

18808
Hence the chance required is „^gy. = •544, or the odds are 544 to 456, or 68

to 57 in favour of the event.

294 APPENDIX.

14. — If in the course of a Tontine's existence, say at age x -^k, a shareholder
propose to sell the present value of his probable share in one division (say the
?•"') if he survive it, then the purchase money, supposing money discounted at
i per pound, should be

l^x + r y 1

But Tx + r . y = —

Purchase-money

'x + ft (l+i)'^

' jr + r . ;/
L

— . (the probable amount of his share.)

(1 + i/-^-*

Ix^r .y

Tx 4- A

(l+i)'--^'-* Tx + A

Or, the present value of his share in the i •■' division is equal to a, divided by
the number, who are noio alive in the Tontine at the date of the sale, with a
discount deducted for the {r . y — k) years, which are to elapse before the
division is to take place ; or it is independent altogetlier of the probubility of sur-
viving ij that date. This could be foreseen by the mere consideration, that the
deduction to be made for the probability of the purchaser losing his money by
the death of the life involved (if the probable future longevity of each existing
life be equal as regards their present health) is exactly balanced by the increase
of the value of his purchase, arising from the probability, that, as one of the
Tontine survivors, he would become entitled to a much larger sum, by way of

a a
dividend, than t^^ , viz. i^ ; Or thus, if the property of the Tontine

l.r + A i-x -i- r . y

were divided, at once, he would get the T,,. ^ /,"' part of it ; therefore the equi-
valents, which he has for sale, now, must be the T^ j. a**" part of each of the
periodic divisions a, which represent the property. The sale of any one tem-
porary survivorship dividend reversion could be effected without the sale of his
right to participate in any other divisions.

15. — If 2 lives be considered, the chance of 2 lives, of equal ages Xi , both
surviving the next division, say in k years.

lx^+k 'x,+ A /'■'i + *Y

f '•-■, + * \

The chance ot both dying ^ ( 1 — ~~i — J

The chance that of two lives one or other dies = '"', ( 1 — -7 — )

Ari'ENDlX,

295

If both lives be males and equal 15 and k = 45, the chance that one will
live over and the other die before 60, = -SM' (1 — -S*!) = •244' nearly, or
the odds in favour of the event, that one, and one only, of two lives will die, are
61 to 189 ; the relative chance of each is of course even.

The chance of a single male, now aged x, dying between the age of x -f /c,

/j- + *, — '.r + *2
and X + k-i is = '. "

Example: x = 15 .t + /c, = 50 i -{- h-z = 60

1^ = 34574 /,.+ Aj z= 23377 L- + k^ = 18808

4569

Probability = ^ ^ '132 nearly, or the odds arc about 33 to 217 in

34574

favour of the event.

16. — Where it is proposed to make a diminution in the cost of a share,
because a life older than the minimum age is nominated to a Tontine, or if the
parties were to wish to estimate at any time the present value of a member's
interest in the fundamental property of the Tontine, contingent upon his being
the last survivor, the calculation must include a comparison of the relative
chance of survivorship which the life estimated has with the others ; but the
investigation would be too long to be treated of in this Appendix. It may,
nevertheless, be incidentally mentioned, that in questions of swvivorship, wliich
is to occur in a particular order, so that the survivor may become entitled to
property, the calculation is very laborious, even in the case of the order of
survivorship of one out of two lives ; unless their ages be equal, and the relative
probabilities even.

For example : Suppose that the chance of a life aged i surviving another
aged X be required. For each year the probability would have to be estimated
of the survivorship occurring in that particular year. Let the year be that in
which the life i would pass from age x^ + k to .t^ -f- /c -|- 1 ; then two contin-
gencies must be considered : either the life .i.^ may die between the ages (x,^ -{- k)
(j _j_ A: -j- 1), and the life i complete his {x^ -|- /c -|- 1)"> year, which chances
would be calculated as in No. 15 of this note ; or both the lives x^ ana x^ may
die in that same year ; the life i,^ dying before the life x^ ; which latter contin-
gency may, with sufficient approximation, be considered as presenting an even

chance, and measured by ^ . . — — . We say

'a-, ''a

with sufficient approximation, because the quantity, of which J is taken and
treated as presenting an even chance, is so small, even in the case of questions

296 APPENDIX.

upon 2 lives, as not to produce much effect on the general result afforded by the
measurement of the first contingency.

The present value of a survivorship Reversion, contingent upon a life x^
surviving another x would be the aggregate of the probabilities of the event
happening in each year, multiplied by corresponding powers of (1 + j) •

17. — In problems involving a survivorship of one out of three or more lives,
the same mode of reasoning must be adopted; but it is important to notice that
the complex expression, which the investigation would then assume, may with
safety be materially simplified by neglecting altogether those contingencies,
which cannot affect the main value of the reversion, such as in the instance of
the second contingency alluded to in the case of only two lives. Even the
complete formula itself, when practically calculated by any existing table of
mortality, could only be used by introducing tabular approximations; and it
would not be difficult to show, that the neglect of unimportant contingencies, in
the formula for valuing a survivorship reversion on three or more lives, would
actually tend to correct the errors unavoidably created by tabular approxima-
tions.

TABLES.

298

TABLES.

TABLE I.
Shewing the Decimal corresponding to every Penny in the Pound.

s. d.

Deci-
mal.

s. d.

Deci-
mal.

0 1

.004

.204

.404

12 1

.604

.804

0 2

.008

.208

.408

12 2

.608

.808

0 3

.012

.212

.412

12 3

.612

.812

0 4

.017

.217

.417

12 4

.617

.817

0 5

.021

.221

.421

12 5

.621

.821

0 6

.025

* .225

.425

12 6

.625

.825

0 7

.029

.229

.429

12 7

.629

.829

0 8

.033

.233

.433

12 8

.633

.833

0 9

.037

.237

.437

12 9

.637

.837

0 10

.042

.242

.442

12 10

.642

.842

0 11

.046

.246

.446

12 11

.646

.846

1 0

.050

.250

.450

13 0

.650

.850

1 1

.054

.254

.454

13 1

*.654

*.854

1 2

.058

.258

.458

13 2

.658

.858

1 3

.062

.262

.462

13 3

.662

.862

1 4

.067

.267

.467

13 4

.667

.867

1 5

.071

.271

.471

13 5

.671

.871

1 6

*.075

.275

.475

13 6

.675

.875

1 7

.079

.279

.479

13 7

.679

.879

1 8

.083

.283

.483

13 8

.083

.883

I 9

.087

.287

.487

13 9

.687

.887

1 10

.092

.292

.492

13 10

.692

.892

1 11

.096

.296

.496

13 11

.696

.896

2 0

.100

.300

.500

14 0

.700

.900

2 1

.104

.304

.504

14 1

.704

.904

2 2

.108

.308

.508

14 2

.708

.908

2 3

.112

.312

.512

14 3

.712

.912

2 4

.117

.317

.517

14 4

.717

.917

2 5

.121

.321

.521

14 5

.721

.921

2 6

.125

.325

*.525

14 6

.725

.925

2 7

.129

.329

.529

14 7

.729

.929

2 8

.133

.333

.533

14 8

.733

.933

2 9

.137

.337

..537

14 9

.737

.937

2 10

.142

.342

.542

14 10

.742

.942

2 11

.146

.346

.546

14 11

.746

.946

3 0

.150

.350

.650

15 0

.750

.950

3 1

.154

.354

.554

15 1

*.754

*.954

3 2

.158

.358

.558

15 2

.758

Il9

.958

3 3

.162

.362

.562

15 3

.762

.962

3 4

.167

.367

.567

15 4

.767

.967

3 5

.171

.371

.571

15 5

.771

.971

3 6

.175

*.375

.575

15 6

.775

.975

3 7

.179

.379

.579

15 7

. 79

.979

3 8

.183

.383

.583

15 8

. 83

.983

3 9

.187

.387

.587

15 9

.787

.987

3 10

.192

.392

.592

15 10

.792

.992

3 11

.196

.396

.596

15 11

.796

.996

4 0

.200

.400

.600

16 0

.800

1.000

* Example. — The value of the Decimal .075, is \s. Qd. — .225, is 4s. Qd.
—.375, is 7.f. 6'i.— .525, is lO.-*. 6rf.— .654, is 13s. Id.— .754, is 15s. Id.—
.854, is I7s. li^.— .954, is 19s. If?.

TABLES.

299

TABLE II.
(A.) Shewing the sum per Pound to which a Rate of Interest
per cent, is equivalent.

2 per cent, interest is equal to nearly 0

^2
a

9
10

exactly 0
nearly 0 7
„ 0 8i
„ 0 9f
„ 0 11
exactly 1 0
nearly 1
„ 1
„ 1

„ 1

exactly 2

5 in the pound.

(B.) To calculate the Interest for One Year on any sum.

If the rate be 1 multiply the sum ^and the product is the
by .02 or

If
If
If
If
If
If
If
If
If
If
If 10

2 per cent.
3

"2 11

4J-

}

interest required.

bv
by
by
by

,025
.03

,035
.04

by .045
by .05

by
by

.06
.07
.08
.09
.1

or
or
or
or
or
or
or
or
or

10 0

2 00

5 0

10 0

e remembered that

Remark. — To perform the above, it will b
to multiply a quantity by a fraction it must be first multiplied by
the numerator, and then the result divided by the denominator of
the fraction. The division by 100 can be effected by dividing
twice by 10. Similarly the other divisors can be separated, and
the quotient obtained by successive divisions.

Example. — To find the interest for one year, at 3^ per cent.,
on £19. 12s. Qd.

,419. 12. 8
7

2)137.

10)68.

14.

10)6.

17.

K 2

Or the Interest required is 13. 8^'*^
13j.-. 9i. nearly.

300

TABLES.

Talle III. can, hy means of the following Formula:, he made to give the
results generally required from Tables of Discount or Annuities.

1. Table YIII. The present value
of <iJl due at the
end of any number j
of years J

2. Table IX.

The Amount of an'
Annuity of <£l in
finy number of
years

'Unity divided by

is eqiial J i\\Q Amount^ mTa.-

to 1 blciii., of<£l atthe

end of the same time

'The quotient of :
(ihe Amount in Ta-
ble III., of a single

pound in the same
> is equal ^ ^5,^^^^ i^^g ^^i^y^)

divided by (the rate
of interest per
pound) involved in
the calculation.

' The quotient of
unity diminished
by the present
value of a single
. '" v,v^c...» , pound, (due at the
end of the same
time) divided by
the rate of interest
^ per pound.*

4. Tables IX and X may be calculated from each other, if either be
known by the property. (Art. 33 Appendix).

that 1 , 1 1 . i

^•^ss -, I 5 s equal f a year's

3. Table X.

The present value'
of an Annuity of
£,\ for any number
of years

is equal J
to

Present Value
of an Annuity.

unt of y ''
nnuity. )

Amount
an Annuit}'

"j interest.

* [Tho present value required for tlie division being- found from Table in.,
by the formula of (1).]

TABLES.

801

Q-

00"

O-t"l-'t<f(5G000C5OCiC>^Or-ii-(CiCO»-C5QC''5'l<i-i-t-

O^OCiOCiCOfOOCiCCi— iXOil^d'OOCD'OOCCCOi—ir-iX
CC -O 'O ■:£ O X I— I "O CJ ".- CO — I I— I CO 1 - iM O Ci f-i O CO CO I - -f -f

o rH CI CO Tt^ ic I -; X C5 1-H CO •>-; I - c; r-< -f I -. c; co -o o •+ cq cc od

r-H r-i rH rH i-i r-< r^ r-H pH ci 04 CI (N 01 CO CO CO CO -t< •+' >6 >6 id CO CO

o C5 o r- 10 I- r- r-i -f ,-H X r-< X 1.0 o rH X C5 >o i:; 10 -f 'O co -h

O -f O O (M O 0 X X I- -t< 01 C3 X C; CI X Ci CO CI C: O O CI I-

I f< CI r-H O O O r- CO O O 'O O l~ 'O >.0 'O 1^ rH ^O "f CO -r I-- CI

O rH CJ CO 'f "O CO (^ X O I— I CI -t* '.0 I ~ Ci rH CO CO X r-H -f I ~ O -f

i(NiMiMiMiMiMCOCOfOCO-^-t-*iOin

o CO o •+ CI "0 CO X -t< X CI 1-1 o 0 'O CO t-- CO >o ^ >.o 10 r^ ot X

O CO —I CI X X CO CO CI O X CI CI O O O' 01 -t< 'O r^ Ci CO C5 X r—
CD CI Ci :0 CO rH O C5 X Oi C2 ^ CO CO Ci -t< C5 10 CI O C; O r-H -f C5
O rH r— I CI CO -^ iC 10 CO l^ X O 1— I C5 CO 10 CO X O Cl CO CO X O Cl

CI CI CI CI CI CI C4 CO CO, CO CO CO •* •*

o >n CO >o CI o — I ■* CO X CO X CO C5 Oi X o CO o CI CI' <M 'o o CO

O CI 1^ no CO O I ~ h- I— I X O 10 10 CI X CI CI CO CD CO 10 10 r-< iC CO

1.0 O 1-0 rH I- h O 1^ 10 CI rH Ci X t- 1^ X 0 O CI 10 X CI I- CI X

O l-i rH CI CI CO ■^ -f l-O CO t^ t^ X C5 O 1— I CI -h O CO 1^ C5 O CI CO

I C<1 <M (M (M IM IM C^l ^' f^ to CO

OOrH10i-<ClXr-lO0iXXrHOlMC0C0-+<Xt^C1C0i-IO-tl
10 CI rH CI CO CI O CI CD CI CI '.O CI I— 1 10 CI CO X l^ rH C' CO CI CO >o
-t< O ^ CI ^ O CO CI X 10 CI Ci I- 10 CO CI -^ O O i-H CI CO 10 1^ o
■O O rH rH CI CO CO -tl •* lO CO CO l^ X O O rH CI CO -t< i.O CO 1^ X o
rH rH rH rH rH rH i-H rH r-i r-i rH rH rH rH r-J Ci C^i C4 Ci C<i Ci Ci Ci Ci CO

rH|^

p. a;
-cH

col'?

~ C-. C: — ' rH CO
M CI CO -f CO 1-; X

r-i ci ci (N c4 ci ci ci c^ o-i

ocDXXcococi>ococi-tioc:cooc:iC3XXrHr^C5t--cox

O rH -t< Ci CO 10 10 X CO O C5 rH 10 r-( O CI I-- ».0 CO rH X Ci -+< CO 1.0
-HXClCOrHCOrHCOClXCOOCOCOOl-^-tiClOOil^COCOCDCO
Ow'rHrHClClCOCO-r-+lOCOCOl--XXCiOrHrHCICO-t<lOCD

CI CI CI d d CI CI d

1.0 rf I- CD rH rH C5 -+ X O CI -+ (^ CO O CI X Ci CO rH -t< |.^ Ci -fl r-l

1^ CO CO X IM 1^ CO CI CI 10 05 10 CO -t 1-^ CI Ci Ci CI X CO r^ rH Ci o
CO I- rH 10 0-f'd-+'Ci-fCi 10 rHl.^COOCOCOrHXCO'fCOrHrH
COrHrHCIdClCOCO-+i-*ilOCDCDI-XXCieC5rHClCO-t;l.O

d"d d d

cor— rHir3C^-r';;iT3i-rCiirirH|.^rr3CJ(;r300rHOOCO

q o :^_ rH CI CI CI CO CO -t<_ Tt; 10 CO CO I- X X Ci c o rH

r^ r-i 1-! rH rH r-i r-i r-^l-^r^ir^^r~^l-^r^r^1-il-ir-io^<:i^

OCll^OCOdClXXiOCiOCiCOCOCiCO-tiiOr hiOrnCOd

l.O rH X I— 1^ Ci CI CO CI O Ci rH CO X 10 CO -f I-- CI Ci Ci rH CO CO CO
CO I- Ci -f X CI (■- rH CO ^ 10 rH O rH |.- CO Ci 10 CI X lO CO O GO CO
O O rH rH rH CI CI CO CO -r •*! 10 10 CO CO 1^ »- X Ci Ci q rH CI CT CO

i-irHr-irHrHrHr-irHrHrHrHrHrHrHrHrHrHrHrHrHCidCidd

10 O 1~- -f 'ti 1.0 Ci "0 >0 X CO X 10 X CD ^ CO CO rH X -t O h- >0 lO

CI CO O CO CO rH O rH CO CO rH I- 10 -t< 10 X CI X CO O I- rH CO •+ -f
CO CO O CO r- rH 10 Ci CO I- CI CD rH CO rH CO CI »^ CO Ci 10 CI X >0 CI
OOrHrHrHC1ddeOeO-*rtl»0>OCOCOl-l~XXCiOC^d
^P^rHrHr-irHrHr-IrHrHrHrHrHrHr-irHrHrHr-irHrHCadcici

o Ci i~- >-o CI o X r- I- Oi CI t- o 'O Ci I-- X -f >o rH ci rH 10 (^ r-

OOCIiOCi-t<CiCO-+<CO-t<iOXdl^-tidClCOCDOCOCOClCO

CO CO O Cl 10 Ci Cl CO O -t< X Cl CD rH 10 O 1-0 O 10 O CO --1 1- CO Ci
OOOrHrHrHCldCOCOCO'f-t<10>.OCOCOI--l-XXCiCiOO
^ ^' ^ ph' rH r-l rH rH rH rH r-i r-i r-i r^ rH rH r-( ^ rH rH r-I rn' r-i ci d

302

TABLES.
TABLE IV.

Shewing the Rates of Interest payable only once a year^ ichich are
equivalent to nominal annual Bates of Interest actually paid at
frequent intervals in each year. Art. 5, Appendix.

Nominal

annual rate

per cent.

Real yearly interest, to which the nominal rates are
equivalent when paid : —

early

Half-yearly.

Quarterly.

Monthly.

Momently.

3 per cent.

£.
3

S.
0

d.
0

£. s. d.
3 0 5^

£. s. d.
3 0 84

£. s. d.
3 0 10

£. s. d.
3 0 11

4 percent.

4 0 95

4 1 21

4 1 6 4 1 7|

5 per cent.

*5 1 3 -

5 1 105

5 2 4 5 2 6^

6 per cent.

6 1 95

6 2 85

6 3 4 6 3 8i

7 per cent.

7 2 5^

7 3 85

7 4 7 1 7 5 01

8 per cent.

8 3 2.]

8 4 10^

8 6 0

8 6 7

* Example. — If a person receives interest half-yearly, after the nominal
annual rate of 5 per cent., the actual interest derived by him by one year's
investment is £5. 1^. 3d.

TABLE V.

Shelving the nominal annual Rates of Interest paid momently,
which are equivalent to rates paid at the end (f each year. Art.
6, Appendix.

Yearly rate.

Corresponding momen
ous rate.

tane-
d.

n
i§

5^
7"
6.1

Yearly rate.

Corresponding momcntane-
ous rate.

2 per cent.

3 „

4 „

5 „

6 „

£. s.
£1.9802 or 1 19
2.9558 2 19
3.9220 3 18
4.8790 *4 17
5.8268 5 16

7 per cent.

8 „

9 „
10 „

£. s. d.

£6.7658 or 6 15 4

7.6791 7 13 11^

8.6177 8 12 4i

9.5310 9 10 7.^

* Example. — The amoimt to which a sum of money will accumulate in
any number of years at yearhj interest 5 per cent, is the same as the amount
to which it would accumulate at momentaneous interest, after the nominal
annual rate of 4Z. 17s. Id. per cent.

TABLES.

303

TAULK VI.
Sheicing the Amount to u-hich t\ ifill increase at Compound In-
terest, according as it is paid yearly, half-yearly, quarterly, or
momently. \_Se6 Table III.~\

Nominal
rate of
Interest.

Payable.

The Amount of £\ in

1 Year.

.') Years. | 25 Years. 50 Years.

3 per cent.

yearly

half-yearly

t^uarterly

momently

1.03000
1.03022
1.03034
1.03045

1.15927
1.16054
1.16119
1.16183

2.09378
2.10524
2.11108
2.11700

4.38391
4.43204
4.45667
4.48169

4 per cent.

yearly

half-yearly

quarterly

momently

1.04000
1.04040
1.040()0
1.04081

1.21665
1.21899
1.22019
1.22140

2.66584
2.69159
2.70481
2.71828

7.10668
7.24465
7.31602
7.38906

5 per cent.

yearly

half-yearly

quarterly

momently

1.05000
1.05062
1.05095
1.05127

1.27628
1.28008
1.28204
1.28402

3.38634
3.43711
3.46340
3.49034

11.46740
11.81372
11.99517
12.18249

6 per cent.

yearly

half-yearly

quarterly

momently

1.06000
1.060!)0
1.06136
1.06184

1.33823
1.34392
1.34685
1.34986

4.29187
4.38391
4.43204
4.48169

18.42015
19.21863
19.64303
20.08553

7 per cent.

yearly

half-yearly

quarterly

momently

1.07000
1.07122
1.07186
1.07251

1.40255
1.41060
1.41478
1.41907

5.42743

5.58493
5.66S16
5.75460

29.45703
31.19141
32.12799
33.11545

8 per cent.

yearly

half-yearly

quarterly

momently

1.08000
1.08160
1.08243
1.08329

1.46933
1.48024
1.48595
1.49182

6.84847
7.10668
7.24465
7.38906

46.90161
50.50495
52.48490
54.59815

TABLE VII.

Time 171 which Money will douhle itself at Simple or Compound
yearly Interest. {See Arts. 12 — IT), in the Appendix for the
theorem, relative to the number 70.)

Rate

Percent.

Simple Interest.

Compound Interest.

Years.

Years. Years

Days.

2 1

r 50.0000

35.00278878 = 35

2§

40.0000

28.07103453 = 28

33.3333

23.44977225 = 23

165

28.5714

20.14879168 = 20

£1 or any

25.0000

17.67298769 = 17

246

other .sum ^
) will dou- I

22.2222

15.74730184 = 15

272

20.0000

14.20669908 = 14

ble itself

16.6666

ll.Sii.-.Cino,-. = 11

327

14.2857

10.24476835 = 10

12.5000

9.O0646834 = 9

M.llU

8.04.323173 - 8

l(i

10 J

, 10.0000

7.27254090 - 7

100

104

TABLES.

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TABLES.
* TABLE XII.

Extract from the TaUe^ of Hyperholic Logarithms.

Number.

Logarithms.

Number.

Logarithms.

1.01

.0099503

2.00

.6931472

1.02

.0198026

3.00

1.0986123

103

.0295588

4.00

1.3862943

1.04

.0392207

5.00

1.6094379

1.05

.0487902

6.00

1.7917594

1.06

.0582689

7.00

1.9459101

1.07

.0676586

8.00

2.0794415

1.08

.0769610

9.00

2.1972245

1.09

.0861777

1000

2.3025851

1.10

.0953102

Rem. — Hyperbolic Logarithms can be deduced from the ordinary tables of
Logarithms to the base 10, by multiplying the latter by Loge 10 or
2.302851.

* See Callet's Logarithms. — Firmin Didot, Paris.

TABLE XIIL

Extract from the English Life Table, 5th Report of the
Registrar General.

\^Tnterpolated by ajiplying the differential Method to the Logarithms of the
probability of living a year ; in tivo series, — the first extending from 15 to
55 in the Table of Males and from 15 to 64 in the Table of Females, the
second series from 66 and 65 to the end oflife^

Age.

Living.

iVIa'ies.

Females.

Age

Living.

Males.

Females.

100,000

51,274

48,726

57,173

28,868

28,305

85,369

43,104

42,265

53,824

27,145

26,679

80,102

40,388

39,714

50,300

25,311

24,989

77,392

39,018

38,374

46,620

23,377

23,243

75,539

38,064

37,475

42,812

21,361

21,451

74,201

37,385

36,816

37,998

18,808

19,190

73,154

36,843

36,311

31,854

15,.590

16,264

72,320

36,411

35,909

24,532

11,824

12,708

71,644

36,065

35,579

16,659

7,868

8.791

71,081

35,787

35,294

9,382

4,316

5,066

70,612

35,564

3.5,048

4,010

1,786

2,224

68,628

34,574

34,054

1,150

492

658

66,061

33,324

32,737

188

111

63,296

31,958

31,338

100

60,333

30,473

29,860

105

TABLES.

309

TABLE XIV.

Extract from the Tables of Rates of Mortality at Northampton, Carlisle, the
Equitable Insurance Office, and according to the Observations of Des Parcieux.

bo
<

Northampton

Carlisle.

Des
Parcieux.

Equit-
able.

60
<

Northampton

Carlisle

Des
Parcjcux.

Equit-
able.

1
Living. Living.

Living.

Living

11650
8650
7283
6781
6446
6249
6065
5925
5815
5735
5675
5423
5132
4760
4385

10000
8461
7779
7274
6998
6797
6676
6594
6536
6493
6460
6300
6090
5879
5642

1000
970
948
930
915
902
890
880
848
814
774
734

2844
2785
2705
2611
2501

35
40
45
50
55
60
65
70
75
80
85
90
95
100

4010

3635

3248

2857

2448

2038

1632

1232

832

409

186

5362

5075

4727

4397

4073

3643

3018

2401

1675

953

445

142

694

657

622

581

526

463

395

310

211

118

2374

2236

2093

1937

1744

1524

1288

1028

752

480

224

TABLE XV.

Present Values of Annuities on Single Lives according to the Carlisle Table

of Mortality.
(See Deposit Life Assurance Formula in Section 4, Appendix.)

Age.

3 per cent.

4 per cent.

Age.

3 per cent.

4 per cent.

17.320

14.28164

18.433

16.04123

20.085

16.55455

17.143

15.073(53

21.501

17.72616

15.863

14.10460

22.683

18.71508

14.303

12.86902

23.285

19.23133

12.408

11.29961

23.693

19.59203

0.491

9.66333

23.846

19.74502

8.917

8.30719

23.867

19.79019

7.123

6.70936

23.801

19.76443

5.512

5 23901

23.677

19.69114

4.365

4.18289

23.512

19.58339

3.229

3.11515

22.582

18.95534

2.499

2.41621

21.694

18.36170

2.757

2.67433

20.665

17.64486

100

1.683

1.65282

19.556

10.85215

THE END.

rniNTED BY geouge taylor, little jamek street,

CRAY'S IKN LANE.

1)1 VI SIGN 1 1 1 of Treatise on Associationafor Provide)/ 1 Invest men I .

T K E A T I 8 E

FRIENDLY SOCIETIES,

CONTAINING

An Exposition of the True Law of Sickness,

RULES AND TAELES,

Remarks on the Extension of Industrial Life Assurance,

and on the Principles involved in the Valuation of Post Obits,

Reversions, and the

Liabilities of Friendly and other Assurance Societies.

ARTHUR SCRATCHLEY, M.A., F.R.A.S,,

Of the Inner Tcwjtle, Hanisiir-nt-Law ;
Forimrhj FeUow and Sacllerian Lecturer of Queens' College, Camhridge, S,c.

LONDON :
SHAW AND SONS, FETTER LANE,

Printers a7id PulUsliers of (he Books and Forms for Saving^i Banks, Friendly Societies,
Government Annuity Societies, ^-c.

CHARLES & EUWIN LAYTON, 150, FLEET STREET.

Depdt for Books on Assurance.

MDCCCLIX

Tenfh Edition., Enlarged.

NOTICE TO TENTH EDITION.

The passing of the recent amending Act (21 and 22 Yict., c. 101),
being the 18th of Eriendly Society legislation, necessitates another
Edition of this Treatise. The opportunity has been taken to insert a
variety of new matter, relating to several subjects of importance, as
follows :

1. — The tetje Laav of Sickness or Inability to Labour
prevailing among Members of Fkiekdlt Societies.
(See p. lOG — 109, and Mathematical Appendix.)

2. — Deposit Tables for Savings Banks, (p. 145—160.)

3. — Observations on the Principles involved in Valuations
of the Affairs of Assurance Offices, and on Errors in
Bonus Allotments. (See Preliminary Remarks and Mathe-
matical Appendix.)

4. — On the Distinction between Moral and Mathematical
Expectation in Prolahilities. (Appendix.)

5. — On the Valuation of Post Obits and Reversions
(Appendix.)

3, Pakliament Street, London,
June, 1859.

ERRATA.

Division III.

P. XXXV. art. xxviii, line 10, for " 45," read " 60."
P. xxxvi, line 1 - - - - for " 65," read " 70."
„ line 2 - - - - for " 44," read " 45."
P. 63 and 64 - - - - dele the asterisk in the numbering of the pages.
Appx. p. 46, line 21 - - for "numbers," read "members."

INDEX

Division Hi.

PAQE

Ad \S zxidi\QN\ci. c.faZ ( Friendly Societies) appx. 41

Amalgamations xxxi; appx. 19

„ Tables ... xxxv, xxxvi

Annuities: Table 54

Applications of Life Assurance 46

„ Tables 61—63

Assignments of Policies 14

Average Ages appx. 35

Bonuses: Errors in Allotment xxi ; 8; appx. 26

Building Societies : Assurance for Borrowers 65

„ Tables 57,68

Capital of an Assurance Society 61

Choses in Action, Assignment of 14

Creditor and Debtor Policies 12

Defects in Life Assurance, as regards the industrious Classes 10

Deposit System of Assurance 22

„ Tables 23

Failure of Assurance Offices xvi

Fidelity Assurance 43

Free Reversionary Policies 21 ; appx. 24

Friendly Societies vii; 73, 110; appx. 41

Friendly Societies Institute 89

Guaranteed Bonuses appx. 33

Half Premium System 29

Honesty Guai-antce 4

VI INDEX.

PAGE

Improvements for the Practice of Life Assurance 12

Indisputability 33

Industi'ial Assurance 45

Life Leasehold Assurance 49

Limit of Assurance Risk to be kept by a Society , appx. 35

„ Table 7

Marriage Assurances 14

Model Rules for a Friendly Society 113

Modifications in Life Assurance Practice, for the Industrious Classes... 12

Moral and Mathematical Expectation in Probabilities prob. appx. 1

Moral Urgency of Life Assurance 65

Mortality of Sound Lives 39

Mortality Tables xxxvi, 6

Nature of Friendly Societies 73

Nature of Life Assurance 1,60

Parish Friendly Societies 92

Political Economists, Opinions of 14

Population: Statistics xli

Post Obits:

Valuation by Life Annuities appx. 1

Purchase by Present Values appx. 11

Tables appx. 7

Probabilities 5; prob. appx. 1

Prosperity of Assurance Companies xiv

Reversionary Life Interests appx. 17

„ Tables appx. 14

Savings Banks Deposit Tables , 145

Sickness: The True Law 10(1; appx. 38

Statistics xli

Suspension Principle 15

Transfer Principle 26

Valuations of Policies and the AfiPairs of Assurance Companies xxvi ; appx. 19
Wives entitled to Provision 13

PRELIMINARY REMARKS.

I. — The title of thisDmsiou (III.) indicates that it treats of two
Idndred subjects — Friendly Societies and Indus/rial Assurance
Societies, — including under these designations the associations
usually denominated Benefit and Odd Fellow Clubs. In
this edition we have thought it desirable to review the various
methods of Life Assurance in practice at the present time, while
suggesting some *improvements that appear to have reasonable
arguments for their adoption. — In that portion of the treatise
which bears more particularly on Friendly Societies, we have
supplied a model collection of rules suited for establishing them
on a sound basis. We recommend the following general sug-
gestions to persons engaged in the formation of new societies : —

General Suggestions.

lo. — j^o member of a Friendly Society should be allowed to
insure for a larger sickness allowance per week than would equal
tico-thirds at most of his weekly earnings. A member has,
otherwise, no interest in returning to his work, and retiring
from the sick list. A declaration should also be required,
stating whether he has effected sick assurances in any other
Benefit Society.

2°- — The subscriptions of Honorary Members should be
applied, partly to assist the fund for expenses, and partly to
enable the society to offer an incentive to 'Benefit-members' to
keep off the sick fund, by according them, out of the honorary
fund, an allowance towards diminishing quinquennially their
payments in proportion to the length of time that they have
previously not been claimants.

30. — The aggregate amount of Sickness alloicance receivable by

* [See Part V. of Division I., or the Treatise on Savings Banks, tor a
plan for extending the operations of Life Assurance Societies and Friendly
Societies, by the agency of Savings Banks, and for the establishment o a
Government Life Office. J

Vlll PRELIMINARY REMARKS

any one person should be limited, but tlie members might have
the privilege of re-entry, at the rates for their advanced ages.

4°- — The rate of sickness allowance might increase with the
number of years the member has not been a claimant.

5°- — The Widows' annuities should be proportioned to the
number of years' membership of the husband before death.

6° — In respect to Superannuation Allowances, we would
remark that, unless Benefit Societies be placed under bettor
inanagementthan, in the majority of instances, is at present the
case, or indeed,unless they be constituted PcrrisA Friendly Societies,
as we have advocated in Art. 87, the members run considerable
risk of never receiving the provisions for old age or chronic
sickness, for which they have subscribed. It is an open ques-
tion, however, as to how the superannuation allowances should
be secured. Many advocate that they should be made a distinct
matter from temporary or Recoverable inahiliiij to labour. (See p.
99.) "We are inclined to think that it would be well if the ordinary
tables were calculated to provide only for this latter risk; and that
those members, who desire to have superannuation allowances,
— that is, annuities to begin at a fixed age, or earlier in case of
Irrecoverable chronic sickness — should pay for such additional
benefits according to a distinct table : arrangements, in the case
of small societies, being made for their underwriting such
special benefits, either with the Government, or some stronger
association that has a sufficient number of like cases to enable
it to undertake the risk. *

7°- — As to Arbitration. — The rules should distinctly state
the manner of settling disputes, for which the following clause
may be adopted : —

" If any dispute shall arise between any member, or person

[* In reference to this, the reader should peruse the admirable Lecture
recently delivered by the learned Registrar, Mr. Tidd Pratt, which contains
suggestions to promoters and managers of Friendly Societies that are en-
titled to the greatest weight, as being the residt of long experience in the
discharge of his onerous duties. Many also of great value ivill be found in
the writings and lectures of Sir John S. Forbes, Bart., of Fettercairn, and
ihe Rev. J. B. Owen, M.A , of London.']

ON FRIENDLY SOCIETIES. IX

claiming under or on account of any member, or under the rules of
the society, and the trustees, treasurer, or other officers of the
society, or the committee thereof, it shall be referred to arbitration.
In each case of dispute the complaining party, or some one appointed
by him or her, shall name one arbitrator ; and the secretary shall,
on the part of the society, name another ; and the two shall be
the arbitrators to decide the matter in difference. If they agree
in making an award theii' decision shall be final. In case they
disagree, they shall make a statement in writing of the facts
of the case, so far as they have been brought to their knowledge,
or each arbitrator may make his own statement, and such state-
ment or statements, shall be submitted to the Registrar of Friendly
Societies in England for the time being, for his award thereon,
and his decision shall, in such case, be final." {See also p. 112. J

8°' — As to Periodical Investigations and Dissolutions. — The
affairs of every Friendly Society should bo investigated at
intervals of three or five years, so that the siiificiency of the
rates, and the good working of the rules, may be tested from
time to time. (See i^age 89. J

In case a dissolution should be deemed advisable or neces-
sary, it can be effected ' by consent ' or compulsorily : — the first,
under s. 1 3 of the Act of 1855, requires the consent of 5-6ths
of the members (see p. 46, appx.) ; the second is applicable in
case the Society should he deemed insolvent, when, under s. 8
of the Act of 1858, an application from l-4th of the members
for an Actuary's award of dissolution alone is necessary.
Another course may he adopted, viz., union with some more
prosperous Society, under s. 14 of the Act of 1855.

II. — The folloicing Arrangements ivouJd go far to ensure
adequate sujjervision : —

1 . — A central committee, consisting of men of experience, to
he formed in the leading town, to whom should be confided the
chief management of the societ}'-, the investment of its funds,
and the determination, from time to time, of the risks to he in-
curred, claims to he discharged, &c.

PRELIMINARY REMARKS

2. — A sub-committee to be appointed in eacb district, for the
purpose of administering tbe benefits of the society, exercising
surveillance for the prevention of fraud (such as feigned pro-
longation of sickness, &c.), and the rejection of any persons not
suited to become members of the society from their habits of
life, state of health, morals, or otherwise.

3. — The sub-committee to consist of Beneiit members, presided
over by the clergyman of the parish, or some person of equal re-
pute. The whole or part of the sub-committee might be elected,
or, at least, nominated by the benefit members of the district.

4. — The sub-committee to superintend the receipt of the
subscriptions of the local members, and to remit them (weekly)
to the head quarters of the central committee of management.

5. — The risks insured in the branches under each class of
benefits to be aggregated together, so as to afford one average
risk for the whole society ; — the subscriptions being paid into,
and the losses being paid out of, separate funds for each class,
as provided by the Act 18 and 19 Vic, c. 63, s. 25.

III. — Numerous collateral advantages, which it is unneces-
sary to enlarge upon in this place, would accrue from the system
of central supervision we recommend. It would check any
want of firmness, on the part of the local committee or agents,
arising from the circumstance of their being tradesmen with
whom the members deal.

An objection is made, " That the great extent of such socie-
ties would prevent adequate supervision and tend to the undue
increase of claims." We think, on the contrary, that it
furnishes the main clement of security. It is only by a large
average, that aberrations in one district, in excess of the calcu-
lated laws of mortality or sickness, can be expected to be
counterbalanced by diminutions of loss in other districts. If
each district bore its own risk, and they were not thrown into
a common average, one branch might be insolvent, whilst
another might be prosperous beyond expectation. The necessity
of continuous investment (the scope for which has been very
much extended by the recent Acts) affords an additional reason

ON FRIENDLY SOCIETIES. XI

why societies should be large enough to invest their surplus
receipts without delay, and at the same time on advantageous
terms, through being able to procure the best financial advice.

ly. — As to Audit of Friendly Societies. — The accounts of a
benefit society can only be audited by persons of experience, and
it frequently happens that they present as many points of
difficulty, and give as much trouble as the accounts of a large
office. In any future legislation on the subject, therefore, it
should be provided that every society registered under the Act
should appoint an Auditor, being a professional Accountant,
and enrol his name with the Registrar of Friendly Societies.

Y. — As to a Permanent Guarantee Fund. — In reference to the
clauses (see p. 81) proposed in 1854, at our request, by Mr.
Seymour Fitzgerald, M.P., we would remark that the managers
of Benefit Societies too much neglect to set apart a sufficient sum
to form a Permanent Guarantee Fund. This fund (even in a
large society) , if not permanent, should, at all events, be established
on such a principle, that it would exist till after the probable
average lifetime of the younger members of the society, that is,
some forty years. In the majority of existing Benefit Societies
of many years standing, those members, who entered young and
are now become old, find the funds exhausted (as in the case
of the Mutual Society in Threadnccdle- street,) by the payments
which have been made to the members, who have gone before
them and were older than they were at the time the societies
were founded. In the case of any society, established in the
present day, the promoters would undertake a certain amount
of moral responsibility ; and its failure would produce infinitely
more mischief, and so do more to check provident habits amongst
the industrious classes at large (apart fi'om the monetary loss
to its members) than the bankruptcy of a thousand of the
ordinary benefit clubs. In such a society, therefore, a Guarantee
fund is absolutely necessary, and should at fii'st consist of tho
contributions of honorary members, invested and set apart for
the purpose. Even should subsequent periodical investigation

Xll PRELIMINARY REMARKS.

into the affairs of the association show, during the first twenty
or thirty years, that it is experiencing less losses than were antici-
pated by the tables, still fluctuations and aberrations may occur,
and a permanent guarantee fund should be kept up.

VI. — It is worthy of notice by all who desire — " to relieve the
physical wants and necessities of persons in poor circumstances,
or to improve the *dwellings of the labouring classes," &c., — that
under the 11th section of the Friendly Societies Act, 1855,
societies for such purposes may be registered, when the following
privileges and regulations will be extended to them : —

1. Buildings for holding their meetings may be purchased or
leased, (sec. 16.)

2. The appointment of trustees by the members, and registration
of such appointment, the treasurer to be trustee, should no
other be elected, (sec. 17.)

3. The property of the society to be vested in the trustees
without assignment, (sec. 18.)

4. The trustees for the time being may sue and be sued in the
name of the society, (sec. 19.)

5. Trustees not to be liable to make up any deficiency in the
funds, (sec. 20.)

6. The treasurer to give security for the due performance of his
duties, (sec. 21.)

7. The treasurer to render accounts to the trustees when called
upon, (sec. 22.)

8. Embezzlement or Praud may be punished by summary process,
(sec. 24.)

9. The rules to be conclusive as to the manner of determining
disputes, (sec. 40.)

10. Disputes (when not provided for in the rules) to be settled in
the County Court, (sec. 41.)

11. The order of the Court may be enforced by a pecuniary
penalty, (sec. 42.)

12. The Lord Chancellor may make orders to regulate the pro-
ceedings, so as to render them as summary and as inexpensive
as conveniently may be, (sec. 43.)

* [In the Ai)pondix to Div. I, or the Treatise on Savings Banlis, will be
found a full inquiry into the question of tlio Improvement of Industrial Dwel-
lings. See also Part II of Div. II, or the Treatise on Building Societies.]

PRELIMINARY REMARKS. Xlll

AS TO

INDUSTRIAL LIFE ASSURANCE SOCIETIES.

I. — With regard to Assurance Societies, much has been
said as to the mjurious effect of so many having been formed
of late years, when so few really transact any large amount of
business. But the mischief, if any, is confined to those
societies, the non-success of which is attributable to their
having been founded, either without a good connection, or
with insufficient paid-up capital to defray the expenses,
that are necessary to establish properly any institution of
importance. All persons, whose opinions on assurance matters
are worth noticing, are agreed that the field for business, as yet
unworked, is so vast and increasing as practically to leave
room for many more companies than now exist ; allowance
being made for the great number that have lately amalgamated ;
the more so, as scarcely any of those in operation seek to do
business with the Industrious classes or the smaller kind of
tradesmen. Moreover, it is to be remembered that not only
are the numbers of the population at large yearly increasing,
but the materials for assurance are themselves gradually
changing, and will do so as long as the world lasts ; for each
year new lives are born ; new lives come of age ; new lives
have commercial transactions, or man-y, and require policies
of assurance.

II. — That altogether scarcely a quarter of a million of
persons should have been assured in the United Kingdom,

XIV PRELIMINARY REMARKS ON

— when the population is at the present time near 30 mil-
lions, and is increasing at the rate of more *than 250,000
lives a year — is conclusive evidence, either that the public do
not yet fully understand the advantages arising from the
assurance system, or that the majority of existing companies,
from the manner in which they conduct their business, do not
meet the practical requirements of the people.f

A great, though gradual, increase is, however, noticeable
in the number of persons assured during the last 10 years,
more particularly by those institutions which are usually de-
nominated class offices ; and this increase leads naturally to
the expectation, that tens of thousands, before long, will avail
themselves of life assurance, where hundreds only do so at
present. We concur, also, with an opinion, recently expressed,
that there are many class interests, as yet not addressed, which
future class offices will succeed in enlisting on the side of the
assurance principle.

III. — As to the prosperity of Assurance Offices. — The
position of the majority of existing Assurance societies
is, indeed, satisfactory, if they be regarded only in their
character as commercial associations. It is certain that they
have met with unexampled prosperity from the precaution,
which has been exercised, of charging a considerable margin
in favour of the society over the mathematical value of the
risk attending the assurance of any life, and from the profitable
and judicious manner in which the premiums, in general, are
invested. Hence it has followed as the result of the experience
of upwards of a century and a-half, that no commercial under-
taking has surpassed a soundly constituted assurance ofiice in
the steadiness with which its prosperity and consequent profit
have increased, where judgment and care have been exercised
in the management.

* See further on as to the numbers of the population, (art. xxxiv-xxxvii.)
t [6'ee Arts. 11 and 12. p. 14, on the practical and legal impediments to
Assurance']

LIFE ASSURANCE SOCIETIES. XV

This may be regarded, not as the result of" accident, but as
verifying the exactness of the limits, within which events may
be estimated by the Laws of ** Average," as likely to occur.
In fact, the remarkable manner, in which the happening of
such events has coincided with the calculated probability of
their occurrence, has proved that there is less tendency to
fluctuation in the profits of an assurance society than in those
of any other commercial enterprise.

IV. — Such is the commercial aspect of the better class of
offices ; but if they be measured by the extent of good they
have done to the community at large, or by the number of
families, whose pecuniary difficulties or suffering they have
contributed to alleviate, then (remembering the millions, in
the United Kingdom alone, who have lived and died since an
assurance office was first founded) it must be acknowledged
that the number of persons, who have been benefited, is limited
indeed, and that hundreds only have been assisted where tens
of thousands have suffered. Hence so far from there being
ground for no greater exertion being made to extend the
operations of assurance companies — so far from there being
any reason that the public should rest satisfied with the
activity of the majority of existing associations — it must be
acknowledged, that they have failed to a considerable extent
in their mission.

The fact is, the managers of insurance companies, in the greater
part of their publications in support of life assurance, have
addressed their efforts mainly to making an impression upon
the minds of the middle and higher classes, and even there
they have only partially succeeded in their object. The humble
operatives, whose circumstances are more precarious, have not
been addressed with the same anxiety to produce conviction.
To make life assurance universah there must first be removed,
as far as the principle of the system will allow, many imper-
fections in the practice upon which it is applied. Societies

XVI PRELIMINARY REMARKS ON

must cease to consider that the industrial portion of the
community are, as a matter of course, to leave their children
without any provision. They must induce the hardworking
mechanic, the small tradesman, and others in a similar position,
to give the subject more careful consideration, as one coming
home to themselves, and affording benefits within the reach
of their narrow resources.

V. — As to the failure of Assurance Offices. — Although, as
a whole, so many assurance societies appear at present to have
been successful, and although it is undoubtedly true that
the principle of Life Assurance is still very far from having
received all the extension of which it is capable, yet the
experience of the last few years has strikingl}' shown, that a
large number of offices have not been able to do sufficient
business to pay expenses or to form Averages of lives. This
is confirmed by the fact, that in the three years, 1 856 to 1858, 88
offices have ceased to exist, 5 have amalgamated, 69 have
transferred their business, and 20 have had recourse to a
winding up in the Court of Chancery. — (v. that useful Annual
the Post Magazine Almanach.)

VI. — Now, in order that a Life Assurance Societ}' may be
successful, — that is, may fulfil its promise of paying to the
representatives of every life, on decease, the amount of the
policy without drawing from any other fund than the pre-
miums received from assurers and the interest obtained on
the same, — various circumstances, it is evident, must concur.*
These are: —

(L) That the premiums of each member be sufficient to pay
his share of the expenses of the Listitution, after setting aside
the amount required to be accumulated according to the law
of mortality.

* [On this head the reader should consult the writings of Messrs. Peter
Hardy, F.R.S., Samuel Brown, Sprague, &c., which bear the stamp of refined
judgment confirmed by experience.]

LIFE ASSURANCE SOCIETIES. XVll

(2.) That the law of mortality shall accurately represent —
or, at least, not exaggerate — the probable future existence of
the lives assured.

(3.) That there be a sufficient number of Assurers in the
Society to form an Average, and ensure the proper distribu-
tion of risks.

(4.) That the premiums be invested on such securities as
shall produce at least an equal amount of interest to that
involved in the tables, without danger of loss from depreciation
in value when they come to be realized.

VII. — As to the Causes of Failure. — The preceding remarks
shew, that it is not sufficient for an Assurance Society, during
the early years of its existence, to pay its way — that is to say,
merely be able to meet current claims by death, and expenses,
or even unforeseen contingencies: — it is, also, necessary that
a sufficient portion of its Premium Income should be set
aside to accumulate* for the claims that are certain to arise
in the future. The want of such accumulation has caused
the insolvency of several old Assurance Companies, (recently
made known), and would be attended with fatal results in a
Mutual Society, where there are no proprietors to fall back
upon, as there were in the instances referred to.

Life Assurance differs from other classes of risk in this
circumstance : — that, sooner or later, all the assured must
die ; and with each year, the time is brought nearer when
their claims will have to be paid.

VIII. — As to the Equitable Society. — The anticipations and
arguments in favour of probable prosperity in modern Assu-
rance Offices are generally deduced from that of the

* \ Directors of Coinpanies too often forget, that it is only hy such a
process of accumulation at compound interest, that a small annual payment
of £2. 4s. 8(/. at aff>: 30 can be made to pay £\Q0 at death. — See page 51.]

XVlll PRELIMINARY REMARKS ON

" Equitable Society," under mistaken views of the causes
that operated in its favour, which it may be advantageous
to consider.

In the year 1762, when the Equitable Society was first
established, (says a writer, who appears to be familiar with
the history of that Institution), it was considered necessary
by its projectors, so limited was their knowledge of the sub-
ject, to graduate the premiums on a very expensive scale.
The Equitable Society was, in truth, the first institution for
Life Assurance which attempted, what was then considered,
the dangerous novelty of graduating its premiums according
to the ages of the insured. It was, therefore, natural, that
those, who were trying a new experiment for the first time,
should endeavour to guard against the danger, which might
arise to the infant institution from too great a degree of
liberality in its charges ; and we cannot, at the present time,
sufficiently admire the prudence of that determination. It
was a good example, but indifferently followed by its many
successors.

The table of mortality, from which the early premiums
of the Equitable Society were deduced, was one formed from
the mortality returns of the city of London, during a period
when that mortality was nearly equal to what it had been
during the continuance of the plague. In consequence of
these very high premiums, and of other circumstances here-
after to be adverted to, the Society prospered so greatly in
its pecuniary affairs that in the year 1781, on the advice of
Dr. Price, it was thought safe to reduce its rates. On this
occasion the now well-known table of mortality, called the
Northampton Table, was adopted ; but even then, with a
safety charge in addition thereto of £15 per cent. In the
year 1785 this latter charge was finally removed, and the
Northampton Table, with a computation of interest at the
rate of £3 per cent per annum has, since that time, been the
standard table of the Equitable Society.

LIFE ASSURANCE SOCIETIES. XIX

The success met with by this Society, and the wealth it
realized, led many to suppose that its prosperity was mainly
to be attributed to the excess of its premium charges. In
reality, however, it was due to a combination of circumstances,
which it is extremely improbable will ever occur again. One
of the most important is the increase, which the value of
its funded property received from the great advance that
some years ago took place in the price of stocks, tending
towards doubling the value of the capital of the Society.
Much of that capital was realized and invested at a time when
£100 Consolidated Stock was purchaseable for less than £60,
while the price of the same amount of stock, for some years
past, has equalled and exceeded £90.

Another source of very considerable profit to the Equitable
Society was the careless abandonment, by the holders, of its
early policies ; a system which continued to favour the society
for many years. During the infancy of Life Assurance, very
few policies were effected excepting for temporary purposes,
and as soon as the object was answered, the policy was
abandoned without any price for its surrender being required,
or allowed by the society.

This practice became a fruitful source of profit to the
institution, until not many years ago, when assurance
societies, under the influence of competition, discovered it to be
judicious and right to offer to purchase back policies for which
assurers had no longer occasion ; so that, at the present
time, these securities have become very valuable and find
ready purchasers in the market.

IX. — The Dangers of Life Assurance, — The author of
" Life Assurance, its Schemes and Difiiculties," who furnishes
these particulars ofthe Equitable, further observes that, although
public fiiilures amongst societies for life assurance are, com-
paratively speaking, of rare occurrence, yet the covert bankrupt
state of such institutions ought in reality to be more vigilantly

c 2

XX PRELIMINARY REMARKS ON

watched for, than the open relinquishment of business. By the
latter course assurers are at once placed upon their guard ;
but against the undetected 'poverty of a necessitous ifistitution
it is difficult to be on the alert. The public are not generally
aware, that the business of life assurance is so peculiar that a
society may, to an inexperienced eye, be apparently in a
flourishing condition, and actually adding every year consider-
able sums to its capital, although proceeding steadily towards
eventual insolvency, no less real, because it does not apparently
suspend the progress of the society.

During a long and improvident infancy, the Directors may
have so infringed upon the Premium fund, that, without its
being exhausted, it may be insufficient, in the Society's matu-
rity, to provide against the inevitable increase in the number
of the claimants through death among the policyholders.
Meantime the Assurers continue sinking their jDremiums in
blind security, until, too late, the reality of the case becomes
known.

An assurer in a Life Office is, in fact, tied for life to the
institution of which he first becomes a member, unless he
discover the state of its affairs very speedily ; for otherwise he
cannot, without considerable loss, recede from the Society ;
neither can he recover back that youth, health, and activity,
he possessed when he first entered it, nor the savings of
his life which he finds he has uselessly expended ; mean-
time, age has advanced with him, his health has probably
become impaired, and no other Society would receive him,
without such a considerable advance in his premiums, as,
perhaps, he may be ill able to afford.

X. — The following are the principal Causes, capable of
remedy, which have brought various Societies to insolvency,
and may, unless attended to, lead others to the same fate : —

1. Excessive expenditure.

2. Too low a scale of Premiums.

LIFE ASSURANCE SOCIETIES. XXI

3. Excessive Bonuses.

As regards the first, but few societies can continue a system
of expenditure disproportionate to their income, without soon
discovering the error of their ways, and either adopting a more
reasonable system or having to make arrangements for the
transfer of their business to some other society or for being
wound up by the Court. That the expenditure is excessive
would, in fact, be found out from the impossibility, after a
very few years, of continuing it ; hence the loss to the
Assurers, or to the Company, cannot be so serious in its
character as that attending the other two causes.

The evil produced by Inadequate rates is not, indeed,
easily detected, as many years may elapse before an actual
deficiency in the assets is discovered, unless a valuation be
made by some one competent to form a sound opinion on the
subject.

Many Boards of Directors are in the habit of dispensing
with such valuations, too frequently contenting themselves
with estimates made by subordinate officials, naturally ready
to have faith in a favourable view of the concern, from which
they derive their means of existence.

XI. — As to Excessive Bonuses. — The attraction of low
rates is resorted to by a few offices for the purpose of
obtaining business ; and it is among the most injurious held
out to the public. To this reduction in the annual premiums,
at starting, are not unfrcquently added foolish promises of
large Bonuses. The incompatibility of the two advantages
does not deter parties desiring to insure ; although, in many
instances, it is apparent that the policy-holders can never
receive even the amount of their policies, while in others, it is
still more evident that the Bonuses promised can never be
realized.

XII. — To this highly mischievous system, wc would urge

XXll PRELIMINARY REMARKS ON

the special attention of our readei's ; for, under delusive notions
of profit, Bonuses are being frequently declared, which neither
the experience of the past operations of the society, nor a
judicious estimate of the contingencies affecting the future
would justify. Indeed estimates of future losses, based on
results of past experience and observation, cannot without
reserve be relied upon for purposes of profit division.

The Bonus system was begun, not very many years
ago, by one or two of the older offices, which, perhaps,
had realised profits from a combination of peculiar causes,
that do not now exist and are not likely ever again to arise.
The plan, being found attractive, was adopted by other
societies, sometimes without actual inconvenience ; but, under
the influence of unhealthy competition, various respectable
offices have taken to declaring bonuses so large as to be
obviously not justified by their financial condition, nor
consistent with security.

There is no branch of the subject so difficult or so little
understood, as that relating to the principles upon which
Profits should be estimated and divided. Many even of
the so-termed old assurance companies are allotting bonuses,
not out of the surplus actually realised in the period anterior
to the division of the same, but out of the prospective profit,
assumed as likely to attend the future Income of the society
from the policies already eifected.

That income (and consequently the profit margin in it) is
treated as already realised, without regard to the probability
of a portion of the policies being discontinued.

We have recently had occasion to examine the affairs of
two companies, established more than 30 years ago, and
found it necessary to recommend, in each case, the immediate
Transfer of the business to some more prosperous society, in
consequence of the insufficiency of Assets, caused to a very
large extent by the imaginary profits, that had been divided

LIFE ASSURANCE SOCIETIES. XXIU

in* past years. We found that, even though such Transfers
would bo attended with some sacrifice on the part of the
shareholders, it was preferable to the increasing losses to be
anticipated in the future.

XIII. — As to Bonuses. — The only case, in which the pay-
ment of a Bonus to an assurer is really proper or desirable, is
where he has paid up in ofice premiums, with interest, the
amount of his policy. It is obvious, that the assurer, who
dies before he has paid in that amount, can have no right to
complain, as he, at least, receives more from the society than
he has contributed to it ; and if he averred, that the rate of
premium charged exceeded the mathematical measurement of
the contingency, the answer should be, that such margin is
added partly to pay expenses, and partly to form a f fund
not only for future contingencies, but, also, as a means of
compensating by Bonuses those subscribers, whose payments
may eventually exceed the pecuniary benefit they have assured
for. There is something absurd in the prevalent system, by
which we see, every day, cases of assurers, who, entering a
society at an age when they are calculated as likely to live a
considerable number of years, are charged in consequence but
a small premium of £2 or £3 per cent, yet, on dying pre-
maturely, leave to their families not only the amount of the
policy, but a goodly sum in Bonus, out of profits, that have
arisen from the subscriptions of other members, and to which
they, by dying, cannot by any possibility have a fair claim. A
case occurs to our mind of a gentleman, who insured in an
office in the month of April 1845, for £500, at an annual
premium of £11, and was agreeably astonished to receive a

* Sgc a curious illustration of such errors further on. — Art. xix.

f [7it/((C(, some portion of the margin is added for the * moral expectation,'
that ill each single case the estimate made of the ' mathematical expectation '
may prove insufficient. ~\ — {See chapter in the Appendix on this subject.)

XXIV PRELIMINARY REMARKS ON

circular in May of the same year, informing him that, by his
payment, he had contributed to the profits of the society to
such an extent that they were enabled to declare him a bonus
of £10. 155!

An assurance society may have made profits on the aggre-
gate of its transactions without a particular member being in
a position to say that he ought to receive a bonus ; for if the
question be asked, which members are entitled to allowances
on account of profit, the answer can only be — those, who, in
the greatest degree, have contributed to the prosperity of the
association, and have not made it a loser by the contingencies
of their own existence.

If things be called by their right names, and the word "profit "
be used in its ordinary sense, nothing could be more untrue
than that the new member, of the society we have referred to,
was entitled to the bonus allotted to him : the true fact was,
that his policy having been efiected just within the close of
the period of a Bonus Division, and a valuation of the society's
afiairs, about that time, having probably shewn profits on the
aggregate, the new member was presented with a Bonus that
previous Assurers had contributed to create. No stronger
illustration could be required of the impropriety of the present
system ; and much would be done to prevent the bankruptcy
of Assurance Offices, and to place them on a sound footing, if it
were put an end to.

XIV. — To resume, then, when a Valuation, that has been
made of the affairs of a society, shows a Balance of Assets over
estimated liabilities, the rateable proportion, that belongs to
all policies which have not been paid up, should be carried to
the Guarantee Fund. As soon as such policies have ceased
to exist, or have attained the required condition, the reserves
which, at various times have been made for them, may be
removed from the Guarantee Fund, and made available for
division by way of Bonus. Those, that die too soon ought

LIFE ASSURANCE SOCIETIES. XXV

to be content with their representatives being paid the amount
of their assurances: those that live beyond would receive
Bonuses out of the reserves in the Guarantee Fund, as a com-
pensation for paying for a longer term.

The above principle is eminently conducive to the safety of
an assurance office ; for all Valuations are but estimates of
probabilities of the duration of lives, and although, mathe-
matically speaking, from Tables of Mortality, a profit may be
shown, yet there is a moral chance of loss by aberration, which
requires a society to see a large portion of the existence of a
group of lives out, before it can actually pay away profits. It
cannot by anticipation be secured that the majority of them
will live up to, or over, the average expected term, or that
the present profit may not be neutralized by future loss, as
was the case with the two societies referred to in Art. xii.

This plan would practically be, in the long run, more bene-
ficial even to the assurers, as a smaller Guarantee Fund would
in the aggregate be required, since the Bonuses on the policies,
that have ceased before their time, would merge into the
general profits, and be improved with the other investments.
The shares of those, who survive, would be very much larger
than under the ordinary system of allotment in practice, whether
applied in the form of a reversionary sum payable at death, or
to the extinction of premium.

In the Mathematical Appendix at the end will he found an
outline of various modes, in which Bonuses might be allotted.

XV. — As to Increasing Bonuses. — If the plan above
recommended were objected to, as deferring too long the
gratification of the eager desire of assurers to participate in
the profits of a society, we would suggest the following method
of apportionment, as about the best to be adopted, viz : — To
convert the estimated present share of an assurer, in the profit
shewn in the balance sheet at any valuation period, into an
equivalent Increasing Reversionary Bonus, payable at death,

XXVI PRELIMINARY REMARKS ON

proportioned to the number of years he survive the allotment,
instead of a Fixed reversionary sum. The calculation would
be as easy as in the method at present practised. It would be
simply necessary to divide each assurer's share by the value of
an increasing assurance of ^1, instead of by the value of a
fixed assurance of £1. In like manner, if preferred, there
might be allotted, instead, an * increasing reduction of premium,
for which the only change in the calculation would be the
division by the value of an increasing annuity due instead of
by the value of a constant annuity due of £1. \_See the
Appendix for the Formulce.^

XVI. — As to a Valuation of the Affairs of a Society. —
To appreciate thoroughly the error of the Bonus System, it
is well to remember that the valuation of the affairs of a Life
Assurance Company is but the aggregate of the valuations of
each policy. It may be made either in reference to full office
premiums, i.e., the premiums actually being paid, or to net
premiums.

1. If by full office premiums — the result produced will
represent the present value of all that will, by the end of life,
be obtained by the office from the policy, as compared with
the ultimate payment of the amount assured at death.

2. The result of such a valuation will, therefore, contain
not only any profit that may have been realized in the past,
but will absorb all allowance for future expenses, profits and
contingencies, indeed all that can possibly be afterwards realized
on the policies, except from circumstances not subject to cal-
culation— that is to say, not involved in the loading on the
premium, and which might arise from the lapsing of policies

* [In the Deposit Tables further on, we have given a now Table, by which
an assurer is guaranteed an increasing Bonus (or every year of his life, in the
form of an increasing Reduction of Premiums, and of a Deferred Annuity
after the premium is extinquished. See p. 159.]

LIFE ASSURANCE SOCIETIES. XXVII

or an unusually high rate of interest obtained on the Society's
Investments, &c.

By way of example :

If the present value of the future premiums be shown to
be £60,000, and the margin was 20 per cent, on the net pre-
miums at the original ages, then there would be £10,000 not
yet realised of any surplus of assets that may be shewn in the
balance sheet.

a. As long as a Division of Profits, by way of Bonus, is not
contemplated, no inconvenience can arise from a valuation by
full premiums ; but, if a division be intended, — as it ought only
to be of the profits actually realised up to the time of valuation
from the past payments of the assurers, — the valuation must
be so made as to exclude all profit obtainable in after years
from iheh future payments.

4. For this purpose, it is simply necessary to ascertain
the state of the society's clear undoubted assets remaining,
out of the past payments and investments, at the time of the
valuation; (all claims up to that time having been paid or
provided for), and to deduct, therefrom, such proportion of
the back premiums as, by the net Tables of Mortality used as
the basis, it would be necessary that the society should have
in hand, with compound interest thereon, towards the ultimate
realization of the policies.

Now this is exactly equal to their values estimated, with
regard to the future, by net premiums. Hence, a valuation
must be made by net premiums, when it is desired to confine the
Division of Bonus to profits arising from the past receipts and
investments of the society, up to the date of the valuation. —
(See Appendix).

XVII. — This distinction has, unfortunately, in many cases
been overlooked ; and, by the aid of Valuations made on the
principle of full office premiums, Bonuses have been declared
out of supposed profits, which, so far from having been actually

XXVUI PRELIMINARY REMARKS ON

realised, absorb a considerable portion of the margin on the
future Income. In so doing, the probable lapsing of the
policies is too frequently neglected. — In fact, an investigation
of the past, alone, shows for what the assurer is creditor on
the society. The ceased policies are, thus, no longer represented
as claimants on the funds ; and the profit or loss that has ac-
crued on them, produces an excess or deficiency in the general
assets in hand.

If previous allotments have been made, they would have to
be provided for by placing on the liability side of the account
an increased proportion of the net value of the policy.

XVIII. — Whatever profits are shown in a Balance sheet,
they will have arisen mainly from the following sources : —

\°- The margin or loading charged in the premiums over
the net tabular rates.

2°' The realization of a higher rate of interest from the past
investments, than was assumed in calculating the tables of
premium.

3°- The lapsing of the Policies, or the surrender of them
on terms favourable to the office.

4° The selection of lives, by which the deaths do not
usually occur, during the earlier years of a set of assurances, to
the extent allowed for in the tables of mortality, which are
based on the experience of a mixed community.

Although the valuation by net premiums would diminish
the apparently favourable present aspect of the contracts, yet
a margin should be found, in the society ""s funds, available
for Bonus reserves, if the past receipts have not been squan-
dered, but solely applied to pay claims not exceeding the
originally anticipated extent and a moderate rate of expendi-
ture; provided, of course, that the balance has been duly invested
at interest, without delay or other loss on that head.

XIX. — The following is an example, given by an experienced

LIFE ASSURANCE SOCIETIES. XXIX

Actuary, of the fatal results, in a very old office, of treating as
realised profits the present value of the margin in the office
premiums receivable in the futui'e : —

" In the year 18 — , the directors of the society declared a Bonus of some
£300,000, no doubt imagining that the state of their finances fully
warranted them in doing so : the account of the state, however, was not
forthcoming afterwards, when another investigation was made anew
under the auspices of regularly appointed Examiners, who reported that
the Surplus fund of the society appeared to be only £44,469. 25, 8d.,

viz., Assets . . £3,053,069, 85. 7d.

Liabilities . £3,008,600. 5s. Ud.

and that the present value, at the second investigation, of the old bonus
declared, was no less than jGI 70,529. 4s. lid, — nearly four times the
whole surplus. By the declaration of bonus in 18 — , therefore, the
members were actually induced to draw upon the subsequent transactions
of the society to the extent of £126,060 ! Nor was this all : — the valuation
of the Examiners on the second occasion bears internal evidence of con-
taining the whole future profits to be expected from the older policies
existing since 18 — ; and thus the Declaration of Bonus, besides absorbing
the whole future profits of the class who were to draw it, made oflT with
an immense sum out of the contributions of expected members and with
everything in the shape of guarantee fund. The effect of this on the
future aff"airs of the society is just what might have been anticipated :
for we find that, seven years afterwards, the state of matters, according
to the report of the same Examiners, stood thus : —

Assets . . £3,780,927. 2s. 2d.
Liabilities . £3,765,530, 6s. Id. .

Surplus £15,396. 16s. Id.

in which surplus was included the then present value of the whole profits
to be expected from the policies current at that date ; so that, besides
the profit actually received between the two valuations, the entire profits
on the transactions current at the latter date, and aU previous accumu-
lations, have been absorbed by this Bonus ; — for the trifling surplus of
£15,400 may be disregarded. Were the i/et unrealized profits (dependent
on the margin of premiums receivable in the future) to be struck oflF,
a very large Deficit would make its appearance, instead of a surplus of
£15,400.

" No one would accuse the manager and directors of this society in
18 — of intentional inequity ; there can be no doubt that they acted
conscientiously according to their ideas and information ; yet no one
can deny that they committed a very serious error, and that, by holding
out this large bonus, they allowed new members to become bound for,
and eventually to pay it."

XXX

PRELIMINARY REMARKS ON

Another eminent Actuary, Mr. Higham, remarks with hu-
mour, that, in offices which estimate future profits as if they were
present assets, not only is the want of prudence to be deplored,
but also the objectionable tendency of a system, which "attracts
customers by the display of an alleged unappropriated surplus,
— ^just as the countryman is led, by the exhibition of what he
takes to be a roll of genuine notes, to conclude that he cannot
do better than place his watch in the keeping of the owner of
such unbounded wealth."

XX. — The following Table exhibits the extent of the error

committed when the premiums paid are represented as creating

large profits : —

Table,
Showing the amount that a net Annual Premium of £1 will assure at the
death of a person of any given age ; or, the amount to which an
Annuity due of £1 will accumulate by the end of the year of his death.
(3 per cent, interest, English Life Table, No. 2.)

Age.

Amount.

Age.

Amount.

Age.

Amount.

Age.

Amormt.

£43.901

£58.739

£29 643

£10 430

64.304

57.316

28.578

9.899

75.119

55.904

27.530

9.391

80.976

54 505

26.499

8.906

84.408

53.119

25 484

8.444

86.263

51.745

24 486

8.003

86.735

50.385

23.502

7.584

86.157

49.037

22.633

7.186

85.152

47.704

21.577

6.809

83.719

46.385

20.635

0.451

82.042

45.081

19.704

6.113

80.082

43.792

18.794

5.794

77.959

42.519

17.928

6.493

75.831

*36

41262

17.102

5.208

73.705

40.021

16 310

4.941

71.769

38.798

15.550

4.689

69.708

37.592

14.820

4.462

67.810

36 403

14.117

4.229

66.099

35.232

13.441

4.020

64.564

34.078

12.790

3.824

63.087

32.943

12.164

3.640

61.025

31.825

11.562

3.467

60.176

30.725

10.984

* Example. — Suppose a Profit Policy for £1000, to bo taken out at age 30,
at a Premium of £24. Is. M. a year (Table II., p. 51) : then, at age 36, the
net Premium, required to meet the risk upon the life, will exceed the full
office Premium.

N.B. — The reciprocal of the figures in the above Table is the Net annual
premium to assure £1, payable at deatli.

LIFE ASSURANCE SOCIETIES. XXXI

This Tabic will, also, serve as a guide to the Free Policy
which might be granted instead of a Cash Surrender Value, —

By the following Rule : Multiply the office premium, being paid under the
Policy, by the value given in the above Table at the present age of the life, and
deduct the result from the amount assured. — Thus, for a non-profit Policy of
£1000 taken out at age 30, at an annual premium of £22. 6s Sd., after ten
years existence a Free Policy of £187 might be granted : and, on such an
assurance, it would never be safe to give the privilege which has been held
forth by some offices, of a Free Reversionary Policy equal to the amount of
premiums paid; — while on a non-profit Policy for ,£1000 taken out at age
20, at an annual premium of iil7. \s. Sd., it would be in favour of the office
if the Policy were dropped at any time after more than 12 or less than 46
years' duration.

XXI. — As to the Selection of Lives. — With respect to the
Selection of Lives, Mr. Milne has justly remarked: — "Although
the members, when they first enter, are select lives, they are
not, even then, so much better than the common average as
many persons suppose ; for the more precarious a life is, the
stronger is the inducement for parties interested in its continu-
ance to get it assured, so that bad risks are frequently offered
and escape detection." Dr. Farr states, that 27 men in 1000,
between the ages of 20 and 60, are suffering from some kind
of disease or other ; and that consumption, the most common
fatal disease, lasts on an average two years : — so that selection
will only diminish the mortality for the first year, or two, or
three, or four, years, subsequent to its exercise, and is of
greater value in reference to older lives than to young ones.

XXII. — Respecting Amalgamations. — In consequence of
a great number of Assurance Companies having been formed,
the majority of which never had any chance of doing a
sufficiently extensive business to make their operations
profitable, a proper desire has, of late, arisen for one society
to amalgamate with another ; such amalgamations being
virtually, however, a transfer of business from the weaker to the
stronger. It is to be regretted that, not unfrequently, these

XXXll PRELIMINARY REMARKS ON

have been sanctioned, without professional assistance, by the
directors of purchasing companies, on most improper terms,
much exceeding the worth of the business obtained ; and
crude notions appear to be prevalent, that one or two years'
purchase may be given for the income of a Life Office,
without regard to the number of years each policy has been
in force, or to the sufficiency of the premiums charged for the
risk in each case, or, as to whether the lives are of a class to
be desired by a respectable society.

XXIII. — The facility, with which amalgamations have
hitherto been effected, is too frequently urged as an evidence of
the practical security experienced by shareholders of Assurance
Offices. For it is argued, that, " Even if we fail in succeeding
as we expect to do, there will be no difficulty in transferring
our business on advantageous terms to another society." This
is undoubtedly true to a very great extent, where the amount
of expenses incurred up to the time of sale has not been much
disproportioned to the receipts ; the reason being, that most
companies are anxious to increase the number of their policies,
so as to render aberrations from the law of mortality less
likely to occur ; and it is felt that, while a considerable
immediate addition to the number of lives is secured by the
purchase, the increased income obtained tends also to diminish
the per centage that the expenditure need bear to the receipts
of the society.

XXIV.— It is also true, that there are a considerable
number of societies, which have been started without any
particular class interest or connections to assist them in
obtaining business ; and, although perhaps conducted with
judgment, yet it is certain that each would gain by coalescing
with three or four others, and by united strength thus present
not only greater probability of stability, but also larger funds
for the extension of their operations.

LIFE ASSURANCE SOCIETIES. XXXlll

There are, of course, a few societies of high standing to
which the addition of the businesses of other companies would
scarcely be of importance, from the fact that they already
transact large amounts of new assurances ; but those cases are
few and exceptional.

XXV. — A variety of practical considerations affect the
theoretical price that might be offered for a business; one
of which is the antecedents of the society to be bought, and
the nature of the agencies and connections it can bring over.
Discussion of such points, however, would be too long in this
place. It may be remarked, nevertheless, that in measuring
the goodwill and relative prosperity of an Assurance Office,
as shown by business transacted or revenue created, those
receipts only should be treated as Income, which arise from
whole life and joint life policies on the full-premium system.

Term Policies are not deemed worthy of consideration, as
but little profit is found to arise from them. In like manner
policies on the half-premium or increasing scales of premium
are, afterwards, in too many instances, abandoned when the
debt becomes an incumbrance or the increase of premium too
heavy.

XXVI. — The only sound way to estimate the position of
a society, offered for amalgamation, is to make a regular valua-
tion of the Policies ; but this course is too often not adopted,
from a desire to avoid the necessary expense of such inves-
tigations ; yet it is important to know : —

p- — What proportion of the past premiums the society
should have in hand.

go. —How much of the annual income of the society would be
required in coming years to meet its existing engagements ; and,

30. — What is the probable amount of claims, looking to the
average age of the lives assured, likely to accrue from and
after the year at which the transfer takes place.

XXXIV PRELIMINARY REMARKS ON

XXVII. — As regards the first, the ratio is given in Art. 15,
p. 22, Appendix. The following Table may be used for obtaining
an approximate valuation of the affairs of a society, by placing
the policies in successive groups according to their average
standing. An allowance can be made for the probable chance
each policy has of lapsing, and of its surrender value being
less than the net value given in the Table. It will be noticed
that it does not necessarily follow, that a greater number of
premiums must be held in hand to provide for a policy on an
older life, than is requisite on a younger life.

The purchasers have also to consider that many of the
existing assurers of the company, of which they are under-
taking the risks, may offer their policies for surrender, and
some inconvenience may arise from declining to meet an
apparently fair demand. The very offices, — which, by making
their valuations on full office premiums, show frequently a
margin in the balance sheet, in favour of the society, — at
the same time offer in their prospectuses, with regard to all
their policies, should the assurers desire it, to give back for
their surrender a price out of the past payments. They do
not reflect that a contract, to get rid of which money would
have to be repaid, cannot, concurrently, be treated as an
Asset to the society.

The Table shows the Amount a Society should have in
hand for every £1 a year of nei premium received on a
life, to meet the ultimate payment of the amount assured,
according to the number of years expired since the issue of
the Policy : in other words, —

How much of the net portion of the past premiums that each
assurer has paid, a transferring office should have in hand
to place its policies in a proper position with regard to
the amalgamated society ; Future Expenses and profits
being supposed to be contributed out of the margin included
in the premiums yet to be paid.

LIFE ASSURANCE SOCIETIES.

(English Life Law, 3 per cent.)

XXXV

Ago

Period of Years cxpii

ed since

issue of Policy

Ago

at issue
of

Policy.

2.73

5.79

9.19

12.95

17.08

21.58

26.52

31.71

36.65

41.28

2.83

5.98

9.47

13.29

17.46

22.03

26.84

31.41

35.71

39.58

2.91

6.13

9.66

13.52

17.74

22.19

26.41

30.38

33.!J5

37.00

*35

2.97

6.22

9.78

* 13.67

17.77

21.66

2.5.32

28.61

31.42

3.00

6.27

9.85

13.62

17.20

20.57

23.60

26.19

3.01

6.30

9.77

13.07

16.17

18.95

21.33

3.03

6.22

9.25

12.10

14.66

16.85

2.93

5.72

8.33

10.69

12.70

2.56

4.98

7.15

9.00

2.24

4.26

5.99

1.90

3.51

1.53

How much less than the above the purchasing company can consent to
take, or in other words how much they can allow off it in the nature of good-
will for Agencies, &c., is a matter that can only be measured according to
the circumstances of each case : but strict inquiry should be made as to what
Bonuses have been allotted or Reductions in premiums granted.

* Example. — If £12 a year be the office premium on a Profit Policy for
£490 (see Table, Art. XX.) effected at age 30, of which £\0 is the net
premium ; then, when it has been 20 years in existence, the society must have
£136. 14s. in hand, out of the .^240 received, towards meeting the original sum
assured, exclusive of any Bonuses that may have been allotted.

XXVTII. — As to Annual Income required to meet Engage-
ments.— In respect to the second point, in Art. XXVI, the fol-
lowing Table, calculated on the English Life Law of Mortality,
will enable an estimate to be obtained. For example, if the
present average age be * 40, and the total amount assured be a
milHon on 1000 hves — then £18,000 will be the amount that
may be expected to be claimed for deaths in the year following;
.£'13,000 in the second year and so on ; assuming the transferred
policies to be kept up. Again, if the average age be older,
''ki, but a lesser amount £861,000 be assured, then £81,000
are the claims that may be expected in the following five
years, of which £17,000 will be in the fifth year, and so on,
and in like proportion if the amount assured be more or less.

The increase in the amount of claims with advancing years.

dD.

XXXVl

OF TABLES OF MORTALITY.

y :' has to be attended to. Thus at ^^ the claims would be
/^^y £28,000, double what they were at 44.

Decrement Table, showing the Amount 0/ Claims, that
may he expected out of £1,000,000 assured at average age 40,
and similarly Jar the amounts set down at older ages, supposing
them to represent the average age of a society, a7id assuming
all the Policies to he kept up.

Num-

Requisite

Number

ber

Sums to be

C +1

Income, fi'om

Age.

Ukely to
die in tlie

PERIOD

out of

Ukely

to
die in

the

paid for

Claims

during tlie

YEAR.

bums to be

paid for
Claims in tlie

PERIOD.

Sums remaining
Assured.

surviving
Lives at NET

Premiums
of £2. 153.

No. of
Years.

Age.

1000 lives.

YBAK.

per cent.

^1,000,000

£27,500

£13,000

987,000

27,142

13,000

974,000

26,785

13,000

961,000

26,427

13,000

948,000

26,070

14,000

934,000

25,685

15,000

73,000

861,000

23,677

17,000

81,000

780,000

21,450

21,000

95,000

085,000

18,837

119

25,000

119,000

566,000

15,565

137

28,000

137,000

429,000

11,797

143

28,000

143,000

286,000

7,865

129

24,000

129,000

157,000

4,317

15,000

92,000

65,000

1,787

6,000

47,000

18,000

495

2,000

16,000

2,000

100

£,

2,000

100

1000

1,000,000

XXIX. — A brief notice of the circumstances, under which
the various existing Tables of Mortality were calculated, may he
interesting :

So little was the average duration of life understood at the
beginning of the last century, that in some of the public loans
of that period, Government paid an annuity at the rate of 14
per cent, on a single life, 12 per cent, on two lives, and 10 per
cent, on three lives ; and in 1704, annuities on single lives were
granted for 9 years' purchase, on two lives for 1 1 years'

OF TABLES OF MORTALITY. XXXVll

purchase, and on three lives for 12 years' purchase.* If the
rate of interest were now, as it was then, 6 per cent, these
prices for single lives would, according to the Carlisle tables,
correspond with ages between 57 and 60, and would be too
little by about 50 per cent, for all ages below 40 upon an
average.

The Northampton table was formed by Dr. Price from the
Bills of mortality kept in the parish of All Saints, which is the
largest of the four parishes of Northampton, during the period
intervening between the years 1735 and 1780, and corrected
by the result of other registers.

These local observations were too confined in extent to be
applicable to the accurate determination of the chances of mor-
tality among the general population of the kingdom ; and they
soon became obsolete in point of time, even for the measurement
of the mortality of the town or parish from the experience of
which they were calculated. This table was adopted by the
Equitable Society for Life Insurance in 1789, and subsequently
by many other insurance offices, and it is one on which they still
compute rates for the insurance of lives, notwithstanding its
*inaccuracy has been made evident by the results of their own
experience, and notwithstanding their knowledge of this fact
is made apparent by their rejection of this table, as a basis
for computing the rates, on which they will grant annuities.
Dr. Price also formed tables from observations made at Chester,
Holy Cross in Salop, Warrington, and Breslaw.

XXX.— The Carlisle table was formed by Mr. Mihie from
observations made by Dr. Heysham during the years 1779 to

* [Cleghorn, Edinburgh, 1834. Parliamentary Paper, 443, 1858.]

f [In 1854 we succeeded in inducing the Legislature to prohibit the use of
this table in measuring life contingencies for the valuations of ecclesiastical
leases and enfranchisements. (17 & 18 Vict., c. 116, s. 12.) — Sec our Treatiise
on Copyhold and Church Vropartij EnfraiichiscmeiUs.^

XXXVIU OF TABLES OF MORTALITY.

1787, upon a population of about 8000, in the town of Carlisle.
The period of nine years was too short to determine the
average mortality of that town ; the population also and the
place were too small for its experience to be applicable
to the whole country. This table represented the duration
of life much more favorably than the Northampton, and is
at certain ages singularly close to the results furnished by
Dr. Farr, from the returns of the census of 1851 ; but Mr.
Farren remarks with justice : — " The Carlisle table of mor-
tality, as is sufficiently well known to all who have used it, and
as will be immediately apparent to any one who will take the
trouble to cast his eye down the column of ' decrement,' stands
much in need of adjustment. Mr. Milne, its constructor,
although he admits that he distributed the numbers given by
the observations among the separate years of age, by a tedious
tentative process, in which he may have committed error,
seems, nevertheless, to be of opinion that the resulting irregu-
larities may be indications of a law of nature, resulting from
our structure. In the present more advanced state of our
knowledge with regard to the laws of mortality, many persons
would not, now, be found to agree with him."

XXXI. — From the yearly reports made to the members of
the Equitable Assurance Society, an eminent Actuary, Mr.
Griffith Davies, calculated the mortality amongst its mem-
bers, who were select lives and chiefly males, and this table
was confirmed by the investigation of Mr. Babbage and
Mr. Gompertz. Some foreign tables have, also, acquired
reputation. The tables in general use in France, until the
recent ones by M. Dumont Ferrand and M. Legoyt, were calcu-
lated by M. de Parcieux. Tliey are six in number ; the first,
from deaths, mostly during the years 1689 to 1696, amongst the
nominees of the French tontines ; the second, third, fourth and
fifth from the deaths among the monks of certain orders in
Paris ; and the last from the deaths among the Nuns at

OF TABLES OF MORTALITY. XXXIX

Paris. The persons, from whose mortality the hist five tables
were calculated, lived under such peculiar circumstances
as to render the results, only good as data to their own class,
and in their own time and country. The lives in the first
table were also select ; and the experience, deducible from
them, was inapplicable to the general population of France even
of that period.

XXXII. — Incorrect data, like bad principles, produce a series
of evil consequences. Upon the Northampton table the govern-
ment had granted annuities to the extent of £810,000 per
annum. For a life of sixty £10. 6s. 3d. per cent, annuity was
allowed, while taking the price of stock to be between 79 and
80 (which is the average of the last one hundred years) the
annuity ought to have been but £8. lO^. 7d. The deferred
annuities were granted on still worse terms. Mr. Finlaison had
the merit of calling the attention of several successive Chan-
cellors of the Exchequer to the subject, representing that in
April, 1827, this loss was advancing at the rate of £8000 every
week, and during the three previous months had exceeded
£95,000. The result of this representation was an order to
Mr. Finlaison, senior, to proceed to form more correct tables,
and a short time after they were completed, the evil was stopped
by Act of Parliament.

For the purpose of investigating the true law of mortality,
which prevailed among the people of England, Mr. Finlaison
made his observations over 25,000 life annuitants, who had been
registered as nominees in Tontines, and who were chosen by lot
from the children of the clergy and magistracy throughout the
country, extending over a period of more than thirty years. His
table exhibited the expectation of life as it was in 1 825, and as it
was a century before that year, and discovered a very extraor-
dinary improvement of human life in the interval, as well as a
great difference in the duration between the two sexes. The
duration of life in 1825, compared with what it was a century

-Xl OF TABLES OF MORTALITY.

ago was nearly as four to three, and the expectation of" a female
life at hirth to a male as 55 years to 50. Mr. Finlaison, also,
calculated the mortality, which prevailed, during the years from
1814 to 1822, amongst 52,682 Chelsea out-pensioners, and
20,210 Greenwich out-pensioners. The Expectations of their
lives were better than those shewn by the Northampton table ;
after 50 they were as good as those in the Carlisle table, and
came very close to the Swedish ; these lives being for the most
part originally good, though many had suffered from service in
foreign climes and severe wounds, were considered by Mr.
Finlaison as better than those of mechanics or labourers in
general ; upon the whole it cannot be doubted, that the tables
framed by Mr. Finlaison were the best extant, until the
appearance of tlie tables that are furnished through Dr. Farr
by the Registrar-General, which, being improved at each
successive census, will of course, in due time, supersede all
other laws of mortality.

XXXIII. — To determine, from time to time, the number of
people inhabiting a country and owing allegiance to its govern-
ment, is a matter of great national importance. A very little
reflection must serve to convince us, that an accurate acquain-
tance with the absolute numbers of the people, and still more,
with the various physical and moral conditions under which they
take their places in the community, is necessary to the full
development of the national resources : when by the recur-
rence at stated intervals of these enumerations, we shall be
able to compare the progress made by the nation at different
periods, as regards all those circumstances which properly
should be C()m])rised in the enquiry, the task of the govern-
ment and the legislature must be greatly simplified ; and on
the other hand it seems hardly possible, without such an inti-
mate and accurate acquaintance with the progressive condition
of a country, as can alone be obtained by means of statistical
inquiries, that the art of government should ever advance be-

STATISTICS, xli

yond the region of experiment, or assume the dignity of a
science.

Former enumerations, made in the United Kingdom, were
not so conducted as to lead, in any material or satisfactory
degree, to this desirable end. If it had been possible at the
first census in 1801, to suggest and carry out such a compre-
hensive plan, as would have embraced all the principal points
which it is desirable to ascertain, and which could have afforded
means for comparison with the same class of facts ascertained
at subsequent decennial enumerations, a great light would
have been thereby thrown upon many questions connected
with the public weal, which are now involved in doubt and
obscurity. The comparative progress made between the three
decennial periods that occurred from 1801 to 18.31, might
have afforded peculiar means of instruction. From 1801 to 1811
the nation was engaged in war; the next interval was of a mixed
character, being almost equally divided between war and peace ;
and the ten years from 1821 to 1831 were passed in profound
peace. If the census of 1801 had been so conducted as to afford
all the useful information, which such inquiries arc fitted to
bring to light, and if the subsequent enumerations had been
made so as to admit of comparing one period with another,
we might, or rather we must have been able, far more accu-
rately than we now can, to estimate the consequences of war,
and its influence upon the material condition of the people.

XXXIV. — The following facts are interesting : —
1. — In England and Wales births are to deaths as 3:2;
boys to girls born as 105 to 100. {IVie ratio yiuctuaiing between
104 and 105 to 100, or 26 to 25, and 21 to 20.)

2. — In 1000 inhabitants in England and Wales,
33 arc born
22 die } yt''U-ly.

16 are married

xlii STATISTICS.

3. — The population of England increased from excess of
births over deaths during the year 1856 by 258,273 persons,
or 708 per diem. In 1857, by 259,710 persons, or 712 per
diem. — London by 30,156 persons, or 83 per diem in 1856;
30,474 in 1857.

4. — In the year 1852, 1000 persons a day emigrated from
the country ; in the year 1856, 484 a day; in 1858, only 312.

5. — The mortality of males is at the rate of 2.313 per cent, for
the average of 20 years, 1838-57 ; whilst of females it is 2.153
per cent., which rates are to each other as 107 : 100 ; that is,
if 100 females die out of a given number of females, out of an
equal number of males 107 males die. The rate of mortality
in England is lower than that of any other country in Europe,-
as appears by the following statement : —

Annual Mortality.
England - - - - 1 death in 45 population.
France ----- 1 „ 43 „
Prussia - - - - I „ 38 ,,

Austria ----- 1 ,, 33 ,,
Russia ----- 1 „ 28 „

XXXV. — The total population of the world is estimated at
1288 millions, as follows : —

1. — By race

Mongolian Race _ - _

Caucasian - - - -

Malayan - - _ . -

yEthiopian _ _ - -

American - - . .

Millions

522

369

200

196

Millions

1288

STATISTICS.

2. — By religious denominations

Christians

_ _ _

Millions 335

Jews

_ _ -

Asiatic Religions

595

Mahonimedans -

160

Heathens

" ■ "

193

Millions 1288

xliii

XXXVI. — The following are the populations of some
of the most important countries, according to the most recent
returns (with which we have been favoured by Dr. Michelsen,
of the Board of Trade) : —

*Belgium _ _ _ - - Millions
German States - - - - ,,

-Austria (proper) - Millions 13

43A

VIZ.

Prussia - - - -

Bavaria - - - -

* Hanover - - .
*Wurtemburgh - -

Other States - -

Austrian Empire - - -

♦Holland - . - .

*Denmark _ _ - -
Sweden and Norway

Russia _ _ _ -

Turkey _ - _ _

*Greece _ _ _ -

Italian States —

*Lombardy - - -

*Venetia - - - -
Sardinian States

* Roman States - -

* Tuscany - - - -
Two Sicilies - -

13
5

Millions

H
9

39i

5
65
37

xliv

f STATISTICS.

Spain _ _ _ _

Millions

161

*Portugal - - - -

>»

*Switzerland _ _ _

British India

«J

180

America _ _ - -

viz. : — United States - -

Millions 28

* British America -

Mexico . - -

Brazil - - - -

»j

Other States - -

* Australia and Polynesia

Millions

XXXVII. — The following Table exhibits the progress of
the population at various censuses, and shows that : —

While the population of Great Britain has sensibly increased, the progress
of England and Wales has been most remarkable, and that London increased
(in spite of deaths and emigration) at the rate of 41,382 souls a year, in the
10 years 1841 to 1851, partly from excess of births over deaths, and partly
by excess of Immigration over Emigration.

THE POPULATION WAS

In 1750. 1801.

Increase
in 50 yrs

1841.

1851.

Increase
in 10 yrs.

England & Wales
* Scotland

Millions,
6|

Millions.
8.893
1.60S

Millions.

Millions.
15.914

2.620
8.020

MilHons.

17.928
2.889
6.330

Millions.

2.014

.269

del .690

Ireland

Great Britain & )
Ireland )

...

26.833
37

27.452
36

.619.
dec. 1

*London

...

.959

...

1.948

2.362

.414

* It is interesting to compare the populations of the countries marked
thus * ivith that of London.

PART I.

Observations on Life Assurance, with an account of the Deposit
and other Systems having for object its extension.

Art. 1. — Our purpose in this part will be, mainly, to bring
forward suggestions for the greater extension of life assurance
among the middle and humbler classes, by removing, as far as
may be practicable, the obstacles which exist, both as regards
the public, and the life assurance companies themselves, in the
adaptation of the system to their respective requirements. To
make the remedies intelligible, we shall have to mention some
of the obstacles ; but it will be advantageous to give, before-
hand, a short account of the nature of a life assurance company,
as described by Mr. De Morgan.

If a large number of persons, all of the same income and
prospects, and all certain of the same duration of life, were to
choose a common bank, in which to deposit their savings, each
laying by a given proportion of his income, it is obvious that
each would receive the same sum as the rest at his decease ;
but if the lives were of unequal and uncertain duration, this
result would no longer be produced. It might, however, be
attained by a covenant, that all sums paid in should remain
till all were dead, and then be equally divided among the
executors of the parties. Such a bank might be called an
equalization office, and it would present the first approxima-
tion towards an insurance office such as those which at present
exist.

As yet, the interest of mone}' has not been mentioned.

2 NATURE OF A LIFE ASSURANCE SOCIETY.

Suppose the equalization office to pay no interest; and sup-
pose all the lives to be 20 years of age, such as are described
in the Carlisle tables, the average duration of which is 41 ^
years. If then, every person pay £1 per annum, each will
ultimately receive £41^, which is the mere compensation of the
inequality of life. Such persons would enter into a mutual
covenant, by which, those who lived beyond the average term,
would divide the surplus of their savings among those who fell
short of it.

Probably, if the following question were put to all those
whose lives are now insured: — "What is the advantage which
you derive from investing your surplus income in an insurance
office ?" more than half would reply : — " The certainty of my
executors receiving a sum at my death, were that to take place
to-morrow." This is but half an answer ; for not only does
the office undertake the equalization of life, as above described,
but also the return of the sums invested, with* compound interest.
No one can form an accurate idea of such an establishment,
who does not consider it as a Savings Bank, yielding interest,
and interest upon interest. This is the reason why an office,
which charges for its insurance more than it is worth as an
insurance, may nevertheless put its contributors in a better
position than they could have held, if there had been no such
institution. To make this matter clear, let us consider the
working of a simple investment office. A large number of
individuals subscribe a sum, which they trust to an individual
or a company to employ, yielding them the return at some
fixed but distant period. Let each share be £100. The best
thing an individual could do with so small a sum, so as to have
perfect security for its return, would be to invest it in the
funds. He might also invest the interest, and thus obtain

* [See Div. II, or Treatise on Building Societies and Tontines, for several
Chapters on the Mathematical Doctrine of Compound Interest, with Practical
Instructions and Tables ]

NATURE OF A LIFE ASSURANCE SOCIETY. 3

compound interest, but it is not easy for an individual to do
this. Unless he provide an agent to draw the dividends im-
mediately on their becoming due, various circumstances will
happen to prevent the immediate investment of the interest.
It is not at all an unfair calculation to suppose that, upon each
half-yearly dividend, a month will be lost, so that nominal
compound interest for 42 years will only be really for 35 years.
A single pound, therefore, laid up by a man aged 20 years,
and improved for the average term of his life, at 3i per cent,
interest a year, would only become £3. 6s. Sd. ; while in the
hands of a person who lost no time, it would become £4. 5s.,
or nearly a pound more. It can be easily seen why an office
of any magnitude rarely has any delay in making investments.
Let us suppose (with the author before quoted) that it should
happen that ten individuals together paid £100 into the office
on account of life assurance premiums in the same hour in
which the executors of a deceased contributor received a claim
of £100. The hundred pounds, which in the theory of the
process should be sold out, or otherwise set free to meet the
claim, is in its practice supplied by fresh premiums, so that
the premiums of those contributors are making interest from
the hour in which they are paid. The advantage will be
greater in large transactions. The payments would, also, be
made without any loss arising from the sale, perhaps at an un-
favourable price, of stock to meet the claim. All expenses
paid, it may be stated, with correctness, that an investment
society can realize (apart from a bonus) 3^ per cent, per annum
compound interest. Hence, £1 improved during the average
life of an individual, aged 20 years, would become £4^.

2. The institution, thus described, is simply an office for the
investment of premiums and the equalization of results. It
becomes an insurance office, when it undertakes to pay a fixed
sum for a fixed premium, at the end of a given time after the

4 DOCTRINE OF PROBABILITIES.

decease of the party ; but, as Mr. Babbage remarks, so little
was known of the relative value of human life, at the time life
assurance began to be adopted in England, that persons were
indiscriminately insured at one common rate, without regard
either to age or health ; so that the young paid for the old,
and the strong for the infirm, — a manifest injustice to the
young and healthy members. Five pounds were at first
demanded as the price of assuring a hundred pounds for one
year on a life of any age ; and, at one establishment, middle
aged and old lives were not taken even on those terms. This
sum was, probably, fixed upon from its appearing that the an-
nual number of deaths in London was nearly one in twenty of
the population. It must soon have occurred to those who
wished to have recourse to such transactions, that the chance
of a person aged twenty dying within any given period, would
not be so great as that of a person of forty dying within the
same limit, and consequently that it was not equitable to de-
mand the same rate of premium in both cases ; and it must also
have appeared, that if a table of the number of persons amongst
a considerable population, dying annually at the different ages
of life, could be procured, by its means the relative chances of
life of persons of different ages might be assigned. Further
inquiries enabled actuaries to calculate a premium proportion-
ate to each age, based upon what is termed the doctrine of
Probabilities.

It has been justly remarked by the late distinguished actuary,
Mr. Galloway, that this doctrine is one of the most important
branches of mathematical science, inasmuch as it reduces to
calculation the reasons we may have for expecting any contin-
gent event, or believing any report or conclusion which may
not be necessarily true. When we consider that the entire
edifice of human science, with the exception of a few self-
evident truths, such as the axioms of geometry, is nothing
more than a collection of propositions, which can only be con-

DOCTRINE OF PROBABILITIES. O

sidered more or less probable, we can easily conceive the
importance of a calculus which enables us to assign the degree
of probability existing in each case.

The calculation of the probability of events, the chances of
which are not known a priori, but deduced from experience, is
founded on the supposed constancy of the laws of nature, in
accordance with which, events arising from constant but
unknown causes, when considered in large numbers, are always
reproduced in the same order. Nothing is more remarkable
in the various phenomena of the physical and moral world,
than the constancy which is observed to exist in the recurrence
of events of the same kind. For example, the ratio of male
to female births furnishes a striking instance of the truth of
this assertion : —

If we consider only a amall number of births, nothing can
be more uncertain than the result ; but if we take a very large
number, as those of a whole kingdom, the proportion of male
to female births, in the course of a year, is found to be almost
invariable and nearly as 105 to 100.

The mean duration of human life aifords another good illus-
tration ; thus we find that the average duration of the lives of
a large number of individuals living in the same country, is
always found to be very nearly the same, notwithstanding the
great uncertainty of human life individually, the diiFerence of
constitutions, and the various accidents to which mankind are
liable; and experience proves, that pecuniary risks depending
on these data, if undertaken in sufficiently large numbers, are
among the least uncertain of all commercial speculations.

A similar constancy is observed in the results of other kinds
of statistical inquiries. The number of crimes committed in
a year, of the same species, the ratio of the number of trials
to the number of acquittals, the number of conflagrations, the
number of ships lost in a particular trade, of letters which
pass through the post office, of patients admitted into the

6 DOCTRINE OF PROBABILITIES.

public hospitals during a given period, are observed in every
case to fluctuate between very narrow limits which approach
nearer and nearer to each other, in proportion as the number
of observations is increased. Hence, since experience teaches
us that the recurrence of events approximates so nearly to fixed
ratios, we are enabled to apply the calculus of probabilities to
the solution of many of the most interesting and useful ques-
tions connected with our social and political institutions, and
to determine the average result of a series of coming events,
with as much certainty as if their chances were determinate
and known a priori. It matters not whether the phenomenon
under consideration belongs to the physical or moral order of
things, the calculus is equally applicable when experience has
determined the requisite data for the purpose.

3. One of the earliest applications of the theory of proba-
bility was that of determining from observations of *mortality

* [From the census of 1841, we have the table furnished in the Appendix ;
and the following shews the Rate of Mortality for the year 1853, which is
interesting, as affording a comparison with the law prevailing in France.

England and France, Annual Rate of Mortality per cent, of Males and
Females at different ages . —

Ages.

Annual Rate of Mortality per cent.

Males.

Females.

England and
Wales.

France.

England and
Wales.

France.

All Ages.

5
10
15
25
35
45
55
65
75
85
95 and upwards.

2.379

2.203

7.355

.822

.518

.889

.874

.985

1.474

2.893

6.521

16.022

29.273

38.422

2.201

2.189

7.346

.847

.506

.828

1.013

1.316

1.958

3.278

6.912

15.897

31.297

47.305

6.362

.813

.540

.861

1.064

1.251

1.596

2.845

6.133

14.106

28.968

45.770

6.383

.882

.630

.848

.928

1.007

1.339

2.732

6.598

15.376

29..S71

35.966]

TABLES OF MORTALITY. 7

the average duration of human hfe, and the value of pecuniary
interests dependent upon its continuance or failure. This
particular application, according to Mr. Hendricks, appears to
have been first thought of, or at least attempted to be carried
into practical effect in Holland by Hudde, and the celebrated
Pensionary De Witt; but the first tables of mortality, with the
corresponding values of annuities on single lives, were con-
structed by our distinguished countryman Dr. Halley, and
published in the Philosophical Transactions for 1693. Other
tables were afterwards formed, which are called by the names
of the places, where the observations were made on which they
were calculated. The information, however, afforded by those
observations, was neither so considerable nor so complete as
it was desirable that the public should possess ; the sources on
which they chiefly depended being parish registers, which in
those times could not be altogether relied upon for accuracy.
(See* Preliminary Remarks on this head.)

* [When a society is not likely to have averages of lives about the same
age, it is judicious to accept a lower amount of Assurance Risk, as the ages
of the lives proposed are greater, so that the Present values of the moral
Expectation of tho current risks may not be greatly vmequal. (See articles
in Appendix on the distinction between Moral and Mathematical Expectations
of Risks.)

The relative amounts, assured at various ages, might be proportionate to the
number of premiums, that are likely to be received on each Policy, on the
principle given in the Appendix. The following table will serve as a guide
to Oflfices, taking a basis of £\000 at age 30, as the Limit or Maximum of
Assurance to be kept, and shews the

Age.

Limit of Assurance Risk to

Age.

Limit of Assurance Risk to

be kept at each age.

1)6 kept at eacli age.

£.

1000

559

945

482

883

395

820

317

745

261

653

If the amount at 30 be greater, say £3000 or dt'5000, the corresponding
amounts at the other ages will be proportionately increased. A similar prin-
ciple applies to the insurance of childrens' lives or other special risks.']

8 ON THE BONUS PRINCIPLE.

4. Associations for assurance having been formed, and a
tolerably safe law of mortality calculated, it was deemed
expedient to fix the rates of annual, or other periodic, con-
tributions, upon such a principle, that not only might reasonable
expenses of management be provided for, but, also, that
every possible excess of early mortality among the members of
any individual society beyond the average of the community
at large, (according to the data by which the fundamental
table of mortality had been constructed) should be met with a
marginal fund. Hence it has been customary to charge assurers,
a somewhat higher * premium per cent, than that shewn as
necessary by the table of mortality ; and this reasonable caution
operates without injury to those, whose families benefit by the
policies of assurance, in case of premature death ; whilst those
subscribers, who survive beyond the tabular average of life,
have a compensation by way of Bonus, in case the institution
meets with a less degree of mortality than the premiums had
provided for.

In general the Bonus system would be deserving of
approval, if applied on the correct principle referred to
in Article xv. of our Preliminary Remarks, because it

* [In the Appendix are given the formulae and methods for calculating
Premiums for Assurance according to any table of mortality, with Instruc-
tions for Valuing Bonuses ; and, in the Tables, are given the elementary data
of the Carlisle and English Life Laws of Mortality. Mr. Willich, in his
valuable " Popular Tables," has deduced the following simple formulae for
remembering the Expectation of life at any age between 5 and 60 :

By the Carlisle Law, the expectation is two-thirds of the difference between
81 j and the present age.

By the English Life Law, the expectation is two-thirds of the difference
between 80 and the present age.

Thus, as a person becomes one year older, his Expectation diminishes eight
months only ; and three times the difference between the expectation of life
at any two ages, is equal to twice the difference between the ages.]

ON THE BONUS PRINCIPLE. 9

must be considered as presenting one main improvement, that
was wanting in life assurance, to remove the only selfish
objection to which that beneficent invention of science was
formerly open : viz., that those who live pay for those who
die beforehand ; since the periodical allotments of *Bonus, if
calculated upon the principles we have recommended, tend
continually to restore the balance of advantage to those mem-
bers who survive each division of profits. (See Math : Appx.)

5. — The natural desire of persons to provide, in times
of comparative prosperity, against privations attendant on
adverse circumstances led to the formation of assurance
companies, which were early recognised as the safest and most
advantageous mode of effecting that object. The experience of
more than a century and a half, and the great success of assu-
rance institutions during that period, have not only established
the soundness of the principles involved, but confirmed, beyond
doubt, the fact that they offer one of the most legitimate me-
diums, by which careful and thrifty persons can invest their
savings in such a way as to secure a large contingent profit,
with the least possible risk.

When the f first Life assurance office was founded at the
early part of the last century, considerable distrust for a long
time prevailed respecting the stability of an institution, which
undertook so great an apparent risk as the guaranteeing of a
definite large sum to be payable to an assurer's family, however
soon he might die, in consideration of a small annual payment
to be made by him during his life. But — when years passed
away and the scheme, so far from becoming a failure, answered
admirably — the feeling of the world changed, and in all direc-
tions new societies began to spring up, which sought for and
soon obtained public support. These old companies were
accustomed, however, to conduct their business in an exclusive

* [See, also, upon this subject, various valuable papers read before the
Institute of Actuaries by Mr. Jellicoe, one of the Vice-Presidents.]

f [The most ancient existing Life office was founded in 1706.]

10 DEFECTS IN LIFE ASSURANCE,

manner, regarding their own profit more than the convenience
or the wants of the assured ; and it is only within a very recent
period that societies have arisen based upon equitable princi-
ples, and extending their operations to an increased variety of
objects. The mode of proceeding on the part of the old com-
panies necessarily narrowed the field of their usefulness.
Hence we find that even in the middle classes but a small
proportion of persons are, or have ever been, assured ; whilst
the industrious classes are wholly denied admission, excepting
in a few offices of modern date, and although many advantages
are held out to them by Savings Banks, those excellent insti-
tutions oflTer only a personal profit upon investments, and no
contingent advantage to a depositor's family.

6. — The industrious classes have also been debarred from
the benefits of life assurance by the uncertainty of their
incomes. Even where they have insured, instances have too
frequently occurred in which they have found it impossible to
keep up their policies, as they advanced in years and their
means of existence began to diminish ; j^et a regularity of
payment is the fundamental condition, which, in too many
offices, if disregarded, causes the whole benefit they have so
long struggled to secure, to be forfeited to the proprietors
or other members. All, who have had opportunities of hear-
ing the objections which are most frequently mentioned when
life assurance is urged on public attention, are aware that the
very first is the inconvenience that an assurer is exposed to,
who burdens himself for life with the payment of an annuity,
in the shape of a periodically recurring premium, whilst he
does not know how soon his circumstances or views may
change, and secondly, that if he be compelled to discontinue
his assurance, he may lose nearly the whole of the amount he
has paid in. Many persons also are unwilling to lock up from
their own use, dujing their lifetime, the funds they are accu-
mulating : some fearing that occasions may arise, when most
pressing need may be felt for a portion thereof; others thinking

AS REGARDS THE INDUSTRIOUS CLASSES. 11

that in their * old age, they may want the money for themselves.

Such objections arc easily conceived : — For example, at age
40, a man in good health can assure his life by Table 1, page 51,
for £500, by an annual premium of £14. 175. Gd. Now it is
exceedingly natural that he should entertain hesitation before
undertaking such a payment, if his income be one fluctuating
in point of time or amount — and those whose incomes are
not of a fluctuating nature are the exce23tion to the great body
of the community. This consideration has had a most power-
ful efiect in restricting the application of life assurance.

7. — Another obstacle is caused by the regulations of
most of the assurance companies. They decline to receive
Small payments, whether monthly or weekly, principally
on account of the trouble and expense attending the
same. This, however, is what persons of limited means
mainly require. Yet the companies have reasonable grounds
for their refusal. Take the case of an assurer proposing for
a small sum, say £100, purchaseable by weekly instalments.
At age 26, the annual rate is £2. Os. Od. per cent. (Table 1,)
or weekly under lid., while the preliminary expenses attending
the medical examination of the life, with the inquiries into his

* [In Art. 39, 2^- 31 of the Mathematical Apjyendix relatini^ to Allotments
of Bonus, will be found a foi-mulf^ for apportioning the Profits of a society, so ^

that, not only the Payment of Premiums by the Assurer may he made to cease
in case of his living beyond the average age, but also that the amount insured
may actually become payable to himself at a certain date, instead of to his
representatives at his death.

Such a raode of allotment would meet many of the objections to the Bonus
system (which wo have discussed in our Preliminary Remari^s to this Treatise,
Art. xiii.) and it is singular that it has not been thought of by the Older
Companies, which charge the very high rates of Premium based upon the
Northampton Law of Mortality.

Those rates are sufficient to enable the Policies to be paid to their Assurers
at comparatively early ages. For example : —

The annual Promiiun charged by many old offices to assure £100 at age 20
is £2 3s. Id. This rate exceeds the Net annual Premium (Heg. Gen. Returns 3
per cent, see p. xxx. ante.) by lis. \\d. Tke difference (less 5 per cent on the
Premium for expenses) or 9*". 9c?, applied by way of Bonu.s periodically, would
(even if only 3 per cent, interest be realized) enable the Policy to be payable
to the assurer at age 59, or in case of previous death.

Should the Society make surplus Profits from a higher rate than 3 per cent,
being obtained from its investments, or by lapsed I'olicies, or other causes,
then the age would come out earlier.]

c 2

12 MODIFICATIONS IN LIFE ASSURANCE PRACTICE,

habits of life, and the cost and trouble of the policy and papers,
all combine to make his proposal as expensive as in the case
of a larger assurance ; so that to cover the first outlay the com-
pany is compelled to require the first year's premium to be
paid in advance, even if they allowed the second and subsequent
payments to be made by small instalments. (See Art. 39.)

8. — A further objection to the present system is the recur-
rence of Fixed payments : — An assurer (at say 35 years of
age) who has assured his hfe for £1000 at £25. 10s. Od. a year,
or for a lesser or larger sum, might be able to pay one year
£25 or £20, another year £S5 or £30, but he is not permitted
to have the option in his own hands of varying, as his neces-
sities may dictate, even within reasonable limits, the amount
and periods of his payments.

9. — Again, where policies are effected on the lives of other
parties (as by *Creditors upon the lives of Debtors) to secure a
debt, objection is raised that if the creditor die before his
debtor, his family may not be able to keep up the policy and
the premiums paid may be lost.

10. — The above objections may to some extent be obviated
by a more general adoption of the following regulations in
existing or future Industrial Assurance Offices.

1. fThe Suspension principle. (See Art. 13.)

2. That assurers, desirous of discontinuing their annual pre-
miums altogether, be allowed to surrender the policy to the
office and receive, instead, another policy of less amount,
equivalent to the premiums paid and free from future pay-
ments. (See Art. 25, Math : Appx.)

3. The Deposit system. (See Art. 18.)

* [To meet the objection in Art. 9 and in similar cases where the payment
of the premiums depends upon another life besides that assured, the premiums
may be calculated thus : — Let the present value of the assurance be estimated
on the life involved ; the value of the premium be measured by the joint
existence of the life assured and that of the Purchaser, so that the payment of
premiums should cease when eithe» life dropped ; the sum assured being pay-
able to the creditor or his heirs only when the debtor dies. For the Formulce
see Art. 6, p. 5 of the Mathematical Notes on the Valuation of Life Contin-
gencies, appended to our Treatise on the Enfranchisement of Copyhold, Life-
Leasehold, and Church property.]

f [See several Tables for New systems of Assurance at pages 158, 159.J

FOR THE INDUSTRIOUS CLASSES. 13

4. The Transfer or Substitution plan. (See Art. 21.)

5. That the payment of premiums be allowed quarterly/, or
monthly, or to be compounded for by one single payment,
commonly called the single premium ; or that they may be
made on the descending or ascending scales — that is, the annual
payments diminishing or increasing in amount, so as to suit
the convenience of persons whose circumstances are subject to
change: — For instance — a man, whose income arises from
fixed sources and will probably not alter, would find it con-
venient to pay for an assurance on his life by annual payments,
which would diminish as his family increases and his children
growing older entail greater expenses upon him. On the
other hand, a young man starting in life, and hoping to in-
crease his future income by his^ professional or other occupa-
tion, might prefer to pay less at first, and more afterwards, for
the assui'ance which, at his death, is to provide for his family.

6. That Half the annual premium be allowed to be kept unpaid
for the first seven years at £5 per cent, interest. (Seep. 29.)

7. That there be no Fees on entrance, nor any expense in
effecting an assurance.

8. That all claims by death be paid by the society at the expi-
ration of one month, after satisfactory evidence of the death
of the assured has been furnished.

9. That policies on the lives of parties, who may die ly suicide,
duelling, or the hands of justice, he not void after five years^
duration.

10. *That the machinery of the Savings Banks be used for
receiving weekly payments.

Other suggestions for the greater development of life assu-
rance are mentioned in Arts. 17, 31, 37, & 40, of this Treatise,
and in the Appendix ; but we may remark that it would be useless
for assurance companies to afford facilities for the Industrious
classes to assure their lives, unless the Legislature devise
some secure method by which the first object of an assurer
may be attained, viz., to provide for his ivife and children in
case of premature decease.

11. — This can scarcely be said to be the case at present, as a
Policy of Insurance taken out for the benefit of a man's family

* [See Part V of Division I, or the Treatise on Savings Banks.]

14 MARRIAGE ASSURANCES AND ASSIGNMENTS.

is liable, like any other property, for his debts should he happen
to leave any at his death. This is a contingency which many
eminent economists consider should be removed by the Law.
They hold that, hy the act of marriage, a man has undertaken
the distinct responsibility of providing, as far as may lie in
his power, for his wife and children ; and, that if he incur other
liabilities of a pecuniary character, his family have at least as
great a right as any other creditor to require some provision
to be secured to them by a Policy of Assurance ; and that it is
to the interest of the community at large that, where Insurances
have been ejEfected, the assurer should have the power of
making some portion of them specially available for his family.

The question is a difRcult one, and able arguments have been
advanced both for and against such a power being sanctioned
by the State. It may be observed, however, that the principle
has already been recognised to a limited extent in this country,
by the Acts relating to Friendly Societies, and its importance
was long ago admitted in ^America, and on the Continent.

12. — On the other hand, as regards Creditors, the full develop-
ment of Life Assurance has been prevented by the existing legal
impediments to the Assignment of Policies, and by the frequent
law expenses consequently incurred, in afterwards obtaining
payment of the amount assured.

Whatever opinion may be entertained as to the propriety
of legalising the assignment of f" Cboses in action" generally,
there can be little doubt that policies of assurance will never

* [The following law has been passed with this object in the State of New
York. (April 1st 1840) : — An Act ibr the benefit of Mai-ried Women.

The People of the State of New York, represented in Senate and Assemhhj, do enact as follows : —
§ 1. It sliall be lawful for any married woman by herself, and in her name or in the name of
any third person, with liis absent as licr trustee, to cause lo be insured, for her sole use, tlie life of
her husband, for any definite period, or for tlie term of his natui-al life; and in case of her
surviving her husband, the sum or net amount of the insurance becoming due aiul payable by
the terms of tlio insurance shall be payable to her, to and for lier own use, free from the claims
of the representatives of her husband or of any of his creditors ; but such exemption shall not
apply where the amount of premium paid anuuaUy shall exceed tlirec hundred dollars.

§ 2. In case of tlie death of the Avife before tlic decease of her husband, the amount of the
insurance may be made payable alter death to her children for their use : and to their guardian,
if under ago.]

t [ For tlio information of our non-legal readers we may remark, that property in,
action is where a man has not the enjoyment (actual or constructive) of the
thing in question, but merely the right to recover it by a suit or action at law,

THE SUSPENSION PRINCIPLE. 15

obtain their full value as commercial securities, until they arc
assignable by simple endorsement, like Bills of Exchange.*

Among the many arguments that can be advanced in favour
of a law being passed to that effect, is one furnished by the
fundamental principles of Political Economy, viz., that the
prosperity of a trading community depends on the extension
of credit, provided such credit bear some proportion to the
capital which guarantees it. It is not necessary that the
capital should be " in possession," and public credit is a thing
essentially ^ersowa/ and dependent on the existence of the
individual to whom it is given. It follows, therefore, that
such an instrument as a Policy of Assurance, which so much
facilitates the creation of capital, and gives security to the
creditor, may be made a most important element in commercial
operations ; — and the rights of the party to whose possession it
is transferred should, so long as he remains the holder of it, be
undoubted and complete.

The Suspension prmciple.
13. — When the principles involved in Life Assurance cal-

fi-om whence the thing so recoverable is called a "chose in action." Thus,
money owed on a bond is a chose in action, for a property in the money vests
whenever it becomes payable, but there is no possession till recovered by
course of law, unless payment be first voluntarily made — A chose in action is a
thing rather in potent la than in esse, though the owner may have as absolute
a property in and be as well entitled to such things in action as to things in
possession. By the strict rule of the ancient common law no chose in action
could be assigned or granted over, because it Avas thought to be a great
encouragement to litigiousncss if a man were allowed to make over to a
stranger his right of going to law. Hence the form of assigning a chose in
action is in the nature of a declaration of trust, and an agreement to permit
the assignee to make use of the name of the assignor in order to recover the
possession. 'I'he Court of Equitr/, however, make the rule give way to the
expediency (in a conunercial point of view) of facilitating the transfer of
property, and allow the assignment of a chose in action as fre«ly and directly
astholawdoesthatofa chose in possession. Nevertheless,if A.aftereft'ectingan
assurance on his own life assigns it and then dies, any action that may become
necessary to recover the amount of the policy must be brought in the name of
the executors of A., for the polu-y and the right of action as annexed to it, is
a chose in action. The fact of the assignees giving notice to the assurance
office makes no difference as to the parties in wliose name the action must be
brought. Notice is given in order to preserve priority over any future incum-
brance that A. might create, or in case of bankruptcy or insolvency.]

* [The sum of money for which a bill is drawn is a chose in action and not a
thing in possession ; and by the general rule would be incapable of assignment,
yet S' a Bill be payable to order or bearei-, the same is liable to be assigneJ.J

16 THE SUSPENSION PRINCIPLE.

culations [were not so well understood as at present, the older
companies were able, for manyyears, to persist in a system of high
charge as regarded their premiums, and in rigid regulations with
respect to the continued validity of their policies. Increasing
competition for business, however, gradually induced them to
issue policies upon fairer terms to the assured, in which one of
the first new features was " The returning an assurer, on surrender
of his policy, a portion of the premiums he had paid, if he found
himself unable to keep it up," whereas it had been previously
the custom to declare the premiums altogether forfeited.

With this improvement, the old plan of assurance went on
as before, many policies being disconthiued from time to time,
through the temporary necessities of those who, not being
always able to pay the renewal premium, were compelled to
surrender their assurance to the office at a very great sacrifice.

No provision was ever attempted to be made for what un-
fortunately, as we have before said, so often happens to per-
sons whose incomes are derived from personal exertions or
trade — who frequently find that money, which they count on
receiving, does not come in at the time they expect it ; and this
too, perhaps, just when a renewal premium has become due
upon a policy, the non-payment of which within the three
weeks' or month's grace (usually allowed) at once causes
it to lapse, and thus destroys all the benefit, which the
assurer had hoped (after perhaps many payments) to secure to
his family at his decease.

This objection to the system must have militated materially
even against the profit of the companies, by deterring many
careful persons from assuring, who naturally felt little disposed
to commence any undertaking, which possibly could be
frustrated by one years temporary j)ressure in their incomes.
The number of persons now assured is great, compared with
wliat was the case twenty or thirty years ago, and yet it is
lamentably small relative to tlie population of this country.
No one will venture to say tliat the numbers assured would
not have been much greater, if this objection had been removed.

THE SUSPENSION PRINCIPLE. 17

and few of the persons already assured are able to feel confident
that tlie time may not come, when they may themselves be
temporarily quite unable to meet the renewal payments on
their policies when they become due.

To meet this contingency we suggested some years ago
the following, as a regulation that might with propriety and
safety be adopted ; from which it will be evident that no policy
can ever be forfeited from mere temporary pressure in the
monetary affairs of its possessor. It is thus stated : —

""As it may happen that an assurer may^ from unforeseen cir-
cumstances^ be unable to pay a premium when it becomes due, he
will, on making application to the directors, be allowed once (or
offener, should the value of the policy at the time of the application
permit it,) lo have the privilege of Suspending the payment of
that premium, (provided he has already paid three whole premiums
at least on the policy, and it be one for the whole life of the assured.)
And his policy will be endorsed to the effect that it continues in
force, as if the premium suspended -were paid, (provided interest
at £5 per cent, be paid annually on the same) but charged with
a debt equal to that premium, which will be deducted from the
amount of the policy when the assured dies. The policy holder
ic'ill have it in his power to free his policy from the debt, at any
time, by paying the amount due.^ "

The following example will illustrate the plan : — A person
aged 26, assures his life for £500 on Table 1, page 51, at
an annual premium of £10. At the beginning of the fifth
year of the existence of his policy, he finds he is without the
money to pay the fifth premium. He avails himself of the
privilege allowed by the society, and obtains the endorsement
on his policy as before stated. The year passes away, and at
the beginning of the sixth year he is alive, and still not able
to pay up the suspended premium. He pays, therefore, the

* [" Half premium policies will not be entitled to this privilege, unless the
arrears due shall have been previously paid up. Fourteen days' notice request-
ing this permission, must be given, prior to the premiums becoming due.
Where the policy is assigned or other wiso held in trust, the consent of the
party interested must be given, in writing, to premiums being suspended."]

18 THE SUSPENSION PRINCIPLE.

sixth premium and the successive ones after that, and leaves
the suspended premium as a debt against his policy ; paying,
however, annually, ten shillings interest upon it.

" We approve very highly of this plan, (says a w^riter of
exjierience) for we have seen valuable policies lost to families
by such pressure as is here described, and sold by auction at
the price, perhaps, of three or four hundred pounds, after
premiums to the amount of £1000 or £1200 had been paid
upon them to the richest and most esteemed old assurance
companies in London ; and we do not hesitate to say, that any
relief from so perilous a predicament, especially in times so
precarious and changeful as those in which we live, must be
welcomed as a manifest improvement in the S3'stem."

14. — This plan of Suspending the payment is unique as yet
in life assurance operations for three reasons: —

*' 1st. Because most societies will not lend on the mere
security of the policy (if it has only been three years, or
thereabouts, in existence), sufficient money to pay the pre-
mium ; simply from the fact that the saleable office value
of the policy, at that time, is not in their estimation equal
to one premium.

2dly. The offices under the old system will never make
any advance under £50, and some not under £100, and
even £200, whilst the premium may be only £15 or £20;
thus rendering it necessary for a person, who wishes merely
to provide for the payment which has become due on his
policy, to borrow more than he requires, for which, also, he
has to pay a high rate of interest ; and this he can only do,
after such a number of years has elapsed as would cause the
policy to be of sufficient office value to be security for the
£50 or £100, which is the lowest sum that would be lent.

The 3rd reason is the most important. In obtaining a loan
from a society on the security of a policy, it must always
be deposited in the hands of the society during the whole
time that the loan continues. This is therefore at once an

THE SUSPENSION PRINCIPLE. 19

important objection, since policies are frequently required
for commercial purposes (such as mortgage security, &c.,)
and few persons would like, or be even able, to deposit their
policies in the hands of the office by which they were issued."
None of these objections exist in the Suspension system :
the privilege is granted without condition or deposit of the
policy, and even when three jears only have elapsed in its
existence. The payment of a premium may be suspended
should the assurer unexpectedly be unable to meet it; what-
ever be his age or the state of his health.

15,^ — Several instances have come under our notice of the
benefits conferred by the Suspension principle. One we will
mention in detail: — In 1847, among the numerous failures, a
leading firm became bankrupt, and the services of its officers
being no longer reqviired, they were dismissed. One, who had
been twenty years in a high confidential appointment in that firm,
partook of the general misfortune. He lost thus suddenly a
liberal income, relying upon the continuance of which he had
eflfected assurances to considerable amounts in several compan-
ies. Not being able to make the renewal payments for 1847,
he applied to each of the offices for permission to suspend the
premium for 12 months, but the replies he received from all
but one were unfavourable. All his policies therefore, but
one, dropped and were lost to his wife and children. The
other was allowed to continue in force. Within twelve
months the excellence of the character, he had secured by past
meritorious services, added to his qualifications brought him
again into good employ, and he was enabled to keep up the
Suspended policy. By the rules of the other assurance offices,
he could within six or twelve months have possibly revived his
policies, on paying a fine for their having lapsed, provided his
health had continued unimpaired. But unfortunately, as so
frequently happens, that health, which had been excellent
some years previously when the assurances were effected, had
been deteriorating for some time, anil the sudden failure of

20 THE SUSPENSION PRINCIPLE.

the firm in 1847, with its attendant anxiety, had mihtated
against its improvement. The medical officers could not advise
their Boards that the life was re-acceptable, or that the policies
should be revived. He thus lost for his family, by temporary
pressure arising from temporary loss of employment, in all but
one solitary instance, the assurance protection which he had
for many years struggled anxiously to secure for his family.

16. — Other examples might be mentioned, such as that of an
eminent contractor whose assurances, to upwards of £38,000,
were perilled in that same year by the difficulty of making the
renewal payments, to meet which he was compelled to sell
valuable securities at a loss ; — of a private gentleman, called
upon unexpectedly to pay a large sum for the delinquency of
a friend in a government situation, whose surety he had
become : a sum, which was equal to two-thirds of his income
and left him without the means of meeting his own usual pay-
ments;— of professional men, and others in the enjoyment of
apparently average fixed incomes, who have been from tem-
porary difficulty unable to pay up their premiums on their
policies. — These cases should come home to all our readers ;
and the Actuaries of Assurance Offices should cease to say,
" Oh, what trouble such a plan would entail." They should
consider more the unnecessary harshness of their present system.
We have said unnecessary, because the measure proposed has
a principle for its basis not unprofitable to the office. The
privilege, as worded above, can commence only when at least
three premiums have been paid, because then the true value
of the policy, or the sum which could be theoretically allowed
for its surrender, is in general more than sufficient to cover the
temporary insurance for one year, at the age of the assured
when application is made to suspend. The office runs no
risk, as the next and subsequent premiums would have to be paid
in due time, and interest at 5 per cent, could be charged on
the sum suspended. After a few more years of regular pay-
ment, the policy could, if required, bear a second or more

FREE REVERSIONARY POLICIES. 21

suspensions. The office would always be protected from loss
and would be making 5 per cent, interest for the money-value
of the privilege conceded, whilst 3 per cent, is the rate allowed
to assurers in the premium tables.

17. — Another practical improvement is becoming generally
adopted. — In many Societies an Assurer can at any time cease his
future payments, and instead of receiving back a proportionate
amount of the premiums he has paid, he can be credited with an
equivalent reduced assurance payable at death, denominated a
* Free Policy, because it is free from future charges for pre-
miums. With but a few exceptions the offices do not, how-
ever, at the time of issuing their policies, fix the scale of reduced
assurance, nor forego the arbitrary power, too often exercised,
of dealing at their will with the assurer, when a time of diffi-
culty has come and he is compelled to accede to almost any
terms, from being unable to keep up his payments. To
guard against this it is desirable to include in the conditions
of the policy some such words as the following : —

That, at any time after five premiums have been paid, the
assurer shall be at liberty to cease all future payments on his
policy, and be considered as having purchased a reduced assu-
rance, (payable three months after his decease,) to be esti-
mated, according to the table fprinted on the back of the
policy, by subtracting from the original amount assured that
amount of assurance which the rate of periodic premiums,
that he has been paying, would purchase at his advanced
age, when he proposes to cease all future payments.

The principle of such a clause is this : — If, at age a, the cost
of a policy for £1000 is £20 a year, and, at age 6, £35 a year ;
— then, reserving off the £35 in favour of the society a margin,
say of 20 per cent, (or whatever it may be that has been charged
in the annual premiums for the security and expenses of the

* [In the Appendix, pages 24, 25, we have given formulae for estiniatmg
Free Reversionary Policies.]

f [The table so endorsed should be one of net premiums, so as to give the
oiBce a small margin in the calculation.]

22 THE DEPOSIT SYSTEM.

office), £28 a year, at the advanced age 6, is the net premium,
which would assure a new policy for £1000 ; therefore, by rule
of three, £20 at the same advanced age would assure £714. 5s.
nearly ; which is the sum that a policy for £1000, taken out
at age a, would be diminished, if, at age h, the assurer deter-
mined to cease his future payments, — or, the policy would be
reduced to £285. 15s. (See also Art. 25, Math: Appx.)

By this plan, policy-holders would at all times be aware
of the minbmim amount of Free Reversionary Policies, which
they would be certain to have secured, in case of future unfore-
seen difficulties occurring to prevent the keeping up of the
original amounts assured.

The Deposit system of Assurance for Sums payable at Death.

18. — A fourth improvement in life assurance is that termed
the Deposit or Accumulative system, by which, to some extent,
obstacles in the way of Industrial assurance are removed. For
explanation we will quote from the prospectus of one of the
assurance offices which have adopted it, basing its tables on
the mathematical formulae (involving two co-existent rates
of interest) which will be found in the Appendix to * Division
II of our Treatise on Associations for Provident Investment.

*' This system of life assurance affiards peculiar advantages
to parties whose incomes are liable to change ; inasmuch as, by
depositing in the office small or large sums, not regularly year
by year, but "j-when it suits their convenience, and in such

* [The Treatise on Building Societies cand Tontines, p. 289 to 202.]

f [The same particulars relative to the health of the party are required as
in the case of an ordinary assurance. And the person assuring may make
his deposits as often and when he pleases, or only once.

The deposit plan is capable of a variety of modifications, according to the
life contingency it is desired to meet : one extension of considerable import-
ance is the payment to the depositor himself, during his lifetime, of a portion
of the current interest on the money deposited, with the further advantage of a
policy of assurance of lesser amount, secured pa yible to his family at his death.

Another modification of the system, not at present practised, would
consist in the allowing the assurer to keep u[) the difference between the
amount of his Policy, at the time of withdrawal, and the sum deposited, by that
annual premium payment, which would have been charged when he entered ]

THE DEPOSIT SYSTEM.

different amounts as they may wish, they can obtain a policy
of assurance, of "which the value increases with the number
and amount of the deposits made ; with a further advantage,
*' that should the assurer at any time wish to tvit/idraw the
whole or part of the money deposited, he may do so on giving
two weeks' notice to the ofRce, which will return him the money
required, with an endorsement on his polic}^, reciting that its
value is diminished by an amount proportionate to the sum
withdrawn." [I'kis is illustrated in the example to Tables A,
and B.'\

* TABLE K.

Amount payable at Death, which
may be secured by tlie single
Deposit of £.100 at the respec-
tive Ages against ivliich each
such Amount is set, tvith profits.

Age

Amount

Birth

Assured.

Birtli-

Assured.

(Lay-

clay.

£. s. d

£. s. d.

2<iS 9 9

190 9 1

264 16 2

187 19 10

261 5 8

185 8 1

257 10 9

183 0 2

t20

263 12 5

180 12 10

249 17 9

178 4 6

246 6 8

175 15 8

242 6 11

173 6 G

238 11 6

170 17 7

234 10 7

168 6 2

231 1 7

165 12 1

227 11 10

162 17 4

223 13 6

160 1 9

220 7 9

157 6 11

217 9 5

154 15 2

214 10 1

152 3 9

211 13 C

149 13 6

20S 16 2

147 1 1

2(15 15 2

144 16 11

202 11 6

142 11 5

199 14 10

140 10 3

196 14 6

138 13 4

193 13 1

TABLE B

Amount payable at Death, ivhich
may be secured by the single
Deposit of£.\0 at the respective
Ages against ivhich each such
Amouht is set, with profts.

Age

Amount

r.iitli-

Assured

Birth-

Assured.

day.

1 day.

£. s.

£. s. d

26 16

19 0 10

26 9

18 15 11

26 2

18 10 9

25 15

18 6 0

120

25 7

18 1 2

24 19

17 16 5

24 12

17 11 G

24 4

17 6 7

23 17

17 1 9

23 9

16 16 7

23 2

16 11 2

22 15

16 5 8

22 7

16 0 2

22 0

15 14 8

21 14

16 9 6

21 9

15 4 h

21 3

14 19 4

20 17

14 14 1

20 11

14 9 7

20 5

14 5 1

19 19

14 1 0

19 13

13 17 4

19 7

* [At page 145, sco also Deposit Tables for Term-certain Deposits and
Deferred Annuities, -wliicii are caleiilated upon the foi'mulae for two co-existent
rates of Interest before referred to.]

t [Example : — Thus, a person aged 20 may, by the single deposit of £.100,

^ THE DEPOSIT SYSTEM.

According to the ordinary plan of assurance, a compara-
tively small annual premium secures a large sum payable
should the assurer die even the day after ]l\e first premium has
been paid ; but the premiums must be paid regularly year by
year, and they cannot be withdrawn from the society, except
in the shape of a loan on which the payment of interest is
required.

" The di&^o&\{, plan presents^ on the other hand, the advantages
of a secure investment for money ^ which, whilst it is comtantly
improving a?id increasing in value, may at any time be with-
drawn, wholly or in part, with the same facility as a deposit
account with a Banker. And, at the same time, so long as the
money or any part of it remains deposited with the society, it
produces a corresponding assurance effected on the life of the
depositor, and entitles his family at his death to a sum of
money varying with the age at which the deposit was made.""

19. — The peculiar advantages offered by this Accumulative
mode of Assurance, are found to be applicable to an infinite
variety of cases. For example : Parents and Guardians
may make provision either for the present wants of children,
or for the purpose of recovering, in the event of their
premature decease, all charges incurred for their education
and advancement in life. Thus, let a parent determine to
lay by £50 per annum for the benefit of a child, now

acquire a Policy of £253 126-. &d., or, in otiier words, a right to have
jS253 12s M. paid at his death, even if that should take place within the
same year in which the deposit is made; or if he have already made deposits,
his Policy will be increased by this further amount, and he may, at any time,
on giving two weeks' notice, draw out the whole or any part of the money
so deposited, by the surrender of so much Assurance as, at the advanced
age to which he has attained, would be purchased by the money withdrawn.
Thus, on attaining the age of 60, he can withdraw ^£^100 by surrendering
JE138 13s. 4d. of his Assurance, and the balance £114 19s. Id., will remain
to be paid to his representatives at his death. Or,

(+) A person aged 20 may, by the single deposit of £10, acquire a
Policy of £25. 7s. 2d., or, in other words, a right to have .;6"25. 7s. 2d.
paid at his death, with the other advantages detailed in the Example to
Table A.]

THK DF.l'OSlT SYSTF.M. 25

ten years of age, and to expend £75 per annum on his
education and entrance into life. By effecting an Accumu-
lative Assurance, the case would stand thus : — £50 is imme-
diately deposited for the assurance, while the £75 is devoted
to the purpose of education. If death should occur in the
first year, the Company would pay £140, which would restore
more than both premium and cost for education. On the pay-
ment of subsequent Deposits* of £50, the sum assured would
become £279. 5^. in the event of death during the second year;
and thus with each successive payment, this sum would
commensurately increase ; so that in the —

ord. year it would be £417 3 11

4th.

5th. „

6th.

7th.

8th.

9th.
10th.
11th.

shewing that, in any interval from ten to twenty-one, there
would have been the repayment, in the event of the child's
death, of an amount exceeding the ivhole of the premiums and
charges for education ; and in the event of his living, either the
refunding of all the premiums paid, £550, as a Capital where-
with to engage in business, or the guarantee of an Assurance

* [A repetition of deposits, of equal or lesser amounts, may saffly be allowofl
without fresh ni'dical examination or proof of unaltered j^ood health, as tlio
office would not by such deposits be in a worse position tlum 11' the party, at
the commencement, had at once decided to undertake rocurrino- payments to
procure a large policy ; and this recurrence of optional deposits may be allowed,
without inquiry into tiie state of health, until the aggref^ate of the separate
deposit policies is equal to the amount which a fixed annua! payment of the
deposit would have assured. The assurance society may well incur the
possible chance of a deposit being brought for assurance just when the health is
deteriorated, as it would not, on the average of its deposit business, l)e worse
off than in the cases where the deterioration of health takes place in ordinary
assurance policies.]

554

690

825

959

1092

1222

1851

1478

26 THE TRANSFER PRINCIPLE.

of £1478. lOs. 1 Id. increasiug with every succeeding premium,
if paid, and by the bonus di\'isions.

20. — If the Deposit system were adopted by Government
through the Savings Banks, for small sums, it would become
very general, as they have the machinery ready for receiving
deposits, and the medical examination could easily be supplied^
In Part II, we will enter upon this subject in relation to
certain clauses in the new Savings Banks' Bill, expected to
be introduced by the Chancellor of the Exchequer : but we
would here draw attention to the fact, that through the agency
of Sa\-ings Banks, premiums payable in small weekly pay-
ments from pennies upwards, might be received for the
assurance of sums from £5 upwards, payable at death. The
very large number of assurances thereby facilitated, would
render medical testimony, or examination of the lives, no
longer of primary importance, as is the case at present with
ordinary assurances companies.

The Transfer, or Suhstitution, principle.

21. — To make the system complete, we propose another
principle, which we denominate the Transfer.

If taken out for the whole of life, (but not otherwise), a Policy
might be made Transferable to some other life, at the death
of which substituted life, in lieu of the original one, the amount
assured should be paid ; the successor thus standing, relative
to the society, in the same position as his predecessor : — it
being understood that the substituted life shall not be of
greater age than the one in the policy at the time of Transfer,
and also in perfect health. A small fee, of proportionate
amount to the sum assured, for office trouble, &c. is all the
charge that need be required for this permission ; the Society
having nothing to do with whatever arrangements the parties
concerned in the transaction may choose to make between
themselves.

22. — In the same manner, the privilege might also be

THE TRANSFER PRINCIPLE. 27

extended to the holders of policies of Endo^^Tllent for Chil-
dren, or Provision for old age ; prG\'ided the said policies are
effected on the returnable rates.

23. — This feature must be considered as furnishing a strik-
ing improvement in Life Assurance, as it removes one
objection, which has hitherto existed ; — viz. the necessity of
either sacrificing afterwards at considerable loss, or of continu-
ing, a policy, which is sought for merely temporary accommo-
dation, and which, it may be, subsequently, on that account no
longer desirable, or from the pressure of temporary pecuniary
difficulty, convenient to keep up.

24. — Many illustrations of its efficacy might be given, but
the following examples will, perhaps, suffice : —

1. Suppose a gentleman in the army, having efiected an
assurance upon his life in time of peace, to be required
afterwards to enter upon remote or active service. If he
wish to avoid an increase of premium, and be in the full con-
fidence of his health, he may prefer at once to give his policv
to a younger brother or friend, at the death of whom the
amount assured would be paid : and yet he may retain to
himself, by mutual agreement, some interest in the policv so
transferred.

2. Suppose a creditor to have effected an assurance upon
the life of a debtor, as collateral security for a loan, which is
afterwards paid off, so that the creditor has no longer any
interest in keeping up the policy ; or, suppose a person to
have borrowed money on mortgage from a private individual
or a society, and to have assured his life, so as to secure his
family from liability for the debt, in case of his decease
before he has paid it off; in both these cases, the Transfer
principle would be at once susceptible of advantageous appli-
cation, as the power of transfering the assurances from their
own to other lives, would allow of the policies becoming
serviceable to other parties for similar commercial purposes ;
and the premiums paid by the original assurers would, thus.

'28 THE TRANSFER PRINCIPLE.

not be entirely lost, when their desire to keep the policies up,
for their own respective benefit, had ceased, as the assurers on
the substituted lives would find it advantageous to pay an
equitable sum for the transfer.

25. — If deposit policies were insured by the agency of
Savings Banks, the Transfer privilege could easily be adopted.
The party, whose life is to be substituted, being of not
greater age, would attend .it the Bank to be examined by a
medical oflficer, appointed for that purpose, to whom he would
pay a fixed small fee, and who would endorse on the back of

the policy : — l^he Life of may he substituted

in the within policy. Whereupon the depositor would put
his endorsement : — I transfer this policy to the above-
named .

The transfer principle would make a deposit policy as
negotiable and transferable almost as a bank note ; for it
would be —

1". Paid up, and free from future charge.

2°. A certain portion of its amount would be with-
drawable at short notice by the holder.

3°. Its full amount would be receivable by the holder,
at the death of the life originally assured, or (if
a transfer had occurred), of the substituted one.
The Substitution or Transfer could be renewed as often as the
policy changed hands, if substitute and healthy lives could be
found of not greater age. * The Society, or Savings Bank,
would, clearly, be benefited by every fresh life being substi-
tuted after careful medical examination, as the vitality of the
policies would thus be renewed. In ordinary assurances this
is not the case. If once a life is accepted, and it subse-
quently deteriorate in health, the office cannot escape the risk,
provided the payments be duly continued.

* In a separate publication, which will shortly appear, will be found Rules
for the formation and sovernment of Friendly Societies, or of Benefit Assu-
rance and Investment Societies, embodyinj^ this and other principles.

The Half -premium System.

26. — In many modern offices a plan is adopted, thus ex-
pressed : — " Half the annual premium on whole life policies
may be kept unpaid for the first seven years, provided 5 per
cent, interest be paid in advance." This accommodation is, in
many instances, a great convenience, both to persons whose
means are likely to increase, but who, temporarily, are unable
to keep up the payments to the whole extent, and, also, spe-
cially in the case of policies in connection with mortgages, as,
during the first seven years, (the term, perhaps, of a mortgage)
the payments are nearly as moderate as in a short term or
temporary policy, and, at the end of the period, if the policy
be still required, it can be continued without renewed evidence
of health still being good. It is to be understood, that, if, in
the first seven years, the assured die, the balance of premiums
in arrear would be deducted from the claim paid to the holders
of the policy ; and, if he survive the seven years, then, to
keep up the policy, the original whole, or full, premium, would
have to be paid for the future, whilst the arrears of the seven
half premiums could either be liquidated at the close of the
seven years, or stand over to be deducted from the policy at
death, provided the assurer pay interest annually thereon,
or agree to the accumulated amount of compound interest
being deducted, with the arrears, when the death occurs.
This system is now very generally in use ; but we desire to
caution the directors of companies against misconception of
the advantages, which their institution may derive from it.
They should understand that they cannot allow its application :
— 1st. unless the half premiums paid, added to the interest on
the half premiums in arrear, exceed, on the average of seven
years, the rate payable (see Table 3, page 52) for a seven
years'-Term-policy. Hence, referring to Table 2, we see
that assurers, on the profit scale of the society to which

30 THE HALF-PREMIUM SYSTEM.

those tables refer, alone should be allowed the half premium
privilege.

27. — The principle would, of course, be most advantageous
to high-rate societies, but not equally safe or desirable for one
proceeding upon a system of low premiums. By Table 2,
page 51, up to age 54, the system may be continued with but
one limitation, that " Half the premiums are to be withheld
only for seven years at interest, on the understanding that
after that period, the whole premium shall be payable, with
interest at 5 per cent, on the arrears until they are liqui-
dated." As an example, let us refer to the case of a life,
aged 25 next birth-day, effecting an assurance for £1000, on
the profit rate of Table 2. His proper payment, (at £2 2s.
per cent.) would be £21 a year, instead of which he is
allowed, during the first seven years, to keep back half of
each premium — viz. £10 lO^., provided he pay lO*. 6d.
interest on each accruing arrear. He, thus, has a whole life
policy with little more cost for the first seven years than a
seven-years temporary policy by Table 3 would require ; and
to this is added the important option of continuing afterwards
his policy for the whole of life, whatever be the deterioration
in his health, encumbered, of course, with £73 10*. debt,
bearing £3 \Ss. interest, until liquidated, or an allowance
of compound interest, (instead of his paying interest annually)
to be deducted at death with the £73 10^. when the claim
is payable. For the 8th and subsequent payments he would
revert, in addition, to the whole premium £21 a year. If
the amount of arrears appear to the assurer to be heavy, he
has to remember that in the past seven years, instead of £147
he has only paid £73 10^., and whether he paid the amount
due, or was accommodated with an advance (or permission to
keep back premiums), his pecuniary position is the same.

28. — By way of caution, we would remark, that any Assu-
rance society to be secure should, at least, receive from each
member such a premium as, collectively, would pay current

THE HALF-PREMIUM SYSTEM. 31

claims and expenses, independently of affording reserves for the
future ; and, strictly speaking, the system is only advisable and
safe for a young society, where it possesses a sufficiently large
protective capital, and w^here the privilege is allowed for
a limited term of years, as seven or less. For a company
with a small paid up capital to permit a longer extension of
the half premium assurances would be analogous to a society
transacting the ordinary business, but investing the greater
part of its money in unavailable securities.

As an axiom of finance the directors of an assurance
society are bound to invest only a small proportion of their
funds, as from time to time received, in securities not readily
convertible into cash. So acknowledged is this, that it is cus-
tomary for Actuaries to take care that the amount invested
in the public funds shall always keep pace with that laid out
on land-mortgages or other similar security.

29. — Theoretically, and on paper, it might be made to
appear that not only half the premiums, but even a larger
proportion might be withheld for more than seven years, with
increased apparent advantage to the society, from the higher
rate of interest, at which the money would seem to be laid
out, than that credited to assurers in the tabular calculations ;
but the law of mortality is in operation all the time, and
while the nominal assets of the society would appear to be in
the most satisfactory condition, deaths would occur, and the
actual available funds would not be sufficient to meet the
claims to which they would give rise.

Such a business can, in fact, be only undertaken by young
societies when they have a considerable paid up capital.

30. — One more remark in addition : — The half premium
plan (although a convenience to the assured) does not give
a young society all the advantage which it has a right to
expect. It would only do so if 5 per cent, interest were
the limit of the advantage that the directors could obtain
from the investment of that portion of the society's funds,

32 THE IIALF-PRF.MIUM SYSTEM.

wliich is not intended to be placed in immediately convertible
securities. Such is, however, not the case. For every £100
invested on land mortgage or sinnlar security, an additional
policy of assurance can be obtained and a fresh source of
profit created. A young society is therefore best oiF, when
receiving the whole premiums upon its policies, and so enabled
to lend out a portion to induce the effecting of new assurances.
Of this benefit, however, it is deprived by consenting to the
half premium system. Nevertheless, to meet the public
requirements, we are of opinion that it should be adopted,
with the limitations previously referred to.

31. — Other new features may be briefly enumerated: —

1. Whole World policies can be effected, upon which the
assurer has not to pay any new extra rate, if he desire to go to
any part of the world, however unhealthy. The question is
treated as one of average, and a small continued per centage,
only, is charged above the ordinary payments, in lieu of the
temporary higher rate of premiums usually required in such
cases.

2. A dwiinution of half a year may be made on the amount of
premiums chargeable, when persons come for assurance within
six months of their last birthday.

3. Policies are issued by one or two new companies with a
covenant, that they shall be Indisputable (when once the first
premium has been paid) whether obtained by fraudulent repre-
sentations or not.

4. Combination assurances may be obtained, whereby the
assurer can, simultaneously, assure the life and honesty of the
assured, or against his becoming unexpectedly incapacitated
by accident from earning his livelihood, or otherwise enjoying
the use of human faculties. — (See page 43.^

On the Indisputability of Policies.

32. — Respecting the Indisputability of policies, we would
remark, that the concurrent testimony of the leading mana-
gers of assurance offices is in support of the adoption of some
more complete contract between the companies and their
assurers, so as to make policies more marketable when held
as security for loans, and more certain as family provision.

On this head, a careful writer, * Mr. James, remarks,
that, — " In the proper estimate then to be taken by the assured
party of the risk undertaken by an office, he must not fail to
remember that, however scrupulous he be in the assertions he
makes relative to his age, health, and habits, he has by far the
most favourable position of the two interested in the contract.
For a small sum paid down annually, and computed from the
results of averaged and not of individual lives, he has the benefit
of assurance of a comparatively large sum, payable at a moment,
whether the event of his death be immediate or deferred.
Nor as may be gathered from the stipulation already referred
to, does his share of the responsibility end hei-e. In making
the preliminary arrangements, he is not only morally bound to
observe that amount of good faith necessary to this as to any
professional or commercial engagements, but he is legally and
absolutely required to do so. The inviolability and strict per-
formance of the contract on the part of the assured, and the
receipt by his representatives of the promised benefit, wholly
depend upon his own entire compliance with the principles of
honour and candour. By a deviation from this course, how
often have we seen innocent parties made severe sufferers by
the folly of those who, when acting under improper or mistaken
motives, have been thus the real means of entailing tlie most

* Treatise on Fire and Life Assurance, 1851.

34 ON THE INDISPUTABILITY OF POLICIES.

serious misfortunes on their families, which but the commonest
act of prudence or forethought might liave wholly obviated.
By an attempt to avoid a less evil, the greater one is created.
Such is the facility now offered by all the respectable offices,
that where undisguised statements of health are made, the
payment of but a small extra premium is required, and an
unconditional risk accepted, all right to open the question of
existing disease or a tendency to its future presence, being
waived by the assurers.

" In the transaction of all kinds of business, however
trifling or important, there is one principle indispensably neces-
sary to its safe and successful conduct, upon which, in fact,
the whole system of our commercial relations must entirely
depend ; that principle, we need hardly remind our readers, is
an observance of good faith one with another.

" The instances of disputed assurances to be found latterly
in the records of our law courts convince us, however, that
there is generally a lamentable and intentional neglect, on the
part of assured persons, of that degree of confidence and good
faith necessary to the inviolability of the mutual contract of
assurance ; and hence we see exhibited a most culpable disre-
gard for the great moral and personal responsibility attached
to the assured, and difficulties entailed by them upon their
innocent and helpless survivors, which will, we trust, operate
powerfully on tlie minds of the public, so as at once and
completely to put an end to a course of conduct highly repre-
hensible and dangerous in the extreme ; convinced, as all
reasonable and honestly-disposed persons must be, that a fair
and honourable explanation of all circumstances relative to the
health and habits of persons proposing t-o make assurances on
their lives, will be the best and only means of securing a
profitable and indisputable result."

33. — Lord Mansfield, speaking of the parties on whom de-
volves the duty of ascertaining the state of the risk in life assu-
rance, has given some heads for a rule in this matter : — " The

ON THE INDISPUTABILITY OF POLICIES. 85

assured need not mention what the insurer takes upon himself
the knowledge of, or what he waives being informed of: the in-
surer need not be told general topics of speculation ;" — such
as the nature of various climates as affecting the constitution
and health of Europeans, the healthiness or unhealthiness of
different trades or occupations, and the degree of risk atten-
dant thereon from danger by accidents, or of the bad tendencies
of particular courses of life.

With reference to matters coming within the knowledge
only of assured persons, what is a fraudulent concealment or
misrepresentation, depends simply on whether the matters
were " material" to the consideration of the risk ; this is a
matter of fact to be ascertained by a jury : and if material, the
consequence is a matter of law, and the policy is bad. This
point has been ruled and carried into subsequent decisions.
The materiality of the fact invalidates the contract ; the
knowledge of the fact by the person taking out the assurance,
however (on another's life), not being material to influence the
issue for trial.

The distinction between misrepresentation and a non-com-
pliance tvith warranty is here defined by that eminent lawyer :
— " Insurance is a contract upon speculation, and therefore
the special facts, upon which the risk is to be computed, lie
chiefly in the knowledge of the insured only. The insurer
trusts in his statement, and proceeds upon confidence that he
does not keep back any circumstances within his knowledge,
to mislead the insurer into a belief that the circumstance does
not exist. The keeping back, therefore, of such circumstances
is a fraud, and the policy becomes invalid, although the sup-
pression should happen through mistake, without any fraudu-
lent intention, yet still the insurer is deceived, and the policy
invalid, because the risk run is really different from the risk
understood, and intended to be run at the time of the
agreement.

"The question, therefore, must always be: — 'Whether

36 ON THE INDISPUTABILITY OF POLICIES.

there was, under all circumstances, at the time the policy was
underwritten, a fair statement or a concealment — fraudulent if
designed — or, though not designed, varying materially the
object of the policy, and changing the risk understood to
be run.'

" A representation is a statement of the case, not part of
the written instrument, but collateral to it, and entirely inde-
pendent of it ; and it is sufficient that a representation be sub-
stantially performed.

" Even written instructions, if they were not inserted in the
policy, are only representations ; and in order to make them
valid and binding as a warranty, it is absolutely necessary to
make them a part of the instrument by which the contract of
indemnity is effected. If a representation be false in any
material point, it will annul the policy ; and if the point be
not material, the representation can hardly in any case be
fraudulent."

There is no distinction better known to those who are at
all conversant in the law of insurance, than that which exists
between a warranty or condition which makes part of a written
policy, and a representation of the state of the case. Where
it is a part of the written policy, it must be performed.

It is now usual to insert in the policy the substance of the
statements made by the assured, or to refer to the written
proposals and statements of the assured, whereby they are
made a part of the policy, and to the truth of which he makes
an admission.

" If an assured person represents facts to the underwriter or
insurer without knowing the truth, he takes the risk upon him-
self {hy so representing).

" The great question is, whether the representation was
false, and that, in a material instance. Fraud is found out by
the materiality of the point. To make written instructions
binding as a warranty, they must be inserted in the policy."

The contract is equally void whether the misrepresentations

ON THE INDISPUTABILITY OF POLICIES. 37

were made on the part of the insured, or of his agent, or of
any other party concerned in his behalf about the insurance.
And it makes no difference that the loss depends on other
circumstances than those which the misrepresentation or con-
cealment concerns, the contract is void.

34. — The general impression is, that all offices would find it
to their advantage to declare their policies indisputable, and to
cover the risk of fraud, which is not of frequent occurrence at
present, by an additional per centage on the premiums ; as in
most cases of past litigation, the public have manifested un-
fairly their opinion against the office, however just their
grounds of dispute, and in favour of the family or represen-
tatives of the deceased policy-holder.

The declaration of indisputability might lead to a ma-
terial increase in the assurance by timid, but honest persons,
who at present unnecessarily fear that, in a policy, they may
be leaving to their families a lawsuit for a legacy. On the other
hand, in an actuarial point of view, the increased risk to the
company in case of fraud, might easily be made a question of
average; provided more details, than are now considered requi-
site, were demanded before treating as complete the chain of
evidence upon which the directors are to found their decision
as to the eligibility of a life. Under the present system, with
all the vigilance exercised by careful managers, there is some
natural reliance upon the probable veracity of the referees
nominated by the life ; and this reliance has existence more
especially in the case of policies required with speed for mort-
gage transactions. The nature of the extra caution required
cannot at once be defined ; and the difficulty will lie more with
country than with town proposals, from the non-appearance of
the former before the Board of Directors at the head office,
where the skill and experience of the officers might be of service
in detecting unfavourable symptoms, which might escape a local
adviser. With an augmentation in the risk, it is possible that
.a slight increase might arise in the expenses to the office upon

38 ON THE INDISPUTABILITY OF POLICIES.

each transaction, through the necessity of obtaining some ad-
ditional independent testimony as to the past habits of life of
the proposed assured, as an adjunct to the special medical
examination by the company's own officer in the locality. At
present the medical examination refers mainly to the state of
health at the time of the proposal. The private referees give
evidence as to his past career : but the principle of indisputa-
bility appears to demand concurrent and independent testimony
upon that head, which could, probably, be procured from some
person of standing, residing in the same locality.

85. — The increased expense, from the necessity of extended
machinery, and the augmented risk from possible deception
without the subsequent power of disputing, could, we repeat,
be provided for by an additional and properly adjusted small
margin on the premiums. The tables of offices are at present so
moderate when compared with the benefits granted, as to bear
an addition without creating any sensible obstacles to assurers ;
and we do not hesitate to express our decided opinion, that a
Proprietary office might well adopt, without delay, the prin-
ciple of indisputability ; for against the increased risk, can
safely be placed the probable profits from additional business.
The position of a Mutual society, in which all the members
partake of any loss through fraud or other cause, would be
somewhat different, unless it be sufficiently old to have accu-
mulated a Reserve fund for contingencies. We believe that
details would be obtained through increased investigation, and
additional facts would be elicited through independent testi-
mony, which, at present, friendship may lead a private referee
to conceal ; that these details might narrow the field of
acceptable lives by suggesting hesitation in accepting them, is
not likely, as, after all, the doctrine and practice of life assu-
rance is essentially one of average, and the experience of
offices discloses that sound lives will sometimes fail before
their time, just as much as those which are considered
doubtful.

ON THE MORTALITY OF SOUND LIVES. 39

The formidable objection, that the principle of indisputa-
bility may increase the disposition to fraud, can only be met,
and it can in our opinion be met correctly, by viewing that
contingency as one of great probability, and, as such, by giving
to it its due estimation in fixing the degree of increase to the
premiums, until a greater generality of adoption of the prin-
ciple, and a more perfect system of evidence, subsequently
proved the first increase to be in excess.

On the Mortality of Sound Lives.

36. — In the practice of life assurance, one element exists
of more importance than would be imagined. It is the
tendency of persons in sound health, and endowed with excel-
lent constitutions, to expose themselves to premature decease,
by imprudence and reckless neglect of ordinary caution in
avoiding causes of illness and death. It is worthy of notice,
that while the directors of assurance companies usually decline
proposers whose constitution is imperfect, or entire organs are
not unimpaired, yet they congratulate themselves on the
accession of all assurers for whom the medical adviser will give
a report of their being good lives. By this circumstance, the
number of assurable lives is greatly contracted, and many
persons, who, in the long run, do not die before their time,
are debarred from the benefits of life assurance. So restricted
a system is unnecessary, for, if a scale of increased rates were
deduced from observations of an extensive average of each
disease, and applied by a skilful medical officer as a guide in
each particular case, then a large number of apparently im-
paired lives, we believe, might be assured, who would be
found to yield a return less productive of loss to the society,
than a similar number of strong persons (assured at the ordinary
rates), whose self-security in the possession of health renders
them indifferent and careless of precautions. The old saying,
of " a creaking door lasting longer on its hinges," is, by
the experience of assurance companies, found to be true.

40 ON THE MORTALITY OF SOUND LIVES.

Taking for instance the claims that have arisen in the course
of the last ten years in one successful company, the proportion
of deaths from imprudence and accident to those from natural
causes, is as 1 to 2, all being accepted as sound and excellent
lives. A few of the causes of death may be mentioned :

1 . The life of a young gentleman of fortune, and a magistrate for
the county, residing upon his estate in Cornwall, was assured as one
of three in a lease for £1000 ; his age was twenty-six, and the
medical opinion was to the effect that he was a first-class life ; two
years after the policy was issued, he caught cold in consequence of
having neglected to change his wet clothes after returning from
grouse shooting, and he died, after an illness of but few weeks. The
premiums paid were £42, and the policy was £1000.

2. Another fell into his tanpit and was drowned three years after
insuring his life for £800. The widow and children then received
a provision, which had only cost £71 Ss.

3. A young nobleman insured his life for upwards of £30,000 in
various ofiices, by way of marriage settlement in case he should
pre-deoease his father. He died within two years of rheumatic fever
inconsequence of exposure to cold.

The experience of most assurance societies furnishes similar
sad records of the uncertainty of human life. Mr. F. G.
Smith, in an interesting pamphlet on the subject, narrates the
following instances of premature decease, where life assurance
had been of benefit : —

1. An eminent tradesman in Cheapside, who makes it imperative
upon each of his numerous shopmen and clerks to insure his life to a
small amount, some time since induced a neighbouring friend to effect
an assurance for £2000 — this friend died within the first year from
typhus fever, and his widow was thus put in possession of £2000.

2. A young married man, in the medical profession, opened a
chemist's shop in the suburbs of London, and was induced by his
wife's friends to insure his life for £1000; shortly after this, the
cholera made its appearance in the metropolis, and the party in
question fell a victim to that disease. The assets of the deceased
were little more than sufficient to pay his creditors, and had it not

ON THE MORTALITY OF SOUND LIVES. 41

been for tlio insurance on his life, liis widow would have been left
destitute ; as it was, however, she received from the office £1000.

3. A farmer, residing about ninety miles from London, having, by
some accident, had his attention drawn to the subject of life insur-
ance, one market day made a proposal for an insurance of £500 on
his life, which, after the usual inquiries had been made, was accepted,
and the insurance was effected. Singular to relate, during the carry-
ing of the next harvest home, he was precipitated from one of his
own waggons, by the horses starting forward while loading, and
killed on the spot. His widow received £.500, which enabled her to
carry on the farm.

4. A young man having contracted marriage at the age of twenty-
five, very prudently insured his hfe for £1000. At the age of
twenty -nine he was unfortunately drowned in the endeavour to save
his brother from a watery grave. In this case four annual premiums
had been paid, which, according to the rates of the office concerned,
amounted in all to ,£80, and his widow received £1000.

5. The life of a lady, within a few weeks of her confinement, was
recently insured in an office in London for £5000 ; and she dying in
childbed, the insurance company had to pay the above sum, liavino-
received only one premium.

6. A gentleman, reported in excellent health, belonging to one of
the liberal professions, took out a policy of assurance for £1500 on
his own life ; and having taken a severe cold, ruptured a blood-
vessel during a paroxysm of coughing. This occurred after two
annual payments only had been made, and his family, of course,
received £1500.

7. A gentleman having made a proposal for an insurance on his
life for a considerable sum — and which the company, cousiderinir
quite unexceptionable, readily accepted — called at the office, and paid
the first year's premium ; but, after completing the transaction, he
had scarcely crossed the threshold of the door, ere he was seized with
apoplexy, and almost instantly expired.

37. — We do not say that we would go the whole lengtli of
advocating the acceptance of diseased lives in the present
limited extent of assurance transactions, and in the absence of
any suilicient data, as yet, to serve as a guide in such cases ;

42 ON THE MORTALITY OF SOUND LIVES.

yet, we recommend to directors the re-consideration of
that numerous class of proposers, whose state of health and
occupations have subjected them to be denominated delicate.
A slight margin on the tables usual for healthy assurers would
render them productive of less loss and more profit than a
similar number of robust lives ; because they are less likely,
if taken to a sufficiently large extent, to give rise to such
aberrations from that law of mortality, assumed as true for
them, as the latter class do. While delicate, or slightly
impaired, lives would be gradually and slowly failing from the
waste of their faculties in the course of that average of years,
for which the charge of premiums would provide, the hardy
and robust would present numerous cases of premature death
from fever and inflammatory causes, generally induced by too
good living ; too free indulgence (perhaps, not habitually) in
the juice of the grape, or fermented liquors ; — from accidents
attending manly sports and amusements ; — from careless neg-
lect of removing wet clothes, as in the case of the young
magistrate who died after grouse shooting ; — from sudden
change from heated ballrooms to the cold out of doors air,
without sufficient additional clothing ; — from damp feet ; —
from overstraining by feats of strength, and by numerous other
apparently trivial causes, whereby the strong man, confiding
and daring in his strength, is so soon laid low. We urge,
therefore, that the field of assurance should no longer be
limited; that, inasmuch as life assurance is merely the result
of judicious money-measurement of the contingencies of
human existence, the system may safely be extended ; that
attempts should be made to determine a proper charge for
the general assurance of lives, however apparently they
may have departed from the assumed standard of average
good health. If this were done, we should cease to meet with
aged persons, who tell us of their having been declined by
such and such an office when young ; whilst, on the other
hand, this and similar publications of the actual experience of

ON LIFE AND FIDELITY ASSURANCE. 43

assurance companies in respect to premature decease among
sound lives, may probably induce fathers and husbands to lose
no time in coming forward and purchasing, while their health
permits it, the benefits of assurance for their families.

On Life and Fidelity Assurance.

38. — Of our principle, for combining Life and Fidelity Assu-
rance in one 'policy y we would remark, (in the words used in the
" Treatise on Industrial Investment") that the rates of contribu-
tion for Fidelity assurance may be ascertained from statistical
data, which can be rendered as complete as the corresponding data
representing the laws of mortality ; and it is plain that the pay-
ments of an assurer might be so combined, that the amount of a
share could be made payable, at the end of the given number of
years, to himself or his family {as in an ordinary life assurance
policy), if he continued honest ; at the same time that it might
be made payable to his employer for the time being, in case he
should, in the mean time, commit a breach of trust ; in which
latter case he himself would forfeit all claim upon the society.

Simple guarantee societies have been established within the
last few years solely to obviate the defects of suretyship by
private bondsmen, a practice which was found to be attended
with various inconveniences and objections; — instances having
constantly occurred in which persons of great respectability
were obliged to forego excellent situations, from either the
great difficulty of obtaining security, or a repugnance to place
their relatives or friends under the obligations involved therein.
A Fidelity society, commonly called a Guarantee society, un-
dertakes, on the annual payment of a small sum, to make good,
in case of default by fraud or dishonesty, any losses which may
be sustained to an amount specifically agreed upon; and, by
such means, obviates the necessity for private sureties, as well
as the obligations arising therefrom, which often prove as
prejudicial to the best interests of the employers as to the
employed.

44 ON LIFE AND FIDELITY ASSURANCE.

To the employer the guarantee of such a society is much
more valuable than the bond of any individual, inasmuch as it
is not liable either to doubt or depreciation. In large esta-
blishments, both public and private, where the securities are
numerous and the sureties often resident in many different
parts of the country, and known only by repute, it becomes
almost impossible to watch over their continued existence and
solvency ; and cases of default have frequently occurred when,
upon investigation, it has been found that all the sureties have
been dead or gone away for many years.

By these means, security has been provided only for the
fidelity of the employed ; but the plan of a Guarantee society
is still defective, in consequence of its being considered virtually
not to offer a sufficient discouragement to dishonesty. It has
been felt that a pure fidelity policy, does not, even in point of
morality, possess the advantage afforded by private suretyship,
inasmuch as the son, to whose nature it would be repugnant,
by his misconduct, to bring disgrace and ruin upon his relations
or friends, might feel little anxiety as to the pecuniary loss
inflicted upon a guarantee society. In other words, it is con-
ceived that a disposition to fraud is not effectually checked, —
the reflection arising, that as the rates of a guarantee society
pre-suppose the existence of such a disposition on the part of,
at least, one out of every two hundred of its selected assurers,
the loss sustained by the society through such defalcation
would be but the result of the " average.""

In the Combination plan suggested, which would be equally
applicable, if not more so, to a Life assurance or other Invest-
ment society, the subscribers, while satisfying the requirements
of their employers in respect to their honesty and good conduct,
would receive an additional stimulus from the reflection, that
all their subscriptions would become forfeited in the event of
their acting dishonestly. Hence, the greatest moral benefits
might be expected, as the members of such an association
would serve as a mutual check on each other. A new incen-

ON INDUSTRIAL ASSURANCE. 45

live to honesty would be gained ; and while a sum of money
would guarantee the fidelity of the invester, the mere fact of
his admissibility to such an assurance would be a strong testi-
mony to his character. At the same time various practical
regulations would, of course, be requisite to secure the judicious
working of this suggestion.

On Indtistrial Assurance.

39. — A sound practical writer on Life assurance, Mr.
Bridges, remarks, that " A beneficial system for the poor
labourer, whether in the church or the factory, would be obvi-
ously to receive from him a weekly or monthly premium, at
the rate involving a share of profits, but, in lieu of such profits
being assigned in bonuses, to accumulate the bonus fund, to
meet the payment of premiums whenever the assurer, either
from want of employment or sudden and unforeseen call on his
resources, is himself unable to do so. And to make such
payments of simple and inexpensive collection, and to faci-
litate accountantship, they should be fixed premiums of say
one shilling, or any multiple of one shilling, per week, what-
ever the age at entry, each shilling securing at death, or at an
advanced period of life, an amount varying with the entrance
age. ' A groat a-day,' says Franklin, ' is the interest of <i£'100
for one year :' so a groat a-day is the premium, at age 30, to
secure twice a hundred pounds to a widow and family on the
decease of the contributor, with a margin to eke out his pay-
ments, in case of sickness, accident, or misfortune, rendering
him incapable of continuing the burden. In the hands of a
paternal government, life assurance on such a basis might be
made a national duty. And while every one may well exclaim
against a tax upon the act of insurance itself (in the case of
fire insurance, the tax is 200 per cent.) as a disgrace to the
legislation of the nineteenth century, we believe that a gradu-
ated insurance tax to do away, in the next generation, with
nine-tenths of the genteel pauperism we see around us, would

46 ON LIFE ASSURANCE.

be much more willingly paid than any of those now pressing
on us to meet the interest, never ending, still beginning, of
the cost of Blenheim and Waterloo."

40. — The following are other instances where life assurance
is peculiarly applicable : —

1. To Husbands and Fathers: — to ensure a provision, after
their death, for their wives and children. (Tables 1, 2,
3, 4, pages 51 and 5^.)

2. To Young Men: — to make a provision for their old age
by the purchase of deferred annuities.

3. To Parents: — to ensure certain sums payable on their
children attaining the age of 14 or 21, or at other ages,
whereby the ready means for starting them in life may
be obtained by a much smaller annual saving, than
would be necessary were they to attempt to realize the
the same sum by putting it in any other species of in-
vestment. Assurance companies charging a smaller sum
as they take into account the chance of the child's
dying before attaining the specified age. This kind of
assurance is called an endowment, and can be effected
by one single payment, or by a series of annual pay-
ments, or premiums, to be made until the child attains
the specified age.

4. To Partners in firms: — who, hy assuring their joint lives on

Table 4, page 52, can secure a sum payable at the death
of the first, which will enable the surviving partner to
pay off the claims of the Widow of the deceased upon
the firm.

5. To Minors,and to the Guardians or Friends of aperson,who,
at a certain age will come into the possession of property: —
may obtain a security for advances made in the interim,
by insuring his life until he shall arrive at the given age.

G. ] n the case of Post obits : — persons having issued post obit

ON LIFE ASSURANCE. 47

bonds may realize their amount at the time they become
payable, by insuring the life or lives on whose failure
they become due.

7. To secure the Return of Advances made Jor Educating
and Establishing the younger members of a family in the
world : — this is effected by assuring the life of a child
educated, so that, should it die young, the parent may
recover from an assurance company the money spent upon
it ; if it live, there is a policy of a certain standing on
its life, lohich may be continued in the usual way, and
as it was begun at an early age, the annual premium
would be small.

8. To Creditors: — who, by assuring the amount due to them,
can by a trifling outlay, secure a compensation for the
loss which the death of their debtors might occasion ;
and by the principle in a preceding article (9, p. 12) the
policy would be fully secured.

9. To Borrowers : — to provide, in case of death, a sum to
repay a loan. This is the usual way in which money is
now borrowed on personal security. The borrower,
say of £500, assures his life for £1000, and gives
personal security, in the shape of three joint sureties
with himself, for the repayment of the principal and the
due payment annually of the interest at £5 per cent, on
the money borrowed, with the premiums of the assurance.

10. To Possessors of Entailed Estates: -who can bequeath
provisions for the younger members of their families,
by assuring suitable amounts on their own lives. This is
applicable to the nobleman who would preserve his
domain unbroken for his immediate heir, and yet pro-
vide for the younger branches of his family by a pro-
portionate economy in his establishment ; thus remedy-
ing, in one respect, the effects of the law of entail. Many
noblemen and gentlemen of large hereditary estates have
become insured in one office or other with this view.

48 ON LIFE ASSURANCE.

and some adopt the salutary rule of making an additional
insurance upon the birth of every child. To persons of
rank who make a reserve from their revenue as a future
provision for their dependants, life insurance is very
useful, if only upon the consideration that it produces
an effectual improvement of their money, which they
are unlikely to accomplish so well themselves.
] 1. To the Expectants of property in Reversion : — to secure
a portion, at least, to their families, should they die before
they themselves enter into possession. (See Table 5.)
This contingency being one of survivorship only, the
payments required would be but small. For example:
— A gentleman, aged thirty-five, entitled to property
should he survive another, aged sixty-five, can assure
£1000 by a payment of £15 10^. a year, receivable by
his family should he die before the older life.

12. To parties who expect to receive sums of money should
they live over a certain number of years, as for example : —
A person aged thirty, is entitled to a share amounting
to £1000 in the Renewal Fine of a Lease, which ispaj'able
at the expiration of three years from the present time.
This share he would lose, should he die within that
period. To secure his family against that loss, he has
only to take out a temporary policy of assurance on his
life for the three years, and by the trifling annual pay-
ment of £12 he assui'es the £1000; so that, should he
die before the end of the three years, the office pays his
family the £1000, and should he live, he will come into
his share of the fine, the amount of which he will, how-
ever, have rendered safe from loss by his death, by an
outlay of £,^Q altogether. (See Table o.)

13. To parties having shares in Building societies upon which
they have obtained loans. Example : — A young man
borrows £300 from a building society, to be repaid by
monthly instalments during ten years, at the rate of, say.

ON ASSURANCE FOR LEASES. 49

£42 a year. The money borrowed is invested iti the
purchase of a house, which is mortgaged to the society as
security until the loan is repaid. Now, if this man die
before the ten years are expired, unless his family can
continue to pay the monthly instalments, the house will
be seized for the remainder of the debt unpaid. It is
obvious, then, that the borrower ought to take out a
policy of assurance on his own life, so that his family
may have, in the case of his death, zvherewith to pay off
the loan. He can effect this object tvith great facility,
according to plans explained with the Benefit Building
society tables (page 55).
14. The Holder of a Lease, which is renewable on payment
of a certain fine, can, by a trifling annual payment, assure
the necessary sum. Leaseholders on lives are specially
interested in the very secure and advantageous manner,
by which they can efiect assurances, which will provide
for the renewal fines in their leases, whether such leases
are for terms certain, or contingent on the existence of
one, two, or three lives.

Li Leases depending on lives, on the failure of a life,
the lease can generally be renewed by putting in another
life, for which privilege a Fine is demanded. From the
uncertainty of human life, the lessee is exposed to be
called upon for such payment, before, perhaps, he is
prepared to meet it (the death having occurred before he
has put by the amount of the fine) ; this circumstance
has often produced serious loss to the lessee, and in
general there is no safer way to provide the money for
the fine, than by a policy of assurance, effected for the
suitable amount to be received at the death of the first or
last of the lives, according as the case may be. Example :
— The holder of a lease would have to pay a fine of
£100, to renew it at the death of the f/)'st of two lives
aged (say) fifteen and thirty-five. He provides for its

50 ON ASSURANCE FOR LEASES.

payment by an annual premium (on tlie Profit scale) of
£3. 1 Is. lid., so that, should any one of the lives in the
lease die even the day after the first premium has been
paid, he will receive from the assurance society £100.
(See Table 4, page 52.)

The above has reference to the renewal of leases, but
in cases, vv^here the lessee purposes to allow his lease to
run out, and is, nevertheless, desirous of having at the
death of the last of the lives, a sum of money, which
shall be of the same value to him as his lease was ;
all that he has to do is to effect an assurance for the
necessary sum to be received, when all the lives in the
lease in question are dead.

If the lease be on three lives the annual premium per
cent, would be very trifling. Example: — £100 can
be assured payable at the death of the last of three lives,
aged, say, thirty-one, thirty-seven, and sixty-one, respec-
tively, by the annual payment of £1 5^. 6d. — In younger
lives the premiums would of course be less.

15. In most copyhold properties, on the death of the tenant,
his successor cannot be admitted except on payment of
a fine. In many instances, the sudden death of the
tenant has put his successor to great diflSculty in pro-
curing the required sum : — an assurance efiected on the
life of the tenant, by himself or his successor, would
provide for this difficulty, and by a small annual outlay.
(See Tables 1 and 2, page 51.)

16. In cases of marriage settlement Life assurance may also
be particularly advantageous. — Suppose a gentleman,
twenty-six years of age next birth-day, be engaged
to a lady whose fortune is £3500, and that the whole
be required to be settled on her at their marriage, as a
provision for herself and children after his death, at the
same time, that it is deemed advantageous to give the
husband the use of a portion of the money to promote his

LIFE ASSURANCE TABLES.

profession or business. Let £1000 be vested in trustees,
and with the annual interest at 5 per cent. let them insure
£2500 on the life of the husband. The remaining
£2500 can be then placed at his command at once, as,
at his death, his wife will still come into possession of
£3500. (See Tables 1 and 2.)

41. — The following Tables will serve as Illustrations of the Subject.

TABLE I.

TABLE IL

Annual

Premium/oj- Assuring £100

Annual

Premium for Assuring

a Single Life, fo

• the whole

^100 on a Single Life, for the

continuance thereof

without

who

le continuance thereof, with

Pro

fits.

Profits.

Age

Birth-

Premium.

Birth-

Premium.

Birth-

Premium.

Birth-

Premium.

day.

£. s. d

£. s. d.

1 11 2

2 17 8

1 13 7

3 2 4

1 11 11

2 19 6

1 14 4

3 4 3

1 12 7

3 14

1 15 1

3 6 3

1 13 5

3 3 1

1 15 11

3 8 2

1 14 2

3 5 0

1 16 10

3 10 2

1 15 0

3 7 0

1 17 9

3 12 4

1 15 11

3 9 1

1 18 8

3 14 8

1 16 10

3 11 5

1 19 9

3 17 2

1 17 10

3 13 11

2 0 10

3 19 10

1 18 11

3 16 8

2 2 0

4 2 10

2 0 0

3 19 9

2 3 2

4 6 3

2 13

4 3 3

2 4 5

4 10 0

2 2 5

4 7 1

2 5 9

4 14 2

2 3 7

4 11 3

2 7 0

4 18 8

2 4 8

4 15 7

2 8 2

5 3 4

2 5 9

5 0 3

2 9 5

5 8 5

2 6 11

5 5 4

2 10 8

5 13 11

2 8 3

5 10 9

2 12 0

5 19 10

2 9 7

5 16 8

2 13 6

6 6 2

35*

2 11 0

6 2 10

35t

2 15 1

6 12 11

2 12 7

6 9 1

2 16 9

6 19 8

2 14 3

6 15 3

2 18 6

7 6 4

2 15 11

3 0 5

* ExAMPLK : — A person whose age is 35 next birth-day may assure the
FIXED sum of .^eiOO, to be paid at his death, by an annual payment during his
life of £2. lis. Od.

t Example : A |)erson whose age is 35 next birth-day, may assure £100
with the profits that shall accrue, to be paid at his death, by an annual pay-
ment during his life of £2 15s. Id.

LIFE ASSURANCE TABLES.

TABLE III.

Annual Premiums for Assuring £100. on a Single Life for One Year and
for Seven Years.

Age

Premium

Birth-

One Year .

Seven

Birth-

One Yfear

Seven

Birth-

One Year

Seven

day.

Years.

day.

Years.
£. s. d.

day.

Years.

£. S. d.

£. s. d.

£. S.

£. s.

d.\£. s. d.\

0 17 1

0 18 4

1 4

1 6 10

1 17

2 0 0

0 17 6

0 18 10

1 5

1 7 7

1 18

2 16

0 17 11

0 19 3

1 6

18 4

1 19

2 3 4

0 18 5

0 19 9

1 7

1 9 1

2 0

2 5 8

0 18 10

10 3

1 7

1 9 10

2 1

2 8 4

0 19 4

1 0 9

1 8

1 10 8

2 3

0;2 11 4

0 19 10

114

1 9

1 11 5

2 4

102 14 10

10 4

1 1 10

1 10

1 12 4

2 7

2 2 18 8

1 0 10

12 5

40*

1 10

1 13 2

2 10

23 2 11

115

13 0

1 11

1 14 1

2 14

03 7 7

1 1 11

13 7

1 12

1 15 0

2 18

103 12 5

12 6

14 3

1 13

1 15 11

3 3

3 3 17 10

13 1

1 4 10

1 14

1 16 11

3 8

04 3 8

13 8

1 5 6

1 15

1 17 11

3 13

24 9 11

14 4

16 2

1 16

1 18 11

* Example : — A person whose age is 40 next birth-day, may assure jglOO
for one year, by the payment of £1. lOa. 9d. ; and for seven years, by annual
payments of £1. 13s. 2d.

TABLE IV.

Annual Premiums payable during the Joint Lives of Two Persons, for
Assuring £100, to be paid on the Death which shall first happen of the
said Two Lives, with Profits.

Ages.

Premium.

Ages.

Premium.

Ages.

Premium.

15 15
.. 20
.. 25
.. 30
.. 35
.. 40
.. 45
.. 50
.. 55
.. 60

£. s. d.
2 13 1

2 16 2

3 0 6
3 5 10

3 11 11

4 0 4

4 9 9

5 4 4

6 7 9

7 19 10

*25 25
.. 30
.. 35
.. 40
.. 45
.. 60
.. 55
.. 60

£. s. d.
3 7 1
3 12 0

3 17 8

4 5 7

4 14 8

5 8 10

6 12 1
8 4 0

£. s. d.
8 10 1

40
45
60
65
60

5 0 7

5 8 3

6 1 1

7 3 4

8 14 8

45
60
55
60

6 14 11

6 6 10

7 8 2

8 18 7

30 30
.. 35
.. 40
.. 45
.. 50
.. 65
.. 60

3 16 8

4 1 11

4 9 7

4 18 4

5 12 4

6 15 5
8 7 3

20 20
.. 25
.. 3C
.. 35
.. 40
.. 45
.. 50
.. 65
.. 60

2 19 0

3 3 2
3 8 4

3 14 3

4 2 6

4 11 9

5 6 2

6 9 5
8 15

50
55
60

6 17 7

7 17 11
9 7 3

35 35
.. 40
.. 45

.. to

.. 55

4 6 9

4 13 11

5 2 3

5 15 8

6 18 5

65
60

8 17 3
10 5 9

11 13 7

* Example : — £100, together with the profits accruing, may be Assured
to be received on the death of either of two persons, aged 25 and 30
respectively, by an annual payment of £3. 12s. Ot^.

LIFE ASSURANCE TABLES.

SURVIVORSHIPS— TABLE V.

Annual Premiums payable during the Joint Lives of Two Persons, A and B, for an
Assurance of £100, payable on the death of A, provided B shall be then living,
without profits.

Age of 1

Annual

Age of 1

Annual

Age of 1

Annual Age of

Annual

A. 1

Premium.

Premium. a

Premium.

£. s. d.

16 6

12 9

2 2 9 55 1 30 1

4 18 0

1 5 10

1 1 9

2 0 3.

. 35

4 16 9

15 1

1 0 10

1 18 0 .

. 40

4 14 9

25
30

14 4
13 7

65
70

1 16 3 .
1 14 9 .

. 45
. 50

4 12 0
4 8 1

2 0 7

1 2 10

1 19 11

1 13 6 .

. 55

4 3 2

12 2

1 19 1

1 12 8 .

. 60

3 17 10

116

25
30

1 18 0 -

3 12 6

1 0 10

1 16 9

3 4 9.

'. 70

3 6 7

10 2

1 15 3

3 4 1.

. 75

3 14

0 19 5

1 13 10

3 3-4.

. 80

2 16 7

65
70

0 18 9
0 18 2

45
50

1 12 4
1 10 11

25
30

3 2 5

...

3 12 6

3 10

6 11 5

0 17 7

19 8

2 19 6 .

6 10 10

0 17 1

18 7

2 17 3 .

. 20

6 10 2

17 7

16 8

••

45
50

2 14 4 .
2 11 0 .

. 25
. 30

6 9 4
6 8 6

1 10 1

19 5

15 8

2 7 6.

. 35

6 7 6

18 7

14 9

2 4 1.

. 40

6 5 11

25
30

17 8
16 9

2 10.
1 18 3 .

. 45
. 60

6 3 6

2 6 10

6 19 7

1 5 10

2 6 3

1 16 0 .

. 55

5 14 9

1 4 11

2 5 5

1 14 5 .

. 60

5 9 2

45
50

1 4 1
13 2

25
30

2 4 4-
2 3 1

5 3 0

3 18 10 .

4 16 6

12 4

2 15

3 18 2 .

. 75

4 10 7

1 1 6

10 8
0 19 9

40
45
50

1 19 6
1 17 7
1 15 8

20
25
30

3 17 6 .

. 80

4 6 7

65
70

' *

3 15 6 6

5 10

8 4 3

0 19 0

1 13 9

3 13 11 .

. 15

8 3 8

0 18 3

1 12 3

3 11 9 .

. 20

8 3 0

1 11 0
19 9

45
50

3 8 9.
3 4 10 .

. 25
. 30

8 2 2
8 14

1 14 10

1 14 2

1 8 7

3 0 5.

. 35

8 0 4

1 13 4

17 4

2 15 11 .

. 40

7 19 1

25
30

1 12 4
1 11 2

2 11 4 .

. 45

7 17 1

2 15 3

2 6 9.

. 50

7 13 4

1 10 0

2 14 8

2 2 9.

. 55

7 8 0

1 8 10

2 13 11

1 19 2 .

. 60

7 1 10

1 7 8

2 12 11

. 65

6 14 5

16 8

2 11 7

5 12.

. 70

6 5 3

15 8

2 9 11

5 0 6.

. 75

6 16 8

14 9

2 7 9

4 19 10 .

. 80

5 8 5

••

1 3 10

2 5 4

4 19 0

* Example --The sum of ^100 may be assured, payable on the death of a person aged 30 next birth-day, pro-
vided a party aged F,0 last blrth-dayshall survive him, by the payment of ^1. 10s. Ud. annually, only so long as

^Ty n?eanf of thiTxable; a person havinK a contingent life interest, depending on survivorship, may secure the
certain benefit of it to his family, by a small annual papucnt.

LIFE ANNUITIES.

42. — Amount of immediate annuity granted for every £100
'paid down.

TABLE Vr.

Age

LAST

Birth-

Annuity.

LAST

Birth-

Annuity.

LAST

Birth-

Annuity.

day.

s. d.

£. s. d.

18 7

6 19 4

10 15 8

1 11

7 2 3

11 4 3

6 2

7 5 7

11 13 7

11 3

7 8 11

12 3 9

17 4

7 12 9

13 6 3

18 9

7 16 7

13 18 2

0 3

8 0 10

14 11 0

1 10

8 5 3

15 4 11

3 5

8 10 0

15 19 4

5 3

8 15 1

16 14 10

7 3

9 0 8

17 12 1

9 4

9 Q Q

18 10 0

11 7

9 13 3

19 8 0

13 11

10 0 2

20 6 3

16 6

10 7 8

&upwards

21 4 6

The following advantages can be offered to purchasers of
annuities.

1. The annuities to be payable in two equal half-yearly

sums, the first payment being made to the annuitant
at the end of six months after the purchase of the
annuity.

2. A person, purchasing an annuity and whose age is
more than six months from his last birth-day, can re-
ceive an annuity equal to the mean between the rates
granted at his age last birth-day and next birth-day
respectively.

43. — Many persons are averse to purchasing annuities,
because, according to the old system, the money once invested
in a company was sunk for ever. Two other improvements
can be adopted ; viz : —

1. Should the purchaser, after three years have elapsed
from the date of his annuity, desire to obtain a loan,

ON BENEFIT BUILDING SOCIETIES. bii

for temporary purposes, the Directors can at any
time make him an advance on the security of the an-
nuity-deed, deposited in the hands of the society until
the loan is re-paid ; an assurance for the requisite
amount being effected on the life.
2. Or : — If, from a change of circumstances, the pur-
chaser, after three years have elapsed, desire to dispose
of the annuity, the society'can re-purchase it of him
on equitable terms, determined by the length of time
the annuity has been in existence, and the state of
health of the annuitant, at the time the annuity is
offered for sale to the society.

Assurance for Borrowers in Building Societies.

44. — The attention of shareholders in Benefit Building
societies and Freehold land societies, should he turned to the
plans of assurance, which are peculiarly applicable to the
circumstances of those ivho have therein obtained loans.

The high estimation in which Benefit Building Societies are
novi^ held by the industrious and provident public, and the
very great number of persons \A\o avail themselves of them
for the purpose of borrowing sufficient money to complete the
purchase of a house, or other similar investment, render it
desirable that every means should be provided to secure the
families of the borrowers from the inconvenience and loss, that
would arise from their sudden death ; since it is obvious, that
although a man may during his life be able, with ease, to pay
the monthly or quarterly instalments necessary for the liqui-
dation of his debt, yet, should he die before the house is free
from the mortgage, his family would, in most cases, find it a
very heavy burden to continvie the payments, without which
the house would, probably, be sold at considerable loss.

Now, although it is certain that some Building societies
will not be able, consistently with the Act of Parliament, to

ASSURANCE FOR BENEFIT BUILDING SOCIETIES.

terminate within the period specified in their prospectus, in
consequence of the shares not having attained the necessary
value ; yet there can be little doubt that a society whose pay-
ments are regulated by the strict mathematical principles of
interest, and whose affairs are managed with judgment, would
not only be likely to close in the calculated time, but would
probably, from the profits arising from fines and other sources,
be in a position to terminate sooner.

With a view, therefore^ to give the Borrower in a Building
society the means of securing his family, by a comparatively
small annual outlay, from the pressure of the debt, in case of
his premature decease : — Temporary policies of assurance can
be effected on the life of the horroiver, in amount equal to the
loan, and for the numher of years it has to run. Upon this prin-
ciple, that, at the end of each year, the assurer shall he allowed
to drop so much of his policy as is equivalent to the portion of the
debt cleared off in the year, and pay, consequently, each year, a
diminishijig premium ; with the further advantage that, at the
end of each year, a portion of the premiums, which have
been paid on the dropped part of the policy (consistent with
the risk incurred), shall be returned to the assurer.

By a policy of this nature, the family of a borrower would
always be sure of receiving from the society in case of his
death, a sum in ready money which would suffice to payoff" the
remainder of the debt.

SPECIMEN OF RATES.
Annual premiums to assure <>6*100 by a temporary policy.

Age.

For One Year.

Seven Years.

Ten Years.

Fourteen Years.

£. s. d.
0 18 5

£.. s. d.
0 19 9

£. s. d.
113

£. s. d.
12 7

1 3 8

1 5 G

16 8

19 6

1 10 9

1 13 2

1 10 7

1 18 10

ASSURANCE FOR BENEFIT BUILDING SOCIETIES. i) t

45. — In some cases, especially in the latter years of the
existence of a Benefit Building society, the family of the
borrower might possibly find the society unwilling to allow
them to pay off the remainder of the mortgage, by a single
sum, in consequence of the probable difficulty the building
society would experience in obtaining a reinvestment for the
money at the rate of interest supposed in their calculations.
Should that be likely, another policy is recommended, by
which, in consideration of a fixed diminishing annual premium,
paid by the borroioer, the life assurance society will under-
take to 'pay (should he die prematurely ) the monthly instal-
ments, for which the house or property is liable, until the mort-
gage be cleared off. This policy, called the Guarantee Tem-
porary Annuity Policy, presents peculiar advantages, as it
affords additional security to the Building society, and at the
same time renders the family of the borrower entirely free
from liability.

SPECIMEN OF TABl.ES.

Guarantee Policy for fourteen years, by which an Annuity of £Q.
a-year, or 10s. a month is purchased, payable from the time of the death
of the Assured, until the expiration of the fourteen years.

Diniinshing

Annual Premiums.

Age

Twe

nty.

eTh

rty.

Age Forty,

£.

£. S. d.

1st year.

14 6

2nd"' „

13 2

3rd „

1 1 9

4th „

10 3

6th „

0 18 10

6th „

0 17 3

7th „

0 15 7

8th „

0 13 11

9th .,

0 12 2

10th „

0 10 4

11th „

0 8 5

12th „

0 G 6

13th „

0 4 5

14th „

0 2 3

ASSURANCE FOR BENEFIT BUILDING SOCIETIES.

Guarantee Policy for ten tears, by which an Anuuity of ^8. 8s. a-year,
or 14s. a month, is purchased, payable from the time of the death of the
Assured, until the expiration of the ten years.

Diminishing

Annual Premiums

Age

Twenty.

Age

Thirty.

Age Forty.

£.

s. d.

£.

S. d.

£.

s- d.

1st year

14 2

0 0

5 7

2nd „

13 0

17 5

3 5

3rd „

11 10

15 10

1 3

4th „

10 6

14 1

18 11

6th „

9 2

12 4

16 6

6th „

7 10

10 5

14 0

7th „

6 5

8 7

11 6

8th „

4 11

6 6

8 9

9th „

3 4

4 5

6 0

10th „

1 8

2 3

3 1

Exainple : — Suppose a party, aged SO, borrows in order to
purchase a house, £300, at the commencement of a building
society, which is calculated to close in 10 years, and whose
shares are <£*120. He requires for this loan five shares, since
£60 is the present value of the cjfi'lSO, and has to pay 14^.
monthly per share, or £8. 8s. per year during the ten years,
which, for the £300 loan, necessitates an annual payment
of £^2.

Now, if the borrower die before the ten years are expired,
the house is liable to be seized for the remainder of the mort-
gage unpaid, unless his family can continue the monthly in-
stalments ; — but if he effect, at the same time with his loan, a
temporary policy on his own life for ten years, securing the
annuity of ^6*42 a year, or £3 10s. monthly, payable in case
of his death, from that event until the expiration of the ten
years, his family is rendered free from any liability by a com-
paratively small annual outlay, which is as follows : viz. —

£. s. d.

1st year's payment 5 0 0

2nd „ 4 7 1

3rd „ 3 19 2

ASSURANCE FOR BENEFIT BUILDING SOCIETIES. 59

£. S. d.

4th year's payment 3 10 5

5th „ 3 1 8

6th „ 2 VZ 1

7th „ 2 2 11

8th „ 1 12 6

9th „ 1 2 1

10th „ 0 11 3

From this it is seen that if, for example, the party die in
the 4th year, he will have purchased an annuity of £^2 a-year,
for six years, by four payments amounting to £1Q, \Qs. 8d.

It is evident the principle of such assurances is the same
whether the payments of the building society are 10*. a month
during fourteen years, or any other amount ; and it matters
not whether the loan be effected at the commencement, or in
any other year of the existence of a building society. All
that a borrower has to consider is the amount of his mortgage,
and the number of years he expects it will run over ; with
these facts he can go to an assurance society, and be informed
what premium and what amount of policy will suit his purpose.
46. — The guarantee annuity policy might be purchased by
equal in lievi of decreasing annual payments, which would be
nearly corresponding to the average of the rates above given ;
but, for the reasons assigned in Art. 195, of the " Treatise on
Industrial Investment and Emigration," the payment of equal
premiums should only begin at the second year.

47. — To resume, we would remark with an able author be-
fore quoted, that the " theory of insurance, with its kindred
science of annuities, deserves the attention of the academical
bodies. Stripped of its technical terms and its commercial
associations, it may be presented in a point of view which will
give it strong moral claim to notice. Though based upon
self interest, it is the most enlightened and benevolent form
which the projects of self-interest ever took. It is, in fact,

60 ON ASSURANCE PRINCIPLES.

in a limited sense and by a practicable method, the agreement
of a community to consider the good of its individual members
as common. It is an agreement that those, whose fortune it
shall be to have more than average success, shall resign, the
overplus in favour of those who have less. And though, as
yet, it has only been applied to the reparation of the evils aris-
ing from storm, fire, premature death, disease, old age, (and
dishonesty), yet there is no placing a limit to the extensions
which its application might receive, if the public were fully
aware of its principles, and of the safety with which they
may be put in practice."

The foundation of every species of Assurance is the expe-
rience of the laws of average, and the object of every appli-
cation of the principle is to secure the benefit of the average
to the individual. Hence, while nothing is more uncertain than
the duration of an individual life, nothing, it would appear, is
more certain than the average life of a generation. In the
same age, and in the same country, it is true, the rate of mor-
tality may be affected by epidemics, scarcity of food, and other
causes, but these influences are speedily counterbalanced : an
intense vitality seems to succeed these periods of death, and
the aberrations from the recorded laws of mortality of one
period, are the measure of the counter-aberrations which mark
the period following.

48. — The safety of a society, professing to assure its mem-
bers against the loss attending any contingency, requires either
that the number of its members be so large as to provide for
all possible aberrations in the law by which the occurrence
of the assured contingency is supposed to be regulated, or,
that a protective capital be paid up, or ready at call, to secure
the society from inconvenience or chance of failure. In ge-
neral such a capital is rarely paid up but in part, and the
protection consists mainly of the personal security of a num-
ber of shareholders collectively making themselves answer-
able for the engagements of the society. Eminent writers,

ON THE CAPITAL OF AN ASSURANCR SOCIETY, 61

judging from the difficulty which the older companies, with
immense paid-up capitals, have experienced in making good
interest for their money, have written against the effects of
this circumstance, and imbued the minds of directors with a
most mischievous tendency to neglect providing a sufficiency
of paid-up capital in the establishment of new societies.

Such sentences as the following have been perverted by
promoters, as an excuse for starting, recklessly, new institu-
tions with scarcely more funds than would defray preliminary
expenses. For example, a judicious authority says : —

" It may be taken as granted that an office charging pre-
miums, * such as are commonly demanded, managed with
prudence and economy, and successful in obtaining business,
will not need any capital at all : firstly, because the premiums
are such as must, in the long run, realise a profit after paying
the expenses of management; so that the only use of the
capital would be as a provision against extraordinary tempo-
rary fluctuations : — secondly, because a sufficient supply of
business renders the probability of ruinous fluctuations ex-
tremely small, and altogether beneath consideration. Now,
since it is well known that the premiums are sufficient, it
follows that the only need which a commencing insurance has
of capital is for safeguard against the early expenses of
management, and against failure of business. The risk,
however, at the commencement is not great in character,
and small in amount ; and the quantity of risk diminishes so
much faster than the amount increases, that it may safely be
said there is nothing in the commercial world which ap-
proaches, even remotely, to the security of a well-established
and prudently managed insurance office."

In the present day it is very difficult to procure for a new
office a large capital, but in cases where it is proposed to

* Again be says : — " If the premiums wore really too low, capital would be
an injury, and not a benefit, for, since this capital is really paid for, in whole
or in part, out of premiums, it would not preserve the oflfice from insolvency,
but would rather accelerate its progress towards bankruptcy."

62 ON THE CAPITAL OF AN ASSURANCE SOCIETY.

insure some new and untried risk, a sufficient paid-up capital
is essential. It is well known, that whatever pains may
he taken in such a case to procure facts and deduce proper
tahles, there is always a risk that the experience of the office
may be at variance with the facts of the tables. When, for
instance, the general conclusions drawn from the mortality of
towns were first applied to the insurance of life, it was a risk
of unknown amount, as to whether the lives of those who
would come to insure would be of the same class as those from
which the tables were made. They might turn out better, or
worse. The risk has been tried, and found to be in favour of
the offices; but in another speculation, of another kind, the
same species of risk might give a contrary result.

49. — For the well working of a new society it is requisite,
therefore, that sufficient capital he paid up to defray expenses
and contingencies for, at least, seven years ; so that no delay or
inconvenience may arise to check the business, from difficulty
in making calls on the proprietors ; but as, after a sufficient
revolution of time, an assurance business will protect itself,
provision should be reserved in the deed of settlement to re-
move the incumbrance of the capital by returning it to the
holders as soon as the state of the society's affairs will permit.
This could be done very gradually and by inconsiderable
withdrawals from the society's assets, if the capital, say, after
fifteen years, were liquidated by a long annuity for some
twenty years, calculated so as to give back not only principal
and interest, but a bonus for the risk they have incurred.

50. — An excellent form of Protective or Guarantee capital
for a new assurance society is suggested by the* jTow^iweprinciple.
The capital to consist of paid-up shares held on the lives of
nominees, and bearing dividends of interest and bonus payable
every five years among the surviving stock-holders, the gross
capital, and any increase from Reserve Bonus, going to the
survivor ; or, bi/ the Redemption Tontine plan, if the capital

* Soe chapter 2, part 2, of " Industrial Investment and Emigration," for
an account of Tontines, and the profits attending that system.

ON THE CAPITAL OF AN ASSURANCE SOCIETY. 63*

and the dividends were accuraulated for ten years from the
commencement of a society, and then liquidated by a long
annuity to last until all the nominees were dead, and divisible
equally among the survivors, then, while the society was
flourishing, the shareholders would be increasing in income.

The principles, remarks the late Mr. Milne, upon which
Tontine* annuities should be calculated, are so simple, that
any one can appreciate them.

One of the principal objections to Tontines of the ordinary
form is, that the subscribers are always uncertain what income
they may derive from them in any future year.

Euler suggested a plan upon which that and other objec-
tions may be obviated, while all the advantages of such
schemes can be preserved. f

Euler supposed that the state which borrows, repays to the
subscriber the interest only of the loan, so long as any of the
nominees survive, and enjoys the absolute reversion of the
principal after the decease of the longest Kver of them ; which
is not equitable. But the principle upon which he calculated
is very simple, and is easily adapted to the payment of an
aiuiuity, which shall discharge the whole debt with interest
during the life of the last surviving nominee.

Adopting Mr. Milne's notation, let n be the number of

* [Suivant I'opinion commune c'est a Laurent Tonti, Napolitain, que nous
sommes redevables de cette invention ingenieuse et utile; I'auteur la fit
connoitre en France vers I'an 1663 ; mais I'etablissement de la premiere
Tontine n'eut lieu qu'en 1689, ct ello fut suivie de celle du 1G96: une
classe de ces deux Tontines s'eteignit en 1726 par la mort de la femnie
d'un Barbier, age de quatre-vingt-seize ans, qui, moyennant 300 livres
s'etait interressee dans ces deux classes, et qui lors de sa mort jouissait de
73,500 livres de rente, St. Cijran, Calcul des rentes, premiere partie, page 32.

f " Eclaircissements stir les etablissements publics enfaveur tant des veuves
que des morts, avec la description d'une noitvelle espece de Tontine aussi
favorable au public qu'utile d Vetat, calculee sous la direction de Monsieur
Leonard Euler j>ar Mr. Nicholas Fuss, a St. Petersbourg in 4(o." The copy
referred to by Mr. Milne was without date, in the Gottliche Ordnung of
Snssmilch, it is stated to have been published in 1775. T.iii. s. 470, edit. 1798,
being that which is always quoted in his work. Montucla states the date to be
1781, and the size 8uo. (Histoire des Mathematiques, T. Hi, page 423), hut in one
of the statements Mr. Milne considers that he, Montucla, erred, probably in both.

ON THE CAPITAL OF AN ASSURANCE SOCIETY,

nominees in any class, s the sum subscribed by each, and v
the present value of an amiuity certain for the term at the
expiration of which all the lives in that class will have become
extinct ; also let the middle age of the class be the same as

that of A. Then will the number of nominees surviving at

"a
the expiration of n years be — n, and the amiuity to be

s
divided among them all will be — n ; the sum to be paid to

each survivor at the end of the n th year will therefore

be — • — ; which, remaining always the same whatever n may

be, it is evident that the borrowers may, without any probable
gain or loss, engage to pay that sum at the end of the nth
year, for every nominee considered separately, who is now of
the age of A, provided he be then living.

As the nominees in such cases must be expected to be the
very best of lives that can be chosen — persons whose situations
and habits are favourable to longevity, and often such as are
descended from long-lived ancestors — it may be prudent to
assume that some of them will reach the age of 105 years,
assuming also that the law of mortality among them will be
such as it is represented in the Carlisle Table, and allowing
interest at 5 per cent., if an individual be 40 years of age at
the time of nomination.

Upon the Nominee attaining to
the Age of

45
50
55
60
65
70
75
80
85
90
95
100

The Annual Sum payable for
every £100 subscribed would be

£5

186

882

2942

THE MORAL URGENCY OF LIFE ASSURANCE. 65

Hence it is easy to see nearly, what sum will be payable at
the expiration of an}' year not inserted above. Tables of this
kind may also be useful in showing subscribers to Tontines in
the ordinary way, what tliey may reasonably expect from them.

The Moral Urgency of Life Assurance.

51. — The preceding articles will probably have sufHciently
shewn that the benefits are considerable, which are derived,
even as a mere matter of investment, from the application of
the life assurance principle ; and a few words may be suffered
on its Moral urgency, which alone affords earnest reasons why
the system should be more extensively adopted.

It is needless to insist on that primary duty, which bids
every man, both as a father and a husband, to promote the
well-doing of his family, whilst he is alive to watch over them.
With the exception of a solitary few, all men are conscious of
its vital importance. It is a natural instinct or affection,
intimately bound up with our existence, and often a source
of intense pleasure. What we have rather to complain of, as
deficient not in degree merely, but too frequently altogether,
is that, perhaps, even more binding duty of providing for the
future welfare of families. Of the uncertainty of life we
need not say anything ; for, notwithstanding the incredulity
of some men in respect to themselves, the Bills of mortality
bear unerring testimony to the possible destruction of their
hopes. And how many families are dependent entirely upon
the income of a parent. How many have been thrown into
irretrievable confusion by his sudden indisposition ; — Or, still
oftener, how frequently has his sudden death reduced them to
the most abject misery, so that their bread has been "dipped
into tears," and they themselves brought " to sit on the
margin of the grave."

52. — It is true, many plans have been adopted by the more
conscientious and thoughtful for the provision of their families.
Perhaps they endeavoured to accumulate their savings by

66 THE MORAL URGENCY OF LIFE ASSURANCE.

depositing them at interest in a bank, or they were laid aside
for the purpose of being invested in stock. But nothing could
be more precarious than either of these methods. There was
the apprehension of sudden sickness, or sudden death ; or their
savings might be interrupted by circumstances, sometimes
purely accidental, sometimes lying wholly in the conduct of
the parlies themselves. It was not unseasonably, therefore,
that the fiist life assurance office was established in England ;
for the advantages offered were immediate, evident, and most
important. The great acquisition was this, that, instantly on
effecting his assurance, or completing his first payment, how-
ever small, the individual secured the full object of his wishes ;
should he die at any moment after, his family would be
entitled to the wJwle amount assured.

53. — But it is remarkable, that, notwithstanding the manifest
increase of late years in the numbers of life assurance societies,
few individuals have, as yet, embraced the great advantage, to be
derived from them. It has been ascertained that, out of the very
many families who are dependent entirely upon the mere life
income of a parent or a husband, — that, in fact, out of upwards
of thirty millions of people in the united kingdom, — not more
than two hundred and fifty thousand persons are assured, (ex-
cepting, of course, those who are members of mere benefit clubs,
which mainly provide against sickness) ; and a large number of
the policies effected in assurance companies are taken out merely
as security in matters of business, not as provisions for families.
Many reasons may be, however, assigned for this startling
fact. There appears to be a very great ignorance not only of
the advantages which are afforded by the assurance system,
but even of the very existence itself of such institutions.
Even where there appears to be some knowledge, there yet
exists an amount of prejudice, which under the, now con-
sidered, too strict regulations of the more ancient companies,
might have been conceived, but certainly is not justified in the
present day, and is altogether unworthy of these enlightened

THE MORAL URGENCY OF LIFE ASSURANCE. 67

times. There are even a small party of silly Illuminati who
view the system as irreligious, and consider it wrong to
attempt to provide against the dispensations of Providence ;
but the feeling, which must be most taken into account, is
that highly dangerous one of self-security,* which is so
common — 'all men think all men mortal but themselves';
and that equally prevalent antipathy among older people to
consider such subjects as are connected with death. Doubtless
this last-mentioned feeling, more than would be imagined, de-
ters men from the assurance of their lives ; they will not engage
in any duty which reminds them of their end ; and, ashamed
of a way of thinking, at once mean and contemptible, they
invent, to satisfy their consciences, all sorts of petty excuses
for the evasion of it.

54. — We remember a case, which has always appeared to us
a melancholy instance of the evil that may arise from the
omission of the important duty which we are advocating. It is
that of a young man, a clergyman ; — though married, and hav-
ing a family, he had still the resources of a good living, amply
sufficient for the most varied requirements. To profound
scholarship, and the inexhaustible riches of a fine intellect,
he added all those kindlier qualities of the heart, which would
make a man estimable. But his character had its dark side
too ; his ' dazzling virtues ' were not more numerous than
his weaknesses. With thoughtlessness and irresolution he
lacked sound judgment ; and it is not surprising, therefore, that
he often took that course which was positively hurtful. Among
other things, he had deferred, from day to day, the carrying
into effect a long contemplated intention to assure his life.
Being in strong health, he was not sufficiently sensible of the
precarious tenure of his existence; or of the common prudence
of not leaving one day between the cognizance of a duty and
the fulfilment thereof. This was the more unfortunate,

* See art. 36, page 39, for remarks on the experience of assurance societies
in respect to premature deaths among sound lives.

68 THE MORAL URGENCY OF LIFE ASSURANCE.

as he was destined to leave this world at a period when it is
most precious ; when, for his children, all was laughter,
buoyancy, and happiness. Of the solemn death-bed scene we
will say nothing ; yet, perhaps, he had quitted life with more
peace, had he but provided for his family.

Need we wonder that, when, in after years, ' the proud man's
contumely ' had more than embittered the cold draught of po-
verty ; — that, when, with the thousand natural ills which flesh
is heir to, came the uncertainty of a precarious and toilsome
existence, hard thoughts of that man fell even from the lips
of his devoted wife ? Need we wonder that, although
gentle as any woman, yet she knew not how to repress at all
times the murmurs of her children ? Need we add, in fine, an
account of her anxious watchings, of her endless toilings, her
wasting melancholy ; how she wept and struggled, struggled
and wept, and, at last, was laid by the side of him, whose
thoughtlessness had been the cause of all her sufferings.

55. — The picture, we have here given, is not an imaginary
case nor a mere outline, distinct perhaps, yet incapable of
being filled up, it is but a solitary example of a system
which is loaded with evils the most palpable and pernicious : —
so pernicious, that thousands upon thousands, we might say,
of men's children are daily bearing testimony to its unfortu-
nate consequences ; but the most saddening point of reflection
is, that, too frequently, the increase of their misery is in exact
ratio with the extent of their merits. As they are the most vir-
tuous and the most amiable, so does the blow of sudden change
from comparative affluence to penury fall the harder; and
the more delicate the nurture of the children during the life-
time of their thoughtless parent, the more painful do they feel
the pressure of their altered circumstances. How much
harrowing misery might be spared to the unfortunate, if every
man, as a father and a husband, were not only conscious of the
duty which he owes to his family, but determined also to put
into practice every expedient that might promote the exercise

THE MORAL URGENCY OF LIFE ASSURANCE. 69

of it ; what a large mass of moral and physical suffering could
be obviated.

56. — But it will be objected by some that the " times are
bad;" and that they are ill-able to afford so considerable a sum
as would be necessary for the assurance of their lives. We
would reply, that, even supposing they are unable to assure
for the sum of £1000, or £700, or £500, — cannot they, yet,
secure £100, when this last can be obtained by the payment
of little more than one shilling weekly ? A life assurance
society is, in truth, adapted no less for the rich nobleman,
than for the tradesman ; while the former may make use of
its full benefits to create a provision for the younger members
of his family, it need not be said how much both of benefit
and of happiness may accrue to the latter in exchange for the
payment of a few small sums weekly or monthly. Wives and
mothers should see to it ; should reflect that no delicacy of senti-
ment need stand in the way of that duty, by which the future
welfare of their children can be so greatly affected. If unwilling
to add to their expenses, or to urge the husband and father to
greater efforts, let them economise from their weekly expen-
diture ; let them lay by sums, however small, which may be
appropriated to the completion of the desired object. Let those,
who have but recently entered the married state, bear this in
mind equally with others, who maybe surrounded with a family.
Let them remember, that the payments for an Assurance are so
equitably graduated according to age on entry, that the earlier
a man begins the discharge of this excellent duty, the less will
be his future payments, and the easier the continuance of the
self-imposed economy. The old man at sixty would have to
pay £6. 155. 3d. a year for the same sum which would cost but
£4. 3s. 3d. a year to the man at fifty, or only £2. 4:s. Sd. a year
to that of thirty (see Table 1, page 51) ; and, where a participa-
tion in the profits of the society is purchased, instances are
frequent where the allotment of Bonus, applied to the reduc-
tion of future payments, has, in policies begun when young,

70 THE MORAL URGENCY OF LIFE ASSURANCE.

almost reduced to nothing the subsequent annual cost to the
assurer.

57. — All, therefore, whose incomes are wholly dependent on
their personal exertions, or upon their continuing in existence,
should neglect no longer to lay aside a sufficient portion,
by means of which some provision may be created for the
maintenance of those they may leave behind them. The
wretchedness of a family, reduced from easy circumstances
to a painfully necessitous condition, which even though not
equivalent to starvation, may deprive the widow of the means
of educating her sons and daughters ; of fitting them to
earn their livelihood, and to contend with the competition
of numerous others in similar positions, — that wretchedness,
we repeat, can be prevented by, comparatively, so small an
outlay, that the abstaining from a few indulgences would
give the head of the family the means of meeting it. To
our mind, nothing can be more selfish than the manner in
which thousands in good employment neglect altogether the
facilities, which the life assurance system would afford to them.
There might be some excuse for the deficiency of a provident
spirit, if the only accumulation, which could be secured to a
man's family, in the case of premature decease, were simply the
amount of the actual savings themselves which he had put by ;
but, by the system of co-operation in question, he can secure
not merely those savings, but the larger amount to which they
would have accumulated in a long term of years. — Take the
case of a man aged thirty, who lays aside £50 a-year from his
income. Suppose him to die unexpectedly, — say, in three
years. If his savings had been merely invested at interest,
his family would receive little more than £150 ; but, if he had
subscribed to an assurance company (the charge for which at
age thirty is £2. 4^s. 8d. per cent.) they would receive £2238,
nearly. This example must speak for itself, but in the words
of an able periodical devoted to the life assurance cause, we
would add, that, ' although in the great number of instances

THE MORAL URGENCY OF LIFE ASSURANCE. 71

in which men fail to insure their lives as a provision for their
wives and children, the neglect arises from the difficulty of
withdrawing from a limited income even the small sum re-
quisite for the annual payment of premium, yet it cannot fail,
to occur to every person anxious for the welfare of his family,
that this very difficulty is the strongest argument that can be
advanced in support of life insurance. If a man whose income
arises solely from his exertions, or from any other source ter-
minating with his existence, finds the whole of that income
absorbed in sustaining his position in society, let him contem-
plate the dreadful situation of those who are dependent upon
his labours, when cut off, by his decease, from their sole means
of support. Who is there who would not abstract something
from his present enjoyments in order to protect a beloved wife,
and the affectionate offspring around him, from so frightful a
state of dependence upon the cold charity of the world ! When
it is considered, indeed, by what * small increments of saving
the means of insurance may be obtained, it is surprising that
any instance should exist in which it is not effected — a few
tavern visits less, an occasional mislaying of the key of the wine

* For example : — The weekly payment for a X'25 policy at age 36, would
be only i\d.

How thoughtlessly will a working man spend St?, a day, and yet 4?. lis.
per annum, which is equivalent, would assure to a man, aged twenty-five,
the sum of 230Z. whenever his death might occur. By a similar payment,
a person aged forty-nine could secure to his widow or children the
sum of 112?., in like manner. By a resolution to forego any useless
luxury, costing 3o?. a day, a young man aged 18 might secure to himself, on
attaining the age of 35, one hundred pounds! By a like saving, a person
aged thirty-five could in fifteen years become possessed of Q'll., which same
amount would have been paid to his representatives had he died at any time
beforehand. — {See Tables of Endowment Assurance.)

A married couple, about middle age, by saving Zd a day, could secure to
the survivor of the two, upon the death of the first, upwards of £100;
or they might secure to a child of five years of age, a like sum when it
came of age.

An ordinary smoker consumes fully two pennyworths of tobacco per day;
but the sum thus spent in a useless habit, if applied in a proper manner
by a person at the age of twenty-five, would secure to him £105 on his at-
taining the age of sixty years or previous death.

72 THE MORAL URGENCY OF LIFE ASSURANCE.

cellar, a tight stopper in the spirit bottle, a water-side visit put
oiF till next year, a party omitted to be given, a slight forget-
fulness of the length of time a coat or a silk gown has been in
wear, and a score other things of the kind, present an ample
variety of sources for furnishing the small annual sum requi-
site to place a family in security. Many men who have a
strong perception of the importance of insuring their lives,
unfortunately neglect to do so from the belief that in a little
time they will be in a better position to do so — next year,
trade may be more brisk, or an official salary may be increased,
or an old aunt may die — but next year brings with it its own
necessities ; and even if it did not, what peril is encountered in
the delay ? It should be borne in mind that people can only
insure when they are in the most perfect state of health — a
whitened tongue, or a quickened pulse, find no passport of
admission to a life office ; and who shall say he is secure, for
a single hour, from some derangement of system, that may
bring these symptoms upon him. What anxiety must he, who
is waiting for the proper moment to insure, sustain at every
incipient approach of illness ? The spasm he feels may be the
herald of cholera — the sudden ache in the temple may be the
courier of death.'

58. — Again then we repeat, the insurance of life in all cases
is wise — in many, absolutely necessary — in some, an imperative
duty. How many of our readers, who at this moment possess
a comfortable competency, would, in the event of death, leave
their families in a state of destitution ! How many family
circles, the heads of which are in the receipt of a liberal salary,
living in handsomely furnished houses, and keeping excellent
tables, would by a single death, be suddenly deprived of all,
and doomed to penury and wretchedness ! How many wives
and children have exchanged their happy homes to become
the inmates of union workhouses, from the neglecting of
life assurance by that person through whose means they were
enabled to live in comparative affluence !

PART II.

ON FRIENDLY SOCIETIES AND SAVINGS' BANKS.

Section 1.

Art. 59. — In the preceding part we have advocated the exten-
sion, upon proper principles, of the benefits of Life Assurance
to the industrial classes as a subject well worthy of serious
attention. Its importance cannot, in fact, be over-rated, for
anything, which tends to inculcate provident habits among the
masses of the people, must be an immense benefit to the com-
munity at large. We have said that while Life Assurance
has, by means of the London Assurance Offices, been acces-
sible for a long period to the upper and middle classes, these
institutions have not, save in one or two recent instances,
sought to do business of sufficiently small amounts to be within
the reach of the more limited means of the industrious poor ;
nor have they undertaken to grant allowances in case of sickness.

60. — Working men of provident habits have thus been com-
pelled to establish societies for themselves; and each individual,
naturally enough, has become a member of whatever society has
happened to exist in the immediate locality of his residence.
This society has usually been a public-house benefit club — and
associations of that description exist in almost every town and
small village throughout the kingdom. Altogether they
amount in number to many thousands, and profess to guarantee
to their members allowances in case of sickness or of death,
while they are founded, for the most part, on such erroneous
data, and are constituted so unsoundly, besides being managed
by persons deficient in practical experience; and often of equi-
vocal respectability, that they have generally been found pro-

74 ON FRIENDLY SOCIETIES.

ductive of more disappointment than advantage to their un-
fortunate subscribers.

61. — We should state, at the outset, that a Friendly Society
is an association formed on the principle of Mutual Assurance.
Each member contributes a certain subscription per week or
month, as may be agreed upon, in return for which the society
undertakes to pay him a certain sura weekly in sickness, or on
attaining old age. In addition to this, it generally agrees to
grant to his family a certain amount on his decease. It would
be merely wasting words to expatiate upon the importance to
the working classes of such societies, when properly conducted.
They promote habits of forethought and prudence, they incul-
cate the wholesome truth that self-reliance is, after all, the only
real independence;* they collect, and might apply to the best
purpose, the earnings of the industrious and the savings of the
economical.

62. — We are met, however, on the threshold of the subject,

* [Poor Relief. — By a return recently made to an order of the House of
Commons, we find that in the 619 unions into which England and Wales are
divided, comprising 14,060 parishes, with a population of 16,273,694, 749,370
paupers of all classes were relieved upon the 1st July, 1853, as compared with
789,021 on the 1st of July, 1854. This gives an increase of 39,651, or 5'3 per
cent, for the year ending the 1st of July, 1854. In England there only two
counties which show a decrease — Durham of 579, and Rutland of 6. In Wales,
however, there are five in which a decrease has taken place — viz., Anglesea,
of 373 ; Carnarvon, of 763 ; Glamorgan, of 297 ; Merioneth, of 55 ; and
Montgomery, of 22. The total decrease in these seven counties is 2,096, which
deducted from the total increase in others of 41,747, gives the average increase
of 39,651, before quoted. The increase of able-bodied paupers out this num-
ber is 14,461. It furtlier appears from the return that the total expenditure
for the in and out-door relief in all the unions for the half-year ending Lady-
day, 1853, was 1,665,978/. ; while for the half-year ending Ladv-day, 1854, it
was 1,900,295/., being an increase of 234,317/., or 14'per cent. Glamorgan is
the only county in England and Wales which can show a decrease in its ex-
penditure, it having expended in the half-year in question 22,700/., against
24,649/. in the corresponding period of the previous year — a decrease of
1,949/. It is to be remarked that the parishes under local acts and the 43rd
of Elizabeth (except those acting under the accounts order of the Poor Law
Commissioners) are not included in this return.]

ON FRIENDLY SOCIETIES. 75

by the lamentable fact, that these societies have failed, and are
failing, by thousands. This truth is admitted, though reluct-
antly, by every writer who has discussed the question. What
causes such wholesale bankruptcy? Evidently it cannot pro-
ceed from the unattainable character of the objects for which
Friendly Societies are established, and must therefore be attri-
butable to defects in the means by which those objects are
sought to be accomplished.

63. — It is our intention to pass in review the errors and re-
quirements of existing societies, hoping to show how they may
be changed, from sources of loss and disappointment to their
members, into means of improving the condition and ensuring
the independence of the industrious classes.

64. — The first defect to which we shall refer, is the inadc
quacy of the rates of contribution demanded from members.
These rates have, apparently, in the majority of instances been
calculated, not so much by a consideration of the value of the
risks incurred, as by the desire to frame a scale of subscriptions,
which from its liberality, would be sure to become popular. It
must be obvious, however, that if a society sells for threepence
a-week a risk which in reality should be rated at sixpence,
bankruptcy is, sooner or later, inevitable. Nor is the case thus
supposed by any means extreme or rare. Thousands of socie-
ties have, from time to time, existed, in which the contributions
required from members have been ridiculously small in propor-
tion to the benefit promised. Nor is the error altogether to be
wondered at. What the proper rate of contributions should be
is an exceedingly difficult problem, which only an experienced
actuary can be expected to solve with accuracy. One element
of difficulty is contained in the fact that the circumstances of
Friendly Societies vary almost as much as their localities and
names. They are, indeed, so dissimilar, that a table of rates
which may be perfectly safe for one may be preposterous for
another. Frequently, also, there is no means of ensuring that
a rate, which, in the earlier years of the Society's existence might

76 ON FRIENDLY SOCIETIES.

be judiciously adopted, will not, as practical occurrences affect
it, become entirely insufficient. The financial considerations
influencing such societies are necessarily fluctuating, and their
managers are unable to improve them, because they are deterred,
from seeking high professional advice from the great expense
generally attending such a step.

65. — The rates, moreover, besides being inadequate in amount^
have been inequitable in principle. It has been, and still is,
a common practice to admit, as members of Friendly Societies,
all persons between some specified ages, and to charge them
all alike. Now, nothing can be more obvious, and nothing is
more undoubtedly established than the fact that, year by year,
the liability of every individual to sickness and to death
becomes more imminent. If this were not already self-evident,
the last Census returns ought to impress it, once for all, on the
popular mind. Other things being equal, a man aged fiflty is
much more liable to fall sick, or to die, than a man aged
twenty. Hence it is clearly unfair to the man at twenty to
exact from him the same payments as from the man at fifty.
Many working men understand this circumstance more
thoroughly than they are supposed to do, and this is one cause
why these societies are so frequently disruptured and dissolved.
Let us describe a case, by way of illustration. A society starts,
we will suppose, with three hundred members, all between the
ages of twenty and forty-five, and all contributing the same sum
per month — calculated after the lowest possible tariff- — for the
sake of the same benefits. For the first few years all goes on well
enough ; but, in progress of time, there is a cessation in the
influx of new members. In the meanwhile, all the members
have become older, and their numbers diminished by death
or removal. The society, under such circumstances, presents
but little attraction, and certainly offers no security to a young
man contemplating tlie future. He perceives that the Average
is against him, and, accordingly, inquires for a society composed
of persons more nearly of his own age, even though it proceed

ON FRIENDLY SOCIETIES. 77

upon the same erroneous principle of making a fixed cliarge for
members at wliatever period of life they may have arrived. He
easily discovers what he is in search of, for in these times of com-
petition new societies are starting up nearly every day, and he can
immediately identify himself with such an association. Should
it appear prosperous, those members of the older society who
happen not to be above the maximum age, very quietly transfer
their membership to the younger, leaving their more aged
associates to shift for themselves. These poor persons, stag-
gering under the weight of augmented years, struggle on for
a time; but the claims of the sick increase; the funds perjie-
tually diminish ; the contributions daily becoming smaller,
and the disbursements greater; and at length, finding it hope-
less to attempt carrying on its career, the society is abandoned.
Many, who had trusted to it for relief in the decline of life, are
now entirely disappointed, and naturally regret that they had
ever joined in such an undertaking. The supporters of the
new society in their turn become older, and, in due succession,
are supplanted by others still more new, which drain off their
means of prosperity, and leave them high and dry, just as they
in their earlier days had left their comrades.

66. — These circumstances demonstrate that the promoters
of Friendly Societies entirely forget one element essential to
success. It is impossible to secure a just average without a
large body of members. The splitting up into five or six
societies of a number of persons scarcely sufficient to form one
of a moderate extent totally destroys all prospect of fair
average results. No Society with a small number of members
can be looked upon as safe, even though its tables may be
founded on the most orthodox law possible, or on the
brilliant scientific data of the mere statistical actuary; for
should its experience turn out worse than the average, its
fate is sealed.

67. — And here let us digress to a subject collaterally con-

78 ON FRIENDLY SOCIETIES.

nected with this, which it is necessary to touch upon before
proceeding further. When a table is adopted for use, the
next point is, as far as may be practicable, to prevent fraud.
All experience shows that one main obstacle to the prosperity
of a " Sick-allowance" Association is the facility offered for
fraud by feigned prolongation of sickness after a member
has passed the stage of inability to return to his work. There is
abundance of evidence, in fact, to prove that the majority of the
statistical returns with respect to Friendly Societies do not
afford a trueguide to the actual Law of sickness prevailing among
the classes to which their members belong. This may be
demonstrated by the simple, though striking circumstance,
that a given number of persons of any particular occupation,
who are members of a Sick Benefit Society, will be found to
experience a higher rate of sickness per annum than an equal
number not having joined such an institution.

68. — It is further ascertained that members of a society ''lay
up" unnecessarily when suffering from trifling ailments, because
they know that the sick allowance is accessible for the support
of their families. They are thus induced to yield to the temp-
tation of indolence, and the principle of Friendly Societies, so
excellent in itself, becomes a source of evil.

69. — It is obvious, therefore, that any Law of sickness de-
rived from the experience of Friendly Societies should be dis-
tinctly denominated " Friendly Societies' law of sickness," and
it is plain that the higher or lower degree of moral rectitude
prevailing in any particular locality, whether agricultural or
manufacturing, and the greater amount of supervision exercised
by the Committee of management, will tend to produce a va-
riation from any assumed standard in the rate of sickness expe-
rienced by a particular society.

70. — But the great defect of Friendly Societies as ordinarily
constituted consists in the inefficiency of their management.
Among numerous proofs of this fact it may be mentioned how
clumsily the books are kept, and how full of blunders they

ON FRIENDLY SOCIETIES. 79

frequently are. Yet few matters are of more importance to
such associations tlian correct book -keeping, since it is quite pos-
sible for a society to be ruined by defective accounts alone.
The importance, too, of promptly investing the funds as they
are received, does not appear to be sufficiently understood,
although all tables pre-suppose that a moderate rate of interest,
at least, will be continuously realised upon the oubscriptions.
If, then, this interest be not realised, the actuary's calculations
are falsified ; the society deceives itself, and the members are
disappointed. On this important subject we would refer the
reader to our Treatise on Industrial Investment and Emigra-
tion, (2nd Edition, p. 43.)

71. — Again, another circumstance, though not perhaps an
actual cause of the failure of Friendly Societies, is, nevertheless,
productive of a vast amount of mischief. We allude to the com-
mon practice of holding meetings at public houses, which, in
the Treatise above quoted, we have said cannot be too severely
condemned as being in direct antagonism M'ith the prudential
purposes for which Friendly Societies are instituted. It draws
persons desirous of saving money into the very place where
there is a temj)tation to spend it. They invite economy into
the very temples of dissipation and extravagance. They ask
men to be prudent within the reach of those influences that
seduce them into riot and waste. On this subject the folio whig
judicious remarks occur in a letter from the agent of an assur-
ance office. He is referring to the introduction of life assurance
among the men employed in the extensive works of which he
is manager. " My only fear is that the men are so addicted to
drink that we may get many black sheep unawares. They join
in their public-liouse clubs by hundreds, but it is a pity they
have not got a club apart from such places, as they spend even
more than their subscriptions when they go to * pay club' as it
is called."

72. — This state of things is truly lamentable, and we need not
wonder that, under such circumstances, innkeepers look upon

80 ON FRIENDLY SOCIETIES.

Friendly Societies as valuable auxiliaries. Cases could be
mentioned in which five or six societies hold their meetings
at the same public-house, the grand object apparently common
to them all being the especial benefit of the host. As, how-
ever, in these times almost every town and even village can
furnish suitable places of meeting, such as national school-rooms,
&c., there is every facility for carrying out measures by which
the adoption of pubhc-houses, as places of resort for the
meetings, could be at once and for ever discontinued.

73. — It would be desirable that the societies should be
sufficiently extensive in their operations to merit the attention,
and secure the services of men of experience and standing
as Directors and officers. We are aware that, even under the
present system, the clergy and gentry do often manifest great
interest in the welfare of Friendly Societies in their immediate
neighbourhood, and we are also fully prepared to admit that
the admission of men of education and station as Honorary
members sometimes introduces a benevolent and protective
watchfulness, which tends to establish relations of almost affec-
tionate regard between men, who would otherwise, by the differ-
ences of social position and fortune, be entirely separated, and
assists in preventing that feeling of hostility or mistrust, with
which working men too often regard those who occupy places
above them. Moreover, in a pecuniary point of view, the
donations of honorary members, by increasing the receipts,
without augmenting the disbursements, add to the benefits that
may be afforded by the association, as well as to its prospects
of permanent stability.

74. — Nevertheless, we are clearly of opinion that the interest,
which the higher classes should have in a Friendly Society,
ought to be of a more direct and substantial character than
honorary membership would involve. It is, in fact, desirable
that their contributions should not be in the shape of Donations,
but Investments. The less a society relies upon accidental and

ON FRIENDLY SOCIETIES. 81

uncertain sources of income, and the more it proceeds upon
strict business principles, the better will it be for its members.
It should more nearly resemble in its constitution and objects
the Metropolitan Assurance Companies, and should take rank
as a Provincial Assurance Office, with such a Guarantee Fund
paid up at the outset, as would be a safeguard against contin-
gencies, and a guaranteefor good management. This fund should
yield to the subscribers a fair rate of interest, and should afford
to the gentry of the district an opportunity of investing a por-
tion of their surplus incomes profitably, while it should at the
same time enable them to assist in promoting a highly laudable
cause.

75. — With this view, the following clauses were, at our
suggestion, introduced in July, 1854, by Mr. Fitzgerald, the
member for Horsham, into the Friendly Societies Bill, which
was then in Committee. — (The word Debenture being used
instead of Guarantee share.)

76. — "Any Friendly Society abeady, or hereafter to be
established, may, for the purpose of forming a permanent
guarantee and expense fund, issue from time to time such a
number of paid-up Guarantee shares not exceeding the sum of
£5 each, as the Actuary to the Commissioners for the Reduction
of the National Debt, or an Actuary of some lAk Assurance
Company, established five years at least in London, Edin-
burgh, or Dublin, shall by writing under his hand certify as
being safe and proper; such shares to be in the form set
forth in the schedule to this Act, and the total amount of the
money to be received on account of such shares, together
with such other monies as may be mentioned and provided for
by the Eules of the society, shall form a fund to be applied
exclusively in defraying all expenses and charges of manage-
ment, and in aid of the funds of the Society, in the event of
the moneys received on account of any particular fund or
benefit not being sufficient to meet the claims thereon; and in

82 ON FRIENDLY SOCIETIES.

case the said fund shall be applied for any other purposes than
those hereinbefore mentioned, every person so misapplying the
same shall be personally responsible for the repayment ol the
amount so misapplied."

77. — "All such Guarantee shares shall be registered in the
books of the society issuing the same, and shall bear interest
at the rate of £3, 5s. per cent, per annum, which shall be a
first charge on the funds of the society, and such Guarantee
shares shall not be chargeable with any stamp duty whatever,
and may be transferred by indorsement to any other person,
and the holder of every such Guarantee share shall be entitled
by way of bonus, to such a part of the profits of the society
as the rules may provide, and as shall be approved of by such
Actuary as aforesaid ; but such Guarantee share shall not be
paid oif except in case of the dissolution of the society, and no
trustee, or other officer of the society subscribing a Guarantee
share shall be individually responsible for the payment of the
same."

78. — In order, further, to enable societies which are in an
unstable condition to secure their members some portion of the
benefits desired, the following clause was also introduced: —

79. — "Any Friendly society, or any Life Assurance Com-
pany, may, with the assent of, and upon such terms as may be
approved by such Actuary as in this Act mentioned, contract
with any Friendly Society whatever, to take upon themselves
all or any of the liabilities of such Friendly Society, and there-
upon any member of such society, or person claiming through
or on account of a member, in case of non-payment by such
society of any moneys agreed to be paid to or on account of
such member, shall have the same remedy against the con-
tracting society or company, in case the benefit assured to, or
liability incurred on accomit of, such member, shall have been
undertaken by such society or company, as if such company
was a society established under this Act, and the deed of such

ON FRIENDLY SOCIETIES. 83

company had directed that the dispute should be decided pur-
suant to the provisions of the Acts in force relating to Friendly
Societies."

80. — It may be desirable here to explain that the Friendly
Societies Bills of the last and the present session have had for
object the consolidation of the laws relating to Friendly Socie-
ties, and at the same time the introduction of such legislative
improvements as experience has shown to be necessary. It
is obvious that some step of the kind is imperatively required,
for the process of legislation upon the subject has for years
past been so experimental in its character, that it has often
been a matter of extreme difficulty to determine what were the
exact provisions of the existing laws. There have been Acts
to consolidate. Acts to amend, Acts to explain. Acts to continue,
and Acts to do we know not what else; and these various Acts
have all contradicted each other in the most remarkable manner.
The case was even in 1854 considered so desperate, that it
was deemed advisable to refer the new Bill to a Select Com-
mittee, in order that the details of the measure . might be so
perfected as to afford room to hope that the new " Act to con-
solidate" would render further legislation unnecessary, at least
for many years to come. The Select Committee was accor-
dingly appointed, which examined a number of very important
witnesses; but, as usual in such cases, their Report was pre-
sented to the House at so late a period of the Session, that
the carrying of an Act of Parliament embodying their recom-
mendations was clearly out of the question till the following
year. The clauses we have quoted above were brought under
the notice of the Committee on nearly the last day of their
sitting; the natural consequence of which was, that the mem-
bers had not time to bestow upon them that amount of delibera-
tion which we believe w^ould have led to their adoption. We
are, however, convinced that some such provisions are required
before Friendly Societies can ever be placed upon a thoroughly

84 ON FRIENDLY SOCIETIES.

satisfactory basis. It is not only as a safeguard against con-
tingencies, and as a protective fund to fall back upon,
that a paid-up capital is desirable — it is also, that it would
afford to wealthier and more educated persons an opportunity
of serving the Society, and would, moreover, introduce into
the management of their affairs that* knowledge and experience
which, as yet, has not been generally found in the conductors
of Friendly Societies. It is on these grounds, that we pro-
posed that the capital should not be paid off except in case of
the dissolution of the Society, that we may retain by direct
pecuniary interest, during the whole of its existence, that care
and vigilance which would be as necessary in the last years of
a Society as in the first.

81. — To facilitate the development of these views, we have
drawn up for the Friendly Societies' Institute, a set of rules
(vide pp. 113 — 143) which are suitable for the establishment of
Provincial Friendly Assurance and Investment Societies. The
aggregate of the clauses are so framed as to retain all those
features, which would make the establishment of Friendly So-
cieties desirable for the industrious classes, and tof exclude all

[* Mr. Farr, in an able paper published in the Appendix to the Twelfth
Annual Report of the Registrar-General, after pointing out the evils of the
existing Friendly Societies, proceeds Tery justly to remark that, " All the
successful business of this country is carried on by the co-operation of masters
and men, and the first evident objection to the benefit club is, that in general
it applies the dissociation of these two classes in a business as difficult as any
of the trades of the country ; in a business which is carried on by elaborate
tables, calculated by actuaries, involving the probabilities of life, funds accu-
mulating at compound interest, and the secure investment of money during
the whole life of a generation of men. One of these clubs undertakes what
no large insurance society is willing to undertake, and without an actuary,
plays with the certified edged tools of actuaries."]

t [The Select Committee on Mr. Sotheron's Friendly Societies Bill took
evidence on the subject of child murder, alleged to be induced by the tempta-
tion of funeral money, and which the above clause was expressly introduced
to check. They examined four judges, two governors of prisons, two coro-
ners, a chief of police, a chaplain of a prison, a registrar of births and deaths,
and a solicitor who had been engaged in a prosecution for child murder ; and

ON FRIENDLY SOCIETIES. 85

such as experience has proved to be objectionable. Provisions,
also, have been introduced with respect to the investment of
the Societies' Funds, which are in accordance with the extended
powers that were conferred by the Act 13 and 14 Vic,
cap. 115, and continued by 15 and 16 Vic, cap. 65, and are
included in the Bill of the present session. The following are
the objects for Friendly Societies, according to the Act 13 and
14 Vic, cap. 115. In the Appendix are given the objects as
altered by the Bill of 1855.

" 1. For insuring a sum of money to be paid, on the
death of a member, to the widower or widow of a member, as
the case may be, or to the child, or to the executors, adminis-
trators, or assigns of such member, or for defraying the expense
of the burial of a member, or of the husband, wife, child, or
kindred of a member; subject always to the restrictions here-
inafter enacted in that behalf:

"2. For the relief, maintenance, or endowment of the
members, their husbands, wives, children, or kindred, in
infancy, old age, sickness, widowhood, or any other natural
state of which the probability may be calculated by way of
average.

"3. For insuring or making good any loss or damage of

the committee came to the conclusion that the instances of child murder
where the motive has been to obtain money from a burial society were very
few (they had evidence of only four convictions in 13 years), and that it was
not necessary to legislate specifically with a view to the prevention of that
crime. The judges, however, urged upon the committee that it was not
allowed to any person, rich or poor, to insure the life of another, unless he
had a pecuniary interest in the continuance of such life, and that an insurance
for burial- money is at variance with this rule, and, if permitted, ought care-
fully to be limited to the avowed object of providing for the child's funeral.
The committee considered that the law requiring the payment to be paid to the
undertaker is disliked, and is altogether illusory and inoperative ; in many
cases no such person is employed. They proposed, as a better course, to limit
the amount to be received, whether from one or more societies, and that a
medical certificate of the cause of death should in all cases be produced.]

86 ON FRIENDLY SOCIETIES.

live or dead stock, goods, or stock in trade, implements and
tools, sustained by any member by fire, flood, shipwreck, or
any contingency of which the probability may be calculated by
way of average:

" 4. For the frugal investment of the savings of the members
for better enabling them to purchase food, firing, clothes, or
other necessaries, or the tools, implements, or materials of their
trade or calluig; or to provide for the education of their chil-
dren or kindred: Provided, that the shares in any such invest-
ment society shall not be transferable, and that the investment
of each member shall accumulate or be employed for the sole
benefit of the member investing, or of the husband, wife, chil-
dren, or kindred of such member, and that no part thereof
shall be appropriated to the relief, maintenance, or endowment
of any other person whomsoever, and that the whole amoimt
of the balance due, according to the rules of such society, to
such member, shall be paid to him or her on withdrawing from
such society:

"5. For the purpose of enabling any member, or the hus-
band, wife, or children, or nominee, of such member, to
emigrate: provided that, incase of any society for that purpose
one of the trustees shall be a justice of the peace residing in
and acting for the county, borough, or place in which such
society shall be established:

"6. For any purpose which shall be certified to be legal in
England or Ireland, by Her Majesty's Attorney-General, or in
Scotland by the Lord Advocate, as a purpose to which the
powers and facilities of this Act ought to be extended:

"Provided always, that it shall not be lawful for any society
or branch established under this Act to assure the payment to
or on the death of any member, or on any contingency, or for
any of the purposes for which the payment of sums may be
assured under this Act, of any sum exceeding one hundred
pounds, nor any annuity exceeding thirty pounds per annum,

ON FRIENDLY SOCIETIES. 87

nor a sum in sickness exceeding twenty shillings per week:

A further limitation occurs in clause 3 of the Act, which
runs as follows: —

"3. And be it enacted, that in all societies established under
the provisions of this Act, or of an}' Act relating to Friendly
Societies, it shall not be lawful for the trustees or other officers
of such societies to assure a sum of money to be paid on the
death of a child, whether a member of such society or not,
under the age of ten years, except the actual funeral expenses,
not exceeding three pounds in case of such child, to be paid to
the undertaker or person by whom the burial is conducted,
and whose receipt alone shall be sufficient discharge to the
society, nor to pay any sum of money which may have been
insured and become payable on the death of any member
thereof, or of the husband, wife, or child of any member,
unless the party applying for the same shall produce and
deliver to the officer a certificate, signed by a physician,
surgeon, apothecary, or coroner, in the form set forth in the
schedule to this Act annexed, except in cases where from the
nature of the circumstances it is impossible to procure such
certificate; and if any officer of such society shall pay or cause
to be paid any such svim of money as aforesaid, such officer shall
be liable to a penalty not exceeding ten pounds, to be recover-
able before any justice of the peace or magistrate of any
borough where such society is established; and, upon con-
viction thereof, one half of the said penalty shall be paid to
the informer, and he is hereby declared to be competent to
give evidence in this case, and the other half shall be paid to
the overseer of the parish in which the place of business of
such society or branch is situated, to be applied to the relief of
the poor therein."

82. — We would here remark, that it is not always desirable
for a Society to include in its plan of operations more than
one or two of the objects above enumerated. The most im-
portant points, to which the attention of Friendly Societies has

88 ON FRIENDLY SOCIETIES.

hitherto been directed, and to which it should still continue to
be turned, are the provision against sickness, and the payment
of a sum at death. The latter of these is, in fact, Life
Assurance on a small scale; and the laws of mortality being
well established, there is no reason why, with proper ma-
nagement, this branch of the business might not be trans-
acted at a profit to the members. If provincial societies
on an improved basis — such as we have suggested — were
formed, we have no doubt this result would be achieved.
Meanwhile, we would strongly urge upon the conductors of
the smaller of the existing Societies throughout the kingdom, the
importance of getting their Death risks underwritten by some
respectable metropolitan Life Office. Tliey would thus secure
themselves against any undue pressure from excessive mor-
tality, and would furthermore obtain, from time to time,
through the London Society, the benefit of its Actuarial
superintendence, in determining the sufficiency or otherwise
of their contributions and funds, which in itself would be to
them an advantao;e.

83. — It is, however, with regard to Sickness, that the greatest
skill and care is required. The Law of sickness, notwith-
standing the various attempts to discover it, still remains a
mystery. This need cause no surprise when the difficulties of
the subject are considered, and it is not to be wondered at that
different enquiries should disagree so widely in their results.
Sickness — unlike death — is not a broad well-defined fact about
which there can be no mistake. There may be, as we have
already observed in these pages, a feigned prolongation, or a
lasting assumption of sickness, and the experience of a society
with a lax management be thereby rendered much more
unfavorable than it ought to be. This branch of Assurance
has consequently found but little favor with the London Life
Offices, for they could not possibly bestow that amount of
vigilance over the "sickness" of members residing at a dis-
tance, which would act as a sufficient safeguard against fraud.

ON FRIENDLY SOCIETIES, 89

Section 2.

Art. 84. — The most difficult part of our subject is tlie determi-
nation of the processes by which the necessary amount of
knowledge may be placed at the command of the conductors
of Friendly Societies throughout the kingdom. The creation
ot a superior description of society, and the consequent intro-
duction as members of a more educated class, Avould, no douljt,
tend somewhat towards the accomplishment of the object in
view, but much would still be required. If, indeed, the pos-
session of a good set of rules and tables by a society were all
that were necessary to ensure success, the matter would be
simple enough. But it so happens, that neither rules or tables,
however good, are of much avail, unless they are placed in the
hands of persons who know, or are at least furnished with faci-
lities for ascertaining how to carry them out properly and effi-
ciently. Furthermore, it is important that, from time to time,
the exact financial position of the society should be investigated
— a process involving considerable labour and expense. This
is, in fact, a prominent difficulty connected with Friendly Socie-
ties. We scarcely ever hear of a Society which institutes periodi-
cally any proper investigation into its affairs. Nor can this be
wondered at. The members, individuallj-, do not understand the
importance of an investigation in the first place, and in the
second, supposing them to be convinced of it, they Avould be
deterred by the expense. Few societies, moreover, could
afford to pay for a periodical investigation. Tlie problem,
then, to be solved, is how to bring the necessary legal and
actuarial skill within the reach of Friendly Societies generally.
It has appeared to some public men, that this might be accom-
plished by the agency of a Central institution, to which all
societies, affiliated therewith, should pay a given annual sum
entitling them to such information and advice as they might
require- Accordingly some time ago* the 'Friendly Societies

* [In the recent Friendly Societies Bill, clauses were inserted to establish an
unpaid Commission, but it was thoup;)it such a commission would be ineffoctivo,

90 ON FRIENDLY SOCIETIES.

Institute' was founded, and for the information of those of
our readers to whom this Institution is yet unknown, we
would state that the chief object it lias in view is to afford
information to the managers or members of societies formed
under the Friendly Societies' and other Acts affecting Indus-
trial Associations, supplying them with such particulars and
advice, from time to time, as may be useful or desired. It
is presumed that if the co-operation of the individuals com-
posing a society of the above kind can be made to work for
the benefit of the members of that society, the co-operation
of the various Friendly Societies throughout the kingdom
in the support of a central institution can, in like manner,
be made to work for the advantage of the societies in
general, and of each one in particular. The Friendly Societies'
Institute,* by being placed in communication with all the
existing societies, and receiving from time to time valuable in-
formation therefrom, is enabled to collect and employ that
information for the benefit of the general body. The societies
are thus a mutual help to each other, and the results obtained
from the labours and collective experience of the Central Insti-
tution are available to each society at a small charge; and it is
believed, that when it is known that tables can be furnished,
rules prepared, calculations made, and advice given at the
Friendly Societies' Institute for a moderate annual fee, by the
aid of an establishment of subordinate skilled assistants, perma-
nently retained in its service, thousands of Friendly Societies
would avail themselves of its advantages.

85. — A general union of Societies, even with separate funds

unless its duties, powers, and responsibilities were fixed. It must be obvious,
that a commission consisting of members of Parliament, would neither have
the practical knowledge of this most intricate subject, nor be suflS-
ciently regular in attendance (from the customary absence of members from
town during the recess), to be of real advantage, unless practical men were
also added to the commission.]

* [Forms of application for admission to, or affiliation with the Friendly
Societies' Institute, will be found in the Appendix.]

ON FRIENDLY SOCIETIES. 91

and risks, would, moreover, permit of a member transferring
his privileges of membership from one society to another, if his
circumstances or affairs caused him to change the place of
his residence. By way of illustrating this, suppose a working
man, a member of a Friendly Society at Liverpool, were to
obtain employment at Birmingham and meet with some acci-
dent or illness, which rendered it necessary for him to avail
himself of his right on the sick fund. How convenient it
would be if he could apply at Birmingham to some society cor-
responding to the one at Liverpool for his allowance. And
such transactions would be likely to prove mutually advanta-
geous to both societies, for taking an average number of trans-
actions, it is probable that the society at Birmingham would
have a corresponding application to make to the society at
Liverpool for some member of their's sick at that town. We
are aware that the rules of many societies allow of a member
changing from one society to another, provided the first
society pays over to the second the amount of his subscriptions
and mterest, or such a sum as an actuary may fix ; but what
we recommend is a mutual Agency system, whereby one society
would assist the other in paying the allowances of those who
might be sick, and in watching against fraud.

86. — We might proceed still further to point out the advan-
tages which may result from the Friendly Societies Institute, biit
enough has probably been said to show the importance and
value of such an institution. It may be worth noticing, how-
ever, in this place, that what the Friendly Societies' Institute is
founded to attempt, the government of the French Emperor
has already imdertaken and with great success. We feel
strongly tempted to quote from the able and exceedingly inter-
esting official documents relating to this question which have
been published by the French government, and introduced
into England in our report to the Friendly Societies' Institute.
We are convinced, however, that in England the preference
would be given to a central Institution, which is not under

92 ON FRIENDLY SOCIETIES.

the control of the government. Englishmen are proverbially
averse to government interference, and we think we may safely
aver that a voluntary society, such as the Friendly Societies'
Institute, is more likely to answer its purpose than any govern-
ment department having the same objects in view.*

87. — It has been suggested by a Barrister of great experience
in Friendly and other Industrial Societies, Mr. William Tidd
Pratt, (to whom we are indebted for a careful revision of the
draft rules which are given at page 113), that a clause
should be inserted in the Friendly Societies' Act, authorizing
the Trustees of the poor in the various parishes of the United
Kingdom to defray the expenses of formation and management
of one soundly constituted Friendly Society in their districts,
provided they have a right of supervision or participation in
management.

Such an allowance towards the expenses would remove one
great difficulty that an Actuary has at present to contend with,
in settling the rates of Friendly Societies, as he has no means of
determining, a priori, what will be the proportion which the
future expenses of the Society will bear to the premiums con-
tributed by the members ; and a theoretical margin based on
the experience of one Society is found not always to be a guide
to the probable expenditure of another.

As the funds of a Parish Friendly Society would have to
be applied solely in payment of the benefits assured by it, its
progress could be marked from year to year with greater
facility; whilst a positive diminution could be made in the

* [" Having examined the returns of a great number of societies, many of
which we have liad personally to report upon, we have recently compared their
statistical results with the Parliamentary Report of 1854, and we believe that
the tables deduced by Mr. Finlaison cannot be safely adopted by any society
without material adjustment, through the unsatisfactory manner in which items
of importance have been suffered to become mingled in the schedules that were
filled up by the Friendly Societies. Nor can any regard be paid to the inge-
nious theoretical law conjectured by Mr. Farr in the 12th Report of the Re-
)4istrar-Gencral."]

ON FRIENDLY SOCIETIES. 93

rates charged to the members, as from the practical impossi-
biUty of safe competition, the Society would be likely to absorb
the members of the other Societies in the neighbourhood, more
particularly of those which are conducted at public houses, or
are under doubtful management. Hence we have no hesita-
tion in saying that Parish Societies, by such an arrangement,
would tend to realise the conceptions of those sound economists,
who consider that the ultimate diminution of the poor's-rate
depends on the increase of provident habits among the working
classes, especially when they make provisions for the unavoid
able necessities of their old age.

88. Model Tables. — Although we are impressed with
the advisability of Societies adopting uniformity in their rules,
principles of management, and forms of assvirance, we cannot
concur in the strong tendency which may have been observed
both in most of the witnesses before the Parliamentary Com-
mittees, and on the part of the members towards the adoption of
model tables of rates of contributions and benefits. Appendix A
to the Report of Lord Beaumont's Committee, session 1847-8,
paper No. 126, contains striking illustrations of the varying
liabilities to which different Societies are subject ; but the
additional examples more recently brought forward are cer-
tainly very curious and remarkable, both in a scientific and
practical point of view, and conclusively prove that nothing
would be more dangerous to the interest of Friendly Societies
that the adoption of Model Tables. It has been well said
elsewhere, that there is nothing connected with the study of a
statist and the profession of an actuary, requiring more judg-
ment and experience than the proper discharge of the duties
devolving on him in giving advice to Benefit Societies; and
everv' day shows more clearly that the circumstances in which ,
different Societies are placed are so dissimilar as to render the
liabilities of one no criterion for those of another. Moreover,
were it once understood that certain Model Tables nn'glit be

94 ON FRIENDLY SOCIETIES.

adopted by any and every Friendly Society, the Managers
would rely on the Tables alone for security. They would lose
sight of the fact, that prudence and economy in the manage-
ment of their affairs was still indispensable, notwithstanding
the guardianship of the Model Table, and thus Societies might
continue, as heretofore, to proceed rapidly on the road to ruin,
not discoverinsi; their error till it was too late to retrace their
steps.

89. — On the Sickness and Mortality of Members of Friendly
Societies. One of the requirements of the 9 and 10 Vic. c. 27,
was that all Friendly Societies enrolled thereunder, should send
in to the Registrar of Friendly Societies, a statement of the
sickness and mortality experienced during the five years
ending the 31st December, 1850. These returns were received
by the close of the summer of 1851, and "formed a huge mass
of papers; when bound up the collection made no less than
forty large folio volumes, each from six to seven inches in
thickness." The duty of reducing this vast mass of information
to a tabular form was entrusted to Mr. A. G. Finlaison, the
Actuary of the National Debt Office, who presented the results
of his labours to the House of Commons, in two reports, one
of which appeared in 1853, and the other in 1854. As there
are several matters touched upon in these reports which will
doubtless interest many of our readers, we propose to make a
few extracts from these valuable documents.

90. — The general results of the inquiry are stated as
follows : —

"The total number included in the Returns selected of persons
as liable to sickness was 792,980; of these 198,152 were returned
as sick. The number returned as sick out of each 100 persons
liable to sickness was 24*99. The average amount of sickness per
annum to each person included in the returns was 10*1 155 days;
and the average sickness per annum to each person sick was
40*4809 days. So that, practically speaking, the returns show
tliat eacli member, young and old, of the Friendly Societies in

ON FRIENDLY SOCIETIES. 95

England and Wales, is very little more than ten days sick in the
year; that one man in four is attacked with sickness in the course
of the year, and that those who are attacked suffer nearly 40^ days'
sickness.

"The mortality is returned at 1-26 per cent, per annum only,
while the exclusions are stated to be 3 per cent, per annum on the
average. The rate of mortality is low, but it is confirmed by the
experience of the Scotch and Irish Societies ; by official returns
made from Friendly Societies in France to the French Govern-
ment ; and by independent researches made by private persons
among large numbers of the Societies of Odd Fellows, &c. It is
to be remembered that the mortality set forth in this abstract is
that which happened during the members' presence for the five
years, or a portion thereof, in the Society, and does not, by any
means, represent the mortality to which they may have been, or
perhaps will be, subject out of the Society, previous to joining it,
or after they may leave it. Other causes may be inferred from
the high per centage of exclusions found to prevail, especially at
the earlier ages. But, whatever be the reason, the mortality per
cent, is the result of the deaths recorded and returned."

91. — On the subject of Burial Clubs the report thus
speaks : —

" The results given in from the Burial Societies of England and
Wales are very imperfect. In those clubs, the members' payments
are so very low, being usually but at the rate of Id. or 2d. per
week, that their funds would not bear the extraneous expense of
remunerating a clerk or secretary for the construction of a volumi-
nous Return, which in some cases would perhaps contain an
account of many thousand individuals.

"These societies are of more frequent establishment in the
counties of Lancashire, Cheshire, and Kent, than in any other parts
of England. It was found upon an examination of the Schedules
sent in from Lancashire, that a considerable number of these
societies admit members from the age of one montli and upwards.
The number present in eight of such societies in each of the five
years, and the number of deaths were as follows : —

96 ON FRIENDLY SOCIETIES.

Persons. Deaths.

1846 12,153 430

1847 12,346 461

1848 13,075 379

1849 13,052 432

1850 13,572 337

Total 64,198 2,039

the mortality, therefore, being at the rate of 3*176 per cent. A
considerable number of Returns were also received from Burial
Societies in Kent ; but in none of these apparently, were children
under 14 years of age admitted. The number of persons in twenty
of such societies in each of the five years, and the number of
deaths were as follows : —

Persons. Deaths.

1846 6,143 105

1847 6,193 132

1848 6,014 112

1849 5,866 104

1850 5,721 102

Total 29,937 555

the mortality, therefore, being at the rate of 1 "854 per cent. No
returns of sufficient importance to justify the trouble of further
compilation were received from Cheshire."

92. — The most important topic brought under consideration
in these reports, is the amount of sickness actually experienced
in these Societies. In the investigation of this subject, the
report divides the country into eight districts or " provinces,"
and gives the results for each. The most remarkable results
are stated as follows : —

No. per Cent. Days of Sickness.

Province. taken Sick. to each Sick Person.

Northern minimum 19*89 maximum 50*38

Welsh 22*14 45*73

Manufacturing 22*34 45*02

Midland maximum 29*29 minimum 36*37

The report then remarks " that if the difference in susceptibility
to attack be most in favour of the north country, it is strikingly

ON FRIENDLY SOCIETIES. 97

reversed on the point of duration. For the midland contributor to
Friendly Societies has but five weeks' sickness to the seven weeks'
illness, with which the northman is afflicted. This bears out the
surmise of the lesser reluctance shown by the agricultural labourer,
to place himself on the " Sick List," as it is evident his attacks are
by no means of such a formidable character as those to which
the north countryman is compelled to succumb.

"In balancing the liability to sickness against its duration, it is
a merciful consequence of their mutually compensating effects that
the quantum of sickness to which each man throughout England is
liable varies but little, let his abode be in what province it may.
If he be frequently attacked, the complaint is of a less formidable
character ; and if the disease that hovers about him be virulent,
his hardy nature is such that it repels the evil for a greater length
of time. Whether the sicknesses that visit the north be more
malignant, or whether the nidus they there find fosters more
greatly their venom, it is not within my province to hazard an
opinion. I may, however, conjecture that their native intensity is
mitigated by the more careful habits of the south, although even
in this latter quarter there is yet room for improvement.

"But between the two classes of facts a consolatory balance is

established. The average sickness of the whole year to each person

throughout England and Wales differs in its most violent extremes

but one day and a half. The Returns give the case as follows : —

Average Sickness per Annum
to each Person, in Days.

South-Western province 11*01

Midland 10-65

Welsh 10-13

Manufacturing 1006

Northern 10-02

Eastern 9-88

tSouth-Eastern 966

Metropolitan 9 45

"The imaginations of enthusiasts in favour of the rural supe-
riority as regards exemption from disease, are not borne out by
the facts derived from the experience of the working classes of
society.

ON FRIENDLY SOCIETIES.

"For, contrary to most preconceived opinions, the place where the
average sickness per annum afflicting each member of a club is at
the lowest point in all England is the metropolis; while even the
Northern and manufacturing districts also take precedence of three
out of the five agricultural districts, and of provinces which previ-
ously would have been supposed incomparably superior. This is a
matter, however, which comes home to the pecuniary stability of
Benefit Societies, while the susceptibility of attack and the dura-
tion of the sickness chiefly concern the individual."

93. — In a subsequent part of the report, the trades and
occupations of the members are arranged in four great classes,
viz., light and heavy labour without exposure to the weather,
and light and heavy labour with exposure to the weather, and
the principal results are exhibited as follows : —

"When the sickness attendant upon labour under the four con-
ditions in which it has been severally arranged is observed, some
marked differences between the respective classes immediately
attract notice. The first phase under which the contrast is exhi-
bited has regard to 'the number returned as sick out of each 100
persons liable to sickness.' The adjusted results show the follow-
ing per- centages : —

LIGHT LABOUR.

HEAVY LABOUR.

Ages.

Without

With

Withmit

With

Exposure to the

Weather.

22-70

23-7]

26-47

28-69

19-90

21-04

25-10

26-47

18-51

19-64

23-45

25-74

18-49

19-02

24-00

25-64

19-40

19-88

24-34

27-01

20-49

19-33

25-14

28-14

23-07

20-74

28-10

29-34

25-63

21-93

31-40

31-11

28-36

22-87

33-25

35-42

32-80

24-84

38-26

40-25

ON FRIENDLY SOCIETIES.

"It would therefore seem to appear from the above, that,
although exposure to the weather seems to exercise a less prejudi-
cial effect on the light employments above 40 years of age, yet on
the whole, and especially in the case of heavy labour, the liability
to attacks of sickness at all ages, is greatest among those who are
most exposed to the severity of the elements.

"Where the important practical question of 'the average amount
of sickness per annum to each person ' is involved, the results are
equally well defined in the same direction. For instance :

LIGHT LABOUR.

HEAVY LABOUR.

Age.

Without

With

Without

With

Exposure to the

Exposure to tlie

Exposure to the

Weather.

Weather,

Weather.

Days.

6-48

6-00

671

7-16

6-00

5-78

6-82

7-45

601

5-85

7-06

7-69

6-20

5-84

7-45

8-04

7-13

7-29

803

9-40

803

7-48

9-87

10-78

10-48

1002

12-15

12-58

13-65

10-66

16-08

1433

17-18

11-23

20-36

21-78

26-22

18-15

26-99

31-55

" The remarkable mitigation of the sickness in the case of the
light labour with exposure to weather, as compared with the
other three classes, at once attracts notice, and indicates the most
healthy condition of existence. But the result of exposure to
weather is not to be conclusively inferred therefrom by any means,
as it would appear in the case of heavy labour to be an ingredient
materially aggravating the quantum of sickness attaching to tliis
ruder class of occupation. Tlie agency of more powerful causes
than the influence of the elements begins to make them per-
ceptible in this arrangement of the subject.

" The third aspect in which the case has to be viewed is with

100

ON FRIENDLY SOCIETIES.

regard to the average amount of sickness per annum undergone by
each person sick. The results are as undermentioned:

LIGHT LABOUR.

HEAVY LABOUR.

Age.

Without

With

Without

With

Exposure to tlie
Weather.

Exposure to the
Weather.

Days.
28-53

Days.
25-30

Days.
25-37

Days.
24-97

30-16

27-47

27-19

28-15

32-43

29-80

30-09

29-89

33-50

30-70

31-04

31-37

36-74

36-66

32-97

34-80

39-21

38-71

39-28

38-29

45-43

48-34

43-25

42-87

53-26

48-63

51-22

46-05

60-57

49 11

61-23

61-48

79-96

73-07

70-54

78-39

" In this presentment of the case, the action of the degree of
labour, or of the exposure to the weather, seems to disappear and
manifest no influence. The only law or principle perceptible
seems to be that immutable rule which pervades the whole obser-
vation, namely, the inverse duration of the sickness in proportion
to its frequency of attack. It will be observed that the class
engaged in heavy labour with exposure to the weather is most
liable to attack out of the four divisions of employment, and is
least afflicted in respect of duration.

94. — With regard to the connexion between sichiess and
mortality, the Report, after giving some Tables, shews that : —

"As the average amount of sickness has been shown to derive
its increase more from the duration of the ilhiess than from the
frequency of the attack, and it is even more clearly evident that the
mortality is in a constant ratio with the duratiou of the sickness,
it is difficult to entertain the doclrine sometimes advanced, that
the sickness and mortality of a community do )iot follow the same
line oi" march. There is far greater reason ibr believing that they

ON FRIENDLY SOCIETIES. 101

advance together in line, when reference is carefully made to the
mass of facts marshalled in the columns appended to this Paper.
The inference tliat the two laws of sickness and mortality do not
of necessity run pari passu, has been drawn perhaps from the less
striking averages of the amount of sickness shown by each person.
But when the returns of the amount of sickness to each person
sick are carefully perused, the steady result of the mortality
correspondent at each age, shows that death is no remiss attendant
on the couch of real sickness. A contrasting glance at the columns
setting forth the number sick out of each 100 persons liable, in
other words, the probable liability to attack, proves, on the other
hand, that the 'grim feature' does not bestow his presence in
obedience to every casual invitation. But, as might be expected,
positive sickness and death in the great majority of cases, go hand
in hand."

95. — With regard to the Sickness of Females and Children,
the Report observes: —

" It is much to be regretted that facts relative to the sickness of
children and females were not obtainable in greater numbers from
the Returns of Friendly Societies, and that where information on
this point was supplied, it was of a scanty and unsatisfactory
character. There are nevertheless many funds existing for the
payment of allowances in sickness to or on behalf of children, which
have been formed among the Sunday and other schools in the
great provincial towns, and from the experience of these Friendly
Societies of a very peculiar class, it is to be hoped that data will
be forthcoming on some future occasion. In respect of the sick-
ness incidental to the female members of Friendly Societies, there
is much reason to believe that it is heavier in amount than that
undergone by the mules But unfortunately mention was scarcely
made in the Returns of the nature of the occupation in which the
women were employed. And looking to the striking influnce which
this consideration displays on the amount of sickness undergone by
males engaged in either class of labour, even still more remarkable
effects might have been expected to develope themselves in tlie
quantum of sickness undergone, by females engaged in various em-
ployments. It would also have been extremely interesting to

102 ON FRIENDLY SOCIETIES.

note, if possible, whether the difference existing between the con-
stitution of either sex presented any influence in relation to the
different amount of sickness undergone by the females, and at
what particular periods of life, and if there were, in fact, any
material excess of sickness really suffered by the weaker sex over
that undergone by the male during the period of working life, and
also during the 70 years' space elapsing after the age of 15, so as
to place them on unequal terms with the male contributors to
Benefit Societies.

"There can be no doubt that in practical experience the de-
mands made on the funds of the benefit clubs for allowances in.
sickness are heavier when preferred by the female members. But
this may result from two causes, namely, the greater difficulty of
searching examination where the delicacy of the sex is respected,
and the greater facility of simulation of any slight derangement
of the feminine system.

" The more precise determination of the amount of real sickness
undergone by the female members of Friendly Societies, therefore,
is still a desideratum. It can only be brought about effectually,
perhaps, by the growth and encouragement of funds for allowances
in sickness which shall be formed for the benefit of females exclu-
sively, and in which careful record of the age, occupation, and
other necessary particulars, will be made in respect of each mem-
ber, and from which trustworthy statements of this information
can be obtained. The distinction of sex also should be carefully
observed in framing any returns from School Friendly Societies
formed among children. But in the absence of better data than
is now possessed in reference to the female sex, and to the very
youthful contributors to the above associations, there exist insuper-
able difficulties in the way of constructing Tables of contribution
precisely applicable to the amount of risk incurred. It is to future
observation, therefore, that the community must look for the means
of more accurately providing those benefits in sickness which are
as requisite to the relief of the industrious females, and the parents
among the working classes, who may be suffering under a calami-
tous source of expense, as they are necessary to the wants of the
provident males of the same order of society."

ON FRIENDLY SOCIETIES.

103

Art. 96. — On the proper method of obtaining Returns. —
Mr. Finlaison, junior, deserves much credit for the elaborate
and skilful manner, in which he has prepared the Report from
which these extracts are made ; but the result of his calcula-
tions, although satisfactory in respect to the averages from the
whole body of returns, cannot be considered as worthy of
perfect confidence when he attempts to classify them under the
heads of 'light and heavy labour,' 'with and without exposure,'
and into towns, cities, and rural districts. The materials
furnished to him were not voluntary on the part of the
managers, and important items in the schedules sent round
were, in many instances, cither wilfully or otherwise, misun-
derstood by them ;* so that it is only for average results on the
aggregate of information, that positive errors and inaccuracies in
one society would probably be counterbalanced by negative errors
in another. The above fundamental difficulty in classification
throws a doubt upon the applicability of Mr. Finlaison's Tables
as a guide to the operations of local Friendly Societies. Mr.
Charles Ansell, F.R.S., whose experience on these subjects
entitles his opinion to great weight, made, by anticipation,
some sound remarks on this very point before the Lords'
Committee in 1848, when the expediency of requiring returns
from Friendly Societies was being discussed. He stated that
the Returns, in the form in which they were then demanded
from every society in the kingdom, were made carelessly, and
when they came, had no authority, and that it would be much
more satisfactory that information (to be used as the basis of a
model law of sickness) should be of a voluntary character, and
procured from but 100 or 200 societies, under such circum-
stances as would offer a guarantee for their correctness, rather

* fSince the above was written, the Return, relating to another ehiss of
associations, viz., Building Societies, has been published, which was moved
for by The Right Hon. Mr. Sotheron Estcourt. It contains a great variety
of palpable errors, evidently caused cither by carelessiicss on the part of the
managers, or by a wilful misunderstanding of tlie questions ; so that the par-
ticulars furnished are rendered of very little value as a guide to the financial
condition of Building Societies.]

104 ON FRIENDLY SOCIETIES.

than that deductions should be attempted from an immense
number of schedules filled up by the managers in obedience to a
compulsory Parliamentary enactment ; he considered that
particulars, prepared voluntarily for the purpose of an actuarial
valuation, would be more likely to be accurate in every detail.

The late eminent Actuary, Mr. Griffith Davies, F.R.S., and
several others of great experience, who were examined at the
same time, stated their full concurrence in the view of Mr. Ansell.

97. — Definition of Sickness. — In attempting to determine the
Law of Sickness prevailing among the members of Friendly
Societies, almost all investigations have produced unsatisfactory
results, and presented discrepancies of a singular character,
from the want of an accurate and uniform definition of wherein
" sickness " consists. As we have said in previous articles —
the word "sickness," indeed, is itself rather unfortunate, as
that which is medically so described is not the precise risk
assured against by Friendly Societies.

What the members seek to provide for is " temporary
inability to labour," whether arising from disease or accident,
and whether necessitating confinement to the house or the
sick bed, or only preventing the continuance of their avoca-
tions. Now in practice it is found that certain degrees of ill
health do not really produce immediate inability to work.
Medical men affirm " that labourers, who have not a Friendly
Society to fall back upon, often go about their employment with
disease of the heart, tubercles in the lungs, and other disorders
of considerable severity. Among 120 Cornish miners in actual
work, it was ascertained that only 63 had good health : — the
remainder being all the time suffering from incipient serious
maladies. Among other classes of operatives, it has been also
ascertained that, favoured by the inspector or foreman of the
works, men really in bad health, icho have no sick money to
draw, do not always find it necessary to go on the sick list : —
/. c, theii- labour is mitigated without their stopping off duty."

ON FRIENDLY SOCIETIES. 105

98. — The theory adopted by Mr. Charles Ansell, in the
inquiries set on foot by him about the year 1828, at the instance
of the Society for the Diffusion of Useful Knowledge, does not,
to a satisfactory extent, tend to the distinction of Friendly
Society " sickness " from medical sickness, and probably this
gave rise to the opinion expressed by him twenty years later,
in 1848. — Other eminent Actuaries, in extensive contributions
to the subject, have set forth the results of a variety of in-
vestigations, from which Tables are deduced, providing for
"permanent" as well as "temporary" inability to labour.
The data of such tables, however, were not confined to societies
submitted for actuarial investigation, but, on the contrary,
in one case, procured promiscuously from managers by a well
intended offer of prizes. Hence, there was not sufficient secu-
rity for accuracy in the materials furnished, since no result
affecting any particular society could arise from them, as would
have been the case had they been extracted from its books
for the purpose of a valuation, upon which an Actuary was to
found a report. — Mr. Finlaison, junior, convinced that some
definition of Sickness must be adopted, states that, in making
his calculations, —

" The cases of superannuation wore carefully separated from the
mass, and subjected each one to a rigid scrutiny, to determine
whether it was a case of chronic sickness, or a case of superannuation,
in the sense of a retirement on a pension for old age."

99. — The following Definition of Sickness in relation to the
* ability to labour ' is given by a high medical authority : —
all sickness, being either acute or chronic, recoverable or
irrecoverable, no attack of acute recoverable sickness ever
lasts longer than from six weeks to three months, and
chronic recoverable sickness no longer than twelve months.
Chronic irrecoverable sickness may therefore be held to be that
which exceeds one year, or which a medical man from the
nature of the case should certify to come under that dcnomi-

106

THE TRUE LAW OF SICKNESS

nation. On this point, the calculations of the Highland
Society went to show that, in all ages under 70, 20 per cent,
of the inability to labour was "bedfast," 50 per cent, "walk-
ing," and 30 per cent, "permanent."*

Section 3.
As to the True Law of Sickness.

Art. 100. — In accordance with the valuable suggestion of Mr.
Ansell (mentioned in Art. 96), we have, in order to test the
views taken by him, caused to be analysed the result of our
own experience in connection with a great variety of societies,
whose affairs have been officially laid before us or the
Friendly Societies' Institute, taking care to limit the
definition of sickness to the inability to continue labour, and
comprehending under the denomination of "chronic," that which

* [In further illustration of this, we give, from the investigations of Dr.
Basham of Westminster Hospital on one form of disease, the following
particulars : —

Number of
Cases of

all Diseases,
including
Accidents.

Niunber of Cases of
Paralysis of all forms.

Proportion
per cent,
of Cases of
Paralysis
to all Diseases.

Males.

Females

Total.

St. George's Hospital ...
Westminster Hospital ...

20,646
15,653

255

166

421
274

2.0391
1.7604

Total

36,299

—

695

1.9147

It will bo observed that the number of males attacked with paralysis is to
the number of females nearly in the proportion of 3 to 2. The average age
of attack was as follows : —

Males

Females

Irrespective of Sex

40.470 or 40^ years nearly.
38.000 or 38 „
39.496 or 30k „ ]

IN FRIENDLY SOCIETIES. 107

after a sufficiently loug duration miglit and should bo treated
as irrecoverable.

101. — Our observations have led us to the discovery of what
may be termed the Trne Law of Sickness. It would seem
clear — and in this the table of Mr. Finlaison aflfords striking
confirmation — that the degree of inability to labour at various
ages follows a simple natural law, which may be expressed as
follows : —

1°- — That, from about the age when infantile diseases arc
past, and the nature of the constitution of the individual is be-
coming more declared, — at age 15, — there is a certain constant
minimum rate of Sickness per annum, to which human beings
(on the average of a large number of lives) are subject at every
period of life, and that this rate depends upon the race, climate,
&c., and, as far as observations in the United Kingdom go,
seems to be between the limits of fve and seven days' sickness
per annum.

2*'- — That, at each age, every indi\adual is exposed, according
to his occupation, rank of life, &c., to

An excess of sickness, f increasing with ^ the sum of the excesses in

over such constant < his years and >• the 5th and 10th years

sickness, ( equal to ) preceding.

By way of illustration, in the class of labour referred to in the

subjoined Table, the constant is 6} days, and the rate per

annum of sickness

at age 20, ByVo t?ays (nearly) or -^^ of a day excess over the constant ;

at age 25, Gy^Q days, or ^ of a day excess over the constant.

The excess, therefore, at age 30, is the sum of these excesses,

or iVo of a day. This, added to the constant, gives the rate of

sickness 61^ days : and so for succeeding years.

In the Mathematical Appendix at the end, we have sho^^^l

that the preceding law may be expressed in another form, as

follows :

The difference between the rate \ (the difference between the rates of

of sickness at any age and > equals < sicknes* for 5 and 15 years
that 5 years beloio, ) ( younger than the given age.

108

THE TRUE LAW OF SICKNESS

For example . —

The difference between the rates of) „ al i '^^ difference between those for
sickness for ages 35 and 30, ) ^ ^ \ ^9^^ 30 and 20.

102. — With this new law — the truth of which seems beyond
dispute — societies, when looking at the probable sickness in the
future, instead of relying upon the results of other associa-
tions, as set forth in published tables, for an estimate of what
they might themselves anticipate, may correct it by a com-
parison with their own past experience : the only point to be
guarded against being that, if they have had too low a rate of
sickness in former years, arising from a favourable aberration,
(which could be tested by a comparison with the standard table
for their class or locaKty), they would have to make an addition
to the probable rate during future quinquennial periods.

103. — -4s io Recoverable Sickness. — This law bears, in the
case where Irrecoverable Sickness is excluded, a remarkably
close relation to Mr. Finlaison's results, in the case of the
" Average Sickness per annum to each Person in Friendly
Societies, in England and Wales, adjusted by taking the average
of each five years, for the middle year of each five." In the
following Table, we have placed Mr. Finlaison's by the side,
and it wall be seen that it agrees within a decimal fraction : —
(Report of 16th August, 1853. Tables, p. 3.)

Government Returns,

Age.

By New Law.

1853.

Constant, 6.20

6.21

6.23

6.57

6.88

6.60

6.83

6.97

6.91

7.37

7.14

8.14

8.21

9.31

9.34

11.25

11.49

14.36

13.95

19.41

18.73

27.57

27.36

IN FRIENDLY SOCIETIES.

lOJ)

* This Tabic includes the sickness of those that die under a year's
illness, and of those that recover. Kates of subscriptions based upon
it would not suffice to provide the allowances contemplated in clause
107 of the Rules (p. 138).— Similarly, if clause 108 be adopted, the
subsci'iptions would vary according to whether it be intended, that
the renewal of the allowance to a member, at the end of the 52 weeks'
non-pay, should depend on his having gone through the stage of
recovery, or only on his having had his pay stopped, although his
illness had continued.

104. — As to General Sickness, including Irrecoverable Cases.
The following are the corresponding rates of sickness according
to the new Law, when all cases of inability to laboui' are
provided for.

Average Sickness per

Age.

annum to each person,

in days.

Constant, 6.20

6.38

6.88

7.06

7.74

8.60

10.14

12.54

16.48

22.82

33.10

49.72

76.62

120.14

190.56

304.50

becoming permanent

soon afterwards.

105. — As to Rates of Premium.— To determine the proper
rates of subscription to be charged by provident associations,

• [Tables, suited for particular localities or occupations, can be obtained
from the Corresponding Secretary of the Friendly Societies' Institute, Mr.
E. W. Brabrook, who has assisted us -with exceeding actuarial talent and skill
in the labour of discriminating among the complicated elements, that enter in
the tables and have rendered the numerical deductions very difficult.]

110 ON FRIENDLY SOCIETIES.

the question of Mortality has also to be considered ; but no law,
deduced from Friendly Societies' experience, can be depended
upon, for the reason laid down by Mr. Finlaison in his Second
Report, viz., that numbers of members retire fi'om each society
before death. In all mortality Tables calculated from Friendly
Societies Returns, through a disregard of this fact, as Mr.
Griffith Davies said in his evidence in 1848, " man is made
almost immortal." Ilence, corrections have to be applied from
the returns of the Registrar for the general population.

It is evident from our Law of Sickness, that, considerably
more must be paid by each subscriber than the actual average
benefit received by him in the early years of membership. In
other words, if 100 jiorsons have together 600 days sickness in
the first year of their membership, their aggregate subscriptions
must be considerably higher than the 600 days' pay. It is not
sufficient that the society should pay its way, and that the
claims for sickness should be not more than the total premiums
received, but a margin must remain to be invested as a provision
fo]' future years.

Section 4.

As to the Rules of a Friendbj Society.

Art. 106. — The set of Rules given in the following pages
(113 — 144) is designed to afii'ord to Solicitors, Clergymen,
and others, who may be contemplating the formation, in
London or the provinces, either of large Industrial Insurance
Associations or small Benefit Clubs, a guide as to the principal
regulations which would be necessary, whether the association
be registered as a Friendly Society, or be made a Joint Stock
Company.

The main clauses of the Rules are also suitable for industrial
VAitTNEusiiip OH TRADE SOCIETIES, Substituting the corresponding
objects and benefits to be obtained by the members.

ON FRIENDLY SOCIETIES. Ill

107. — As, at first sight, the Rules may appear sotneivhat
voluminous, we would explain that, in order to meet every possible
case, a variety of regulations have been brought together, which,
although necessary for a large general society, would not be all
required by smaller institutions, associated in the form of a club
for a jyartieular object. In printing a comprehensive set, our
desire has been to enable parties to select such regulations as may
be necessary for the society they have in vieiv, whether it be a
Sick Club, a Provision for Old Age and Deferred Annuity
Society, or one for the Assurance of Sums payable at Death.

108. — As to the necessity of completeness in Rules. — To secure
brevity, framers of the Rules of Benefit Societies not unfre-
quently leave out clauses, afterwards found to be of vital
importance. We would, therefore, caution clergymen and
others not to take for granted that they are perfectly competent
themselves to frame the regulations required for the society,
the establishment of which they are contemplating. However
small or humble its purpose may be, great care in drawing up its
provisions is of primary importance, and those, who endeavour
to prepare rules for local clubs, should be cautious not to
disregard the necessity of perfect legal accuracy and consistency
in them as an aggregate, otherwise inconvenience and litigation
are sure to arise hereafter in settKng the rights of the members.
Many instances might be cited of either loss to societies, or
injustice to members, which has arisen from an ambiguous or
erroneous wording of the clauses. It may be advantageous that
the benefits offered should be few in number, but it is very
unwise to suppose that it is equally desirable not to make the
Rules so far complete, — without being too voluminous, — as
may be requisite to secure their being fully suited for the
perfect working of the society.

109. — As the Rules were printed before the passing of the
recent Acts, some trifling alterations are necessary to adapt them

112 ON FRIENDLY SOCIETIES,

to tlie present state of the law ; and the reader will be pleased
to substitute 18 and 19 Vict, c. 63, and 21 awd/ 22 VkL,c. 101,
for the 13 and 14 Vict, c. 115, wherever the latter occurs in
the Rules. The following are the most important new provi-
sions : —

Eule IV. (As to Arbitration). — ^XJnder the 21 and 22 Yict.,
c. 101, s. 5, the rules of any society may provide that all disputes
shall be referred to two Justices of the Peace, or in Scotland to the
Sheriff of the County.

Eule VIII. (As to Investment of Funds). — ^By s. 32 of the
Act of 18 and 19 Vict., the funds of the society may be invested
upon any security whatever authorized by the rules, " not being the
purchase of house or land, (save and except the purchase of buildings
wherein to hold the meetings or transact the business of such society,)
and not being the purchase of shares in any joint stock company or
other company, with or without charter of incorporation, and not
being personal security, except in the case of a member of one full
year's standing at least, and in respect of a sum not exceeding one
half the amount of his assurance on life, such member providing the
written security of himself and two satisfactory sureties for repay-
ment, and in case of such member's death before repayment, the
amount of such advance, with interest, may be deducted from the
sum so assured, without prejudice in the meantime to the operation
of such security."

Eule XII. (As to Dissolution of the Society). — Sect. 8 of the 21
and 22 Vict., (1858) provides, that an agreement for dissolution
shall be valid if, instead of stating the exact arrangements intended
to be made, it refers the settlement of the rights of the members
either to the Eegistrar, or to an actuary of five years' standing,
whose decisions are to be final.

Sect. 4 of the Act of 1858, enables any society to change its name,
with the consent in writing of the Eegistrar, and under s. 7, actions
may be brought against any society in the name of the Secretary or
any other officer. Actions brought by the society must still be in
the name of the trustees, under s. 19 of the Act of 1855.

113

tRULES

FRIENDLY SOCIETY.

ESTABLISHED OF-

(Pursuant to Act and Vict., cap. )

CONSTITUTION.

T. Name and Object of the Society.
1. — This society shall be called the

Pkiendlt Society, and is established for the purpose of assuring to
persons of both sexes, between the ages of ten and sixty (and in
special cases at more advanced ages), one or more of the following
benefits, viz., a weekly sum during sickness, with medical attendance
and medicine ; an annuity commencing at once, or at sixty, sixty-
five, or seventy years of age ; the payment of a certain sum at death ;
and endowments for children, on attaining the respective ages of
fourteen, eighteen, and twenty-one, and for adults, at any specified
age ; \_or other contingency. ~\

II. Date of Formation and Place of Meeting.
2. — This society shall be considered to begin, and the first meeting

thereof shall be held, on the day of

185 , at o'clock in the evening; at the first ofiices of the

Society. The offices of the society shall be at in the

city of , or at such other place as the directors may

determine ; and in case of any alteration in the place of meeting of

[t In case of its being desired to enrol the Society under the Joint Stoclc Companies
Act, as <a provincial Life or other Assurance Company, the rules above given would suit with
the modifications required by the Act.]

114 CONSTITUTION.

the society, notice shall be sent to the Kegistrar of Friendly Societies
in England, within seven days after such removal, signed by three
members of the society, and countersigned by the secretary.

3. — The annual general meeting of the members shall take place
at the offices of the society, on the first _________ day in the month

of in each year after the year 18__ . A special general

meeting of the society may be called by the directors of their own
authority, and shall also be called upon a requisition sent to the
secretary, signed by twenty-five members, and fourteen days' notice
of such meeting shall be given by circular to each member, stating
the time, place, and object thereof; and no other business than that
specified in the circular shall be transacted at such meeting.

III. Voting.

4. — Every question submitted to any meeting of the directors or
members generally shall be decided by the votes of the majority of
the members present thereat and entitled to vote ; and every director
shall be entitled to one vote at any meeting of the directors, or of the
members. All votes shall be first taken by show of hands, upon
which the decision of the chairman of the meeting shall be final,
unless a scrutiny be demanded, in which case it shall be forthwith
taken.

5. — No member, except on the question of the dissolution of this
society, shall be entitled to more than one vote, neither shall any
director or member be allowed to vote by proxy, nor shall any mem-
ber be entitled to attend any meeting of the society, or to vote on
any question without producing his certificate of membership, if
required to do so by the chairman of the meeting, nor until he has
been three months a member of the society, and has duly paid his
subscriptions for that period,

6. — In all cases of equality of votes, the chairman of the meeting,
in addition to his vote as a member of the society, shall have an
additional or casting vote.

7. — No officer or member of the society shall be allowed to vote
on any question affecting his individual interest or conduct, nor shall
he be present at the discussion thereof, should the majority of the
members present desire him to withdraw.

CONSTITUTION. 1 1 .')

IV. Arbitration.

8. — Any dispute between the society and any individual member
thereof, or any person entitled to claim through or on account of
any member, shall be referred to arbitration.

9. — At the first meeting of the society after the enrolment of
these rules, five arbitrators shall bo named and elected (none of them
being beneficially intwrested, directly or indirectly, in the funds of
the society), and in each case of dispute, the names of the five
arbitrators shall be written on pieces of paper, and placed out of
view in a box ; and the three whose names are first drawn out by
the complaining party, or by some one appointed by him, shall be
the arbitrators to decide the matter in diffierence, and their decision
sliall be final. — If any of the arbitrators refuse to act, or any vacancy
occurs by death or otherwise, the directors at the fourth meeting of
their board afterwards held shall elect another arbitrator in the place
of the arbitrator refusing, or to supply any such vacancy, who shall
act until the next annual general meeting of the members.

10. — Every member requiring a reference to arbitration, shall
deposit with the secretary ten shillings, to abide the result;
and the arbitrators may direct the expenses of the reference, or any
part thereof, to be paid by such member in such proportion as they
may think fit.

11. — Any member neglecting to attend on arbitration, if sum-
moned to do so, or refusing to answer any question put to him by
the arbitrators, touching the matter in dispute, shall be fined five
shillings for the first refusal, and be expelled the society if he
persevere in such refusal ; and if any member, officer, or other
person, be proved to have tampered with one or more of the
arbitrators, or attempted to do so, he shall be fined ten shillings for
each offtnce, and be subject to exclusion if the fines be not paid
before the next meeting of the board.

V. Altt'rulion und Construction of Hides.

12. — Any of the rules herein contained, or any future; rules of
the society, may be re]K\aled, altered, or added to, at a general
meeting of the members convened for that purpose, by giving to
each member tseven days' notice of the time, i)lace, and object thereof,

Q 2

116 CONSTITUTION.

in pursuance of a requisition for that purpose, signed by not less
than seven members, and addressed to the board of directors, setting
forth tlie exact alterations and additions to be proposed at such
meeting ; but no such repeal, alteration, or addition shall be made,
except with the concurrence of three-fourths of the members present
at such general meeting, at wliicli any amendments relating to the
particular rule to be altered or added to may be proposed; and no
rule not mentioned in such requisition shall be in any respect altered
or repealed, except the same may relate to the subject matter of any
rule so mentioned in the requisition.

13. — All alterations in, or additions to, these rules, shall be duly
enrolled and certified, after which only they shall come into efi'ect,
and be binding on the members.

1 4. — In the construction of these rules the word " member " shall
apply to an ordinary member, or person assured for any one or more
of the benefits of the society, and not to an honorary member, unless
when so expressed ; the word " month " shall be held to be a calendar
month; the word "year" shall mean the society's year, and every

such year shall be taken to expire with the day of

; the word "board" or "directors" shall mean

board of directors; the words "policy" or "policy of assurance"
shall be an assurance for any benefit whatever authorized by these
rules ; and the words, " this society " shall mean and include any
branch or branches thereof ; and whenever any word importing the
singular number or the masculine gender only is used, it shall be
held to include or apply to the plural number or feminine gender, as
the case may be, and vice versa, unless there be something in the
subject or context repugnant to such construction.

VI. Alteration of Rates and Tables.

15. — It shall be lawful for the directors, with the advice of the
consulting actuary, to alter from time to time the tables in use by the
society, and the rates of subscriptions at which members may there-
after be admitted into the society, provided that such tables and
rates, shall not be considered to be in force until a copy thereof shall
be deposited with the Registrar of Friendly Societies in England and
Wales.

CONSTITUTION. 117

VII. Funds.

1(). — Separate and distinct accounts shall be kept of the funds,
receipts, assets, and liabilities of each class of business of the society,
and no class shall in any manner be liable to make good the deficien-
cies in, or be entitled to participate in the profits of, any other class.

17. — Each class shall consist, and be con)])osed, of all contributions
made by members in order to assure for the benefits of the said class.

18. — The funds arising from all the classes shall be invested in
common, (in the manner hereinafter provided,) and the profit or loss
arising from such investments, shall be rateably divided among the
classes, according to the amount of money contributed by each.

lU. — The members of this society shall have an interest in its
assets, and its profits and losses, in proportion to their qualification
in the particular class to participate in the benefits of which they
have become members.

20. — i']ach class shall be entitled to participate in the benefits of
the permanent guarantee and expense fund, in such proportion as the
directors shall from time to time think safe and equitable.

VIII. Investment of Funds.

21. — So much of the funds of the society as may not be wanted
for immediate use, or to meet the usual accruing liabilities, shall, with
the consent of the board of directors, acting on the advice of the
solicitor, be invested by the trustees in such of the securities
authorized by the Act of Parliament in force for the time being
relative to friendly societies, as the board shall direct, and more
particularly in any savings' banks, subject to the provisions of Acts
in force relating to the same, or in any of the Parliamentary stocks or
public funds of Great Britain and Ireland, or at interest upon
Government securities, or in the Bank of England stock, or in the
stock or securities of the Honourable East India Company, or on
mortgage of freehold, leasehold, or copyhold proi)crty, such leasehold
being for a term of years absolute, of whicli not less than thirty
years shall be unexpired, and such copyhold being copyhold of
inheritance in Great Britain or Ireland, or in security of any heritable
property, or in any chartered or other public joint stock bank in
Scotland, or in or upon the security of any county or borough rates

118 CONSTITUTION.

anthorized to be levied and mortgaged by any Act of Parliament, or
on loan to any member of this society, on the security of any policy
of assurance effected therewith on his own life, provided that the
amount of such loan shall not exceed the actual estimated value of
such policy at the time such loan be made ; and it shall be lawful for
the trustees, from time to time, with such consent as aforesaid, to
alter and transfer such securities and funds, and to make sale thereof
respectively; and all dividends, interest, and proceeds which shall
from time to time arise from the monies so laid out or invested as
aforesaid, shall be brought to account by the trustees, and shall be
applied to and for the use of this society, as hereinbefore provided.

IX. Permanent Guarantee and JE,rpen$e Fund.

22. — There shall be created a Permanent Guarantee and Expense
Fund to meet the contingencies attending each class of the society's
business, and the general expenses of management : such fund to consist

of [_C J £5 guarantee shares paid up in full, and of~\ all fines

or fees mentioned in these rules, (except remuneration fees payable to
the officers of the society), and of all monies arising from the sale of
rules, balance sheets, reports, or other documents, published by the
board ; and also of such an annual deduction or percentage on the
other receipts and subscriptions as the consulting actiiary may from
time to time recommend ; and also of all donations that may be made
by honorary members or other friends to the society ; and likewise
of any interest to arise from the investment of such fund.

23. — All expenses and charges of management in carrying on the
business of the society, and all surplus claims upon the society's funds
for benefits assured in any class over and above the amounts respect-
ively applied thereto, shall be defrayed out of the Permanent
Guarantee and Expense Fund ; provided always, that if \j.he pay-
ments which shall have been or inay have to he made out of this fund.,
shall have the effect of reducing the same to less than one-third of the
amount at that time paid up on the guarantee shares, or //"] at any
investigation of the affairs of this society, it shall be found that the
funds of any class, together with the sum or sums for which the
members thereof may have made themselves responsible, are insuffi-

CONSTITDTION. 119

cient to meet the claims upon that class*, or if it shall appear that
such is likely to hecome the case, {^il shall bo laicfid for the directors^
tcith the advice of the consulting actuary^ either to issue an additional
number of guarayitee shares^ on such terms as he may deem just and
proper, or~\ the consulting" actuary shall settle and adjust the claims of
the members interested in that class or classes in which the deficiency
may exist, and may divide among them such portion of the charges
as may be necessary in such proportion per member, and to be payable
or chargeable after such manner as thoy may deem equitable ; and
whatever adjustment shall be recommended by the actuary and agreed
to by the board of directors, shall be binding on all parties ; and any
member refusing or neglecting to comply with such adjustment or
alteration, shall be liable to the fines and other penalties laid down in
these rules.

24. — At the end of the first five years, and every subsequent five
years, investigations into the afiuirs of the society, valuations and esti-
mates of its liabilities and assets, and of the Permanent Guarantee and
Expense Fund, shall be made by the consulting actuary, and if, after all
losses and expenses shall have been satisfied and provided for, any
surplus profit remain, arising from excess of assets over liabilities, the
same shall be [_divided into three parts, one-third part to be allotted by
way of bonus among the holders of guarantee shares, and the other tico-
thirds to be~\ appropriated to each class of the society's business, for the
benefit of the members thereof, in such proportions and manner as
the consulting actuary shall think safe and equitable: provided always,
that any appropriation of surplus profit to the members of the sick
fund, shall be made proportionably to the number of years that each
member respectively shall not have received any benefit from the
funds thereof.

25. — [The holders of the guarantee shares hereinbefore referred to
shall be entitled, during the continuance of the society, to half-yearly
dividends, after the rate of 3 per cent, per annum on the amount
paid up on the same, and by way of bonus, to a share in the before-
mentioned one-third of the surplus profits, (if any), of the society,
that may have been ascertained at guinquennial divisions of profits.
And such participation in the profits shall not entail any liability
whatsoever upon the holders of the guarantee shares, nor shall they be

120 CONSTITUTION.

entitled in respect thereof to any advantaqe or benejit from the society^
beyond the dividends and division of surplus profits above referrrd to.~\
26. — \_The amount paid up on the guarantee shares^ shall not be
withdrawable from the fnnda of the society^ but the riyhts and profits
appertaining to the sam.e shall be transferable^ on payment to the society
of six pence per share^ by the owners thereof to any other parties who
may be approved of by the directors^ and an entry of such transfer
shall be made in one of the books of the society^ and be signed by the
original and new holders of each share^ and by the secretary. ~\

X. Indeinuit)/ to 0(ficers.

27. — The trustees, directors, and all other officers of the society
sliall be and are hereby indemnified and saved harmless, out of
its funds and property, from and against all losses, cost, charges,
damages, and expenses, which they may incur or be put unto in or
about the execution of their respective offices, trusts, and services ;
nor shall they be liable for any banker, broker, or other jierson, with
whom the trust monies shall from time to time be deposited for safe
custody, investment or otherwise, nor for any involuntary loss, mis-
fortune or damage whatsoever, which may happen in the execution
of their respective offices, services, or trusts, or in relation thereto ;
and none of them shall be answerable for any act or default of any
other of them, nor for the insufficiency or deficiency in the title or
otherwise, of any security whatsoever, in which the money of the
society may be laid out or invested, unless the loss, arising from such
means, shall happen through their own neglect or defiiult ; nor unless
he or they shall, in pursuance of 13 and 14 Victoria, c. 115, s. 14,
make a declaration in writing under his or their hands, to be deposited
with the registrar of friendly societies, that he or they respectively
are willing to be so answerable, and then only to such amount as
shall be specially named in such declaration aforesaid.

XI. Power to Amalgamate.

28. — It shall be lawful for this society to become united and in-
corporated with, \_or to underwrite the whole or partof its liabilities /»,]
any other friendly or life assurance society or societies, duly established
according to law, upon such terms as the consulting actuary may

CONSTITUTION. 121

advise, and as may be approved by the major part of the trustees
and board of management of both societies.

29. — The directors may also incorporate the members of any
existing society, so as to become part of this society, upon such
terms as may, upon the recommendation of the consulting actuary,
be mutually agreed upon. And the limit as to age, fixed in these
rules, as regards the admission of new members, shall not extend to
any person, being a member of any existing society, who shall become
a member of this society under this rule.

30. — [The directors shall also have power to contract tvilh any other
friendly society whateoer, and to underwrite, undertake, or reassure
all or any of the liabilities of such society, upon such terms as may he
approved by the considtiny actuary.^

XII. Dissolution of the Society.

31. — No dissolution of this society shall take place so long as any
of the intents and purposes in these rules remain to be carried into
effect, unless the votes of five-sixths in value of the then existing
members, and also tlic consent in writing of all persons then receiv-
ing, or then entitled to receive, relief from the society, be first had
and obtained ; and for the purpose of ascertaining the votes of such
five-sixths in value, every member shall be entitled to one vote, and to
an additional vote for every five years that he may have been a
member ; provided always that no member shall be entitled to more
than five votes in the whole ; and in all cases of dissolution, the
intended appropriation or division of the funds, or other property of
the society, shall be fiiirly and distinctly stated in the proposed plan
of dissolution prior to such consent being given : and it shall not be
lawful for this society by any rule to direct the division or distribu-
tion of such funds or property, or any part thereof, to or amongst
the several members of this society, other than for carrying into effect
the general intents and purposes declared by these rules, as originally
certified ; and all such rules for the dissolution or determination
thereof, without such consent as aforesaid, or for the distribution or
division of the stock or funds, contrary to the rules, shall be void and
of none effect ; and in the event of such division or misappropriation of
the funds, without the consent liereby declared to be requisite, any

122 OFFICERS AND MANAGEMENT.

trustee or other ofl&cer or person aiding or abetting therein shall be
liable to the same penalties as are provided in the act 15 and 16
Vict., c. 115, in case of fraud. In case of the dissolution of the
society, notice shall be sent to the registrar of friendly societies in
England seven days before or after such dissolution, signed by the
secretary and three members of the society.

OFFICERS AND MANAGEMENT.

XIII. Appointment and Removal of Officers.

32. — For the conduct and management of the affairs of the society,
the follovi'ing officers shall be appointed, namely, — trustees, directors,
a treasurer, secretary, consulting actuary, banker, solicitor, auditors,
medical officers, and visitors.

XIV. Trustees.

33.—

shall be and are hereby appointed the first trustees of this society,
and shall be ex officio members of the board of directors.

34. — In case the said trustees, or any or either of them, or any
future trustee or trustees to be appointed as hereinafter provided,
shall die or be desirous of resigning or be discharged from, or shall
become incapable of acting in the trusts in him or them reposed by
these rules, or any amendment thereof, or be guilty of any gross
neglect or improper conduct (of which the board of directors shall be

the only judges) or shall remove from to a distance

of more than ten miles ; or shall cease to have a place of business or

residence in , so that the performance of their duties

may become inconvenient to them ; or if a difficulty of access to them
shall impede the business of the society, or if they shall become
bankrupt or insolvent, or shall compound with their creditors, the
secretary shall convene a special meeting of the members, who shall
hear and determine thereon, and may thereupon remove such trustees
or trustee; and as often as any new trustee or trustees shall be
elected or appointed, the trustee or trustees so removed shall cease to
be a trustee or trustees, and shall be incapable of acting as a trustee

OFFICERS AND MANAGEMENT, 123

after such removal, or after the appointment of a new trustee or
trustees shall have taken place. Any vacancy in the office of trustee,
from any cause whatever, shall be filled up at a special general
meetino- by the members then present, and after every fresh appoint-
ment of a trustee or trustees, the resolution of the appointment shall
be sirrned by the chairman of the board of directors for the time
beinff, or by the chairman of the meeting at which such appointment
shall have been made, and by three members and the secretary, and
countersigned by the trustee so appointed ; and the same shall be
duly entered in the minutes of such meeting, and sent to the Registrar
of Friendly Societies in England pursuant to 13 and 14 Vic, c, 115
s. 14; and the estates, monies, securities, funds, deeds, papers and
property of the society shall become at once vested, without any
assignment, in the continuing and newly appointed trustee or trustees,

35. — All deeds, writings, and securities to and from the society
shall be made and taken in the names of the trustees or trustee for
the time being, and shall be deposited with the bankers of the society,
to be appointed by the board of directors, or with such other person
as they may deem fit, in a box furnished by the society. And no
documents whatever shall be allowed to be removed from such box,
unless by an order of the board, signed by at least three directors
then present,

3G. — In case it shall be deemed necessary or expedient to bring or
defend any action, suit, or prosecution at law or in equity, touching
or concerning the property or assets, rights, or claims of this society,
or touching or concerning the breach or non-performance of any of
the articles, matters, and things herein contained, or of the conduct
of any member or officer of this society, the same shall be brought or
defended in the uames or name of the trustees or trustee for the time
being, and he or they shall be indemnified from all loss or damage to
be by him or them sustained in consequence thereof; but no such
proceeding shall be taken or defended until the approbation of a
majority of the members present at a special meeting to be convened
for that purpose, shall be first had and obtained ; neither shall any
trustee do any act in his official capacity, but by the written order of
the board of directors, such order to be signed by the chairman of
the meeting at which the same is made, and to be attested by the

u 2

124 OFFICERS AND MANAGEMENT.

secretary. It shall be lawful for the trustees of this society, with the
consent of the members thereof, to purchase, hire, or take upon lease,
any room or premises, for the purpose of holding therein its meetings,
or for the transaction of business relating thereto, and to hold the
same in trust in and for the use of this society, and to sell, exchange,
let, and demise the same, in whole or in part, with the consent as
aforesaid.

XV. Board of Directors.

37- — The board of directors shall consist of the trustees, treasurer,
and of not less than six, nor more than ten, elected members, four of
whom (not being the trustees) shall annually go out of office by
rotation after the first two years.

38.— Messrs.

shall be and are hereby appointed the first and present directors of
the society, with power to increase their number within the before-
mentioned limits.

39. — The election of all future directors, in the places of those
retiring by rotation, shall take place by ballot, at the annual general
meeting in each year, except in case of vacancy by resignation or
death during the year, when the same shall be filled up by the
remaining directors at their next monthly meeting.

40. — One of the directors in rotation, with the treasurer and
secretary, shall attend all meetings for the receipt and payment of
money within the hours specified in these rules, or at such other time
as the directors may from time to time think fit. Any director failing
to attend in his rotation at any meeting for receipt of subscriptions,
or to procure a substitute, shall pay a fine of two shillings and six
pence, or if he fail to be present within the appointed hour, he shall
forfeit one shilling.

XVI. Qualifications of Directors and Auditors.

41. — The qualification of any future director or auditor of this
society, elected after the first year, shall be the holding, at the time

of his election, of a policy of assurance, for £ , with the society,

on his own life, for the Avhole continuance thereof; or of an endow-
ment assurance, on his own life, of at least £ , or of a policy for

OFFICERS AND HIANAGEMEXT. 125

an annuity, immediate or deferred, upon his own life, of at leas

£> ; or an assurance against sickness, in respect to himself, of at

least (5.9.) per week, and upon which he shall have duly made his
payments for not less than six calendar months.

XVII. Power of Directors.

42. — The board of directors, for the time being, shall, subject to
the provisions of the act 13 and 14 Vict., c. 115, generally and
specially direct and manage the affiiirs and business of the society,
according to the rules which from time to time may be in force for
the government thereof, and shall in all things act for and in the
name of this society; and all acts and orders under the powers
delegated to them, shall have the like force and effect as the acts and
orders of this society at any general meeting. The board shall fill
up all vacancies in the offices of this society, occurring during the
year, except where otherwise provided for by these rules ; and the
persons appointed shall continue in office until the then next annual
general meeting.

43. — The board shall have power to accept or refuse any proposal
for assurance made to this society, or to accept the same at any
special or increased rate, or to refuse the same without being compelled
to assign any reason for such refusal ; or to insert in, or to endorse on
any policy by them issued, such special clauses, agreements, and stipu-
lations, as they may deem necessary and expedient; and all assurances
effected by the society, and all business transacted, shall be done in
such manner, and upon such terms and conditions, as the board may
think proper.

44. — It shall be lawful for the board of directors to accept, upon
such terms as they in their discretion shall think fit, with the advice
of the consulting actuary, the surrender of any policy issued by the
society, and also to redeem or re-purchase any annuity granted by
the society, and to pay out of the funds or property of the society,
the money required for such surrender, redemption, or re-purchase.

45. — The board of directors shall have power to appoint and keep
in emjiloy such other officers, clerks and servants as they may deem
the business of the society to require, and to remove them or either of
them at pleasure, and appoint others in their stead, and to fix the

126 OFFICERS AND MANAGEMENT.

duties from time to time to be performed by them respectively, and
to allow them respectively such remuneration, by way of salary,
wages, commission, or otherwise, as they may deem fit and proper.

XVIII. Meetings of Directors.

40. — The board of directors, or an executive committee thereof,
shall meet for business twice in every month, or oftener, as the
circumstances of the society may require, and they shall annually
appoint out of their own body, a chairman and deputy chairman, and
in the absence of both chairman and deputy chairman at any meeting
of the board, the directors present shall appoint a chairman to preside
at the same.

47. — The board of directors shall have power to hold special meet-
ings of their own body, and to adjourn their ordinary and special
meetings, as well as all general and special meetings of the members
of the society, as occasion may require.

48. — The board may divide themselves into rotas, or executive and
other committees, for the conduct of the business, and delegate such
of their powers and duties to the same as they may think fit : (such
rotas, or executive or other committees to be open to the other
members of the board ;) provided, however, that no rota or executive
committee shall continue to act longer than six calendar months at one
time, without some change of members. That for the transaction of
general business, three elected directors shall form a quorum. If an
executive committee be appointed, which at any time shall consist of
not less than five members of the board, then the full board shall also
meet at least once every three months, to receive a report from the
executive committee, as to the business of the society.

XIX. Ilesignation or Removal of Directors and Auditors.

49. — Any director or auditor ma}'^ at any time vacate his office
upon giving seven days' notice in writing of such his intention to the
secretary. If any director or auditor shall at any time after his
election, cease to keep in force the qualification necessary for the
holding of his office pursuant to rule 41, or shall become bankrupt,
or be declared insolvent, or die, or resign, his office shall become
vacant, and if during the year, the vacancy shall bo filled uj) by the

OFFICERS AND MANAGEMENT. 127

board, and any director or auditor so elected by the board in the place
of any deceased or resigning director or auditor, sliall be considered
as his substitute, and shall go out of office by rotation at the same
time and in the same manner as the director or auditor in whose
place he is elected.

50. — Any director or auditor, not being disqualified, retiring from
office by rotation, shall be eligible to be reelected immediately or at
some future time, and shall after such reelection be considered, for all
purposes of retirement by rotation, as a new director or auditor of
the society.

51. — At the annual general meeting of the members in each year,
the directors and auditors going out of office, shall, for all the pur-
poses of the said meeting, or any adjournment thereof, be considered
as the directors and auditors in office, and be empowered to act as
such, the appointment of their successors having taken place, not-
withstanding.

XX. Treasurer.

52. — is hereby appointed the first treasurer

of this society, and he shall be ex officio a member of the board of
directors.

53. — All monies received by or on account of the society by the
treasurer shall, on the same day, or at latest the day following the
receipt thereof, by him be paid to the bankers of the society for the
time being ; and the book in which the entry of monies so paid, or
the bankers' receipt in lieu thereof, shall on the same day be deposited
by him with the secretary, who shall cause it to be produced at the
next meeting of the directors.

54. — The treasurer shall from time to time, as fixed by the board
of directors, deliver to them an account of all the receipts and pay-
ments of money had and made by him on account of the society.

55. — The future appointment, removal, and remuneration of the
treasurer shall vest in the full board of directors, and upon the re-
moval or resignation of the present treasurer, or any future treasurer
to be hereafter appointed, the treasurer so removed shall be incapable
to act as a treasurer after the date of such removal, and he shall cease
to be a member of the board of directors ; and he shall, upon demand,

128 OFFICERS AND MANAGEMENT.

deliver up and pay over all the monies, funds, and property remain-
ing unaccounted for or unpaid by him to the society.

56. — The present or future treasurer shall give such security,
pursuant to the act 13 and 14 Vict. c. 115, s. 11, for the faithful
discharge of his duties, as the board may from time to time require.

XXI. Secretary.

57. — __is hereby appointed secretary to this

society.

58. — The secretary shall, under the control and instruction of the
board of directors, conduct and manage the business of the society ;
shall prepare and transmit the returns required to be made by the
act of 13 and 14 Vict., c. 115 ; shall keep the books and accounts
of the society ; shall send all letters, and generally conduct the cor-
respondence of the society.

59. — For the payment of petty current expenses, the secretary
shall from time to time receive a cheque of ten pounds, which shall
be duly renewed on a proper account of his former payments, to the
amount of the last cheque received by him, being made to, and
allowed by, the board.

XXII. Consulting Actuary.

60. — A consulting Actuary shall be engaged to make a valuation
of the affairs of the society at the end of every five years, to whom
also all questions, as they arise, relating to the rules and tables or the
benefits of members and the financial condition of the society, shall be
specially referred. The report of the auditors shall be countersigned
by the actuary, and shall be read at the annual meeting.

CI. — is hereby appointed consulting

Actuary to this society.

XXIII. Bankers.

62. — The board of directors sliall have power from time to time to
select the bankers of the society, and the signature of a trustee shall
not be necessary in any case to cheques drawn on the society's account.
No payment shall be made out of the society's funds to the amount of
£5 and upwards, except by cheque, to be signed by not less than

OFFICERS AND MANAGEMENT. 129

three members of the board of directors, and countersigned by tlie
secretary, and all payments so made shall be valid and cfFcctual as
between the trustees and the members.

63. — All money received from the members shall be paid in to the
bankers to the credit of the society, by the Treasurer, Secretary, or
other persons receiving the same, as the board of directors shall appoint.

XXIV. SoUclfor.

64. — shall be the first solicitor of the

society, and it shall be his duty, and the duty of any solicitor who
shall be appointed by the board of directors in case of a vacancy
(which latter solicitor, as well as the said solicitor hereby appointed,
shall be removable for misconduct) to transact all the legal business
of the society, under the direction of the board, for which he shall
receive a fair and reasonable remuneration ; and should any dispute
arise as to his charges, the same shall be referred to the decision of
the board, whose determination shall be final,

Q5. — The solicitor shall, at any time, upon the request and at the
expense of any mortgagor, furnish him, on receipt of a proper fee
for the same, with an abstract of the title, or copy of the security

given by him.

XXV. Aiulltors.

GQ. — At the annual meeting of the members in each year, two
auditors (not being directors) shall be elected by ballot from among
the members; who, with one to be appointed by the board of
directors as public auditor, shall examine and audit all accounts
previous to the next ensuing yearly meeting.

XXVI. Medical Officers.

67. — There shall be medical officers of this society, each

duly qualified, and having a legal title to act as a physician or surgeon.
The appointment, remuneration and removal of such officers shall be
in and be determined upon by the directors. One of them shall, if
required, examine all persons proposing to make an assurance with
the society, and shall apply for such written particulars and infor-
mation connected with every case as shall be necessary or expedient
for the knowledge or guidance of the board. Tlie medical officer

130 OFFICERS AND MANAGEMENT.

designated by the board, or his deputy or assistant, shall at least once
in every week, visit any member of the society claiming weekly
allowance on the funds through sickness, and shall report thereon as
may be directed by the board.

XXVII. Visitors.

68.^From time tO time, two or more members, one of whom at
least, if necessary, shall be a female, shall be appointed by the board,
subject to their direction, as visitors ; and in case of resignation or
illness, their places shall be supplied from among the other members.

69. — They shall periodically visit all members claiming or receiving
sick allowance, and they shall receive such remuneration as the board
may think fit.

XXVIII. Local Branches.

70. — If at any time it shall appear to the directors that the interests
of the society shall require the same, they shall have power to create
local branches of this society, and to vary, change, and discontinue
the same from time to time.

71- — Each branch shall be under the management of an agent, or
committee of two or more local directors, (to be annually appointed
by, and to be under the control of, the board of directors,) who shall
delegaL. such powers, and allow such remuneration to the said agent
or committee, and vary the same, and make such regulations for their
guidance and conduct, and in respect to the qualification or interest
in the society they should possess, as from time to time the board
may deem expedient ; provided always, tliat no resolution or pro-
ceeding of any agent or local committee formed under this or any
future rule, shall be binding on the society until it shall have received
theappro valor confirmation of the board of directors for the time being.

72. — The agents or local committees may accept, imder the super-
intendence of the board of directors, proposals for assurance with the
society, receive premiums from, and pay the weekly allowance due
to, all persons assured through their agency, and transact such other
business, through the direction of the board, as may pertain to the
duties of their office.

73. — Every agent or branch of this society shall periodically, at

MEJIBEBS. 131

such time or times as the board may fix, transmit a return of the
amounts received and paid by him or them since tlic date of his or
their last return, on behalf of the society, together with all other
necessary documents and information required by the board.

XXIX. Agents.

74. — In case of simple agencies, one or more of the members resi-
dent in the agent's districts may be appointed to see to the proper
discharge of his duties.

MEMBERS.

XXX. Admission of Members.

75. — Any person, male or female, between the age of 10 and 60,
in good health, and of good moral character, may, subject to the
approval of the board of directors, become an ordinary member of
the society, and assure for any one or more of the benefits eet forth
in these rules, on making application to the board in the . j m
appended hereto ; but no minor shall be competent, during his
minority, to hold any office in the society.

70. — Any person making such application shall deposit with the
secretary, in advance, one month's or week's subscription on the
benefit proposed to be assured by him; and shall also produce, before
admission, a register of his birth or baptism, or some other satis-
factory proof of age, together with a certificate of health, signed by
a medical officer of the society ; but in the event of his not being
admitted, the deposit shall be returned to him by the secretary.

77- — The date of a member's admission shall, in all cases, count
from the first payment made by him, after his proposal shall have
been accepted by the board.

XXXI. Houorav)/ Members.

78. — Any person, upon the payment of an annual subscription of
, or a life subscription of , shall be deemed an honorary

member of this society.

79. — No honorary member shall vote at any meeting or in any
manner particij^atc in the profits or losses of this society.

s 2

132 MEMBERS.

XXXII. Payments.
{^0. — All payments by members, wlietlier single, annual, quarterly,
monthly, or weekly, shall be made in advance.

81. — A member may, at the time of his admission into the society,
or at any subsequent period, redeem or pay up the whole of his
subscriptions, on one or all of the benefits, for which he may be
assured, in one sum; and whenever he may have so paid up his
subscriptions for any one or more benefits or assurances, the said
benefits or assurances shall continue in force, exempt from forfeiture,
(subject nevertheless to the rules) notwithstandintr that his subscrip-
tions for any other benefit or assurance may fall in arrear and remain
unpaid.

g2. — No member shall be entitled to receive the benefit of his
assurance or assurances until he has been six clear calendar months
in the society, and has also made all the payments due in that time ;
but any member may immediately become free and entitled to his
benefit by paying down in one sum the extra amount of four months'
subscriptions, in addition to his ordinary subscriptions to be made
during the same period ; and this rule shall apply to any member who
may, at any time subsequent to his entrance into the society, be
desirous of increasing the benefit or benefits for which he may be
assured;

XXXIII. Fims.
83 — Any member failing to pay his contribution at any meeting
for the receipt of subscriptions, shall, for the first two months' defaults,
be fined five per cent, on the amount of the arrears. If the arrears
exceed three months, he shall pay a fine equal to one-sixth of the
amount of arrears then due, and if all arrears of subscriptions or fines
be not paid before the end of six calendar months, such member
shall forfeit all claims to those benefits in respect of which the sub-
scriptions were due, as well as all monies previously paid on the
same ; provided nevertheless that if any benefit assured by this
society, shall become void in consequence of any non-payment of the
premiums from time to time falling due thereon, it shall be lawful
for the board of directors to re-establish or revive such benefit at such
terms and at such period thereafter, not exceeding six calendar
mouths, as they shall think proper.

MEBIBEKS. 1.33

XXXIV. Increa.yc, decrease, or sale of Benefit.

84. — A member under fifty years of age may, at any time after
his admission into tlie society, increase the amount of any benefits
for wliich he may liave assured on admission, or, having only
assured for one benefit, may subsequently assure for any other
benefit or benefits either continuino- his original benefit or cancelling
the same, upon producing, if deemed necessary, satisfactory medical
evidence of the unimpaired state of his health, his monthly or other
subscription for such increase being calculated according to his in-
creased age ; his original subscription and the benefit assigned thereby
remaining the same.

85. — If any change in the occupation or abode of any member,
should at any time render it equitable or expedient that the board of
directors should consent and agree to determine or cancel any of the
assurances eff'ected between such member and this society, or if any
member shall, from loss of employment or other unforeseen circum-
stances, not occasioned by his immorality or improvidence, be unable
to continue his subscriptions, it shall be lawful fur the board to allow
sucli member to determine or cancel any one or more of his assurances,
or part of any assurance, without forfeiting any other or part of an
assurance ; and the then value of the assurance or part of assurance
so determined or cancelled shall be applied in reduction of the future
premiums on that assurance or part of assurance remaining in force ;
or the board may grant to such member in lieu thereof another
equivalent policy, free from all further payments to be made by him,
or upon such other terms as they may think fit, and as may be fixed
by the consulting actuary as just and reasonable: and no member
shall in any other way sell or assign or transfer any benefit or
assurance effected by this society, and any agreement made for any
such i)urpose shall be null and void, and <very such benefit or assu-
rance, together with all subscriptions paid thereon, or in respect
thereto, shall be forthwith forfeited for the use of this society.

XXXV. Change of JRes'idence.

86. — Any member changing his place of abode shall give notice of
the same to the secretary within fourteen days of such change, and
any member neglecting so to do shall be fined .

1^4 MEMBERS.

87. — Any member may be transferred from this society or from
any branch thereof to any other branch, upon giving due notice in
writing to the secretary ; or if any member shall remove from the
limits of this society to any place in which a friendly society, not
being a branch of this society, but founded and conducted upon the
same principles, and adopting the same rates as this institution, shall
have been established according to law, the board shall have power,
with the consent of such member, to transfer his assurance to such
society, and pay thereto such a sum, out of the funds of the class to
which he may belong, as may be recommended by the consulting
actuary, and agreed to by the majority of the boards of both societies :
the subscription and benefit of the member in all cases continuing
the same.

88. — The assurance of any member of another society, upon his
coming to reside within the limits of this society, may in like manner
be transferred, either temporarily or permanently, on his providing
such evidence and his subscribing such declaration as maybe prescribed
by the directors, and conforming to the rules in all respects.

89. — Any member may, (in time of peace) with the sanction of
the board of directors, travel and reside in any part of Europe, (except
Turkey and the Levant,) the British Colonies, and that part of
America 35° north or south of the equator, without forfeiture of
the benefits for which he may be assured, provided that he previously
make such arrangement respecting the payment of his subscriptions,
cither by instalments during his absence, or within three months
after his return, together with interest thereon, as the board may
deem just and equitable : upon fulfilling which, and producing, if
required by the directors, satisfactory proof of the unimpaired state
of his health, he shall be reinstated, as if no such absence had occurred.

90. — No member, during the period of his residence out of England,
shall receive any allowance to which he may be entitled from the
sick fund.

XXXVI. Members mai/ inspect Books.

91 — Any member may inspect his account in the society's books,
during the time that the books are open for the receipt of subscrij)-
t'uma, and any member may have a copy of his account on applying

MEMBEnS.

135

to the secretary, after six days' previous notice in writing for that
purpose, and the payment of sixpence.

XXXVII. Alteration of Trade.

92. — Any member, who shall, at any time subsequent to his
admission into this society, change his trade or occupation, shall give
notice thereof to the secretary : and if his new trade or occuiiation
be considered by the board as hazardous, they shall have power, with
the advice of the consulting actuary, at their own discretion in each
case, to make a proportionate increase in the amount of subscription
to be paid by the said member to keep his benefit in force, or tlie
board may purchase the same from him as laid down in these rules.

XXXVIII. Suspension.

93. — If at any time after a member's admission into the society,
doubts may arise as to his age, or as to the truth of any statement
made at admission, or on any other point which the directors may
deem it necessary to investigate, it shall be laAvful for them to call
for such evidence as they may require, and in the meantime to suspend
such member's benefits until satisfied as to the point at issue, subject
to the member's right to have recourse to arbitration as hereinbefore
provided.

XXXIX. Exclusion.

94. — If any member, having in his possession any sum of money,
the property of, or efiects belonging to, this society, shall fraudulently
withhold, or attempt to withhold the same, he shall, upon satisfactory
proof to the board of directors, be fined double the amount of all
the monies so withheld or attempted to be withheld.

95. — If any member, upon satisfactory proof as aforesaid, be found
guilty of such offence a second time, or shall neglect or refuse within
ten days to pay the fine imposed upon him as above, or shall be
convicted of felony or any other infamous crime, or shall be proved
to be fallen into confirmed habits of intemperance, or if he shall
knowingly recommend for membership any person not eligible,
according to the rules of this society, or if he shall receive sick
allowance from any other friendly society without giving notice to

130 LIFE ASSURANCE.

this society, or if he shall know of any deception or fraud being
practised on the funds of the society by any other member, without
giving immediate notice thereof to the secretary, and such proof
thereof as may be in his power, or if he shall while receiving sick allow-
ance, be found drinking in a public-house, beer-shop, or in any place
connected therewith, or be found intoxicated, gambling, transacting
any business, or serving in a shop, or imposing or attempting to impose
on the funds by feigned sickness, or by any other deception, or doing
any wilful act, whereby his recovery from sickness may be retarded,
or if he shall refuse to declare ofF the funds of the society, as laid
down hereinafter, he shall for ever be excluded from the society, and
forfeit all his interest in the benefits or funds thereof.

AS TO LIFE ASSURANCE.
XL. Termg.

96. — The society will grant (according to Tables appended

to these rules) policies of life assurance to any person between the

ages of and for any sum not exceeding £(100) to

become payable at the end of one month after satisfactory proof
shall have been given to the directors of his death.

97. — Any person so assuring shall give a reference to two
respectable persons (one being of the medical profession, if required
by the board) to corroborate his own statement of good health.

XLI. Forfeitures.
98. — Any life assurance policy issued by this society (together with
all premiums paid in respect thereof) shall be forfeited and become
void, if the monthly or other payments be not duly made, or if
the person assured therein shall, without the permission of the board
of directors first had and obtained, go beyond the limits allowed by
his policy or by rule 89, or if he shall die by the hand of justice, or
in, or in consequence of, a duel or fight, or by justifiable homicide,
or by suicide ; provided however that in the last-mentioned case, it
shall be lawfid, but not compulsory, for the directors to return to the
representatives of the deceased, a sum not exceeding one-half of the
total amount of premiums received on his policy, if the same has
been two full years at least in force.

LIFE ASSURANCK. 137

99. — If any policy of assurance shall become forfeited, so also shall
any sum or sums which may have been added thereto by way of
bonus.

XLII. Special RiAs.

100. — In any case in which a person, on whose life an assurance
may be efifected by the society, shall go or travel beyond the limits
allowed by rule 89 or by his policy, or shall insure any other risk
not embraced in the said policy, it shall be lawful for the board of
directors, upon such terms and conditions and upon the payment of
such extra premiums as they may think proper, to enlarge the terms
of the policy so as to embrace the increased risk.

XLIII. Loss of Policy.

101. — Should any member, who may be assured for a sum of money
at death, lose or mislay his policy of assurance, he may procure another
on application to the board of directors, on paying a fine of 2s. 6d.,
and giving such indemnity to the society as the directors may require;
but if the policy cannot be produced after the death of the person
assured thereby, by the person who, at the time of making application,
shall, to the satisfaction of the board of directors, prove himself
entitled to receive the sum assured by the said policy, it shall be
lawful, but not compulsory, for the board of directors, notwithstand-
ing the policy may be lost or mislaid, to pay the sum assured thereby,
upon the personal indemnity, against the consequences of the loss or
mislaying of such policy, of any person or persons, with whose
character and responsibihty the board of directors shall, in their
discretion, be satisfied.

XLIV. Payment of Claims.

102. — A notice of the death of any member shall be furnished to
the secretary, accompanied by a certificate of burial, signed by the
minister officiating at the interment, or by a coroner, or some other
competent person ; and the amount assured shall be paid within one
month after the next meeting of the board, or the directors may, at
their discretion, if required, advance a portion thereof before the
funeral of the deceased.

138

SICKNESS ASSURANCE.

103. — The directors shall have power to require, where they mav
deem the same necessary, a satisfactory certificate from a householder,
identifying the deceased with the person assured in the policy.

AS TO SICKNESS ASSURANCE.

XLV. Terms.

104. — The subscriptions payable for sickness allowance shall be
according to Tables appended to these rules.

105. — No member shall be allowed to assure for a weekly allow-
ance in sickness exceeding three- fourths of his average weekly income
or earnings.

106. — Any member assuring for a weekly sum in sickness, and
also for a deferred annuity of not less than half the sanie weekly
amount, shall be entitled to his full allowance during sickness for a
period not exceeding fifty-two weeks whenever it shall occur, and half
allowance thereafter as long as it shall continue ; provided in all cases
such allowance shall cease when the deferred annuity commences.

107 — Any member assuring for a weekly sum in sickness, but
not also for such deferred annuity, shall be entitled during the con-
tinuance of any sickness to his full sickness allowance (or full pay)
for fifty-two weeks, and to one-half (or half pay) for the remainder
of the sickness, provided such sickness do not continue more than two
years in the whole ; but he shall not be entitled to full pay again
before fifty-two consecutive weeks have elapsed from the last pay-
ment on account of any sickness ; and any claim made by him on
the funds before the expiration of such fifty-two weeks shall be con-
sidered as on account of the same sickness, and he shall receive half-
pay only.

108. — When any such member shall have received fifty-two weeks
of full pay on account of any one or more attacks of sickness, ho
shall be reduced to half-pay for any subsequent sickness, until he
sliall have been altogether ofi" the funds for fifty-two consecutive
weeks, when he shall again be entitled to full pay.

109. — No female member shall be allowed payment for any sick-
ness during the first month after confinement ; but every married
female member who shall pay per month in addition to her

SICKNESS ASSUUANCE. 139

other payments for not less than ten months previous to her
confinement, shall receive per week during the said month.

XLVI. AUoivance.

110. — Any member claiming on the sickness fund shall give notice
to the secretary in the form appended to these rules ; and his allowance
shall commence on the same day, if the notice be received by the
society before twelve o'clock, if after that time, on the following day.
Such member shall then be supplied weekly with a sick paper, upon
which the medical officer and visitors of the society shall enter
regularly the dates when they see the sick member, and the then
state of his health ; and on the following Saturday, and every Satur-
day while the sickness of such member lasts, his sick allowance for
the preceding week shall be paid on production of his weekly sick
paper at the offices of the society.

111. — Any member residing beyond the district where his pre-
miums are paid, who may claim on the sickness fund, shall give
notice to the secretary in the usual form, but accompanied with the
certificate of a respectable medical practitioner residing in the locality,
setting forth the nature of the member's disease, and its rendering
him incapable of work. Such member's allow^ance shall then be
forwarded to him, deducting the expenses of sending the same ; and
this medical certificate shall be renewed every fortnight, or no further
allowance will be sent.

1 12. — No member shall be required to pay his sick fund subscrip-
tion during the time he may be receiving allowance from the fund,
and credit shall be given him for such time, and on such terms as
the Directors may deem just and proper, for any subscriptions which,
during his sickness, may be due for other benefits assured by him.

XLVII. Declaring off the Funds.

1 13. — On the day when the medical officer shall declare a sick
member to have recovered from his illness or incapacity for labour
his allowance shall cease ; and on receiving his last weekly allowance,
the said member shall sign a declaration of recovery in the form
appended to these rules.

114. — Should any sick member, on the report of the medical

T 2

140 SICKNESS ASSURAKCK

officer, refuse so to declare oflf* tlie sick fund, the directors shall appoint
a committee of three members holding assurances against sickness,
and two medical officers, to examine and report on the case ; and,
should a majority of these five persons state that such member is in
a fit state to resume his usual employment, he shall forthwith declare
off the funds or be excluded from the society.

XLVIII. Leaving Home.

115. — No member receiving sick allowance, or claiming medical
aid, shall leave home, except with the written permission of the
medical officer, setting forth the hours at which he may walk out
for air or exercise. Any member leaving home without such per-
mission, or being absent from home at any other than the hours
sjDccified therein, shall be fined 2s. Qd. for the first offence, 5^. for the
second, and for the third offence he shall be excluded from the society.

XLIX. Limitation of Alloivance.

116. — No member shall be entitled to claim upon the funds or to
receive medical attendance or medicine on account of any sickness
with which he may have been wholly or partially afflicted at the
time of his admission, or on account of any accident, illness, or
incapacity for labour brought on or occasioned by permanent in-
sanity, intemperance, or immorality, or by fighting, wrestling, or
any unnecessary exertion or exercise (of which the medical officer
of the society shall be the sole judge), or by any hurt received by
working at any other than the ordinary trade of such member, as
set forth by him in his declaration at the time of his admission.

117. — In case of palsy, blindness, accidents, or any affections
likely to continue an indefinite period, and which do not entirely
incapacitate a member, it shall be lawful for the member so afflicted,
if he be able, partially to follow his employment, subject however
to an arrangement with the board, who shall have power to fix the
amount thereafter to be paid by the society, in respect of or in lieu
of his allowance as assured. If the member shall be vuiable partially
to follow his employment, the case shall be submitted to three
arbitrators, who shall fix the amount thereafter to be paid him by
the society.

SICKNESS ASSURANCE. 141

1 18. — No sick allowance is to be paid to any member, who shall
have been in arrear with his subscriptions or fines within two months
of his claimino- on the funds.

119. — No member confined in a lunatic asylum, or debtors' or
criminal prison, shall receive any sick allowance durina* the period
of his confinement, neither shall any member in the police force be
entitled to sick pay for any injury he may receive in the performance
of his duty, unless he shall have insured specially ao-ainst such
contingency; nor shall any member receive any allowance for sickness
during such time as he or she shall be in a workhouse.

120. — In all cases of accident to the person, in which damages
are awarded for the injury or injuries received, the society shall have
a claim for sick allowance granted to the member during the illness
consequent thereon, to be repaid to it from the amount of damages
given.

121. — In cases of permanent bad health, or total inability to work
arising in consequence of injuries, the society, having granted its
bounden allowances, shall only have claim to certain proportion of
the damages given, to be decided by arbitrators selected for the
occasion. If no legal proceedings are taken by the individual mem-
ber, the society may act on its own responsibility.

L. Medical Aid,

122. — Any member assured for an allowance in sickness may, by

an additional subscription of ■ per month, become entitled to

receive medical attendance and medicine from the medical officer of
the society during sickness or accident. Any member may also

assure the like benefit for any children, tmder ■ years of age, by

an additional payment for each child, of ■ monthly.

123. — A member's right to receive medical advice or medicine,
either for himself or his children, shall commence at the expiration
of six months from the date of his first payment to assure the same,
and shall cease only with his assurance against sickness. Any
member entitled thereto may claim medical aid and medicine without
declaring on the funds.

142

AS TO DEFERRED ANNUITIES.

LI. Terms.

124. — Any member may assure for a deferred life annuity for
himself, or on the Hfe of another, to commence at the age of sixty
or upwards, and payable yearly, half-yearly, quarterly, or monthly,
as may be previously agreed on.

125. — The subscriptions to assure a deferred annuity, according

to Tables shall cease to be paid as soon as the annuity

commences.

AS TO ENDOWMENTS.
LII. Terms.
126. — Members of any age or occupation may assure for any sum
of money from £5 to £ — , as an endowment for themselves or their

children, or on the lives of others, according to the Tables

appended to these rules,

LIII. Payment of Claims.

127. — The payment of any endowment shall be made within one
month from the date of that meeting of the directors at which the
validity of the claim shall be admitted by the board.

LIV. Death of Assured.

128. — Should any person assured for an endowment at a specified
age, die before the attainment thereof, his representatives shall receive
back the whole amount contributed, less a deduction towards the
expenses of management after the rate of per cent, per annum.

LV. Death of Assurer.

129. — The death of any person holding a policy of endowment on
the life of a child, and any consequent cessation of payments thereon,
shall not affect the interest of the child assured, as regards tlie
premiums already paid, as an endowment shall still be granted to the
child, on its attaining the prescribed age, proportionate to the amount
of premiums paid.

ENDOWMENTS. 143

LVI. Notice of Claims.

130. — IVIcmbers assured for any deferred benefit (cither annuity
or endowment) shall, previous to tlie age at which such benefit is
payable, give one month's notice of the same to the secretary, and
shall, if required, produce satisfactory evidence of identity and of age.

\_Here should follow the Tables and Schedules of Forms, Sfc.~]

NEW DEPOSIT TABLES

FOR

SAYINGS' BANKS AND INDUSTRIAL
ASSOCIATIONS.*

The following Tables arc given in illustration of a system proposed
^Yith the view to give a Depositor a greater average rate of interest for his
investment than that at present afforded by Savings' Banks, and at the same
time to afford f\icilitics for the withdrawal, at will, of a pre-arranged
portion of the Deposit. The sum deposited is accordingly divided, in the
outset, into two portions, one of which has been supposed to be with-
drawable at a week's notice, the other at not less than six months. The
latter i^ortion, therefore, not being liable to abrupt withdrawal, can be
invested at a higher rate of intei'cst than the former. On this account
two rates of interest are employed in the calculations, as will be seen on
reference to the Tables. It is also a condition of the investment that the
accrumg compound interest thereon shall not be withdrawn until the
M'ithdrawal of the whole of the Deposit, an equivalent for this restriction
being given in the investment from year to year, at the higher vaie, of the
total amount of each year's interest on the two portions of the Deposit.

The portions assumed in the Tables Avill probably, in most cases, be
found sufficient, with care, to meet any ordinary contingency; and the
delay which occurs in the removal of the remainder will operate bene-
ficially as a check to hasty and reckless withdrawals. These preliminary
observations will suffice to explain the system, and we now proceed to
describe the arrangement of the Tables.

I. Single Deposits.
These consist of Tables I. to VI. inclusive, all of which are computed
upon the same pririciple, but different rates of interest (Sec Formulcc in
Appendix to Treatise on Building Societies). The rates employed are
cited at the head of each Table, and it is presumed that the headings
and foot notes will be found sufficiently explanatory.

II. Annuity Deposits.
These consist of Tables VII. to XII. inclusive, and show the rcsidt of
a series of annual Deposits. It will be perceived that these Tables arc

• If the Managers of a Savings' Bank prefer it, they can underwrite the Annuities herein
referred to, with an Assui'ance OfiBce.

146 Diiposrr tables.

computed at tlie same rates, respectively, as the previous six Tables.
They are, in fact, obtained from those Tables by addition.

III. Uei'ekued Annuities.

These consist of Tables XIII., XIV. and XV., and arc an adaptation of the
principles developed in Tables I., II. and III., to the purchase of Deferred
Annuities. The attention of the reader is particularly requested to these
Tables. It will be perceived that the money deposited accumulates,
during the stipulated period, without any reference to a law of mortality.
The consequence of this is that a Depositor, who may, from any cause,
find it advisable to withdraw before attaining the stipulated age, will
receive a much larger sum, under these Tables, than he would under any
other system of Deferred Annuities hitherto proposed. It is true that,
were the same amount to be deposited in a Savings' Bank in purchase of
an annuity, the resuUitig annuity would be somewhat larger than these
Tables give ; but, viewed as a whole, it is conceived that the plan herein
delineated is much more advantageous. Thus a man at 30, Avho deposits
£10 in a Savings' Bank, will at 60 obtain an annuity of £2. 19s. Id. ;
whereas, Table XIII. would give him but £2. lis. \ld. Suppose, how-
ever, that at the age of 55 he should withdraw or die, then he or his repre-
sentatives would receive, under the above mentioned Tabic XIII., the
sum of £22. 13s. 2d. The Savings' Bank would merely retm-n the £10.
(See Note to Table XIII.)

Note — Thercadcr tvill observe, on examining the Tables, that the Columns relating
to Deposits o/flOO are not in all cases, exactly ten times the amount of the eor-
respondiny value for Deposits of £10, These discrepancies are occasioned by the
suppiression of fractional parts of a penny.

0-3^ For Tables of Single Deposits to assure sums payable
at death, see Part I. of this division of the " Treatise/' and
for Ammal Deposits, see Tables XVI. and XVII. herein.

DErOSlT XAISLES.

147

SINGLE DEPOSITS.

TAELE I.

Showing the Amount to which a Deposit of £10 or (£100) will accu-
mulate at the end of any number of Years up to 10; on the condition
that, after the first Year, One Half (or One Fourth) of the Sum de-
posited may be withdrawn, xvithont interest, on giving one week's
notice ; the balance of the Deposit and the accumulated compound
Interest remaining unwithdrawable till the end of the period, imlcss
six months' notice of withdrawal be given.

Rates of Interest £3 10s. and £2 IO5. per Cent., as explained at foot.

Deposit of £10.

Deposit of £100.

No. of

One Half

One Fourth

One Half

No. of

Years.

withdrawable.

Years.

£ s. d.

£ s. a.

£ s. d.

10 6 0

10 G 6

103 5 0

103 0 0

10 12 2

10 13 3

lOG 12 4

lOG 2 1

10 18 8

11 0 2

110 1 11

109 6 u

11 5 3

11 7 5

113 13 11

112 12 11

11 12 2

11 14 10

117 8 7

IIG 1 9

11 19 4

12 2 7

121 5 9

119 13 0

12 6 8

12 10 7

125 5 8

123 6 9

12 14 4

12 18 10

129 8 4

127 3 1

13 2 3

13 7 5

133 14 0

131 2 1

13 10 5

13 16 3

138 2 7

135 3 11

N.B. — This Tabic is computed according to formula No. I., Art. 3, iii the
Appendix, on the supposition that the lower rate of 2\ per cent, is allowed on
the withdrawable portion of the Deposit, and 85 per cent, on the unwithdrawable
portion, as also upon tlio entire amount of the interest as it accumulates from
year to year.

Bxample. — A person having deposited £100 will bo entitled, at any time
after the first year, to draw out 50, or £25, as the case may be, at a week's
notice. Say he has retained the power to withdraw one-half, and that ho
exercises this power at the end of the 5th year. The amount at his credit at
that moment is £116 Is. 9</., from which deducting the £50 witbdraM'n, there
will remain £66 Is. 9^^. to accumidate for the remaining 5 years (or imtil with-
drawn under a six months' notice) at 3^ per cent, compound interest. If, on the
other hand, the whole amount of the Deposit be left undisturbed by the Depositor
during the term, then the accumulated amount at the end of 10 years will be
£135 3.?. \\d.

a 2

148

DEPOSIT TABLES.

TABLE II.

Showing the amount to which a Deposit of £10 (or £100) will accinnu-
late at the end of any number of Years up to 10, on the principle of

Tabic I.

Rates of Interest of £3 5s. and £2 10s. per Cent.

Deposit of

£10.

Deposit of £100.

No. of

One Half

One Fourth

One Half

No. of

Years.

withdrawable.

M'ithdi-awablc.

Years.

£ s. d.

10 5 9

10 6 2

103 1 3

102 17 G

10 11 8

10 12 5

106 4 6

lOo 16 10

1 2

10 17 10

10 19 0

109 9 9

108 18 2

11 4 2

11 5 9

112 17 3

112 1 G

11 10 8

11 12 8

IIG 6 9

115 6 9

11 17 5

11 19 10

119 18 8

118 14 3

12 4 5

12 7 3

123 12 10

122 3 11

! 1

12 11 7

12 14 11

127 9 6

125 15 10

12 19 0

13 2 11

131 8 7

129 10 0

13 6 8

13 11 0

135 10 3

133 G 9

1 ^^

N.B. — The observations at the foot of Table I. apply in a similar manner to
the rcsiilts of this Table.

TABLE III.

Showing the Amount to Avhicli a Deposit of £10 (or £100) will accumu-
late at the end of a.nj niimher of Years up to 10, on the principle of
Table I.

Rates of Interest £3 2s. 6d. and £2 IQs. per Cent.

N.B. —The obsei-vations at tlic foot of Table I. api)ly in a similar manner to
the results of this Table.

BKrOSIT TABLES.

149

TABLE IV.
Sho\Ying the amount to which a Deposit of £10 (or £100) will accumulate
at tlie end of any number of Years up to 10, on the principle of
Table I.

Rates of Interest o and 3 per Cent.

Deposit of

£10.

Deposit of £100.

No. of

One Half

One Foiuili

One Fourth

One Half

No. of

Years.

i
1

withdrawable.

withdraw

able.

withdrawable.

Years.

£ s. (I.

£ s.

£ s. d.

10 8 0

10 9

104 10 0

104 0 0

' 2

10 IG o

10 18

109 4 6

108 4 0

11 5 2

11 8

114 3 9

112 12 2

11 14 6

11 18

119 7 11

117 4 10

12 4 3

12 9

124 17 4

122 2 1

12 14 5

13 1

130 12 2

127 4 2

13 5 1

13 13

136 12 9

132 11 4

13 16 5

14 o

142 19 5

138 3 11

14 8 2

14 19

149 12 5

144 2 1

15 0 8

15 13

156 12 0

150 6 3

N.B. — The observations at the foot of Table 1. apply in a similar manner to
the results of this Table.

TABLE V.

Showing the Amount to which a Deposit of £10 (or £100) will accumu-
late at the end of any number of years up to 10, on the principle of
Table I.

Rates of Interest 6 and 3 per Cent. •

Deposit of

£10.

Deposit of £100.

No. of

One Half

One Fom-th

One Fourth

One Half

No. of

Years.

withdrawable.

Years.

£ s. d,

£ s. d.

10 9 0

10 10 6

105 5 0

104 10 0

10 18 6

11 1 8

110 16 3

109 5 5

11 8 8

11 13 5

IIG 14 4

114 0 6

11 19 5

12 5 11

122 19 4

119 13 9

12 10 9

12 19 2

129 11 11

125 7 4

13 2 9

13 13 2 i

136 12 5

131 7 9

13 15 6

14 18 2

144 1 4

137 15 5

14 9 1

15 3 11

151 19 3

144 10 9

15 3 5

IG 0 8

160 6 7

151 14 3

15 18 8

IG 18 5

j 169 4 0

159 6 4

N.B.— The observations at the foot of Table T. apply in a similar manner to the
results of this Table.

150

DEPOSIT TABLES.

TABLE VI.

Showing the amount to which a Deposit of £10 (or £100) will accumu-
late at the end of any number of years up to 10, on the principle
of Table I.

Rates of Interest 7 and 3 per Cent.

Deposit of

£10.

Deposit of £100.

No. of

One Half

One Fourth

One Half

No. of

Years.

withdrawable.

withdi-awable.

Years.

£ s. a.

£ s. d.

£ ,'*. d.

£ *. d.

10 10 0

10 12 0

106 0 0

105 0 0

11 0 8

11 4 10

112 8 5

110 7 0

11 12 2

11 18 7

119 5 9

116 1 G

12 4 5

12 13 3

126 12 10

122 4 0

12 17 6

13 9 0

134 10 1

128 15 1

13 11 G

14 5 10

142 18 5

135 15 4

14 6 7

15 3 10

151 18 6

143 5 5

15 2 7

16 3 1

161 11 2

151 5 11

lo 19 9

17 3 9

171 17 4

159 17 10

IG 18 2

18 5 9

182 18 0

169 1 8

N.B. — The observations at, tbe foot of Table I. apply in a similar manner to
the results of this Table.

It may further be observed that the system, as developed in one or other of the
last three Tables, might be adopted with advantage by Industrial Associations
(such as Friendly Societies and Building Societies) as an mducement to In-
vestors. It gives them, upon the whole sum invested, an advantageous average
rate of interest, and enables them to set free, at a brief notice, a considerable
portion of the sum deposited, to meet unexpected emergencies.

DlvPOSlT XADLTiR.

151

ANNUITY DEPOSITS.

TABLE VII.

Showing the Amount to which a Deposit of £10 (or £100) per Annum
will accumulate at the end of any number of Years up to 10 ; upon the
condition that One Half (or One Fourth) of the aggregate of the Sums
deposited may be withdrawn in the manner explained in Table I.

Rates of Interest £3 lOi'. and £2 10s. per Cent., as explained at foot.

Deposit of £10

PER ANNUM.

Deposit of

£100 PER ANNUM.

No. of

One Half

One Fourth

One Half

No. of

Years.

withdrawable.

Years.

£ s. d.

10 6 0

10 6 6

103 5 0

103 0 0

20 18 2

20 19 9

209 17 4

209 2 1

31 16 10

31 19 11

319 19 3

318 8 6

43 2 1

43 7 4

433 13 2

431 1 5

54 14 3

55 2 2

551 1 9

547 3 2

66 13 7

67 4 9

672 7 6

666 16 2

79 0 3

79 15 4

797 13 2

790 2 11

91 14 7

92 14 2

927 1 6

917 6 0

104 16 10

106 1 7

lOGO 15 6

1048 8 1

118 7 2

119 17 10 1

1198 18 1

1183 12 0

N.B. — This Tabic shows the result of a series oi Annual Deposits of £10 (or
£100), and is found by taking successively the sums of 1, 2, 3, &c., terms of the
corresponding columns of Table I., the rates of interest in this being the same
as in that Table, viz. 3| per cent, on the unwithdrawable portion, and the
accumulating interest, and 2h per cent, on the witlidrawablc portion.

Example. — A person having deposited £10 per annum, say for 5 years, will
be entitled at the end of that year to withdraw one-half or one-fourth of the
aggregate of his deposits to that time (viz. £25 or £12 10s.) as the case maybe,
at a week's notice ; the remainder, together with the interest, being left to
acciunulate at 8.3 per cent, till the end of the term, or uutil withdrawn under a
six months' notice. [Vide Note to Table I.]

152

DEPOSIT TABLES.

TABLE VIII.

Showing the Amount to which a Deijosit of £10 (or £100) per Annum
•will accumulate at the end of any number of Years up to 10, upon the
principle of Table VII.

Rates of Interest £3 bs. and £2 10s. per Cent.

Deposit of £10

PER ANNUM.

Depo,sit of

£100 PER ANNUM.

No. of

One Half

One Fourth

One Half

No. of

Years.

■withdrawable.

■\vithdra"wable.

withdrawable.

withch-awable.

Years.

£ s. d.

10 5 9

10 6 2

103 1 3

102 17 6

20 17 5

20 18 7

209 5 9

208 14 4

■2

31 15 3

31 17 7

318 15 6

317 12 6

42 19 5

43 3 4

431 12 9

429 14 0

54 10 1

54 16 0

547 19 6

545 0 9

66 7 6

66 15 10

667 18 2

663 15 0

78 11 11

79 3 1

791 11 0

785 18 11

91 3 6

91 18 0

919 0 6

911 14 9

104 2 6

105 11

1050 9 1

1041 4 9

117 9 2

118 11 11

1185 19 4

1174 11 6

N.B. — This Table is formed from Table II. in the same manner as Tabic VII.
was formed from Table I. [Vide Note to Table VII.]

TABLE IX,

Showing- the Amount to Avhich a Deposit of £10 (or £100) /)er Annum
will accumulate at the end of any number of Years up to 10, upon the
principle of Table VII.

Rates of Interest £3 2*. Gd. and £2 10s. per Cent.

Deposit of £10

PER ANNUM.

Deposit of

£100 PER

ANNUM.

No. of

One Half

One Fourth '

One Fourth

One Half

No. of

Years.

withdrawable.

M'ithdrawable.

withdrawable.

withdrawf

iblc.

Years.

£ .<(. d.

£ s. d. \

£ s. d.

£ s.

10 5 7

10 5 11

102 19 4

102 16

20 17 0

20 18 0

209 0 0

208 10

31 14 5

31 16 4

318 3 9

317 4

42 18 0

43 1 3

430 12 7

429 0

54 7 11

54 12 10

540 8 7

543 19

66 4 5

66 11 4

665 13 10

662 4

78 7 8

78 17 0

788 10 6

783 17

90 18 0

91 10 1

915 0 10

908 19

103 15 5

104 10 8

1045 7 1

1037 14

117 0 3

117 19 2

1179 11 8

1170 2

N.B. — This Table is formed from Table III. in the same manner as Table YII.
was formed from Table I. [Vide Note to Table VII.]

DEPOSIT TABLES.

lo3

TABLE X.

Showing the Amount to -whicli a ])cposit of £10 (or £100) ;)<;?• yinnum
will accumulate at the end of any number of Years uj) to 10, upon the
principle of Table Vll.

Hates of Interest 5 and 3 per Cent.

Dep

OSIT OF £10

PER ANNUM.

Deposit of

£100 PER ANNUM.

No. of

One Half

One Fourth

One Half

No. of

Years.

■withdrawable.

withdrawable.

withdi-awable.

withdrawable.
£ s. d

Years.

£ s. d.

10 8 0

10 9 0

104 10 0

104 0 0

21 4 5

21 7 5

213 14 6

212 4 0

32 9 7

32 15 10

327 18 3

324 16 2

44 4 1

44 14 7

447 6 2

442 1 0

56 8 4

57 4 4

572 3 6

564 3 1

69 2 9

70 5 7

702 15 8

691 7 3

82 7 10

S3 18 10

839 8 5

823 18 7

96 4 3

98 4 9

982 7 10

902 2 6

110 12 0

113 4 0

1132 0 3

not) 4 7

125 13 1

128 17 2

1288 12 3

1256 10 10

N.B. — This Table is formed from Table IV. in the same manner as Table
YII. was formed from Table I. [Vide Note to Table VII.]

TABLE XI.

Showing the Amount to which a Deposit of £10 (or £100) jier Annum
will accumulate at the end of any number of Years up to 10, on the
principle of Table VII.

Rates of Interest 6 and 3 per Cent.

Deposit of £10

PER ANNUM.

Deposit of

£100 PER ANNUM.

No. of

One Half

One Fourth

One Half

No. of

Years.

withdrawable.

withdraAvable.

withdrawable.

Years.

£ s. d.

£ s. d. '

£ 5. d.

£ s. d.

10 9 0

10 10 6

105 5 0

104 10 0

21 7 6

21 12 2

216 1 3

213 15 5

32 16 2

33 5 7

332 15 7

328 1 11

44 15 7

45 11 G

455 14 11

447 15 8

57 6 4

58 10 8

585 6 10

573 3 0

70 9 1

72 3 11

721 19 3

704 10 9

84 4 7

86 12 1 1

806 0 7

842 6 2

98 13 8

101 16 0 1

1017 19 10

986 16 11

113 17 2

117 16 8 1

1178 6 5

1138 11 2

129 15 9

134 15 0

1347 10 5

1297 17 6

N.B — This Table is formed from Table V. in the same manner as Table VII.
was formed from Table I. [Vide Note to Table VII.]

154

DEPOSIT TABLKS.

TABLE XII.

Showing the Amount to which a Deposit of £10 (or £100) per Annum
will accumulate at the end of any number of Years up to 10, on the
principle of Table VII.

Rates of Interest 7 and 3 per Cent.

Deposit of £10

PER ANNUM.

Deposit of

£100 per annum.

No. of

One Half

One Fourth

One Half

No. of

Years.

•withdrawable.

withcbawable.

withdrawable.

Yeai's.

£ s. d.

10 10 0

10 12 0

106 0 0

105 0 0

21 10 8

21 16 10

218 8 5

215 7 0

33 2 10

33 15 5

337 14 2

331 8 6

45 7 3

46 8 8

464 7 0

453 12 6

o8 4 9

59 17 8

598 17 1

582 7 7

71 IG 3

74 3 6

1 741 15 6

718 2 11

86 2 10

89 7 5

893 14 0

861 8 4

. 8

101 5 5

105 10 6

1055 5 2

1012 14 3

117 5 2

122 14 3

1227 2 6

1172 12 1

134 3 4

141 0 0

1410 0 6

1341 13 9

N.B. — This Table is formed from Table VI. in the same manner as Table
VII. was formed from Table I. [Vide Note to Table VII.]

The attention of Industrial Associations is requested to the hist three Tables.
[Vide Note to Table VI.]

BErOSIT TABLES.

155

DEFERRED ANNUITIES.

TABLE XIII.

Showing the accumulated Amount, ov the Life Annuity (payahlc half-
yearly), which a single ])epo.sit of £10 will entitle a J)epositor to
receive at the end of stipnhitcd periods; the whole of the ])ei)osit,
together with the accumulated Litcrest, upon the principle of Table
I., to be returnable at six months' notice, in case of decease of
])epositor, or of his desiring to cancel the transaction before the close
of the period. It being further provided that a Depositor may at any
time, before entering on the Annuity, withdraw One Fourth of the
Sum itself deposited, on giving one week's notice.

Rates of Interest £3 lOy. and £2 10s. per Cent., as explained at foot.

Annuity to

commence at

30.

Present
Age.

Accumulated
Amount. j

Correspondir

ig Annuity.

ilalc.

Female.
£ s. d.

£ s. d.

£ 5. d.

37 9 7

3 12 8

3 9 3

31 13 4

3 15

2 18 7

*30

26 15 6

2 11 n*

2 9 6

22 13 2

2 3 11

2 1 11

19 3 10

1 17 2

1 15 6

16 5 5

1 11 7

1 10 1

13 16 3

1 6 9

1 5 6

11 14 10

1 2 9

1 1 8

Annuity to

COMMENCE AT

65.

Present
Age.

Accumulated
Amount.

CoiTespondi

Qg Annuity.

Male.

Female.

£ s. d.

44 7 7

5 3 11

4 18 10

37 9 7

4 7 9

4 3 5

31 13 4

3 14 2

3 10 6

20 15 0

3 2 8

2 19 7

22 13 2

2 13 1

2 10 5

19 3 10

2 4 11

2 2 9

16 5 5

1 18 1

1 16 3

13 16 3

1 12 4

1 10 9

11 14 10

1 7 6

1 6 1

N. 13. —The columns in this Table licadcd ' Accumulated Amount,' arc computed on the
principle of Table I., and at the same rales of interest as that Table, viz. 3.J per cent, on ll:e
unwithdrawable portion of the Deposit and the accumulated Interest, and 2.J per cent, on
the withdrawable portion. The columns headed * Corresponding Annuity' arc deduced from
the English Life Table at 3 per cent. An example is subjoined.

* Example. — A person aged 30 having deposited £10 will bo entitled, on attaining the ago
of CO, to receive either a gross sum of £20 15.s. G(/., or an Annuity of £2 lis. llrf. for tiio
remainder of Life. Should ho withdraw or die before attaining that age,— say for exanijilc
at 55, — then he or his representatives would, in that case, receive, six months thereafter, the
sum of £22 13s. 2d., or the amount corresponding to 25 years deposit, which is the same as
at age 35, for 60.

156

DEPOSIT TABLES.

TABLE XIV.

Showing the Accumulated Amount, or the Corresponding Annuity
(payable half-yearly), Avhich a single Deposit of £10 will entitle a
Depositor to receive at the end of stipulated periods, on the principle
of Table XIII. •

Rates of Interest £3 5*. and £2 10s. per Cent.

Annuity to

COMMENCE AT

60.

Present

Age.

Accumulated
vimount.

Corresponding Annuity.

Male,

Female.

£ s. d.

£ s. d:

£ «. d.

34 8 11

3 6 10

3 3 8

29 8 10

2 17 1

2 14 5

25 3 6

2 8 10

2 6 6

21 10 10

2 19

1 19 10

18 8 10

1 15 9

1 14 1

15 16 0

1 10 8

1 9 2

13 11 0

10 3

1 5 0

11 12 8

1 2 7

116

Annuity to

COMMENCE AT

65.

Present

Age.

Accumulated
Amount.

Correspondi

ng Annuity.

Male.

Female.

£ s. d.

40 6 4

4 14 5

4 9 9

34 8 11

4 0 8

3 16 8

29 8 10

3 8 11

3 5 6

25 3 6

2 18 11

2 16 0

21 10 10

2 10 5

2 7 11

18 8 10

2 3 2

2 1 0

15 16 0

1 17 0

1 15 2

13 11 0

1 11 9

1 10 2

11 12 8

1 7 3

1 5 11

N.B. — The observations at the foot of Table XIII. apply in a similar manner
to the results of this Tabic.

DEPOSIT TABLES.

157

TABLE XV.

Showing the Accumulated Amount, or the corresponding Annuit}-,
(payable half-yearly), which a single Deposit of £10 will entitle a
]3epositor to receive at the end of stipulated periods, on the principle
of Table XIII.

Rates of Interest £3 2*. Gd. and £2 10s. per Cent.

Annuity to

COMMENCE AT 60.

Present
Age.

Accumulated
Amomit.

Corrcspondiug Annuity.

IMalc.

Female.

£ s. d.

£ «. d.

33 0 7

3 4 1

3 1 1

28 7 10

2 15 1

2 12 6

24 8 3

2 7 4

2 5 1

21 0 0

2 0 9

1 18 10

18 1 7

1 15 0

1 13 5

15 11 5

1 10 2

1 8 9

13 8 6

1 G 0

1 4 10

11 11 7

1 2 5

1 1 5

Annuity to

COMMENCE AT

^5.

Present
Age.

Accumulated
Amount.

Correspondi

ng ^Vimuity.

Male.

Female.

£ s. d.

38 8 10

4 10 0

4 5 7

33 0 7

3 17 4

3 13 0

28 7 10

3 6 6

3 3 2

24 8 3

2 17 2

2 14 4

21 0 0

2 9 2

2 6 9

18 1 7

2 2 4

2 0 3

15 11 5

1 16 5

1 14 8

13 8 C

1 11 f

1 9 11

11 11 7

1 7 1

1 5 9

N.B. — The observations at the foot of Table XIII. apply in a similar manner

to the results of this Table.

158

DEPOSIT TABLES.

NEW SYSTEM OF ASSURANCE.

LIFE ASSUUINCE

ANNUAL DETOSTT PREMIUMS.

TABLE XVI.

Showing the Animal Deposit Premium to Insure £100, receivable at
Death, with a return by the Office, in addition, of all the Premiums
l^aid but the first.

cl.

Age 20

Annual Deposit Premium

„ 25

)> )) J)

„ 30

)) » )»

„ 35

J> !) )J

„ 40

>> )) ))

„ 45

!> 5) )J

„ 50

)) )) )>

,, 5o

1) M )>

„ 60

J> )) >!

„ 65

)) 5» ))

„ 70

)5 >» >>

„ 75

)> !) >)

Hxatnph. — A Deposit paid anmially of £6 Os. id. at age 45, will secure £100
at death ; and, in addition, the family, or representatives of the deceased, will
receive back aU the prejiiiums paid but the fii-st.

DEPOSIT TABLES,

159

NEW SYSTEM OF LIFE ASSURANCE.

TABLE XVII.

Annual premium to Assm'C £100 for the wliole term of life, payable at
Death, Interest in the mean time being paid each succeecling year
to the Assurer on all premiums lie has paid.

Age.

£ s.

£ s. d.

2 17

4 3

7 9 6

2 18

4 5

7 15 7

2 19

4 7

8 1 8

3 0

4 9

8 7 0

3 1

4 11

8 13 9

3 2

4 13

9 0 3

3 3

4 16

9 7 5

3 5

4 18

9 15 3

3 6

5 1

10 3 10

3 7

5 4

10 13 3

3 8

5 7

11 3 7

3 10

5 11

11 15 3

3 11

5 14

12 7 11

3 13

5 18

13 0 1

3 14

6 3

13 17 1

3 16

6 7

14 11 11

3 17

6 12

15 6 5

3 19

0 18

15 19 6

4 1

7 3

By the above table Assurers would secure three advantages : —

1st. — A fixed diminution each year iu their premiums.

2nd. — A limited number of payments, as they practicallj'' cease as soon
as the aggregate interest on the past premiums paid equals one
year's premium.

3rd. — A deferred annuity for old age is secured equal to the sum of the

interests.

Thus a person aged 25, might, if the rate of interest allowed were 4 per Cent.,
by a premium of £3 2s. 6d. for the first year, £3 for the second year, and so on,
decreasing 2s. Gd. per annum, until tbc twenty-fifth 3'ear, secure in addition to
the sum of £100 payable at death, a deferred increasing annuity, to commence
on attaining the age of 50.

160

DEPOSIT TABLES,

OLD AGE AND ENDOWMENT TABLE.

Showing the amount of Savings that would bo efifected by accumulating £6
a year with interest.

AT END

OF
YEARS.

Amount of Savings

AT END

OF
YEARS.

3 per Cent

4 per Cent.

5 per Cent.

£ s.

£ s. d.

6 0

6 0 0

12 3

12 4 10

12 6 0

18 10

18 14 8

18 18 4

25 2

25 9 8

25 17 3

31 17

32 10 0

33 3 1

38 16

39 16 0

40 16 3

45 19

47 7 11

48 17 1

53 7

55 5 9

57 5 11

60 19

63 10 0

66 3 3

63 15

72 0 10

75 9 5

76 17

80 18 5

85 4 10

85 3

90 3 2

95 10 1

93 14

99 15 3

106 5 7

102 10

109 15 1

117 11 5

111 11

120 2 11

129 9 6

120 18

130 19 0

141 18 11

130 11

142 3 9

155 0 11

140 9

153 17 6

168 15 11

150 14

166 0 7

183 4 9

161 4

178 13 5

198 8 0

172 1

191 16 5

214 6 5

183 4

205 9 10

231 0 8

194 14

219 14 2

248 11 9

206 11

234 10 0

267 0 3

218 15

249 17 7

286 7 4

231 6

265 17 5

306 13 8

244 5

282 10 2

328 0 5

257 11

299 16 2

350 8 5

271 6

317 16 0

373 18 10

283 9

336 10 3

398 12 8

300 0

355 19 5

424 11 4

315 0

376 4 3

451 15 11

330 9

397 5 2

480 7 9

346 7

419 3 0

510 8 1

362 15

411 18 4

541 18 5

Example. — A person setting aside £6 a year, or 10s. a month, for a child aged
3 years, would, with interest at 4 per Cent, have accum^ilated £153 I7s. 6d. by
the time the child attained the age of 21.

In case of previous death, or inability to continue the payments, the amount
paid could be returned with interest at 3 per Cent., less — per Cent, towards
expenses of bank or society.

Errata in Mathematical Appendices.

IN APPENDIX ON PROBABILITIES.

Page 6, formula (5), for {F -j- /\) ' read (F +/,)"^
Page 13, line 6, for (F'- 9,200) V read (F'-9,200) '.
Page 14, line 4, for (g + I) read {g + /)"

IN APPENDIX ON INVESTIGATIONS INTO THE AFFAIRS
OF A COMPANY.

Page 22, formula (11), for tt^ ^ „ read 7r^ + „
Page 30, formula (4), for a\. _ read a',.^_

Page 31, formula (8), for ji' read p^.

^^^*»^J«H-i-«

APPENDIX

MORAL AND MATHEMATICAL EXPECTATION IN PROBABILITIES.

Art. 1. — In this Section we propose to illustrate, as briefly as
the subject will admit, the distinction laid down by Laplace and
other celebrated writers on Probability between Mathematical and
Moral Expectation, which it is most important should be thoroughly
understood by all who are engaged in Assurance business, or in any
operations connected with events of a contingent character.*

Mr. Galloway has observed that in the theory of Probabilities
the term Exijectatioti is used to denote the value of a contingent
Benefit, multiplied by the probability of the event taking place on
which it depends. A little reflection will show that the Benefit
should not be estimated with respect to its absolute value, but to
the amount of relative advantage it aifords the individual who is to
receive it. Hence, when the circumstances of the individual are
not taken into consideration, and regard is had merely to the abso-
lute value of the benefit, the product of its amount by the chance
of receiving it is the Mathematical Expectation ; but when such
circumstances are regarded, a Relative or moral value, dependent
upon them, is assigned to the benefit, — the product of which by
the chance of obtaining it is termed the Moral Expectation.

2. — By way of illustration, there is the common error, which is
made in the measurement of Life contingencies, of assuming that
estimates, which are true on the average of a large number of cases,
are equally so in isolated instances ; and actuarial opinions are not
unfrequently given as a guide to purchasers of property dependent
on the existence of human life, which, being deduced from Tables
of Mortality constructed on the basis of a large number of lives, are
not applicable to cases where but two or three lives are concerned.

* [For more extensive discussion of the theory of probabilities than would
come within the range of this Treatise, we refer our readers to the works of
Laplace and Poisson, which have been rendered into a most elegant form by our
late lamented friend Mr. Galloway. Although it is in the works of Laplace and
Poisson that the higher and more abstruse part of the theory of probabilities
must be studied, yet a very clear explanation of the principles of the science,
together with many interesting remarks on the uses and application of the theory,
is to be found in the valuable little work of Lacroix, Trait e Elemcntaire du Calcul
des Probabilites : Paris, 1833.]

2. APPENDIX OX MORAL AND MATHEMATICAL

3. — Thus, for instance, the value of a single Annuity, offered for
sale, on a life aged 60, is of larger mathematical value, according to
mortality tahles, whatever be the rate of interest assumed, than,
morally speaking, it would be worth the while of a purchaser to give
for it, as in making his purchase he would have to guard against
the chance of premature decease, which, although in a large number
of cases likely to be compensated by Retarded deaths of other lives,
would be fatal to the profit of his investment when occurring on one
single purchase.*

4. — In like manner, in valuations of Leases on lives, for the pur-
pose of substituting a Term certain for the Life Lease, a common
error is made, of treating the mathematical value of the term certain
as exactly equivalent to the value shown by the mortality table for
the annuity on the life or lives involved, whereas considerations of
moral expectation enter, which depend upon the number of similar
cases the parties concerned are interested in.

Of Mathematical Expectation.

5. — This is estimated as follows : —

Suppose P and Q to be engaged in play. Let p and q be the
respective probabilities of P's and Q's winning a game, upon the
issue of which an amount, S, is staked : then the mathematical ex-
pectation of P is p.S, and that of Q is g . *S. Now, if P and Q
were to purchase these expectations, the respective amounts they
ought to pay for them, or, in other words, to stake on the issue of
the game, in order that they may play on equal terms, must be pro-
portional to the expectations or probabilities of winning the game.
If therefore P^ be the sum staked by P, and Qj the sum staked by
Q, we have

p.S : q.s:: P^ : Q^
or p : q:: P-^ : Q^

and consequently p.Q^ =■ q.P^

* [Hence arises the necessity, to Isolated purchasers, of actually charging for
the Insurance in some office of the life upon which the Annuity depends, instead
of ni.aking the net provision, ir.r, for a sinking fund, in the formula for the value

of an annuity due, a.,-, or -. This is effected hy putting in the denominator,

the office premium, jOr, for irr, thus producing a value considerably less than or.]

EXPECTATION IN PROBABILITIES. O

Now, suppose the amount played for = the stakes, or

l\ + Qi = S

then, since P expects to gain Qp the probabiUty of winning which
is p, we have, for the mathematical value of P's expectation of gain,

p.Q,
and in a similar manner we find the value of Q's expectation of gain,

q.P,.

Hence it is evident that when the stakes of each are in proportion
to their respective probabilities of winning, the mathematical expec-
tations of each player are equal ; so that, subsequently to the deposit
of the stakes, and prior to the decision of the event, the players may,
without advantage or otherwise on either side, exchange places.
Also, since the sum which the one must gain is equal to that which
the other must lose, the product of </.Pi, which is Q's expectation
of gain, may be regarded as P's expectation of loss, or, if taken with
a negative sign, as part of P's whole expectation, which then becomes

p.Q,-q.P,
But p.Q^ - q.P^=:0

consequently, P's condition prior to the decision of the event is in
nowise affected, speaking mathematically, by his having staked on
the issue of the game.

6. — This result is correct, for although on a single trial the player
P must either lose Pj or gain Q-^, that is, either augment or dimi-
nish his fortune, yet if the play be undertaken on terms of mathe-
matical equality and continue to a sufficient number of games, the
probability, that the sum gained or lost in the long run shall be prac-
tically nothing, or that the sums gained and lost shall be very nearly
equal, amounts to a certainty. (See A.rticle 32, at end.)

7. — It is however practically impossible to suppose an indefinite
repetition of the hazard ; whence it appears that an individual or
society of individuals must be guided by other considerations than
the mere mathematical value of the expectation in their speculations.

For example : a Society of small resources should not risk £,\ ,000
on a single or small number of speculations for the chance of
gaining ^10, although the chance might be 100 to 1 in its favour ;
but the same remark would not apply to the case of risking ^G 10 for
the expectation of gaining aGlOOO, even if the chances were 100 to
1 against the occurrence ot the event. In both cases, however, the
expectation would he purchased at its real mathematical value.

4 APPENDIX ON MORAL AND MATHEMATICAL

8. — Again, a person whose sole fortune consisted of a lottery-ticket,
which has an equal chance of either turning up a prize of ^1,000
or a blank, is, mathematically speaking, by the above formula, in an
equally advantageous position as he who is in possession of ^500 ;
yet no man of ordinary prudence, if offered his choice of the two
stakes, would hesitate as to which he ought to prefer. Common
sense will prevent a man from risking a large sum, the loss of which
would be attended with great privations or inconvenience, even when,
mathematically speaking, the chances are considerably in his favour.
It is evident, therefore, that two persons whose fortunes are very
unequal, cannot engage in play on equal terms, notwithstanding that
the chances in favour of each in respect of a single game may be
precisely the same. For the one who has the larger fortune can
repeat the hazard so often that the probability that his loss will not
amount to any given sum will nearly be equal to a certainty, whereas
the other, who cannot continue the play in the case of a loss, runs a
considerable risk of being ruined. Hence it is obvious that in mea-
suring the value of an expectation, the number of cases has to be
considered, apart from the abstract theory of probability. Conse-
quently, an individual dealing with contingent events must to a
certain extent be guided by considerations of relative advantage.
In other words, such contingent events will have to him a moral ex-
pectation value, different from the mathematical expectation value.

9. — By way of illustration : A small Society cannot risk the satne
sums as a large Society in speculations, unless the former can make a
much higher rate of profit than the latter. Suppose a Society,
possessing a capital of ^6 100,000, considers it prudent to risk
^10,000 in a certain speculation, then another Company, whose
capital is £10,000, should only risk ^6 1,000 in the same. To illus-
trate this by an extreme case : Suppose one Society can command
pounds where another can command only pence ; what should the
second do to preserve its relation unaltered to the first 1 It is clear
that if it engage in precisely the same kind of transactions, it must
risk only one penny where the first risks £\. In this case, both, if
either, would only become bankrupt together, and both pay the same
percentage of their liabilities ; and if both gain, the profit would be
the same percentage of their invested capital : the only difference
between them, mathematically speaking, would be the name of the
coin they deal in. Change the word "pound" into "penny," and
the books of the first Society would become those of the second.

EXPECTATION IN PROBABILITIES. 5

10. — There is, in addition, another circnmstance which always is
and must be in favour of the larger Society, viz. the Expenses of
Management ; since the outlay in a small Society cannot be pro-
portionably less than the similar outlay in a larger ; that is to say,
by way of example, a Company with an Income of ^620,000 can, in
general, be managed for less than double the expense attending
another with an income of 5610,000.

1 1 . — Moreover, a small Society cannot command the same range
of choice as a large one for temporary investment, on account of the
smallness of its resources ; consequently it must select the best out
of a more limited number than the larger Society can command. It
is a well-known fact in the commercial world that large businesses
can exist with lower profits than smaller ones, inasmuch as the Fluc-
tuation fund must be a larger percentage of the whole in the latter
case than in the former. The increase of large farms, large manufac-
tories, etc., confirms this abundantly. A large Society and a small
one, trading at the same rate of profits, may, in the words of Mr. de
Morgan, be compared to a line-of-battle ship and a small boat in a
rough sea : in which case, the first only oscillates, but the second
is upset.

Of Moral Expectation.

12. — Moral considerations aifecting pecuniary contingencies may
be accurately measured by formulae depending on the hypothesis
first advanced by the celebrated Bernouilli,* viz. That the relative
value of any infinitely small sum, dx, is inversely proportionate to
the Fortune, x, of the individual who expects to receive it, but di-
rectly proportionate to its absolute value.

Then, the moral advantage arising from the contingency of re-

dx
ceiving dx would be represented by k — , and the relative or moral

value of the fortune, which is susceptible of contingent augmenta-
tion, (its absolute value being x,) becomes

/''

* [Vol. 5, Petersburg Commentaries.

The theory of moral Expectation had its origin in a problem proposed by
Nicholas Bernouilli to Montmort, which, on account of its having given rise to
considerable discussion in the ' Petersburg Memoires,' has been usually called the
Petersburg Problem. 1

6 APPENDIX ON MORAL AND MATHEMATIOAL

= k . log X + h . . • ( 1 )

k and h being constants to be determined from the nature of the
question.

Thus, i{ X =■ F, the original Fortune, the integration would be
taken from x = F to x = x, and the above moral value can be put
under the form

^•.log| (2)

13. — To illustrate the application of this formula for moral values,
let fi, fc^, /g, .... be sums to be received on the happening of
certain contingent events, the probabilities of which are ^j^, p2>
p^, . . . . and let it be supposed that one or other of the events will
necessarily happen ; then

i?i + Po + B +•••• = 1 • • • (3)
and the moral or aggregate relative fortune of the individual, which
is, by (1),* represented by

k . log X + h
will also ~ p^{k. log (F +f^) + h}

+ p^,{kAogiF+f,)+h}

+ Ps{k. log (F+f,) +k} + etc. . . (4)
Hence x = (F +f^) ^x . (F +/.) "'^ . {F + f,^^ . etc. . (5)
and x — F is the sum, which if it were certain to be received, would
procure to the individual the same relative advantage as his contin-
gent expectations.

14. — From eq. (5), we gather that, even when the mathematical
chances are equal, there is a moral disadvantage in speculation.

To illustrate this : Let A, whose fortune is ^1,000, make a bet
with another, B, on an event, which presents an equal mathematical
chance of either gaining, — the loser to pay, say ^G.oOO, to the winner.
What is the moral value of ^'s fortune after he has made the bet,
and before the result is known?

Here F =^ 561,000, /^ = 36500, fz= ~ ^500,

and p^ z= p^=z\

x= {1,000 + 500}4. {1,000 - 500}*
= 500 v'S = ^866 nearly,
consequently, the position of ^ is worse by 56134 than it was before

* [Laplace calls x the fortune physique, and ^-.log a' + A the forlune morale.
See his Theorie Analylique des Probabilites, chap. 10, art. 11, p. 432.]

EXPECTATION IN PROnABILITlES. 7

he made the bet : therefore, the moral disadvantage is equivalent to
this sum, though the terms of the play, according to the mathema-
tical theory, are equal.

If the bet be smaller in proportion to the fortune, say ^61 00,
then the moral value of ^'s ^'1,000, after having made an even bet
involving a gain or loss of ^100, is

= {1,100 X 900} 4

= 300 ^/ll = ^995 nearly,
which shows, in this case, a moral disadvantage of only £b, very
much less than a fifth of that in the previous example, scarcely -2\th.

15. — As another illustration, take the case of two persons, A and
JB, whose fortunes are the same, ^61,000 each, making a bet that
aCoOO should be paid by A if he loses, and 5^50 to ^ if 5 loses, the
odds being supposed and taken in the ratio of the bets, i.e. 10 to
1 ; then the moral value of ^'s and B's fortunes after the bet is
made, but before the result is known, w'ould be : —

For ^'s case,
(where 2h = \r F= 1»000 fi = 50 /> = - 500)

= (1,050)" . (500)-- = ^981.
For ^'s case,

X = (l,500)xV . (950)1" = ^£990,
which shows that although, according to Art. 5, the mathematical
expectations are equal when the stakes are in exact proportion to
the chances, yet the moral expectations are no longer equal, when
the bet is made and the result unknown.

16. — Conversely, if the problem in (14) be to find the value, jOj,
of the mathematical chance, such that the moral value of ^'s for-
tune may remain nearly intact, or only affected to a trifling extent,
say jii per pound,- by his having made a bet. Then

(^+/i)''^ • (F-f,y-'^ = F(i - ^)

|^±^.(F-/2) = F(1~;.)

p^ {log {F +/i) - log (F-/,)} =log(l -/.) + logF_log(i^-/,)

log(l-M) + logF-log(F-/o)
•• -Pi- log(F+/i)-log(i<'-/2) • ^^^

Example : Let the fortune be aC 1,000, the sum risked ^500, on

(See Art. 5.)

8 APPENDIX ON MORAL AND MATHEMATICAL.

the chance of making a gain of sGSOO ; to find^^, so that the moral

value may differ from the mathematical by 1 per cent.

„ log 1-98

Here p. = f „ = • 622

-^^ log 3

or the chances should be about 6 to 4 or 3 to 2 in his favour.

17. — All risks, if only mathematically balanced, are disadvan-
tageous.— In order to prove this principle, suppose an individual,
whose fortune is F, stakes a sum, R, with a chance, p, of winning.
The stake to be won, by the hypothesis, is
^Rji - P)

P
and the value of the expectation by eq. (5) is

= {F + -^ — i-^y.{F-Ry-^ . . . (7)

If this be less than 2^, the bet has produced a moral disadvantage,
and his pecuniary condition is worse than it was before he entered
upon the speculation. Now the above result divided by F

__ \F.p. + Rii-p)y.{p.iF-R)y-^

~ F.p

Putting this into logarithms, we have it

=p.\og{F.p + R I— p|+ 1 -pAog{p.F—R\-\ogp.F

= (I -P) pf{p.F^R{l-p)-p{F-R)Y^'
0
in which the coefficient of dR'is evidently negative for all positive
values of R, the integral is therefore negative, whence the Expec-
tation itself is negative.

18. — To determine what should be the contingent gain, G, that a
person with a fortune, F, may without moral disadvantage, risk a
sum, R, on a speculation of which the chance of gain is ^ ; in other
words, what proportion G should bear to R.

Here {F 4- Gy . (F - R)'^' = F

or G={F^'^{F-Ry} -F . . . (8)

1 9. — Let p =. \, and put R= —,

EXPECTATION IN PROBABILITIES.

or in another form ^ — -^ = ^^ . , . . . (9)
Again, G = —^.R .... (10)

20.— If m = 2or R = -

G = 2 R = F

whence we learn, That a person should not stake half his fortune
upon an even chance, unless the contingent gain be such as loill double
his fortune, or give him cent, per cent.

2 1 . — Let R = F, then G ^ cc , or the sum to be gained by a
speculation must be infinitely large to make it worth while to risk
the whole of one's fortune upon an even chance.

22. — If, in formula (4), the quantities f^, fc,, f, etc., be very
small in comparison with F, the expression for the moral expecta-
tion, X — F, becomes very nearly

=ihfi+P2A+2hA (11)

which is the mathematical expectation ; — that is to say, the Moral
and Mathematical expectations nearly coincide, when the contingent
benefits to be obtained from the speculation are very small in com-
parison with the fortune in possession before the risk is incurred.

23. — A corresponding result to the above arises when the risks,
to which a given Capital is exposed, are so divided that the number
of ventures may be large. Hence it is better for an Insurance
Society that its funds and capital should be exposed to a number
of small* risks, independent of each other, than to take the liability
of a limited number of large policies, although the mathematical
probability of loss be in both cases precisely the same. For ex-
ample, the mathematical value of the risk on one policy of a6 10,000
on a life aged 30 is the same as the aggregate mathematical values of
ten policies of a61,000 each on lives of the same age ; but the moral
values of the expectations of the two kinds of risks are different.

As another illustration, take the case of a merchant with a capital
of a64,000, besides goods of the value of ^8,000, which must be

* [See the formulae and remarks on the subject of Loan Risks in Building
Societies, in note, Div. Tl., p. r)8, of Treatise on the subject.]

10 APPENDIX ON MORAL AND MATHEMATICAL,

transported by sea : supposing yV^h to be the probability that the
vessel will be lost in the voyage, what is the moral expectation of
the merchant, — first in the case of the goods being transported in
a single vessel ; and secondly, in the case of one-half being embarked
in one vessel, and the other half in another.

I. If the goods be embarked in one ship, the merchant's absolute
fortune will, in the event of the safe arrival of the ship, become
,a6 12,000 : and, in the event of her being iost, ^64,000. The proba-
bility of the first of these events is ■^, and that of the second, -^ ;
consequently, the moral value of his absolute fortune becomes, from
formula (5),

X= (12,000)w. (4,000).V = 5610,751 nearly,
which is £449 less than the mathematical value by the probability
{■^-^j) of the gain.

II. In the second case, supposing the merchandise to be embarked
in two ships, we have three compound events to consider, viz. : —

1". Both vessels may arrive in safety, the chance of which is

_9_ y _?_ — 8 1

10 ^^ 10 100

2°. One of the ships may be lost, and the other arrive in safety :
this may happen iu two ways ;
.•. the chance is 2(^ x -jL.) — _i_s_.

3°. Both ships may be lost ; the chance of which is
J- X -"- — '

lo ^ 10 100"

If the first of these events take place, the Capital of the mer-
chant will become

^4.000 4- ^8,000 ^ ^12,000.
If the second happen, it will be

^4,000 + ^'4,000 = ^8,000.
And if the third happen, it will be only 564,000.
Hence, substituting these numbers in the same formula,
X= (12,000)i"oV X (8,000)t'^ X (4,000)1^3
= ^11,033 nearly,
which is ^167 only below the mathematical expectation, and ^6282
in excess of the result on the hypothesis of the merchandise being
risked on one ship ; and it may be easily shown in the same way,
that the moral expectation is increased by an increase in the
number of ships among which the risk is divided, and approaches
its limit a67>200, which is the value of the mathepjatical expecta-
tion, or

.V X .-€8,000.

EXPECTATION IN PROBABILITIES. 11

24. — It may, also, be shown that, whatever may be the risk of
ruinous fluctuation to which a Society may be exposed in embarking
a certain amount of Capital in each of a certain number of similar
speculations, it is halved by employing one-fourth as much Capital in
each of four times as many speculations, and so on. Mercantile men
are perfectly aware of the general truth of this principle, but they
very often imagine that they halve the risk by doubling the number
of ventures; whereas they would have to be four times as many.

25. — The theory of Moral Expectation enables us to assign the
circumstances, in which it is advantageous or otherwise for Societies
to grant, and for individuals to pay for policies insuring Property,
dependent on jJartictdar hazards, such as Invalid Lives, Untried
Risks, particidar kinds and seasons of voyages, etc. For this, we
have three principal questions to consider : —

a. What amount of premium, Y, the Insurer can pay to the
Society without disadvantage.

b. What ratio his fortune sho^dd bear to the value of the sum
speculated, in order that it may prove advantageous to insure at a
given premium.

c. What Capital a Society ought to possess in order that it may,
with probable advantage to itself and safety to the Insurer, accept
a given risk.

(a.) Let R be the sum which an Insurer has at risk, dependent
upon an event, the probability of the favourable happening of which
is p, and F his capital independently of R. Then the mathematical
value of the Assurer's absolute fortune is

{F + R) — {\ -p)R = F +p .R
if he insures, paying for the policy its net value, (1 — p) R ; and
the moral value x= {F + R)P . F^-P
if he does not insure.

Consequently, according as

F + p. R> or <:iF + R)P. F^-p
it will be advantageous or otherwise to insure. To examine this, we
must take the Logarithm of tlicse ex])rcssions. The first

Pp-dR

The second = p .log (F + R) + {I - j)) log F
V . d R
F + R

-fi

12 APPENDIX ON MOBAI. AND MATHEMATICAL

which is less than

'p.dR
F + p.R

since ^ is a proper fraction. Therefore, in general, Assurance is at-
tended with advanta2;e.

26. — In the above, let

T = {F + p .R)-{F^ R)P.F^-P . . (12)
This represents the sum the Insurer could afford to pay the Assurance
Society in addition to the mathematical value of the risk, without
moral disadvantage. Hence, his relative fortune will be increased or
diminished by insuring, according as he pays less or more than
{(1 — p) R + Y'\. In practice, the premiums paid, Y, may be
considered to fall between the limits of {\ —p.R-\- Y') and
(1 — p.R). Hence, notwithstanding that the Assurer pays more
than the mathematical value of the risk, he gains a moral advantage
by the transaction.

27 . — (b.) The amount of Capital, F, the Insurer should possess,
so that it may be morally a matter of indifference to him whether
he insures or not at a premium, Y, is the value of F determined
from the equation

F + R — Y={F ■]- R)P . F^-P

For example : Let R, the sum at risk on the event, = 5610,000,
Y = ^esOO, and p = ^ ; then we have

F + 10,000 — 800 = {F+ 10,000)=§ . i^A
or {F + 10,000)M . F'^s - F= 9,200

from which we find the value of F, by approximation, = £5,043.
Therefore, to neglect insuring for a policy of ^10,000 would not
prove advantageous, unless his other capital amounts to more than
£5,043, even though the premium charged exceeds the mathema-
tical value of the risk by £300.

28. — (c.) The Capital, F', the Society granting the policy ought
to possess, may be found in the same way. Its capital, after ac-
cepting the risk of the sum R, for the premium Y, becomes (F'
+ Y) should the vessel arrive in safety, and

(F -R + Y)

in the event of her being lost ; therefore the moral expectation
becomes

EXPECTATION IN PROBABILITIES. 13

x = {F' + r)P .(F' - R+ T)!-/'
which must = the Society's original Capital, F', in order that neither
advantage nor disadvantage may accrue in undertaking the risk.
Therefore, supposing the numerical values of R, Y, p, and I — p
to remain as before, the equation becomes

F' = {F' + 800)'t; X (F' — 9,200)aW
from which we find, by approximation,

F' = 14,243 nearly;

or there would be a moral disadvantage in a Society undertaking the
risk of insuring a cargo with £10,000 for a premium of £800, unless
its Capital amounts to £14,243, and should a less premium be de-
manded, the Capital should be still greater.

If F= £600, which still exceeds the mathematical value of the
risk, F' becomes ^29,878.

29. — From the preceding we learn that a Company, with a large
capital, may not only with safety engage in speculations, which might
prove ruinous to another whose resources are more limited, but also
with certainty derive a profit from them at a lower premium.

The smaller Company would consequently require a larger margin
on its premiums than the richer Company, to guard against contin-
gencies of loss in its speculations, setting aside all question of the
expenses and fixed profit on capital required, these being usually
included and provided for in the margin added to the premiums.*

30. — It follows that an Office, that has but few cases of amj par-
ticular kind of risk, must charge a larger margiii over the theoretical
premium than lohere it has a sufficient average ; otherwise, the moral
value of its assets is less, after a Policy is granted and risk com-
menced, than before. Also, that «w Office of small resoui'ces should
not attempt risks of an unfavourable character, such as diseased
lives, etc.

31. — If a Society enter into a given number of successive or si-
multaneously independent transactions of a contingent character, the
combination, which, of all others, is most likely to hajjpen, is that
in which the number of losses is to the member of gains most nearly
as the probability of losing any one to the probability of gaining it.

* [See Laplace and Traitc Eldmentaire ile Lacroix, p. 132.]

14 APPENDIX ON MORAL ANt> MATHEMATICAL

Suppose there are g ways of gaining and I ways of losing, and that
the number of speculations in question is n, depending on n events
of the same sort. In the developement of

{g + 0' = ^" + nf-'^ + '^-^f-' /^ + . . . .

we see, in the coefficients, the number of ways in which all, all but
one, etc., may succeed ; and if we divide both sides by the whole

possible number of cases, {y -f- ly, and let — '—-: =^ p , — ;— , = q,
we have

j9" + w .^""^ q + 1 2 i^"~^ ^" + ....= 1

the terms of which express the probabilities that all, all but one,

etc., will succeed. The ratios of these successive terms to those

which precede are

q n — \ q n — 2o

n.-, -— -, — , etc.

p 2 p S p

^, r + 1th term n — r + \ q ^ ,

The ,, , = ^— ■-=T, (say).

rtn. term r p r k j ,

Let the ?'th term be the greatest ; that is, let T,. be less than unity,

and 2Vi greater than unity, or

{n- — r -\- \) q K.r p I (% — r — 1+1)^>(?'— 1)^

.-. («+l)^<r I .-. («+ 1) </>(?■ -1)

But the rth term expresses the probability of losing (r — 1) and

gaining (» — r ■\- 1) of the speculations ; consequently, in n separate

events, against each of which the probability is q, the most probable

of all losses is the whole number next below (« + 1)5', which is

more likely than any other given loss, though not more likely than

any out of the other losses.

The preceding relations give

r — \ v nq — p ^ (n+ I) q

n — r + 1 -^ {n + l)p ^ np — q

Where u is a large number, the two fractions just found are very

near to -, which establishes the theorem.
P

32. — Although the 7nost likely combination in question is not to be
necessarily counted upon, yet the greater the number of speculations
entered into, the smaller will be the percentage of fluctuations to
be reasonably looked for. Consequently, if a Society enter into
1,000 speculations, against each of which the chance is 9 : 1, then

EXPECTATION IN PROBABILITIES. 15

it may anticipate the loss of 900 and the gain of 100, and the spe-
culations must not be entered into unless upon terms that will make
the 100 pay the risk of the whole 1,000 : or, if each successful
speculation would bring £10, the sum risked by the Society must
be less than the probability of gain, ^I, in each of the 1000, in
order to allow for the possible deviation from the most likely com-
bination.

33. — The following principles are also important, not only in consi-
dering questions similar to the preceding, but in the measurement of
the probability of events happening in a particular manner among
the lives assured in a Company, where the probabilities depend on
the experience it has had during previous periods, such as the nature
of diseases attending certain occupations and certain districts, or
the mortality among invalid lives in successive quinquennial periods.

1°. The Probability, p, that a particular kind of event which
has occurred n times already, will occur again is

-m ■■■ ■ <'^'

When n is very large, p ■= I ; that is to say, after a very large
number of observations the probability of the event occurring as be-
fore approaches certainty.

Example : —

Thus, if an event, depending on unknown causes, and which can
happen only in one of two ways, has been observed to happen once,
the probability is two-thirds, or the odds are two to one in favour of
its happening in the same way at the next occurrence.

2°. The probability that the event ivill occur n' times the same
way again is

"+' ... (14)

ft + ?*' + 1 '

Example : —

Thus, if there are five events, which must turn out in one of
two ways, and the first two events have occurred in one way, it is
three to one that the next will occur in like manner, and an even
probability that all will occur the same. If, however, three events
have occurred one way, then the chances are two to one that the re-
maining two will do so likewise.

3°. The Probability that there exists a cause which necessitates the

16 ON MORAL AND MATHEMATICAL PROBABILITY.

reproduction of an event that has been observed several times to-
gether, increases more rapidly than the probability of the next hap-
pening of the event.

For the probability that the event has not been produced by acci-
dent, but that it has been facihtated by causes, is

2n+l \

which increases more rapidly with n than (13).

For farther details on these points, see Cournot ' Exposition de la
Theorie des Chances et des Probabilites,' and Quetelet's ' Probabi-
lities.'

APPENDIX

ON THE

VALUATION OP TOST OBITS

AND

CONTINGENT REVERSIONS OR LEGACIES.

Jl'i//i some simple new Formulce and Tables.

By Life Annuities.

Art. 1 . — Frequent complaints are made of the excessive amounts
that are charged hy way of Post Obits on property, in consideration
of the payment of a sum in present money or of Life Annuities
granted to the Uves entitled to the property in Reversion. These
complaints are particularly frequent (and generally with justice)
when the parties concerned are private individuals, not conversant
with the principles of calculation involved, or when erroneous for-
mulse are used by Actuaries who have no experience in dealing with
such questions. "We have consequently thought that the annexed
Tables might be useful in enabling Solicitors and others to ascertain
the fair amount for a Post Obit, or charge to be made on Continyent
Revei-sionanj Legacies or property, in the most general case of two
lives, where a present annuity is pi'oposed to be granted to one life,
in consideration of a Post Ohit, contingent on its surviving another,
and provision is made for the annual cost of an Assurance in case of
previous death. Where more than two lives are involved, the Tables
would be too extensive for convenient publication.

*2. — The subject has become more especially interesting of late,

2 APPENDIX ON POST OBITS

through the recent actions of T. v. the H. and P. of W. Assurance
Societies in the Court of Queen's Bench, where the Plaintiff claimed
on an Assurance connected with a Post Obit Bond ; and the follow-
ing explanation of the cases may he serviceable.

3. — The Post Obit Bond in question was given for 5614,000, to
be paid by a life aged 35, in the event of his surviving another aged
74, in consideration of receiving, during the joint existence of the
two lives, an annuity of ^330 a year. The Plaintiff, having sub-
mitted a case to an Actuary, effected, it is said, assurances for £\ 4,000
on the younger life, at an annual premium of from £A. 15«. to £a
per cent., costing him therefore, in the aggregate, nearly ^700 a
year.

4. — Various pleas were raised by the Companies resisting pay-
ment, one of which was, that the sum assured exceeded greatly the
legal assurable interest which the Plaintiff had in the life. This one
plea is supported by an examination of the case, submitted to the
Actuary referred to, which was as follows : —

" What amount should a Post Obit be for, to be paid by a gen-
tleman aged 35, if he outlives his father, aged 74 1

"The cotisideration to be an annual payment q/"jS330, together
ivith the necessary insurance on the younger life, which can
be done at 5 per cent., he not being a very good one; the old
life to be calculated to live ten years."

5. — The Actuary's opinion was as follows : —

"Assuming that the older life will live ten years, and that the
younger will survive the elder, I am of opinion that the amount
of the Post Obit, to cover the necessary insurance, should not
be less than ^€1 2,832."

6. — The above answer being assumed as correct, the Plaintiff
would not have been far out in effecting his Assurances for j614,000,
and in requiring a Post Obit for that amount.

But, in the preceding case, two arbitrary suppositions were laid
down as conditions of the question : —

] st. That the older life would live ten years certain.
2nd. That the younger life would certainly survive him ;

AND CONTINGENT UEVRRSIONS. 3

and such assumptions are constantly being made, to the injury of
property mortgaged for Post Obits.

7. — On these assumptions the calculations would stand thus (treat-
ing the Annuities, for simplicity, as Annuities due, and interest at
five per cent.) : —

Let A = Accumulation of an Annuity of £\, paid at the begin-
ning of the year, for ten years certain, at .5 per
cent, interest ;

a =. Annuity paid = ^330 ;

O = Post Obit :
then O .(. O.")) = Annual premium paid by Assurer :
.-. { 330 + O-(.05) } .A = 0

, r\ A X ooO (\\*

" ~ 1 - 'A^dY ^ ^

_ 13-207x330

1- (13-207 X -05)
= ^12,832 nearly.

The preceding assumptions, however, are erroneous, as, by the
Carlisle Law of Mortality, the joint existence of two lives, aged 35
and 74, is only worth, at five per cent., 5-881, or less than six
years' purchase.

8. — The case would have been correctly stated thus : —

" What amount should a Post Obit be for, to be jJf'id by a gen

tleman, aged 3.5, if he survive his father, aged 74 1
" The consideration to be an annual jjnyment of £,3?tQ, together
with the necessary Insurance on the younger life, the ^jre-
miumfor lohich may be taken at £5 per cent, per anmun."

9. — The correct amount would then be obtainable thus by the or-
dinary mode of calculation : —

Let a = Annuity due, or payable in advance each year to x,
during the joint existence of two lives, aged x, y,
for a Post Obit O, to be received if x survive y ;
A = Accumidated amoxmt, with interest {Iry the end of the
year when one has died), of £\ a year, payable in
advance during the joint existence of x, y,

* [See Ta])lc 9, page SO."), Treatise on Industrial Investment and Emlyration,
(taking amount for eleven years, minus £\).^

APPENDIX ON POST OBITS

^'>^d Px ' y— Q^^^ Annual Premium to assure £1 in case of x dying
oejore y :

then 0=(a+ 0.2h-y)A.

(1)
A . a

= r^rA7j^, (2)

(1)

10. — In the Plaintiff's case, ^^. , the premium, was taken at as

(I)

high as £5 per cent., and it would have been but fair to have taken
a corresponding reduced expectation for the joint duration of the two
lives, and a lesser Post-Obit Bond. But, even assuming their joint
duration to be not less than that shown by the Carlisle Tables, and
allowing the Plaintiff £6 2ier cent, compound interest for his money,
or aSl per cent, per annum more than he professed to charge, by
formula (2), O would only equal ^4708 (nearly).

11.— To justify a Post Obit of ^614,000, an Amiuity of ^1020
should have been paid to the younger life ; and the fact that, while
the Annuity paid was only ^330, the premiums were £70Q a year,
should have suggested to the Judge and the Jury that the life was a
bad life, and that the assumptions made in the case submitted to the
Actuary, viz. — that the older life looxdd live ten years certain, and
that the younger life tvoidd survive him, were erroneous.

12. — The result in Art. 9 might be proved elegantly thus, in a
form, it is believed, not to be found in works on Life Contingencies :

Since the amount of the Post Obit is receivable at the death of

either life.

If TTjj.y = Annual sinking fund, or Net premium {calculated at the
rate of interest the purchaser is to receive), to pro-
duce £1 at the death of the first of the two lives,

and pj..y =■ Annual Office premium to Assure £\ in case of x dying

(1) , J.

before y ;

then TT^.y—p^.y

(1)

is the Annuity which should be paid to life x for a Post Obit of ^1.

AND CONTINGENT REVERSIONS.

the Post Obit, O = (3)

(1)

Hence if £ a be the actual Annuity desired to be bought : Then
the Post Obit, O = ~

(1)

which is identical with (2), since

13. — Whence this Rule : —

To Calculate the Amount of a Post Obit Bond.

"From the net a7inual premium, — or sinking furul, at Jive per
cent. Carlisle (or such other rate of interest as may he
allowed, and Law of Mortality selected) , for the Assurance
of £,\, payable at the death of the first of two lives, — Sub-
tract the Office annual prendum for £\ Assurance against
the younger life dying before the older, — And divide the
proposed Annuity to the younger, by the differenced (See
the Tables at page 7.)

14. — The rate of interest that should be involved in Tv^.y varies in
practice from 5 to 7 per cent., and tt^.^Is easily calculated, with
the aid of Joint Life Annuity Tables, from the formula given in our
Treatise on Copyhold Enfranchisement and Freehold Land Societies
(3rd ed., page 4, App.), viz. —

^.■y= (4)

where a^. y is the present value of an Annuity due on two lives,
and a^ the present value of a perpetuity due = -j'

15. — The preceding assumes that the Annuity is payable at the
beginning^ of the year, for which, if desired, the equivalent value of
the Annuity, payable half-yearly or quarterly, can be substituted ;
but this should not be done, unless interest on the Post Obit is

* [It is worthy of attention that, if formulae rehiting to Life Contingencies
are made to depend, when practicable, on but one unknown quantity, and to
involve symbols for annuities due or payable at the beginning, instead of at
the end of each year, their forms are not only more elegant, but more simple
for practical use and remembrance. Such forms are also preferable, as they are
then analogous to formuhc for premiums, which are customarily payable at the
beginning of the year ; and they can be as easily adapted to cases of half-yearly
or quarterly Annuities, as formulse involving Annuities due at the mid of the

6 APPENDIX ON POST OBITS

receivable in the event of delay occurring in the settlement by the end
of the year that one life dies ; and although such delay would not in
general arise if the assured life die first, it might be the case if the
older die first, and there be delay in the younger coming into the
estate. This suggests the propriety of adding some margin for the
expenses that may be incurred by the purchaser in the recovery of
the amount of his Post Obit.

16. — If, after n years have clasped^ the holder of a Post Obit, O,
desire to sell it, the value would be

(5)

^0(1-^^^^")

It may be remarked incidentally, that the coefficient of O is a neat
formula for the value of a Policy.

year. It is an objection to existing works on Life Contingencies, that this ana-
logy is disregarded. By way of illustration (see our Treatise on Copyholds) : —
Ifaj,= Value of Annuity due on life x; using the Greek letter Alpha.
o^ = Value of a perpetuity due, or an Annuity for ever ;
and Sj, = Net single premium for Assurance, or present value of ^1 receivable at
death, of life x: —

• d = -J—=-L

\ + i a^

d + ITr

Ax = amount of annual premium
1

TTx
1

(aj~'^'^ (j.)

= 1- ^
= 1 - d.ux

TTr

d + TTj;

d . S.-
l-Sx
1 1

of A"!, by

end of year

after

• (1)
. (2)
. (3)

death of x.
(4)

(5)

(6)

(7)
(8)
(9)

(10)

(11)

(12)]

AND CONTINGENT REVERSIONS.

Art. 17.

Table for calculating the Annuity to be granted in purchase of a
Post-Obit Bond or Contingent Reversionary Legacy of £100,
payable on the contingency of one life {A) surviving another (B).

(The Annuity is the difference between Columns 1 and 2.)

Column 1.

Column 2.

Gross Annual Payment to purchase a Post

Deduction to be

Ages.

Obit or Contingent Reversionary Legacy of

made for rate of

^100, receivable if A survive B, inclusive

insurance of £100,

of cost of insuring the chance of A dying

payable should A

before B, allowing interest at

die before B.
Office.

5 per cent. 6 per cent.

7 per cent.

£. s. d.

£. s: d.

2 0 8

1 18 3

1 16 3

1 8 7

2 3 8

2 1 2

1 19 2

1 7 8

2 7 6

2 5 0

2 2 10

1 6 9

2 11 10

2 9 0

2 6 7

1 5 10

2 17 11

2 14 10

2 12 2

1 4 11

3 4 8

3 1 1

2 18 0

1 4 1

3 15 5

3 11 5

3 7 10

1 3 2

4 13 1

4 9 0

4 5 4

1 2 4

5 17 9

5 13 6

5 9 8

1 1 6

7 4 0

6 19 5

6 15 2

1 0 8

9 8 0

9 3 3

8 19 0

0 19 9

12 9 7

12 4 6

11 19 9

0 19 0

15 13 9

15 8 5

15 3 5

0 18 3

20 13 5

20 8 2 20 3 4

2 6 7

2 4 1

2 1 :i

1 12 4

2 10 4

2 7 8

2 5 5

1 11 2

2 14 5

2 1] 7

2 9 1

1 10 0

3 0 4

2 17 3

2 14 7

1 8 10

3 6 11

3 3 6

3 0 5

1 7 8

3 17 6

3 13 7

3 10 1

1 6 8

4 15 2

4 11 1

4 7 5

1 5 8

5 19 10 5 15 6

5 11 7

1 4 9

7 5 10 7 13

6 17 1

1 3 10

9 9 9 9 5 0

9 0 8

1 2 9

12 10 11 12 6 2

12 1 11

1 1 9

15 15 1 15 9 11

15 5 1

I 0 10

20 14 10 20 9 6

20 4 8

8 APPENDIX ON POST OBITS

Annuity for the Purchase of a Post-Obit Bond — continued.

Column 1.

Column 2.

Gross Annual Payment to purchase a Post

Deduction to be

Affes.

Obit or Contingent Reversionary Legacy of

made for rate of

£100, receivable if A survive B, inclusive

insurance of £100,

of cost of insuring the chance of A dying

payable should A

before B, allowing interest at

die before B.

5 per cent.

6 per cent.

7 per cent.

Office.

£. s. d.

2 13 10

2 11 1

2 8 10

1 16 9

2 17 8

2 14 10

2 12 5

1 15 3

3 3 5

3 0 4

2 17 9

1 13 10

3 9 9

3 6 4

3 3 3

1 12 4

4 0 0

3 16 4

3 12 10

1 10 11

4 17 8

4 13 9

4 10 1

1 9 8

6 2 3

5 18 1

5 14 5

1 8 7

7 8 4

7 3 10

6 19 9

1 7 7

9 12 5

9 7 8

9 3 4

1 6 8

12 13 6

12 8 11

12 4 8

1 5 8

15 17 9

15 12 7

15 7 11

1 4 9

20 17 7

20 12 3

20 7 5

3 1 3

2 18 3

2 15 8

2 1 5

3 6 7

3 3 6

3 0 9

1 19 6

3 12 8

3 9 2

3 6 0

1 17 7

4 2 9

3 18 10

3 15 5

1 15 8

5 0 0

4 16 0

4 12 5

1 13 9

6 4 5

6 0 4

5 16 7

1 12 3

7 10 4

7 5 10

7 1 9

1 11 0

9 14 2

9 9 5

9 5 0

1 9 9

12 15 3

12 10 7

12 6 3

1 8 7

15 19 2

15 14 1

15 9 4

1 7 4

20 18 11

20 13 6

20 8 7

3 11 8

3 8 5

3 5 6

2 7 9

3 17 3

3 13 8

3 10 6

2 5 4

4 6 10

4 2 11

3 19 5

2 2 9

5 3 11

4 19 10

4 16 2

2 0 3

6 7 11

6 3 11

6 0 3

1 18 0

7 13 9

7 9 2

7 5 I

1 IG 3

9 17 6

9 12 10

9 8 6

1 14 9

12 18 9

12 14 0

12 9 9

1 13 6

16 2 10

15 17 8

15 12 10

1 12 8

21 2 6

20 17 2

20 12 3

AND CONTINGENT REVERSIONS. 9

Annuity for the Purchase of a Post-Obit Bond — continued.

Column 1.

Column

Gross Annual Payment to jjurchase a Post

Deduction

to be

Ages,

Obit or Contingent Reversionary 1

^egacy of

made for

rate of

.ill 00, receivable if A survive U,

inclusive

insurance of .€100, |

of cost of insuring the chance of

A flying

payable sh

)uld A

before B, allowing interest at

die before B,

5 per cent.

6 per cent.

7 per cent.

Office.

£. s. d.

s. d.

£. s.

4 2 1

3 18 4

14 11

2 14

4 11 0

4 7 0

3 5

2 11

5 7 5

5 3 2

19 4

2 7

6 10 10

6 6 8

2 10

2 4

7 15 11

: 11 3

7 1

2 1

9 19 2

9 14 5

10 0

1 18

13 0 0

12 15 4

11 0

1 16

16 3 10

15 18 8

14 0

1 14

21 3 9

20 18 4

13 3

4 19 1

4 14 9

10 10

3 4

5 14 8

5 10 3

6 2

3 0

6 17 3

6 12 11

8 11

2 15

8 1 2

7 16 G

12 1

2 11

10 3 6

9 18 7

14 0

2 6

13 3 4

12 18 6

14 1

2 2

16 6 2

16 0 11

16 1

1 19

21 5 4

20 19 10

14 9

6 9 6

6 5 0

0 11

4 3

7 11 6

7 7 0

3 0

3 17

8 14 4

8 9 7

5 2

3 12

10 15 9

10 10 9

6 1

3 6

13 15 2

13 10 2

5 7

3 1

16 16 9

16 11 4

6 4

2 16

21 15 0

21 9 5

4 3

8 13 0

8 8 7

4 7

5 9

9 14 10

9 10 1

5 10

5 3

11 15 8

11 10 8

6 1

4 16

14 15 0

14 10 1

5 7

4 10

17 16 3

17 10 10

5 10

4 5

22 14 8

22 8 11

3 7

APPENDIX ON POST OBITS

Annuity for the Purchase of a Post-Obit Bond — continued.

Ages.

Column 1.

Gross Annual Payment to purchase a Post
Obit or Contingent Reversionary Legacy of
jGIOO, receivable if A survive B, inclusive
of cost of insuring the chance of A dying
before B, allowing interest at

Column 2.

Deduction to be
made for rate of
insurance of JEIOO,
payable should A
die before B.

5 per cent.

6 per cent.

7 per cent.

Office.

65
70
75

£. s. d.
10 14 6
12 13 4
15 11 2
18 10 2
23 7 4

£. s. d.
10 9 6
12 8 2
15 6 1
18 4 7
23 1 6

£. s. d.
10 5 0
12 3 5
15 1 5
17 19 4
22 16 1

£. s. d.
6 14 5
6 5 3

5 16 8
5 8 5

70
75
80

14 10 1
17 6 5
20 2 3
24 16 6

14 4 7
17 1 0
19 16 4
24 10 I

13 19 6
16 16 0
19 10 10
24 4 2

8 19 11
8 9 2
7 18 6

20 2 11
22 16 9
27 9 11

19 17 6
22 10 10
27 3 5

19 12 6
22 5 3
26 17 3

80
85

25 6 5

29 15 7

25 0 3

29 8 7

24 14 7
29 1 11

33 19 1

33 11 5

33 4 2

Example : — A Life 35 should receive an Annuity due of £\\. 2s. during his
joint existence with another, 75, in consideration of a Post Obit of iilOO,
supposing that the ptirchaser can Assure the life against 75 for a j)remium
of £\. 8*. Id. per cent, per annum, and is allowed to charge 6 per cent, in-
terest.

Hence for a Post Obit o/"iG14,000 an Annuity of £\bh\ should be given. {See
case as stated in Article 3.)

AND CONTINGENT ttEVERSlONS. 11

As to Purchase by Present Values.

Art. 18. — If, instead of an Annuity, a present cash sum is to be
paid to X, for a Post Obit of £1, or in purchase of a Contingent
Reversionary Legacy of di\, dependent on x surviving y, the price
should be, —

Tlie present net vakie of £1 receivable at the death of t\\^ first of
the two Uves, less the Office shiyle premium for the contin-
gent Assurance of x dying before y ;
= {S^ . y) or net single premium at the rate of interest proposed to

be received by the purchaser
— IS^.y\'At Office rate.

This result is equivalent to

TT^.j,* {a^.y taken at 5, 6, or 7 per cent, interest)

~Px-y' {'^x-y taken at 3 or 4 per cent, interest),
(1)
the reason being, that the purchaser is entitled to deduct from the

Present Value of the total annual cost of the Post Obit (discounted at

the rate of profit he is to make, viz. 5, 6, or 7 per cent.) the Present

Value of the Office annual premium for the Contingent Assurance

(discounted at the Office rate of interest, which would be 3 or 4 per

cent.).

19. — Some writers recommend the use of the following formula
(which gives a lesser present Value), viz. : —

I — {d + 2h-y) ■ O-x-y

(1)

in which d = , or annual interest due of £1, and is usually

1 + " ^

taken at 5 per cent, for the advantage of the purchaser, whilst a^.y
is taken at a lower rate, that is, 3 per cent. The first two terms,
\—d.a^.y, would coincide with S^.y or tt^ . j, • a^, . ^ in the preceding ar-
ticle, if one same rate of interest were involved in both expressions.

20. — The introduction of two rates of interest in the first two
terms of the above, viz. : —

1 (,")5 per cent." ("i • j/js per cent.

as the value of a Reversion of £1, receivable at the death of the first
of two lives (without Assurance), is scarcely equitable ; for the Seller
is made to allow the Purchaser, instead of </-, the supposed 5 per
cent, yearly interest due, its present value discounted at 3 per cent.,
which is equivalent to allowing a much higher rate.

12 APPENDIX ON POST OBITS

21. — A like form,

1 ("jopercent.' ('^.rjs per cent. (1}

has also been strongly recommended by some Actuaries as a just and
proper present value for a. Reversion of £\ depending on a single life
in place of the usual form

('^^js per cent, or 1 ("J5 p„ ^ent. ' (<*.r)5 per cent. • • \^)

which is the expression for the single premium or present value of
£1 at death of a life x discounted at 5 per cent.
The first form (1) differs from (2) by

Ky-Jb per cent. ' \ K^-Xji per cent. Kf-xjs per cent. | J

or the difference between the present values of a Life Annuity {d)i, ^^^ eem.
at 3 and 5 per cent., but it cannot be supported by any satisfactory
reasoning, and is objectionable from its giving negative results for
ages under the zero point, corresponding to

^ V^/5 per cent.* (,<*.rJ3 per cent. ^^>

01* ("^73 per cent. ^y-T^ ^^("'00 ^5 per cent.

V /o per cent.

that is, when the Life Annuity due at 3 jjer cent, at age x^the value
of a perpetuity due at 5 ^;er eew^. = 21.

22.— Our own preference would, perhaps, be in favour of the for-
mula Sx or

1 — d. ttj.
in which a higher rate of interest, such as 6 or 7 per cent., should
be used throughout ; — as we are prepared to recognize that a 5 per
cent, discount by the formula S3, is not sufficiently advantageous to
satisfy purchasers ; considering they run the risk of locking up their
money a long time before the Reversion falls in.

23. — But a much more satisfactory form may be deduced as fol-
lows (analogous to that in the preceding Articles on Post Obits), and
is worthy of consideration, as it does not yet appear to have been
noticed by other writers : —
Let (7r;t')5=net annual premium or sinking fund to realize £1 at

death of x at 5 per cent. ;
then (ttiOj is the immediate Annuity due that might be granted to
the Reversioner in purchase of a Reversion or Post Obit of ^1, re-
ceivable at death of x, crediting the purchaser with 5 per cent, for
the money he advances each year.

Now if the Reversion is to be bought by a single present sum, the
Present Value of the Annuity (ttx)^ should be given, which, by cus-
tomary rule for purchasing Life Annuities,

AND CONTINGENT REVERSIONS. 13

(3)

<5 +px

*where^;^ is Office premium to insure £1 at death of .r.

24. — From the theoretical value of a Reversion, whatever formula
be used, a deduction would have to be made, if Legacy or other
duty is payable, or if legal or other expenses are anticipated to arise
at the time of coming into the Reversion.

25. — For comparison, we place side by side these three forms
and their numerical values at various ages, which we will designate
by numbers (1), (2), (3). (See next page.) It will be seen that
if a person aged 20 were entitled to a Reversion of ^6100, and the
interest of money were 5 per cent., formula (2) would make its
value £19' 92, and the newly-suggested formula (3) .£ 18-24 ; while,
by the method now in frequent use, viz. (1), the party would not
only have nothing to receive, but would actually be called upon to
2iai/ the Purchaser a68*01 ; thus making the possession of such
Reversion a positive liability or debt. This absurd result, apart from
any abstract argument, is conclusive proof that the formula from
which it is obtained must be radically defective, and cannot be
founded on any correct or equitable principle. The positive values
given by this latter method at older ages also present equally
strange results, for at age 40 it makes the value of 56 1 00 in rever-
sion, at 5 per cent., worth only^l3'64; whereas the discounted
value of the same is ^31 "48, or, even at 7 per cent., £22'5l.

* [The value of an Annuity due of £1 is a„, which used to be taken formerly
at 5 per cent., and is

. . . (see note p. 6)

^5 + (ira.)a

The modern writers substitute, in the denominator, p^, the Office annual pre-
mium for (irj,)5, the net premium at 5 per cent.

It may be mentioned incidentally that the ages at which the present Value

(S^ or J^ \ of a Reversion of ^1 is J, i, ^, or -, correspond to the ages at

V d+7rj f

which the annual premiums are equal to d, -, -, or ^ — p. respectively.

Thus P. V. of a Reversion of JGIOO is ^-, or ^£33. 6s. M. at age where Net
annual premium is -J or Je2'38 per cent. (See note to p. 5.)

In like manner Practical Estimates can be read off" from an Office Table of
Annual Life Assurance Prcnviums.]

APPENDIX ON POST OBITS

Comparative Table of the Values of £\ in Reversion on a Single
Life by various formulce (1), (2), (3).

3 PER Cent. By (2) or ^3 ox\-d., {ct,\ or ^^'^'}\ '

«3 + (•^^•Jj

5 PER Cent. By (1) or 1 ^(a,,), or ('^-)3-(^5-'^3)-

«3 + \^'h

„ (2) or S, or ^ ^'';^\ •

,, /o\ ^"^'''^ . New Form recommended.

6 PER Cent. By (2) or S^ or t-^^-

,. (3) ^'^'' ' . New Form recommended.

^ ' de+Pr

7 PER Cent. By (2) or Sy or , \'^7" . .

Age.

3 per cent.

5 per cent.

6 per cent.

7 per cent.

(2)

(1)

(2)

(3)

(2)

(3)

(2)
or S^

or^.

1-^5(0^)3

or S,

New Form.

or -S"^

New Form.

•3390

-•0801

•1992

•1824

•1603

•1465

1326

•3446

•2035

•1640

1358

•3504

•2082

•1681

1393

•3564

•2131

•1724

1431

•3625

•2182

•1769

1471

•3681

•2237

•1817

1514

•3755

•2292

•1867

1558

•3822

•2350

•1920

1605

•3889

•2409

•1972

1653

•3953

•2463

•2021

1696

•4013

+ •0215

•2513

•2289

•2064

•1863

1733

•4073

•2563

•2108

1771

•4136

•2616

•2155

1812

•4201

•2673

•2205

1856

•4269

•2733

•2^259

1905

•4340

•2797

•2317

1956

•4412

•2863

•2378

2011

•4487

•2932

•2441

2068

•4562

•3002

•2506

2128

•4639

3075

•2574

2189

•4716

•1364

•3148

•2833

•2640

•2352

2251

•4789

•3217

•2704

2308

•4862

•3285

•2767

•2365

•4935

•3354

•2829

•2421

•5011

•3426

•2896

•2481

AND CONTINGENT REVERSIONS.

3 per cent.

5 per cent.

6 per cent.

7 per cent.

Age

(2)

(1)

(2)

(3)

(2)

(3)

(2)

orSs

1-^5(0^)3

or 5;^,

New Form.

or Sr

^cw Form.

or Sx

•5089

•3501

•2965

•2544

•5169

•3581

•3040

•2613

•5-254

•3666

•3120

•2687

•5344

•3759

•3209

•2770

•5441

•3861

•3308

-2864

•5543

•2716

•3971

•3520

•3416

•2994

•2968

•5651

•4090

•3535

•3083

•5760

•4212

•3656

•3202

•5870

•4337

•3780

•3324

•5981

•4465

•3909

•3451

•6095

•4597

•4043

•3584

•6210

•4732

•4181

•3723

•6326

•4871

•4324

•3867

•6441

•5010

•4469

•4012

•6551

•5143

•4606

•4151

fiO

•6653

•4530

•5267

•4601

•4734

•4098

•4280

•6744

•5375

•4844

•4392

•6833

•5482

•4955

•4503

•6922

•5591

•5068

•4617

•7016

•5707

•5187

•4739

•7111

•5826

•5313

11 ^4866 1

•7210

•5951

•5444

•5001

•7312

•6082

•5583

•5145

•7417

•6219

•5729

•5297

•7525

•6361

•5881

•5456

•7634

•6133

•6507

'5603

■6039

•5158 i -5623

•7746

•6659

•6205

l! ^5800

•7852

•6804

•6364

i| ^5969

•7948

•6936

•6507

li ^6122

•8033

•7052

•6635

, ^6259

•8103

•7148

•6740

'i ^6370

•8172

•7242

•6842

!; ^6479

•8235

•7329

•6938

; ^6581

•8300

•7418

•7035

1 ^6685

•8371

•7519

•7147

i •esos

•8437

•7446

•7612

•6479

•7-250

•6136 1 •6917

Note. — The following are the Constants occurring in the above formul.T :
r/3 = -0291.
il, = -0476.
4 = -0566.
d. = -0654.
The Variables may he found as follows : —

Pr in Table 1, page 51, for Office Annual Premiums.
(tt,) in the following Table, Art. 26, page 10.

APPENDIX ON POST OBITS, ETC.

Art. 26.
Table of the Value of ttx, the Annual Premium (due), to assure
.£100 {or Sinking Fund due to accumulate £\00) by the end of
the year of death of a Person aged x, at 5 per cent, interest,
Carlisle Law, Net.

£.

s.
3
4
5
5
6
7
8
9

10
11
12

d.
9
5
1
10
8
6
4
3
3
2
0

12 10

13 9

14 9

15 10

0
3
6

11
4
9
2
7
1
8

10
2
2
5

11
9

51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80

£.

Note. — [The Equivalents of ir^. are —
= — = :^ = ^ - ^

^j: «! ax a^

- d.

tx ax a^ a^ (1 — -S,)

(See Appendix, page 4, ' Treatise on Copyholds.')
Hence n^ at other rates of interest than 5 per cent, can he readily calculated
from a Life Annuity, or an S^ Table.]

AND CONTINGENT Iir.VKRSIONS. 17

27. — In note at page 13 we have mentioned that tlie value of" a
Life Annuity due of ^1 is where the PoUcy assured is sup-

posed effected to extent of this vahie. It sometimes happens, how-
ever, that the seller has already a Policy for the whole or part of
the amount required in his possession, say for P, taken out n years
ago, at a premium of ^^,_„ jier pound, which he is prepared to dis-
pose of at the same time. In such case, the saleable value of the
Life Interest is increased, since the necessary insurance will cost
less a year through the premium on the whole, or part of it, being
less. In fact, it is equivalent to his having for sale an additional
annuity of

P{p.-p.-n),

which gives to the price an additional value of

PjP.-p.-n),

P. + d
which is in fact the Value of the Policy, calculated by Office Pre-
miums. (See "Valuation of Policies," in the Appendix on the In-
vestigation of the affairs of a Coui])any, etc.)

Of Contingent Reversionanj Life Interests.

28. — In the preceding Articles relating to the sale of a Reversion,
it has been supposed to be a sum of money ; if, however, it be a
Reversionanj Life Interest, I, of a Life, x, after death of another, y,
should X survive, then the usual theoretical value would be

I K — Ox.y).

supposing X to receive the * whole year's annuity I at the end of
the year in which y dies. This value, putting a, (Greek letter alpha)

for 1 -\- Oj., is

= I (o^— "x.y).

which may be put under the form of

= vir.i''-'^-^'"'-}

* Ry the Apportionment Act ( t & 5 Wm. IV. c. 22), this would not be tlie
case in practice, as tliat statute directs that a life in possession shall receive a
proportion of" any rent, annuity, pension, dividend, modus, composition, or other
payment," for the period elapsed between the last day of i)ayment and the death,
— unless there he (Jnj sect. .3) an express stipulation to the contrary.

18 APPENDIX ON POST-OBITS, ETC.

29. — If for TTj-the Office Premium, j^^t be substituted, and S^^y, d,
and a^y be taken at a high rate of interest, varying from 6 to 8 per
cent., then the result would be the net Cash Value, Ri, of the re-
versionary interest, after the deduction made for necessary assurance
on the life x for the whole duration thereof, or

^' = 7rb:,{*"-^"""} • • • (»

aj.„ is taken at 3 or 4 per cent, if a single premium is to be paid
for the assurance.

30. — This result may be deduced by direct reasoning, and its pro-
priety shown, thus : —

Let P = amount of Assurance Policy on life x, required to cover
Ri, with accumulations of interest thereon till the end of the
year in which occurs the death of the first of the two lives x
and y, and also to cover accumulation of annual premium,
Ppx, loith interest, until same event.

Now — '- ■= accumidated amount of R^,

P n

and — '— = accumulated amount of Pp^.,

P=3l + P±^ (2)

^x.y '^x.y

31. — Now since accumulations are only taken to the end of the
year of the first death, and the Policy P is not receivable till x is
dead, / must, in case of x surviving y, be sufficient to cover Pd and
Ppx the annual Office Premium still payable till x dies ; and, by hy-
pothesis, if X survive, he comes into receipt of one / at the end of
the year in which y dies.

.-. I=Pd^Pp,

.'. P=-J— (3)

and Ri = { ^^x y — P.v • «x « r ^'I'om (2)

d ^ px I J

as before.

32. — If a present Life Annuity is to be given to x, payable while
X and y are jointly alive, in exchange for his contingent Reversionary
Interest, then, as Sj; and «,,„ may be at the same rate of interest.

Present Annuity = , — (tt^ v — Px) • . • (4)
d+pj;

APPENDIX

INVESTIGATIONS

INTO THE

AFFAIRS OF A COMPANY

FOR

AMALGAMATION OR BONUS DIVISIONS.

Section I.

As to Valuations of the Policies and Liabilities 0/ Assurance
Societies.

Art. 1. — Let /^j.,b = Value of a Policy of Assurance of £\ at

aye x, after n years; siipjwsiny net

annual premium (tt^) only to he payable.

V'3;^„= Value of the same Policy, where Office

Premium (p,r) is considered.

Then, at the time wlien the PoUcy is effected, if no premiums had to

be paid, V^. would coincide with S^,* but as there is a contract to

pay a premium, 2h>

V'x = 8;,— jj.r . a^ .

2. — If there were no margin or loading on the premiums, that is, if

then at starting F, = 0
since S,^ = tt^ . a^ .

* See definition of Sj- at note to page 5.

20 VALUATION OF POLICIES.

3. — As in practice, however, the Office charges a higher rate than

TTn, viz. Px = (iJ- + ^) T^X

then V'31, = — fi . TTx . Oc . . . . (1)

that is to say, at the beginning the contract is in favour of the So-
ciety to the extent of

jj. . TTa; . a^, or fi . Sx . . . . (2)
which is the present value of the margin (or loading for Office ex-
penses and contingencies, and for divisions of profit) added on to the
net premium ttx-

It may be mentioned, however, that n is rarely a constant at all
ages.

4. — When n years have elapsed, supposing premium just due,

1^'x.n= ± {S,v + n—Ih- ' a^ + n} • ■ • (3)

(which is the form ordinarily used in Valuations), or

= ± (tTx + n — P.v) (Ix -rn • • • (4)

5. — Until age (x + k), where

■^x + k= Pi'

the present value of the contract is still in favour of the Society, or
V'x,n is negative.

6. — After n exceeds k, F'x,n becomes positive, and the Policy has
a saleable or Surrender Value in favour of the Assurer, and that is
the sense in which the Value of a Policy is generally understood.
It is the excess of the accumulation of the premiums paid, with in-
terest, over the proportion of Losses estimated (according to the
Law of Mortality assumed) as likely to have been experienced each
year. Thus, young policies have no surrender value, if the terms of
the contract be adhered to.

7. — If, however, it be understood that, from the commencement,
a surrender value is to be allowed at any time, the Assurer would
have to be credited with this fact, and the formula (4), for surrender
purposes, would be changed into

iPx + n —Px) nx + n (5)

which is always positive, and not an exaggerated surrender value of
a Policy, as it is the present value of the difference between the in-
creased premium the Assurer would have to pay at his present age
for his policy, and that which he is paying.

VALUATION OF I'OLICIES. 21

8. — A deduction is sometimes made in fixing prices for Surrender,
to cover the circumstance that, as a general rule, when lives with-
draw from a Society, it is probable they are good, and that the So-
ciety, having some invalid ones left, is injured by the self-selection
of the Assured.

9. — We give a new form of great simplicity for the valuation of
the Policies at an investigation of the aifairs of a Society,

V'^:n = ± {1 - {d + p.) a, + „] . . . (6)

requiring only a Table of Life Annuities.

This equation shows that on a Policy of £\, all that the Society
gains, by the death of the Life not occurring, is an annuity o^ {d+p-^).

Hence, if the Assurer were to fipply a sum of money, such as a
Bonus, to make his Policy payable to himself at a future age or in
case of previous death, it must be sufficient to provide for the So-
ciety a deferred annuity of (c? + px). (See Art. 39.)

10.' — Again,

^'..»=±{l-(l +i^..«J.(l -«. + „)} . . .(7)

where a^ = --

= value of a perpetuity due of d£\.

This form requires only a Table of Reversions (see page 14).

1 1 . — Again,

V<^^= -j- ^ + " ~1^- (8)

TTj. + ^■]r d

depending only on a Table of ttj., or Net Premimns, of which we have
given the reciprocals in the Preliminary Remarks.

12. — Where the Valuation of Policies is by net premium, tt, in-
stead of Office, p, then

r.,„=i-''^ (9)

(depending only on a Table of Annuities Due), or

in terms of Reversions, S.

13. — The form in equation (8) can be reasoned out thus : — Since,

22 VALUATION OF POLICIES.

at end of n years, the Assured has paid up F, „, the interest on this,
added to the premium he pays, or

must be sufficient to insure the remainder of the Pohcy (1 — ^a;,n)>
at present age, or

r,,„.</ + 7r,, = ^,.+„(i-rr.„) . . . (11)

whence F, „ = ^ + "~";

as before.

14. — Hence, if the pohcy be re-valued at end of a further period
of k years, we must have

15. — If F^ „ be compared with tt.j., or the question be, what mim-
her, Hx,ny of past net premiums upon a sum assured at age a;, the
Society should have in hand at a Valuation, we have

^x + n ".P

• (1-^)

a^ being the value of a perpetuity due.

II^„ is therefore the actual amount for every 58 1 a year of net
premium paid, for which the Assurer is creditor on the Society. See
Table in Preliminary Remarks.

16. — In terms of annuities due

TT — "■»' ~ "^ + « (\0\

-".t'.K — ^ -J ..... y^io)

1 — a .ax

17. — In like manner, at the next Valuation, Jc years after, there
would be jH^ ;pir^ in hand, and a comparison with the previous
Valuation would show that in the interval there should be an in-
crease of the net premiums in hand

This increase includes allowance for interest on the last H^,,, and on
the net premiums paid in the interval, deduction being made for the
mortality experienced.

18. — If a Policy has been valued on the principle of net pre-

VALUATION OF POLICIES. 23

miums, or TaLles of such values are at hand, and if /x he known,
then F', ,, can he deduced from F, „ as follows :

V',.„=F..„-;x(5f.+ ,lr,.,.) . . . (15)

19. — Simple formulae for net premiums may he * devised in func-
tions of J) and iV symhols :

»'••■ = '-frrf ('«)

20. — The preceding formulae can he adapted for the case of Joint
Life and Survivorship Policies hy introducing the corresponding
Values of S and a.

21. — For Joint Life Policies payahle at the death of the first,
V'^,n =l-(d -^p^J . «FTir , 7+^ . . (17)

which is prohahly the most convenient form, as requiring only a
table of Joint Life Annuities.

22. — If the Policy be one of Survivorship Assurance, payable if a
Life, X, die before another, y,

l^'.-TTTn = (^TTTs^^rnr -p.,y) «r+T,ir+ir . (18)

(1) (1) (1)

23. — If tables of tt^ ,, he not at hand, F'j77,„ can be deduced from

(1) " CD

the Office rates for survivorship assurance ^^^.y, if its loading or mar-

gin be known or ascertainable, for

(1) V ^ + 1 »' '

which onJij requires a Joint Life Annuity Table.

The discussion of the formulae for other kinds of assurance or
endowment would be too long for our space, but the preceding re-
marks will suggest the necessary forms to be adopted.

* \_Nj: is the sura of money wliich will buy at birth, for each of the survivors
Ij, of lo persons then born, a deferred annuity of ^1 a year, beginning at age .r.
This Nx corresponds to David Jones's N^^i

Mj is the sum necessary to provide an assurance of il to each person dying
after age x.

D.r is the sum at birth necessary to provide au endowment of £\ to the sur-
vivors at age x, or it will provide annuities due of d (interest) and assurance at
death of £1.

D.= M.+ d . AV]

24 FREE REVERSIONARY POLICIES.

24. — The whole or half of a years Fremimn would have to be
added in all the preceding formulce, if the •premium had just been
paid, or were not due for six months.

25. — If, on Surrender of a Policy, its full value be allowed in the
form oi?i free reversionary policy, F'^^^, then

from Article 4

i^', „= 1 - -J^ (20)

26. — F'.^^„ is important, as it measures that portion of a Policy
which an Assurer who has survived n years since he effected it, has
already paid up or realized, after deducting an allowance for the risk
incurred by the Office in the same period.

27. — Each year's payment adds to the amount so paid up on the
Policy, until the commencement of the last year of life, when the

correspondina; value of tt , + „ would be . or r ; and, before he

^ ^ \ -\- I

pays the last premium,

F',= \-p,{\ +0 . . . . (from 20)

When it is paid, F\. becomes £\.

28. — The progress of a Free Policy in k years, in passing from
age X -\- n to x + n + k, after enjoyment of assurance for those
years is

n.n-TY-n..=i?. |-^ ^ j. (21)

29. — These formulae suggest how much a Policy should be re-
duced, if an Assurer desire to omit altogether the payment, say, of
his n-\-\ ^^ premium, and the risk of the Office be suspended for that
year. Let S^+^ be the premium for an insurance of £\ for one

year at age x -\- n. Then the Redaction in Policy should be

L+n+X ,. O ^.+ n-S,+ „^ \ ^^ + n+J

— . ? . O ^ + „ + , 1 I

lx+ n

Px —s^ + ^_

^.(2^:^0 . . (22)

■n'x + „

FREE REVERSIONARY I'OLICIES. 26

30. — If the omission take j)lace at an age wlicu tt^ + „ docs not
differ very much from p,., the first fraction may be neglected, which
would give the

lleduction =F'^r+-^^i (see Art. 25),

which is the amount of a net Free Policy corresponding to a new
Policy taken out at age (,r + n) and dropped at end of one year.
In fact, this value would be in favour of the Company as soon as
7r^+„ exceeds ^^ and might with safety be used.

In the above,

Fr:^,,= {l - ^■''^" s = (l ~ J!l±^). . . (23)

TTx+x + l^ P^ + n + l

if the margin on the premiums be constant ; so that the value of
f^TTliA c^" 1^6 calculated from the Society's office tables.

31. — Even where the Policy is not suspended as in preceding
Article, a practical method is nevertheless afforded by formula (22)
to provide for cases where Assured is not ablfe to pay a premium.
The reduction might be permanent or temporary, or the original
amount assured might be reinstated afterward^ on payment of the
omitted premium, with interest.

32. — Again, since F,x._^ is Free Policy Assurer gets by past pay-
ments for a Life Policy of ^1, 1 — i''^ „ is what he loses in amount
assured by dropping his Policy.

If he take out a Policy for that amount at present age a: + n and
dropped it at age x -\- n -\- k, then

is what he would lose in amount assured by dropping his new
Policy.

This is equal of course to what he would lose in amount assured
by dropping a Life Policy of £1, effected at age .r, at the end of a
term of (n + k) years, or

(l-i^,,„) . (l-F,-+„,,)= 1 -i'V;r+I . . . (24)

33. — This example shows

or the progress of a Free Policy in passing from age {x + ?<) to

{x -\- n -\- 1). The same relation holds of i^,.,„.

34. — In one or two offices that have been recently established, a
jjrivileffe is held forth, by way of attraction to the public, that any

26 DIVISION OF I'ROFITS

Assurer, desirous to discontinue his policy, will be allowed a free Re-
versionari/ Policy equal to the amount of the Premiums he has paid.
This is unsafe for the Office, until

F':c,n= or > n.p^,

or 1 = or > « .px

Tl'^ + n

or p~'^ — 7r.r+i = or > n

or until the amount, that was assured for £1 a year of the original
office premium, exceeds by £,n the number of pounds that ^1 a year
of net premium would assure at the present age.

When the margin of the Oifice premium p, over the net tt, is
known, such that

^ = (/X + 1) TT

the safety of the privilege can be tested, on a policy of n years'
standing, by seeing whether

(i^+1) 1 .

^^- '- — — = or < M

(See Table of Reciprocals of ttj. given in the Preliminary Remarks.)

Section II.

As to Divisions of Profit and Allotments of Bonus.

In the Preliminary Remarks, we have briefly pointed out the pro-
per mode of measuring the Liabilities and Assets of an Assurance
Company, and we will now consider the Allotment of Bonuses.

As to Allotment of Bonus.

35. — iVctuaries are not agreed as to the proper principle for ap-
portioning among the Policies the Profit declared in the Balance
Sheet as available for division ; and various methods are practised,
which, although perhaps admitted as objectionable, are continued at
subsequent divisions, on account of the almost insuperable difficulty
of making any alteration without disturbing the vested rights of the
Assurers, many of whom in such Societies anticipate in future Bo-
nuses a compensation for any error in the principles of allotment in
the past.

I. At the epoch of a First Division, one mode of allotment

AND ALLOTMENT OF BONUS. 27

adopted is to form a Unit, equal to the sum of the net vahies, Vj._„
of the PoUcies. For subsequent Divisions the Unit l)eing made
equal to the progress of the value of the Policy in (he period ; that
is to say, if ?i + k be the number of years the Policy has been in
force, of which k is the number elapsed since the last Division, the
Unit would be

in which the Amount of the Polioj is taken as including the Bonus
declared at previous Divisions.

This plan has the recommendation of crediting the Assurer with the whole
amount of the accumulation of the premiums he has paid, with interest, deducting
the proportion to defray the losses hy death, and the margin for expenses and
profits.

Those who advocate this method, make their valuations hy net premiums, and
argue tliat the principle adopted in dividing profits should not he different
from that which would he fair if the Office were going to wind up or pay off its
niemhers.

The argument is that, as the office margin on the net premiums is contrihuted
for expenses and contingencies, any unahsorhed portion of it goes to make profits,
and as Fj.,„ is all that the Policy-holder is actually creditor on the Society in
respect of his past payments, the surplus should he divided in proportion to Fi_„.

II. Another plan, which is advertised in the Prospectus of a
Scotch Office, is thus stated : —

" The amount of Premiums received under each Policy, with ac-
cumulated interest to the time of Valuation, requires to be ascer-
tained, and the difference between these and the values of the corre-
sponding Policies constitutes, of course, the profit arlsint/ from each
insurance.

" Then the total available Proft beiny divided hi pi-oportion to
these various tabular j)rofits or differences from Policies, the quotients
give the share of present profit falling to be allotted to each."

This process is equivalent to taking as a Unit
p,.A,- F,,„
where A^ = amount by the end of n years of an Annuity due of ^'I .

In this it is overlooked that no px-A^ can e.vist in the Society's
hands on any Policy, as each year a portion of the jj's, paid by the
members who survive, has been used to pay the Claims of those who
have died.

Indeed, F^,„ itself would be exactly equal to ir-e . A„, were it not
for the annual losses on the policies ; and this method of allotting

28 DIVISION OF PROFITS

Bonus in proportion to the difference is, in fact, to proportion it to
the Losses of the Society.

III. Another plan, adopted by many of the leading Offices in Eng-
land and Scotland, is, to allot the Surplus funds among the loolicy-
holders in the form of a Reversionary Bonus, at an equal rate per
cent, per annum on the sums assured, according to the whole duration
of the assurances at the time of the allotment, without reference to
the ages of the parties.

But the actual present values of such Reversionary Bonuses (which
are payable only when death occurs) vary in reality with the ages
of the assured, and are proportioned to the values of S for each life
at the time of the valuation, i.e. to the present value of a Reversion
of £\ at their respective ages. Thus an equal Reversionai'y Bonus
of £2 per cent, per annum on policies of 5 years' standing, or ^10
in all, is, at 3 per cent, discount, only worth in present money £4
at age 30, whereas it is equivalent to £6. I3s. if the present age
be 60.

If G = whole Profit available for Division, the allotment will be
correct under this pMn if made in proportion to the present values of
the risks, so as to give per ^1 assured an equal Unit of Reversionary
Bonus, b, for every year of standing. The share, B, of each policy,
P, would be worth in present value

B=n.b.P.S,+ ^

IV. Another method in use is to allot the surplus profits on the
'plan of III., but '\\\ proportion to the number, only, of years' dura-
tion of each Policy since the last Division, and to the amount as-
sured, including the previous bonuses.

V. A fifth method of allotment is in proportion to the amount
paid in ptremiums, without interest, since the commencement of the
Policy; treating each premium, j?, or the margin of percentage there-
on, as having given rise to the profits.

This plan has the advantage of simplicity of calculation, and
consists in apportioning the profits according to the fructification
which each premium paid by the Assured has experienced. Thus,
a Policy, upon which ten premiums have been paid, would be consi-
dered as entitled to ten Units of Bonus on the first year's premium,
nine on the second, and so on, down to one on the last, or, in other

AND ALLOTMENT OF BONUS. 29

words, to fifty-five Units on tlic Policy. The present value of the
share would be

^ n(n + ]) J

where h

/ » + 1 \ . . . (2)

This is equivalent to an application of the Bonus in the nature of
simple interest on the premiums, and does not seem objectionable on
the score of unfairness.

VI. Where the valuation is by Office premiums, and V^ „ has not
been calculated, another mode is to adopt as a Unit the accumu-
lated amount of the premiums with interest, without deductions for
losses ; i.e., p^ . J^ at first division, and ^;.r (^^T* — A^) at sub-
sequent divisions.

As to the AjipUcation of the Bonus.

36. — The shave of each Policy in the divisible profits, G, of a
Society at the time of a Valuation represents an immediate Bonus, B,
although, if the assured elect to take this Bonus in cash, a deduction
is sometimes made to compensate the Society for the perhaps unde-
sirable withdrawal of the amount from its funds.

The immediate Bonus, B, is convertible, by dividing by Sx--, (if the
age at the time of the allotment be x\) into an equivalent fixed Re-
versionary Bonus, payable at death, or, dividing by a^^^ or a.,, _ , it is

applicable to a fixed annual reduction in the premium, either per-
manently for the whole of life, or until the next epoch for Division
of Profits.

If B be converted, as suggested in the Preliminary Remarks, into
an increasing Reversionary Bonus or an increasing annual Reduction
of premiums, — that is to say, one that is greater for each year the
assured lives Jifter the date of the division, — then B would have to be
divided by* S'j^ in the one case, and by a'^^ in the other, so that the

* [S'l being single preiniuni for an increasing assurance which is £\ if death
occur ill the first year, £2 if in second, or £n if in ?ith year,

'~ IK '
and if -n ^ be corresponding annual premium, then

The uniform ptiymcnt of ir', annually is equivalent to an increasing one of

30 DIVISION OF PROFITS

rate of increasing Reversionary Bonus, b, would be = ^ , and if the

assured die in the nth. year after allotment, his representatives would
receive (n . b) in return for this share in profits, B. In like manner,
the rate of increasing reduction of premium,

P=^ (3)

or the reduction in the wth payment after the allotment in return for
this particular share of the profits, B, would be np.

37. — If repeated allotments be applied in Increasing reduction of
the premium, the total extinction of the payment would ensue at an
earlier date than in the case of an Invariable annual reduction.

Now the Assurer can be permitted to select either —

1°. That the reductions should tend to the extinction of the an-
nual payment at a given age ; or,

2°, be left to ascend as the Assurer continues to live, in which
case he may live to cease to pay any premium himself, and enter
upon the receipt of an increasing annuity.

As regards the first, if n be the number of years' interval (usually five or seven)
at which the allotments are made, and {Xj^ + gn) be the given age at which the
extinction is desired to take place, then the amount of each successive reduction
in return for the successive Bonuses Bj, 5o . . . . allotted, will ascend up to the
gni\a. year, and then remain constant ; so that if By be the Bonus, p the corre-
sponding reduction,

A = / ["'.'•._+ i7«.'^".'-^"«...+.»j (4)

V. g/\ if

In like manner

B..

and it will depend upon the amount and number of B's as to whether his pre-
mium will be extinguished at age (^, -\- ffn) or not.

&, &• + !, & + 2 • • • • each year, and S'.r is the value of such irregularly increasing

Annuity Sr, & + j, &• -j- „ . . . .

If o'j-, the value of an increasing annuity due, be tabulated from its value

2 N,-

—jr-, SO that the annuity be a£l at starting, £2 the second year £n

the nth year, then

S'.r^aj-— d . a'j; . . . . . (!)

or, in another form, taking away the denominator Dj;

:S,Ms-= N.-d^N^ (2)]

AND ALLOTMENT OF BONUS. 31

38. — If a Bonus, B^ be allowed at age x^, and the Assured desire
to apply it so that at some future unknown age, x-^^ + y, the pay-
ment of his annual premiums, p^-, may cease, we have

lh=p. ^'^'-^^

whence iV^^,^ + ^ = -^-^ — — . . . . . (6)

P«

which gives y by comparing this result with a Table of N. Simi-
larly, the next Bonus will bring the age y earlier.

39. — If the Bonus be applied to make not only the *payment of
the premiums cease, but the amount assured itself become payable
to the Assurer at age x -\- z ox in case of previous death, B must
suffice to meet the deferred Annuity {d -f p.^), or the annual interest
on the amount assured as well as the premium.

.-. B,= {d + p,)^^^
_B^JK^

P.v

and 2^ can at once be determined by simple inspection of a Table of
A" (see Article 9).

whence A^.,+.-, = ^qi^ • • • • (')

40. — In like manner, a second Bonus, 5.,, allotted at age .r.,, would be applied
to bring the result out at an earlier age, x., + 2.., than ar, + z^, and D._. must be
sufficient to buy a temporary deferred Annuity due of d + pr, deferred till age
X., + Z.2, and lasting till age (^i + rj — 1) inclusive.

B., = (<Z + 7/O jj-^

in which z., is the only unknown quantity, since from (7)

' ■ ^^^+-= d+pl ^ ^

whence 22-

The reader will notice thai B^ . -jp is the amount of the previous Bonus, im-

proved to the next division, allowinff for the jirohabiliiy of the life surviving till
that time.

* [ The Problem in this article has been investigated in two Papers, published
in the Sixth Volume of the 'Assurance Magazine' {pp. 290 and 344) ; but the
writer 7tas used for his purpose an unnecessarily lengthy method.']

32 ALLOTMENT OF BONUS.

41. — Similarly, the third Bonus, jSg, allotted at age a'3, would bring out the
age of realization, x.^+ z^, of the policy, from

'^ '= d +pa^

and so for successive Bonuses. It is to be remarked that these equations are
independent of the previous z'&.

42. — If in previous formulae the Bonuses be assumed of equal amount, B, and
annual, commencing at age x of Assurance, and continuing up to the year before
the age at which the Policy is receivable, we have

d + p.r

d + 2h

B.N,

B + {d + p.r)

(10)

43. — By putting ■k.v iox p.v in the preceding equation, we have the age, cc + z,
at which an Assurer can make his Policy payable to himself if he live or iu case
of previous death, provided he pay in addition to the ordinary net premium,
IT,,-, any given annual margin, B.

44. — Conversely, if a^ + r be a given age, (10) gives the extent of the margin,
B, over ttx, to buy an Endowment Assurance, or

^^AT-^.f^ + .,..)

Nx — N,- + z

45. — This last equation agrees with ordinary formula; for an Endowment As-
surance, for the total annual payment the Assurer makes is

^^ "^ ""^'^ " a^,.-a{+, ^"^ + ''■'') + ""■'■

Nr + z-d + N^.-Tx-

Na,-N^ + i

Nx + z.d + M.C

N.V- N^. + ,
- M..+ ,

(12)

or, if preferred, = ^^ _ ^^_^^ — - .... (13)

See note to p. 23.

The reader will observe that the M jjortion of the fraction represents the Death
part of the Premium and the D the Endowment part.

GUARANTEED UONUSKS. 33

Section III.

As to Guaranteed Bonuses.

46. — If the plan, adopted by an Assurance Society, be to charge
in addition to p^ (the Office Premium for simple assurance without
profits), such a further margin over the net mathematical rate ttj., as
would enable it to (juarantee a certain Ileversionary Bonus payable
at death : — Then the proper addition to px would be found as fol-
lows,— Supposing all expenses and other contingencies of the Society
to be provided for by the margin already in px over tt,., and by a
higher rate of interest being realized than is allowed in the calcula-
tion ; also, by the lapsing of policies, etc. : —

I. Let the guaranteed Bonus be t per S of the sum assured, for
each year of standing of Policy, so that the Assured shall receive
1 + wi at death if it occur in the wth year: — then if x< = annual
premium for an assurance of £\ and such an increasing Bonus, a
*portion = t . tt'^. is paid as a premium to assure n .t '\i death occur
in nth year, and the remainder

Xv— t . TtJ — Px'

X,. = p^. + t . 7r\. . . • (1)

Similarly single x^ =7T'l . S, + t . S',. . (2)

if iJ^- = (/* + 1 ) TT r

Example : U t = "02, or the Bonus be 2 per cent, per annum
of the sum assured (an amount not unfrequently allotted), then

Xx = Px- + '02 . it'x

(/x+ 1)M..+ -02 SM^

II. Let the guaranteed Reversionary Bonus be a return of t per
pound of all the annual premiums, t/)^, paid after n years (n being
equal to the time in which the Assured will have paid in £\ in pre-
miums). The Bonus will thus be ^ . <^^ if death occur in the

n -\- Ith year ; 2 ^ . (^^ if in the n + 2th year, etc.
t
Now the margin over;;,, or {(t>x—Px), nfiust = the annual premium

for a deferred assurance of t .(p^ at the end of n years, 2 . 1 0^. at end

t t

of ?i + 1 years, etc. : —

* See note to Art. 36, for a definition of ir'j..

34 GUARANTEED BONUSES.

'>T^2^, = f'

^^ - IM^ . . . (3)

III. If the Bonus in II. commence at once, we must put n — 0,
and (})^ becomes

. . . (4)

(5)

IV. If the Bonus be a return of all the premiums, ^ = 1,
1

<f>. = r^ .... (6)

47. — If the Guaranteed Bonus be an increasing Reduction of
Premium, commencing at the end of n years, various modes of cal-
culation may be adopted, according to the extent of the Reduction
intended. A simple case is that where the Assurer is to receive, as
in Table 16, page 160, an annual increasing reduction equal to the
interest at some given rate on all the premiums he has paid, and
after the premium is extinguished, an increasing Deferred Annuity.

Here we have only to assume that in calculating the premium, say /)^,

1
the Assurer is credited with no interest, so that he may receive it

annually during his life : —

r\r={^^

Pt'-\Nj{i = 0)
_ 1

where e^ is the expectation of life at age x,

48. — Conversely, if the excess of the Bonus office rate over the
non-prof t rate be a known quantity, say /x, . 77,, then, in considera-
tion of the Assurer at age x paying lx^ . tt^ a year more than is neces-
sary for a simple assurance of ^€1, an increasing yearly bonus, com-
mencing at an agreed age, *■,, might be guaranteed, on the plan
suggested in the Preliminary Remarks, which (in the case of the
death occurring, say in the ni\\ year after Xi) would be, —

GUARANTKKD BONUSES. 35

C-f")

(7)

since — y ' is the annual premium for an increasing assurance, ef-
fected at age x, but not to commence till age Xi. This result is

= ^^'¥m^ ... (8)

49. — If instead of the increasing rate of annual Bonus, as in the
preceding Article, /xi tvx had been applied to obtain a fixed Bonus or
increase to the Policy, it would have been /^i pounds.

Section IV.

As to Average Ages, and the Limit of Assurance Risk to be kept by

a Society.

50. — The considerations of Moral and Mathematical Expectation
given in a previous Appendix, show that it is disadvantageous to an
Assurance Society to grant Policies of the same amount to Assurers
of different ages, or of different amounts lohere the ages are the
same.

I. As to the average age of Policies. — In valuing Policies, various
arrangements are usually made for classifying them according to
what are intended to be ' average ' ages, so as to diminish the labour
of calculation. The 'average age' of two or more lives is that
which would give to the Society the same results, in respect to risk,
average duration of live, and the general contingencies of existence,
on one Policy for the whole amount assured, as attend the aggre-
gate of the Policies on separate lives. Hence, by way of example,
even in the extreme case of only two policies being considered, of
different amounts, P^, P.., at ages, say 30 and 60, it would not be
correct to say that they are equivalent to one of P^ + P.. at age 45,
nor that the average age is 45, even when P^ = P^; for the Expec-
tation of a Risk (whichever way it be considered, whether by present
value, or with regard to ultimate payment at death, or in respect
to the current risk each year) is not the same on a policy at the

36 AVERAGE AGES.

mean age for the sum of the two amounts assured, as on the two
separate Policies. In other words, the Average age will not lie
midway between two ages, or be equal to the mean age.

5 1 . — There is no method that can be applied practically which
would give an age truly representing, even in respect to Mathema-
tical expectation, an equivalent for the ages of the lives in the sepa-
rate Policies. When relative or Moral expectation in respect to
Policies is considered, the average age of policies on lives of the same
age, but for diiferent amounts, is no longer that age : — for instance,
suppose three policies, for £\QQ, ^€200, and ^1000, on lives aged
30 ; the moral expectation attending such Policies is not equal to
that of one Policy for £1300 at the same age.

II. As to Limit of Assurance Risk to be kept by a Society. — This
leads on to the remark that, in order that the Moral expectation of
the current risks of a Society at the various ages may not be greatly
unequal while it is young, or when, from that or other causes, it has not
a sufficient number of lives of about the same ages to form an Average,
then the Limit of Assurance kept at each age should be diminished
as the age is greater. Thus if ^€3,000 be the amount of policy granted
on a life aged 30, not more than ^1,677 should be granted on a life
aged GO, otherwise the Society would experience Mor^Z disadvantage;
for it is obvious that although, from the Premiums being larger in Po-
licies on advanced ages, the value of the Mathematical expectation of
the total ultimate payments received by a Company from an assurance
on an old life may be equal to that from a corresponding assurance
on a younger and consequently longer enduring life, yet the Moral
expectations of the immediate risks for any current period can only
be rendered equal to each other, or nearly so, by a large average of
about the same age, or by some system of graduation of the amount
assured, so as to tally with the increase of immediate risk attending
the fact of the ages being older. There is no means, indeed, of
fixing the amounts, so that the proportion of the increase of the
Moral expectations of the risks attending the policies in the office as
they advance in age shall year by year remain the same. This, as
the Office gets older or obtains a larger business, is, however, un-
important, the object being to avoid Aberration and consequent loss
that may arise from want of an average number of lives of about
the same ages. In selecting a decreasing limit of assurance, various
ratios will present relative degrees of argument in their favour, but

LIMITS or RISK. 37

the one we rather inchne to is : — That the relative amounts as-
sured at various ages should be proportional to the corresponding
values of n^., which represent the equivalent of the number of pre-
miums the Society is Hkely to receive on each PoHcy : always sup-
posing (as may, in general, safely be done) that the premiums them-
selves are properly calculated to correspond to the ages of the lives
assured. This ratio would give a sufficiently accurate adjustment to
equalize the moral expectation that the lives will last long enough
to pay a sufficient number of premiums to prevent the Society from
losing by them. Thus, as we have said before, if at age 30 the
limit of the Society's assurance is fixed at £3,000, at 40 it should
be only

3,000 a^o ^^^^„
= £2,648

at age GO it would be

See the table at p. 7.

030

3,000 a,;o

^30

= ^1,677

52. — Although we recommend this peculiar ratio, our readers can,
by the aid of the method in the Appendix on Probabilities (Art. 13),
deduce a series of values of the moral expectation, to be used as
limits of Assurance at each age, which should correspond to the
values of (1 — ^->), or the chance of dying that each life has, in the
period for which the equalization of the moral expectation is desired.
For instance, if 5 years were the time, then, at age 30 (I — ^)) or
the chance of death would be ^q^^ or y^-^ nearly, and at age 60 it
would be tWt ^^' iVo > ^"'l ^^^^ mathematical expectation of the older
policy becoming a claim on the Society is as 17 to 5 against the
younger policy; but there would still be (according to Art. 14,
Appendix on Probabilities) a moral disadvantage to the Society in
granting these Policies of equal amount, where the risks for the
period are so disproportioned, even if the premiums charged were
according to these ratios.

To make the calculation with accuracy, it would of course be ne-
cessarv to take the chance of the death for each of the years of the
period, since the policies are payable within three months after
death, whenever it may occur.

APPENDIX

THE TRUE LAW OF SICKNESS

FRIENDLY SOCIETIES.

1. — Let, as stated in Art. 101 p. 107, c be the constant minimum
rate per annum, at all ages, of Sickness, defined as Inability to Labour,
to which human beings are subject, on the average of a large number
of lives, and which depends upon their Race, the Climate of their
habitations, etc. ;

o-^., the rate experienced on the average at age x ;
and Ex = a^ — c

or the quantity that &x exceeds c.

Then, we have found that the True Law of Liability to labour,
through Sickness, consists in the relation that, for successive quin-
quennial periods,

E, = E,_, + E,_^, . . . . (1)
or, in another form,

0-,r = (T^._5 + CT-^-10 — (^ • • • (2)

2. — If c be eliminated, we have

cr^r = •^ (^x-i — O"^— 15
or (Tj; — cr,r_5 = cr,^._5 — <Tx-Vo ' ' • • (3)

that is to say, the difference between the rate of sickness, at an in-
terval of 5 years, is equal to the previous difPerence at an interval of
10 years.

3. — From (1) we have by summation of the £"s

Ex+r,^ =11 n • E.I.+; + ?/„_, E,r

TRUE LAW OF SICKNESS. 39

in which the coefficients Un are found by the relation

Wn + i ^ "»! T Wn_i

and are terms of the^series,

1, 1, 2, 3,5, 8, 13, 21, etc.
or, the probable rate of sickness bn years hence may be estimated in
terms of two past experiences at an interval of 5 years.

4. — The above can be made

-E'.r + 5„ = Un+lE^, + l<„ . £'^,_5 . . . (4)

5. — If £",4+5 = £'.t. at commencement, such as sickness at 25 =
that at 20, nearl}', then

-E',.+5„ = w„ + 2^,. . . , . (5)

6. — From (3) we can deduce

[o-^'+i + <^.«'+-:: + ^r+3 + o-.t+j + o-,r+5] = [o-^' + o-,r_i -h o-.t._.2 + • • • (Tt-^—^C ... (G)

whence we see that, if we suppose a Society for its protection to take
the unfavourable view that all now alive at age x will survive the
coming quinquennial period, and expose the Society to loss from
Sickness, the maximum amount, it is likely to pay per head on a
large average of members, can be expressed in terms of the rates ex-
perienced in the last 10 years. The actual result, considering that
deaths in the interval may occur, would be probably less.
In another form, putting £ for a- — c in equation (6),

2{E,+,toE,+,)=:2(E^_,toE^) . . (7)

7. — From two quinquennial experiences, E^BXid E^+i, the average
rate of sickness during the next quinquennial period may be deduced
with sufficient approximation by supposing it to be the mean between
the rates at the beginning and end of the period :— that is to say, if
-E!r+i2i be the average sickness for the period between x -{■ \0 and
X -\- 15, it may be taken,

~~ 2

then £',+i,i = f £•.+5 + ^. . • • («)

APPENDIX ON FRIENDLY SOCIETIES.
THE NEW ACT.

AN ACT TO CONSOLIDATE AND AMEND THE LAW
RELATING TO FRIENDLY SOCIETIES, 1855.

18 & 19, Vic. c. 63.

Whereas it would conduce to the improvement of the law-
relating to Friendly Societies if the several statutes relating thereto
were consolidated, and certain additions and alterations were made
therein: Be it therefore enacted bj 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:

Acts or parts I. That there shall be hereby repealed the several

forth'^in first Acts or parts of Acts set Ibrth in tlie first schedule
repealed. hereto, save and except as to any OiFences committed^

or penalties or liabilities incurred, or bond or security given, or
proceedings taken under the same, before the commencement of
this Act.
Societies un- jj^ Provided nevertheless. That, notwithstanding

der former

?inue° ''°°" tl^e repeal of the said several statutes, every Friendly
Society now subsisting, which heretofore had been formed and
established under the said Acts or any of them, shall still be
deemed to be and shall continue to be a subsisting Society, as fully
as if this Act had not been made, unless and until such Society
shall be dissolved, or united with some other Society as herein-
after mentioned.

III. Provided also, that the Rules of every such
coiftinue in subsistiu"" socicty hitherto formed and established

force, and ° /. i • x j

enrolments which have been hitherto confirmed, registered, or

to be sent to

lo uu seni lu p » 1 11 1

Registrar. certified under the said Acts or any ot them, shall be

deemed valid and in force until the same shall be altered, or

42 APPENDIX ON

rescinded, as herein-after mentioned; and all transcripts of any
of such rules, which are now filed with the Rolls of the Sessions of
the Peace, of any County, Riding, or Division, City or Borough,
Liberty or Place, shall be taken off the file and shall be transmitted,
on or before the first day of November, one thousand eight hun-
dred and fifty-five, to the Registrar under this Act, to be by him
kept in such manner as shall be directed from time to time by one
of her Majesty's Secretaries of State in that behalf.

All their con- ^^ ' Provided also, That all contracts and engage-

SfBond"'^ mcnts by or with any of the said societies now valid
to'^continue"' ^^^ i" force, and all bonds and securities heretofore
given by any trustee, treasurer, or other officer of any
such society, shall continue and be valid and in force notwithstand-
ing the repeal of the said Acts.

Their exemp- V. All such Subsisting societies, whose rules have

tions. Powers,

and Privi- heretofore been confirmed, registered, or certified under

leges under

this Act. the said Acts or. any of them, shall, so long as they

shall not hereafter effect an assurance to any member thereof, or
other Person, of any sum exceeding two hundred pounds, or of
any annuity exceeding thirty pounds per annum, enjoy all the
exemptions and privileges by this Act conferred on societies to be
established under the provisions of this Act, as fully as if they
had been registered and certified under this Act as herein-after
mentioned.

Registrars. VI. For the purposcs of this Act, there shall be

How and hy three Registrars of Friendly Societies, one for Eng-

whom ap-
pointed, land, one for Scotland, and one for Ireland, who shall

hold their respective ofilces during the pleasure of the Commis-
sioners for the Reduction of the National Debt; and upon the
death, resignation, or removal of any one of them, the said Com-
missioners shall appoint another, being a barrister, in England or
Ireland, and in Scotland an advocate, of not less than seven years
standing, to the said office.

Their saia- VII. It shall be lawful for the Commissioners of

her Majesty's Treasury to pay to the present Registrar

for England a salary equal to that which has been paid to him

FRIENDLY SOCIETIES. 43

yearly in each of the three hist years, not exceeding one thousand
pounds per annum, and to pay to any Registrar hereafter to be
appointed for England a salary not exceeding eight hundred
pounds a year, and to pay to the Registrars for Scotland and Ire-
land respectively a salary such as the said Commissioners shall
direct not exceeding one hundred and fifty pounds a year, eveiy
such salary to be paid by four equal quarterly payments; and any
of the said Registrars who shall be appointed, or who shall die,
resign, or be removed from his office, in the interval between two
quarterly days of payment, shall be entitled to a proportionate
part of his salary, and such salaries and proportionate parts of
salaries shall be paid out of such monies as shall be provided by
Parliament for that purpose.

Their Ex- VIII. The Said Commissioners of her Majesty's

penses ot ,_ in pi • i • t t

office, &c. Ireasury shall, out oi such monies as may be provided

by Parliament for the purpose, pay to the said Registrars respec-
tively such sum as will defray the expenses allowed by the said
Commissioners fi-om time to time for office rent, salaries of clerks'
stationery, computation of Tables, and for such other expenses as
may be incurred by them respectively.
„ . ,. , IX. It shall be lawful for any number of persons to

Societies liow •' ^

purpose ^'^** form and establish a Friendly Society, under the pro-
formed, visions of this Act, for the purpose of raising by
voluntary subscriptions of the members thereof, with or without
the aid of donations, a fund for any of the following objects; (that
is to say,)

For pay- 1 • For insuring a sum of money to be paid on the

death. birth of a member's child, or on the death of a

member, or for the funeral Expenses of the wife or child of

a member:

^ ,. , . 2. For the relief or maintenance of the members,

For rehef m

sickness, &c. their husbands, wives, children, brothers or sisters,

nephews or nieces, in old age, sickness, or Avidowhood, or the
endowment of members, or nominees of members at any
age:

44 APPENDIX ON

For other 3. For any purpose Avliich shall be authorized by

authoTLd one of her Majesty's Principal Secretaries of State,

of staTe?&Z or in Scotland by the Lord Advocate, as a pur-

pose to which the powers and facilities of this Act ought
to be extended:

Provided, that no member shall subscribe or contract for an
annuity exceeding thirty pounds per annum, or a sum payable on
death, or on any other contingency, exceeding two hundred pounds:
And if such persons so intending to form and establish such
society shall transmit rules for the government, guidance, and regu-
lation of the same, to the Registrar aforesaid, and shall obtain his
certificate that the same are in conformity with law as herein -after
mentioned, then the said society shall be deemed to be fully formed
and established from the date of the said certificate.

No money to ^ In any society in which a sum of money may be

lie paid on j j j j

a'cww wit"h- insured payable on the death of a child under ten years
entry of'the^ ^^ ^S^' ^^ '&\\s\\ not be lawful to pay any sum for the
Deaths.'"^"* funeral expenses of such child, except upon production
of a copy of the entry in the register of deaths, signed by the
Registrar of the district in which the child shall have died ; and if
such entry shall not state that the cause of death has been certified
by a qualified medical practitioner, or by a coroner, a certificate
signed by a qualified medical practitioner, stating the probable
cause of death, shall be required, and it shall not be lawful in that
case to pay any sum without such certificate ; and no trustee or
officer of any society, upon an insurance of a sum payable for the
funeral expenses of any such child, made after the passing of this
Act, shall knowingly pay a sum which shall raise the whole amount
receivable from one or more than one society for the funeral ex-
penses of a child under the age of five years to a sum exceeding
six pounds, or of a child between five and ten years to a sum
exceeding ten pounds ; and any such trustee or officer who shall
make any such payment otherwise than as aforesaid, or who shall
pay any sum without endorsing the amount which he shall pay on
the back or at the foot of the copy of entry signed by the said
registrar, shall be liable to a penalty not exceeding five pounds for

FRIENDLY SOCIETIES. 45

every such offence, upon conviction thereof before two Justices of
the County or Borough in which such death shall have taken place:
the said registrar shall bo entitled to receive, upon delivery of su; h
copy of entry, for the purpose of receiving money from a Friendly
Society, a fee of one shilling, and it shall not be lawful for him to
deliver mr.re than one such copy for such purpose, except by the
order of a Justice of the Peace.

Benevolent ^^' ^'^^^ whereas many provident, benevolent, and

AWnitcase" charitable institutions and societies are formed and may
tiiV benefits be formed for the purpose of relieving the physical

of tliis Act. i J •..• o

wants and necessities oi persons in poor circumstances,
or for improving the dwellings of the labouring classes, or for
granting pensions, or for providing habitations for the members or
other persons elected by them, and it is expedient to afford protect-
ion to the funds thereof: Be it enacted, That if two copies of the
rules of any such institution or society, and from time to time the
like copies of any alterations or amendments made in the same,
signed by three members and the secretary thereof, shall be tians-
mitted to the registrar aforesaid, such registrar shall, if he shall find
that the same are not repugnant to law, give a certificate to that
effect ; and thereupon the following sections of this Act, that is to
say, the seventeenth, eighteenth, nineteenth, twentieth, twenty- first,
and twenty-second, fortieth, forty-first, forty-second, and forty-
third, shall extend and be applicable to the said institution and
society, as fully as if the same were a society established under
this Act.

Statutes as XII. The act of the thirty-ninth of George the

to unlawful n^, . i ^, o • 114 n ^ m-

oaths not to ihird. Chapter heventy-nine, anfl the Act of tlie nfty-

extend to So-

cieties under scveiitli of Gcorge the Third, Chapter Nineteen,

this or any re-
pealed Acts, and also the Act of the* fourtoonth and fifteentli

of her present Majesty, Chapter Forty-eight, relating to unlawful
oaths in Ireland, shall not extend to any society established under
this Act or any of the Acts hereby repealed, or to any meeting of
the members or officers thereof, in which society or at which
meeting no business whatever is transacted other than that which
dii-ectly and immediately relates to the objects of the society as de-
clared in the rules thereof, and set forth in the certified copy thereof:

46 APPENDIX ON

Provided that the trustees or other officers of the society, when
required under the hands of two of her Majesty's Justices of the
Peace, shall give full information to such Justices of the nature,
objects, proceedings, and practices of such society, and in default
thereof the provisions of the Acts herein recited shall be in force
in respect of such society.

Societies, XIII. It shall be lawful for the members of any

how dis- . .

solved. society heretofore formed and established, or hereafter

to be formed and established at some meeting thereof to be specially
called in that behalf, to dissolve or determine the same by consent:
Provided that no society established under this or any Act, relat-
ing to Friendly Societies shall be dissolved or determined without
obtaining the votes of consent of five-sixths in value of the then
existing members thereof, including the honorary members, if any,
to be ascertained in manner herein-after mentioned, nor without
the consent of all persons, if any, then receiving or then entitled to
receive any relief, annuity, or other benefit from the funds thereof,
to be testified under their hands individually and respectively, unless
the claim of every such person be first duly satisfied, or adequate
provision made for satisfying such claim; and for the purpose of
ascertaining the votes of such five-sixths in value of the ^timbers
as aforesaid, every member shall be entitled to one vote, and an
additional vote for every five years that he may have been a mem-
ber, but no one member shall have more than five votes in the
whole; and the intended appropriation or division of the funds or
other property shall be fairly and distinctly stated in the agi-eement
for dissolution prior to such consent being given; and the agree-
ment for such dissolution, duly signed as aforesaid, accompanied
with a statutory declaration by one of the trustees, or by three
members and the secretary, taken before a Justice of the Peace,
that the provisions of this Act have been complied with, shall be
forthwith transmitted to the Registrar, to be by him deposited
with the rules of the society, and such agreement shall thereupon
be an effectual discharge at law and in equity to the trustees,
treasurers, and other officers of such society, and shall operate as a
release from all the members of the society to such trustees, trea-
surers, and other officers; and it shall not be lawful in any society

FRIENDLY SOCIETIES. 47

to direct a division or :vi)i)ropriation of any part of the stock
thereof, except for the purpose of carryiiij^ into eilect the general
interests and objects dechired in the rules as originally certified,
unless the claim of every member is first duly satisfied, or adequate
provision be made for satisfying such claims; and in case any
member of such society shall be dissatisfied with such provision, it
shall be lawful for him or her to apply to the Judge of the County
Court of the district within which the usual place of business of
the society is situated for relief or other order; and the said Judge
shall have the same powers to entertiiin such application, and to
make such order or direction in relation thereto, as he may think
the justice of the case may require, as hereinafter is enacted in
regard to the settlement of disputes; and in the event of the
dissolution or determination of any society, or the division or appro-
priation of the funds thereof, except in the way herem-before pro-
vided, any trustee or other officer or person aiding or abetting
therein shall, on conviction thereof by two Justices, be committed
to the common gaol or House of Correction, there to be kept to
hard labour for any term not exceeding three calendar months, as
to such justices shall seem meet.

c . ,. XIV. It shall be lawful for any two or more

Societies may .'

^lers^^r^ societies established under this or any of the Acts
mayTransfer hereby repealed to unite and become incorjjoratcd in
nientf to^ One socicty, Avith or without any dissolution or divi-

sion of the funds of such societies or either of them;
or a society formed and established under this Act or any of the said
repealed Acts may be allowed to transfer its engagements to any
other Friendly Society, if any other such society shall undertake
to fiilfil the engagements of such society, upon such terms as shall
be agreed upon by the major part of the trustees, and also of the
committee of management of both societies, or the majority of the
members of each of such societies at a genertxl meeting convened
for the purpose.
Minors may XV. A persou Under the age of twenty-one may be

be elected as . , . <•

members. elected or adnntted as a member ot any society estab-

lished under this Act or any of the Acts hereby repealed, the rules
of which do not prohibit such cleclion, and may anil he is hereby

48 APPENDIX ON

empowered to execute all necessary instruments and to give all
necessary acquittances: Provided always, that during his nonage
he shall not be competent to hold any office of director, trustee,
treasurer, or manager of such society.
Buildings for XVI. It shall be lawful for the trustee or trustees

t>\\Q Purpose

may be pur- for the time being of any Friendly Society formed and
leased. established under this Act or under any of the Acts

hereby repealed, with the consent of a majority of the members
thereof present at a special or general meeting of the society, to
purchase, build, hire, or take upon lease any building for the pur-
pose of holding such meetings, and to adapt and furnish the same,
and to purchase or hold upon lease any land not exceeding one acre
for the said purpose of erecting thereon a building for holding the
meetings of the society, and such trustee or trustees shall thereupon
hold the same in trust for the use of such society ; and, with the
like consent as aforesaid, such trustee or trustees may mortgage,
sell, exchange, or let such building or any part thereof; and the
receipt in writing of such trustee, or one of such trustees for the
time being, shall be a legal discharge for the money arising fi-om
such mortgage, sale, exchange, or letting ; and no mortgagee,
purchaser, tenant, or assignee shall be bound to inquire into or
ascertain or prove the consent aforesaid, to verify his title : Provided
always, that any building purchased or appropriated for the purpose
aforesaid already belonging to or in the possession of any Friendly
Society heretofore formed and established under the said repealed
Acts or any of them may be holden and dealt vpith as if it had been
acquired under this Act ; and the land or buildings which may be
vested in the treasurer, trustee, or other officer thereof for the time
being shall thereupon vest in the trustee or trustees for the time
oeing of such society, for the same estate and interest as the said
treasurer, trustee, or other officer may have therein, without any
conveyance or assignment whatever : Provided nevertheless, that
all money spent in purchasing, building, hiring, or taking upon
lease any building for the purpose of holding such meetings, and in
adapting and furnishing the same, be raised according to the rules
of the society on such behalf inserted ; and this section shall apply
to any society registered under the Industrial and Provident

FRIENDLY SOCIETIES. 49

Society's Act, 1852, and to any building or land to be purchased,
built, hired, or taken on lease for the purposes of the labour, trade,
or handicraft of such society, in all respects as hereby enacted with
regard to any building or land for the holding the meetings of any
friendly society.

Trustees, XVII. Every friendly society established under

how ap- 1 • * 1

pointed. this Act shall, at some meeting of its members, and by

a resolution of the majority of the members then present, nominate
and appoint one or more person or persons to be trustee or trustees
for the said society, and the like in the case of any vacancy in the
said office ; and a copy of the resolution so appointing such person
or persons to the Office of trustee, and signed by such trustee or
trustees and by the secretary of the said society, shall be sent to the
registrar, to be by him deposited with the rules of the said society
in his custody ; Provided always, that where no trustee shall have
been appointed in any society established under any one of the
Acts hereby repealed, the treasurer thereof, or other person who
has custody of the monies of such society, shall be taken to be a
trustee vdthin the meaning of this Act.

^ , XVIII. All real and personal estate whatsoever

Property of i

vestedTn*^ belonging to any such society established under this
them. j^^^ ^^, ^j^y qI> ^j^g Acts hereby repealed shall be vested

in such trustee or trustees for the time being, for the use and
benefit of such society and the members thereof, and the real or
personal estate of any branch of a society shall be vested in the
trustees of such branch, and be under the control of such trustee or
trustees, their respective executors or administrators, according to
their respective claims and interest, and upon the death or removal
of any such trustee or trustees the same shall vest in the succeeding
trustee or trustees for the same estate and interest as the former
trustee or trustees had therein, and subject to the same trusts,
without any conveyance or assignment whatsoever, save and except
in the case of Stocks and Securities in the Public Funds of Great
Britain and Ireland, which shall be transfeiTcd into the name or
names of such new trustee or trustees ; and in all actions or suits
or indictments, or summary pi'oceedings before magistrates, touching
or concerning any such property, the same shall be stated to be

50 APPENDIX ON

the property of the person or persons for the time being holding
the said office of trustee, in his or their proper name or names, as
trustees of such society, without any further description.

Actions, &c., XIX. The trustee or trustees of any such society

by or against ,, ■,'■,-,• -i n ->

them. are hereby authorized to bring or detend, or cause to

be brought or defended, any action, suit, or prosecution in any
Court of Law or Equity, toucliing or concerning the property,
right, or claim to property of the society for which he or they are
such trustee or trustees as aforesaid ; and such trustee or trustees
shall and may, in all cases concerning the real or personal property
of such society, sue and be sued, plead and be impleaded, in any
Court of Law or Equity, in his or their proper name or names, as
trustee or trustees of such society, without other description ; and
no such action, suit, or prosecution shall be discontinued or shall
abate by the death of such person, or his removal from the office of
trustee, but the same shall and may be proceeded in by or against
the succeeding trustee or trustees as if such death or removal had
not taken place ; and such succeeding trustee or trustees shall pay
or receive the like costs as if the action or suit or prosecution had
been commenced in his or their name or names, for the benefit of
or to be reimbursed from the funds of such society.

,. . ,. , XX. Provided nevertheless, That no trustee or

Limitation of '

biutv^^""*'" trustees of any such society shall be liable to make
good any deficiency which may arise or happen in the
funds of such society, but shall be liable only for the monies which
shall be actually received by him on account of such society.

XXL The treasurer of every such society, and

Treasurer to j j ^

give security, every treasurer hereafter appointed in any society
established under any of the repealed Acts, or any other ofiicer
who is required by the rules to give security, shall, before he take
upon himself the execution of his office, become bound with one
sufficient surety, in a bond according to the form set forth in the
third schedule to this Act, or give the security of a Guarantee
Society established in London, in such penal sum as the society or
the committee of management shall direct and appoint, conditioned
for his just and faithful execution of his said office of treasurer, and

FRIENDLY SOCIETIES. 51

for rendering a j ust and true account of all monies received or paid
by him on account of the said society at such time as the rules of
the said society shall direct and appoint, and at such times as he
shall be required so to do by the trustee or trustees of the said
society, or by a majority of the members present at any meeting of
such society ; and every such bond shall be given to the trustee or
trustees of the said society for the time being ; and if the same
shall at any time become forfeited, it shall be lawful for such trustee
or ti'ustees for the time being to sue upon such bond for the use of
such society ; and in Scotland such bond shall have the same force
and effect as a bond there in use duly attested and completed, and
containing a clause of registration for execution as well as for
preservation in the books of Council and Session and other Judges'
books competent, and shall be registered in such books accordingly,
with a view to diligence.
^ , XXII. Every such treasurer or other officer, whether

Treasurer to -^

account. appointed before or after the passing of tliis Act, at

such times as by the rules of such society he should render such
account as aforesaid, or upon being required so to do by the
trustee or trustees of such society, or by a majority of the said
committee of management, or by a majority of the members present
at a meeting of the said society as aforesaid, -within seven days
after such requisition shall render to the trustee or trustees of the
society, or to the said committee of management, or to the members
of such society at a meeting of the society, a just and true account
of all monies received and paid by him since he last rendered the
like account, and of the balance then remaining in his hands, and
of all bonds or securities of such society, which account the said
trustee or trustees or committee of management shall cause to be
audited by some fit and proper person or persons by them to be
appointed ; and such treasurer, if thereunto required, upon the
said account being audited, shall forthwith hand over to the said
trustee or trustees the balance which on such audit shall appear to
be due from him, and shall also, if required, hand over to such
trustee or trustees all securities and effects, books, papers, and
property of the said society in his hands or custody ; and if he
fail to do so the trustee or trustees of the said society may sue

52 APPENDIX ON

upon the bond aforesaid, or may sue such treasurer in the County
Court of the district, or in any of the Superior Courts of Common
Law, or in any other Court having jurisdiction, for the balance
appearing to have been due from him upon the account last
rendered by him, and for all the monies since received by him on
account of the said society, and for the securities and effects,
books, papers, and property in his hand or custody, leaving him to
set off in such action the sums, if any, which he may have since
paid on account of the said society ; and in such action the said
trustee or trustees shall be entitled to recover their full costs of
suit, to be taxed as between attorney and client.
Property how XXIII. If any pcrson already appointed or em-

the°offlcer' ployed or hereafter to be appointed or employed to or
cornebank- in any office in any Frienrlly Society established under

rupt or in- p i a i i i i

solvent. this Act or under any ot the Acts hereby repealed,

whether such appointment or employment was before or after the
legal establishment of such society, and having in his hands or
possession, by virtue of his office, any monies or property whatso-
ever of such society, or any deeds or securities belonging to such
society, shall die, or become bankrupt or insolvent, or have any
execution or attachment or other process issued against him or any
part of his property, or shall have any action or diligence raised
against his lands, goods, chattels, or effects, or property or other
estate, heritable or moveable, or shall make any assignment,
disposition, assignation, or other conveyance for the benefit of his
creditors, the heirs, executors, administrators, or assignees of every
such officer, and every other person having or claiming right to the
property of such officer, and the Sheriff or other person executing
such process, and the party using such action or diligence respec-
tively, shall, upon demand in writing made by the treasurer or by
the trustee or any two of the trustees of such society, or any person
appointed at some meeting of the society to make such demand,
deliver and pay over all such monies, property, deeds, and securities
belonging to such society to such person as such treasurer or
trustees shall appoint, and shall pay, out of the estate, assets, or
effects, heritable or moveable, of such officer, all sums of money
due which such officer shall ha^•e received, before any other of his

FRIENDLY SOCIETIES. 53

debts are paid, and before any other claim upon him shall be
satisfied, and before the money directed to be levied by such
process as aforesaid, or which may be recovered or recoverable
under such diligence, is paid over to the party issuing such process
or using such diligence ; and all such assets, lands, goods, chattels,
property, estates, and eifects shall be bound to the payment,
discharge, and satisfaction of such claims.

Punishment XXIV. If any officer, member, or other person,

withholding being or representing himself to be a member of sucli

money, &c. . , ^, ' . , , . .

society, or the nominee, executor, administrator, or
assignee of a member thereof, or any person whatsoever, by false
representation or imposition, shall obtain possession of any monies,
securities, books, papers, or other effects of such society, or having
the same in his possession shall withhold or misapply the same, or
shall wilfully apply any part of the same to purposes other than
those expressed or directed in the rules of such society, or any part
thereof, it shall be lawful in England for any Justice of the Peace
acting in tLe County or Borough in which the place of business of
such society shall be situated, upon complaint made by any person
on behalf of such society, to summon the person against whom such
complaint is made to appear at a time and place to be named in
such summons ; and any two Justices present at the time and
place mentioned in such summoas shall proceed to hear and
determine the said complaint, in manner directed by the Act
passed in the eleventh and twelfth years of Her present Majesty
Chapter Forty-thi-ee ; and in Scotland every such oflfence may be
prosecuted by summary complaint at the instance of the Procurator
Fiscal of the County, or of the society, with his concurrence, before
the Sheriff; and if the said Justices or Sheriflfs respectively shall
determine the said complaint to be proved against such person,
they shall adjudge and order him to deliver up all such monies,
securities, books, papers, or other effects to the society, or to repay
the amount of money applied improperly, and to jjay, if they think
fit, a further sum of money not exceeding twenty pounds, together
with costs not exceeding twenty shillings ; and, in default of such
delivery of effects, or repayment of such amount of money, or
payment of such penalty and costs aforcf^iiid, the said Justices or

54 APPENDIX ON

Sheriffs may order the said person so convicted to be imprisoned
in the Common Gaol or House of Correction, with or without
hard labour, for any time not exceeding three months : Provided,
that nothing herein contained shall prevent the said society, or in
Scotland Her Majesty's Advocate, from proceeding by indictment
against the said party ; Provided also, that no person shall be
proceeded against by indictment if a conviction shall have been
previously obtained for the same offence under the provisions of
this Act.

XXV. Before any Friendly Society shall be esta-
made. blishcd undcr this Act, the persons intending to establish

the same shall agree upon and frame a set of rules for the regulation,
government, and management of such society ; and in such rules
they may, amongst other things, make provision for appointing a
general committee of management of such society, and delegating
to such committee all or any of the powers given by this Act to
the members of Friendly Societies formed or established under or
by virtue of the same ; and such rules shall set forth,

1 . The name of the society and place of meeting for the business

of the society :

2. The whole of the objects for which the society is to be

established, the purposes for which the funds thereof shall
be applicable, and the conditions under which any member
may become entitled to any benefit assured thereby, and the
fines and forfeitures to be imposed on any member of such
society :

3. The manner of making, altering, amending, and rescinding

rules :

4. A provision for the appointment and removal of a general

committee of management, of a trustee or trustees, treasurer,
and other officers :

5. A provision for the investment of the funds, and for an

annual or periodical audit of accounts :

6. The manner in which disputes between the society and any

of its members, or any person claiming by or through any
member, or under the rules, shall be settled :
And the rules of every such society shall provide that all monies

FRIENDLY SOCIETIES. 55

received oi* paid on account of each and every particulai' fund or
benefit assured to the members thereof, their husbands, wives,
children, fathers, mothers, brothers or sisters, nephews or nieces,
for which a separate table of contributions payable shall have been
adopted, shall be entered in a separate account, distinct from the
monies received and paid on account of any other benefit or fund,
and also that a contribution shall be made to defray the necessary
expenses of management, and a separate account shall be kept of
such contributions and expenses.

Copies to be XXVI. Two printed or written copies of such

Registrarl^ rulcs, Signed by three of the intended members and
ficate oi^*^"^"" the secretary or other officer, shall be transmitted to

the registrar aforesaid, and the said registrar shall
advise with the secretary or other officer, if required, for the
purpose of ascertaining whether the said rules are calculated to
carry into effect the intentions and object of the persons who
desire to form such society, and if the registrar shall find that such
rules are in conformity with Law and the Provisions of this Act,
he shall give a certificate in the form set forth in the Second
Schedule to this Act, and shall return one of the said copies to the
said society, and shall keep the other in such manner as shall from
time to time be directed by one of Her Majesty's Principal
Secretaries of State, and for which certificate no fee shall be
payable to the said registrar ; and all rules, when so certified as
aforesaid, shall be binding on the several members of the said

society : Provided always, that it shall not be lawful

Actuary s ■' •'

certificate to f j. ^^^ g^^jj registrar to grant any such certificate to

be sent with o ok

case'^of tables ^ society assuring to any member thereof a certain
of annuities. j^nnuity or certain superannuation, deferred or imme-
diate, unless the tables of contributions payable for such kind of
assurance shall have been certified under the hand of the actuary
to the Commissioners for Ileduction of the National Debt, or by
an actuary of some Life Assurance Company established in London,
Edinburgh, or Dublin, who shall have exercised the profession of
actuary for at least five years, and such certificate be transmitted
to the registrar, together with the copies of the rules aforesaid.

56 APPENDIX ON

Ruiesniaybe XXVII. After the rules of a Friendly Society

amended. ^^^^^ Ivdve been SO Certified by the registrar as afore-

new'mfes "' Said, it shall be lawful for such society, by resolution
at a meeting specially called for that purpose, to alter,
amend, or rescind the same or any of them, or to make new rules ;
and it shall be lawful for any Friendly Society formed and esta-
blished under any of the Acts hereby repealed to alter, amend, or
rescind the rules by which their society is governed, regulated,
or managed, or to make new rules : Provided always, that two
copies of the proposed alterations or amendments, and of such new
rules, signed by three members of such society, and the secretary
or other officer, shall be transmitted to the said registrar, to one of
which shall be attached a declaration by the secretary or one of the
officers of such society that in making the same the rules of such
society respecting the making, altering, amending, and rescinding
rules, or the directions of the Act under which such society was
established, have been duly complied with ; and if the said registrar
shall find that such alterations, amendments, or new rules are in
conformity with law, he shall give to the Society a certificate in
the foi'm set forth in the Schedule to tliis Act, and return one of
the copies to the Society, and shall keep the other, with the rules
of such society, in his custody, and for which certificate no fee shall
be payable to the said registrar, and as against such member or
person such certificate shall be conclusive of the vdidity thereof ;
and all rules, alterations, and amendments, when so certified as
aforesaid, shall be binding on the several members of the said
society, and all persons claiming on account of a member or under
the said rules ; but unless and until the same shall be so certified
as aforesaid such rules, alterations, and amendments shall have no
force or validity whatsoever.

When place XXVIII. Whenever any Friendly Society esta-

"sii'tere'df bkshed under this Act or under any of the Acts
senttoKe-^ hereby repealed shall change its place of business,

gisirar. i.' r- t i

notice ot such change, under the hands of two of the
trustees or three members and secretary or other officer, shall,
within fourteen day thereafter, be sent to the said registrar.

FRIENDLY SOCIETIES. 57

Circulating XXIX. If any person ehall crivc to any member of

alse copies ■'

of rules. &c. a Friendly Society establislied under this Act or under

a misde- ^ j

meauor. any of the said repealed Acts, or to any person intend-

ing or applying to become a member of such society, a copy of any
rules, or of any alterations or amendments of the same, other than
those respectively which have been enrolled with any Clerk of the
Peace or certified by the registrar, with a copy of his certificate
appended thereto, under colour that the same are binding upon the
members of such society, or shall make any alterations in or
addition to any of the rules or tables of such society after they
shall have been respectively enrolled or certified by the registrar,
and sball circulate the same, purporting that they have been duly
enrolled or certified under this or any of the said repealed Acts,
when they have-not been so duly enrolled or certified, every person
so offending shall be deemed guilty of a misdemeanor.
rules, how XXX. All rules and tables of any society esta-

evideuce. blished under this Act or any of the said repealed Acts,

and all alterations and amendments thereof, and all copies thereof
or extracts therefrom, and all writings and documents relating to a
Friendly Society, and purporting to be signed by the registrar,
shall, in the absence of any evidence to the contrary, be received
in all Courts of Law and Equity, and elsewhere, without proof of
the signature thereto.
On death of XXXI. When, on the death of any member of a

Member, ' •'

sorma*' te society established under this Act or any of the said
SdmiJist?a-"' repealed Acts, a sum of money not exceeding fifty
*^°"' pounds shall become payable, the same shall be paid

by the trustees of such society to the person directed by the rules
thereof, or nominated by the deceased, in writing deposited with
the secretary (such person being the husband, wife, father, mother,
child, brother or sister, nephew or niece of such member) ; and in
case there shall be no such direction or nomination, or the person
so nominated shall have died before the deceased member, or in
case the member shall have revoked such nomination, tlien such
sum shall be paid to the person who shall appear to the said
trustees to be entitled under the Statute of Distributions to receive
the same, without taking out Letters of Administration in England
or Ireland, and without Confirmation in St'Otland : Provided, that

58 APPENDIX ON

that wherever the trustee or trustees of any such

Indemnity to

trustees. society, after the decease of any member thereof, shall

have paid and divided any such sum of money to or amongst any
person or persons who shall at the time of such payment appear to
such trustee or trustees to be entitled to the effects of any deceased
member who has died intestate, without having appointed any
nominee as aforesaid, the payment of any such sum shall be valid
and effectual with respect to any demand from any other person or
persons as next of kin of such deceased member, or as the lawful
representative or representatives of such member, against the funds
of such society or against the trustees thereof ; but nevertheless
such next of kin or representative shall have his or her lawful
remedy for such money so paid as aforesaid against the person or
persons who shall have received the same.

Funds how XXXII. The trustee or trustees of every Friendly

invested. Society estabhshed under this Act or any of the said

repealed Acts shall from time to time, with the consent of the
committee of management of such society, or of a majority of the
members of such society present at a general or special meeting
thereof, or in accordance with the rules of such society, invest the
funds of such society, or any part thereof, to any amount, in any
Savings Bank, or in the Public Funds, or with the Commissioners
for the Reduction of the National Debt, as hereinafter mentioned,
or in such other security as the rule of such society may direct, not
being the purchase of house or land, (save and except the purchase
of buildings wherein to hold the meetings or transact the business
of such society, as herein-before mentioned,) and not being the
purchase of shares in any joint stock company or other company,
vnth or without charter of incorporation, and not being personal
security, except in the case of a member of one full year's stand-
ing at least, and in respect of a sum not exceeding one half the
amount of his assurance on life, such member providing the written
security of himself and two satisfactory sureties for repayment,
and in case of such member's death before repayment the amount
of such advance, with interest, may be deducted from the sum so
assured, without prejudice in the meantime to the operation of
such security.

FRIENDLY SOCIETIES. 59

Fundsmaybe XXXIII. Every Friendly Society established under

thrcommfs- ^liis Act wliich does not assure the payment in any
Natfonai ^ event of a sum exceeding two hundred pounds, or an
annuity exceeding thirty pounds per annum, may pay
any sum of money not less than fifty pounds into the Bank of
England or Ireland, to the account of the Commissioners for the
Reduction of the National Debt upon the declaration of the Trustee
or of the trustees, or any two or more of them, that such monies
belong exclusively to the said society; and the cashier of the
Bank of England is hereby required to receive all such
monies, and to place the same to the account raised in the name of
the said Commissioners in the book of the bank, named " The
Fund for Fi'iendly Societies;" and if such declaration shall not be
true, then and in every such case the sum of money so paid in on
such declaration shall be forfeited to the said Commissioners, and
shall be applied by them in the manner directed by any act or
acts for the time being in force relating to Savings' Banks with
respect to the account of such banks; and the Regulation of
receipts, certificates, or orders concerning Savings' Banks shall be
deemed applicable to monies paid in as aforesaid under the autho-
rity of this act, as if the same had been herein repeated; and
every such society, on paying money directly into the bank as
aforesaid, shall be entitled to receive receipts bearing interest at
the rate of Twopence per cent, per diem: Pro%dded, that eveiy
society which shall deposit any part of its funds in any Savings'
Bank, or with the Commissioners for Reduction of the National
Debt, shall furnish to the said Commissioners from time to time
such accounts as they may require in reference to the funds so de-
posited.

What inte- XXXIV. Evci-y Society already established under

dedesthaii ^"7 ^^ ^'"^ '^^'*^ hereby rei)caled, which shall have

^^^^ heretofore invested any part of its funds with the

Commissioners for the Reduction of the National Debt, shall be

entitled to pay into the Bank of England or Ireland in sums of not

less than fifty pounds, money received from members on account

of assurances made before the passing of this Act, and to receive

receipts for the same bearing interest at such rate or rates as

60 APPENDIX ON

such society has hitherto been entitled to receive on account of
such assurances; that is to say, for money invested with the Com-
missioners by any society legally established before the twenty-
eighth day of July, in the year one thousand eight hundred and
twenty-eight, on account of any assurance made before the fif-
teenth day of August in the year one thousand eight hundi-ed and
fifty, threepence per centum per diem; and on account of any
assurance effected after that day, twopence per centum per diem;
and for money invested with the Commissioners by any society
established between the twenty-eighth day of July in the year one
thousand eight hundred and twenty-eight and the fifteenth day of
August in the year one thousand eight hundred and fifty, on account
of assurances made before the fifteenth day of August in the year
one thousand eight hundred and fifty, twopence halfpenny per
centum per diem; and on account of any assurance effected after
that day, twopence per centum per diem; and for money invested
with the Commissioners by any society established since the fif-
teenth day of July one thousand eight hundred and fifty, the sum
of twopence per centum per diem ; provided that the trustees of
every society which shall have invested or shall invest any part of
its funds with the said Commissioners shall furnish from time to
time such accounts and returns as the said Commissioners shall
require, and shall satisfy the said Commissioners that they are
legally entitled to receive such interest as aforesaid, and to make
such further investment.

Re-deposit- XXXV. Where any Friendly Society shall with-

wkhd^r^n.^^ draw money invested by them with the Commissioners
for the Reduction of the National Debt, such society shall not be
entitled to make any further deposit with the said Commissioners
without the consent of the said Commissioners, or of the Comp-
troller General or Assistant Comptroller under them.

Transfer of XXXVI. Whenever it shall happen that any per-

^ ""^ ■ son, being or having been a trustee of any society

established under this act or any act hereby repealed, and whether
he shall have been appointed before or after the legal establish
ment thereof, in whose name any part of the several stocks,
annuities, and funds belonging to any such society, transferable

FRIENDLY SOCIETIES. 61

at the Bank of England or Ireland, or in the books of the Go-
vernor and Company of the Bank of Enghind or Ireland, or in
any Savings' Bank, is or shall be standing, shall be out of Eng-
land, Ireland or Scotland respectively, or shall have been removed
from his office of trustee, or shall be a bankrupt, insolvent, or
lunatic, or it shall be unknown whether such trustee is living or
dead, it shall be lawful for the Registrar, after receiving an appli-
cation in writing from the secretary of the society and three
members thereof, and upon proof satisfactory to such registrar, to
direct the Accountant-General or other proper officer for the time
being of the said Governor and Company of the Bank of Eng-
land or Ireland, or of any Savings' Bank, to transfer in the books
of the said Company or of the said Savings' Bank such stocks, annu-
ities, or funds standing as aforesaid, into the name of the trustee
who shall be newly appointed, and to pay to him from time to
time the dividends thereof; and if one of two or more such
trustees shall die, or be removed from his office of trustee, or
become bankrupt or insolvent, it shall be lawful for the registrar,
on the like application, to direct that the other or others of the
trustees shall transfer such stock, annuities, or funds into the
name of such person as may have been appointed in his stead,
jointly with the continuing trustee or trustees.

XXXVI 1. No copy of rules, nor power, warrant,
'^Tr"bi ' f '^" *^^ letter of attorney granted by any person as trustee
stamp duty. ^f j^jjy socicty established under this Act or any of
the Acts hereby repealed, for the transfer of any share in the
public funds standing in the name of such trustee, nor any order
or receipt for money contributed to or received from the funds of
any such society, by any person liable or entitled to pay or receive
the same by virtue of the rules thereof or of this Act, nor any
bond to be given to or on account of any such society, or by the
treasurer or any officer thereof, nor any draft or order, nor any
form of policy, nor any appointment of any agent, nor any certi-
ficate or other instrument for the revocation of any such appoint-
ment, nor any other document whatever, required or authorized by
or in pursuance of this Act or the rules of any society, shall be
liable to stamp duty: Provided that no exemption from
of exemp- g^y (jf ^{jg duties granted by any Act or Acts relating

tions to so- .' c J J e>

t62 appendix on

assuring"' *o Stamp duties shall be deemed to extend to any
above 200/. society -which shall assure the payment of money
exceeding two hundred pounds, or which shall assure the pay-
ment of any money on the death of a member to any person,
except executors, administrators, or assigns of such member, or
the husband, wife, father, mother, child, brother, sister, nephew
or niece of such member.

No member XXXVIII. If any person shall become a member

more than of more than one Society, whereby certain benefits

200?. or 30?. „ _ , -I ■ 3 n

a year from shall accruc on account 01 the same kina oi assur-

any number . .in i. i p i

of societies. ance from more than one society, it shall not be lawiul
for him, or for any person entitled through or under him or by
reason of his membership, or for any number of such persons in
the aggregate, to receive more than two hundred pounds, or in the
case of annuities, thirty pounds a year, from such societies collec-
tively; and in any case where a person shall so as aforesaid be a
member of more than one society, and he, or any other person or
persons, shall be entitled to any benefit in gross or by way of
annuity from any such society, he, or (as the circumstances may
require) every such other person, shall, before he shall receive any
such benefit from any of such societies, make and sign a declara-
tion that the total value of all benefits accruing or which shall
have accrued in respect of any one kind of assurance does not
exceed the value of two hundred pounds, or, in the case of
annuities, thirty pounds a year; and it shall be lawful for any
society to require any member or any other person who shall be
entitled to any such benefit, before he shall receive the same, to
make and sign a declaration to the same effect, or that such mem-
ber was not, when the benefit accrued, a member of any other
association; and if any person shall knowingly make any false
or fraudulent declaration in any such case he shall ,be guilty of
misdemeanor.

Trustees may XXXIX. The trustees of any Friendly Society

a hospital or may, out of the funds thereof, subscribe to any hos-

provident . , , • i • x-i

institution. pital, infirmary, charitable or other provident institu-
tion, such annual or other sum as may be agreed upon by the
Committee of Management, or by a majority of the members at a

FRIENDLY SOCIETIES. 63

meeting called for that purpose, in consideration of any member
of such society, his wife, child, or otlier person nominated, being
eligible to receive the benefits of such hospital or other institution
according to the rules thereof.
As to the de- XL. Every dispute between any member or mem-

terminatioii . ,,.,i i ,.a

of disputes bers 01 any society established under this Act or any

according to „ , • .

the rules. Or the Acts hereby repealed, or any person claiming

through or under a member, or under the rules of such society,
and the trustee, treasurer, or other officer, or the Committee
thereof, shall be decided in a manner directed by the rules of such
society, and the decision so made shall be binding and conclusive
on all parties, without appeal: provided that where the rules of
any society established under any of the acts hereby repealed
shall have directed disputes to be referred to justices, such dis-
putes shall from and after the first day of August one thousand
eight hundred and fifty-five, be referred to and decided by the
County Court as herein-after mentioned.
In what cases XLI. In all Friendly Societies established under

bytlieCounty

Court. this Act or any of the said repealed Acts, all applica-

tions for the removal of any trustee, or for any other relief, order,
or direction, or for the settlement of disputes that may arise or
may have arisen in any society the rules of which do not prescribe
any other mode of settling such disputes, or to enforce the decision
of any arbitrators, or to hear or determine any dispute, if no arbi-
trator shall have been appointed or if no decision shall be made by
the said arbitrators within forty days after application has been
made by the member or person claiming through or under a mem-
ber or under the rules of the society, shall be made to the County
Court of the district within wliich the usual or principal place of
business of the society shall be situate; and such court sliall, upon
the application of any person interested in the matter, entertain
such application, and give such relief, and make such orders and
directions in relation to the matter of such application, as herein-
after mentioned, or as may now be given or made by the Court of
Chancery in respect either of its ordinary or its special or statutory
jurisdiction; and the decision of such County Court upon and in
I'clation to such application as aforesaid shall not be subject to

64 APPENDIX ON

any appeal : Provided always, that in Scotland the sheriff within
his county, and in Ireland the assistant barrister within his dis-
trict, shall have the same jurisdiction as is hereby given to the
Judge of a County Court.

XLII. In all cases where the order of such County

Order of •'

Court^ Court shall be for the payment of money, the same

how enforced. ^^^^ ^^ enforced in the same manner as the ordinary
judgments of such court are enforced ; but where the order of the
said court shall be for the doing of some act, not being for the
payment of money, it shall be lawful for the Judge of such County
Court in his said order to order the party to do such act, or that
in default of his doing it he shall pay a certain sum of money ; and
in case he refuse or neglect to do the act required, upon demand in
that behalf, the sum of money or penalty in the said order may
then be recovered in the same manner as a judgment for debt or
damages in such court ; and it shall not be lawful to remove the
same by certiorari or other writ or process to any superior Court
of Record.

XLIII. Provided, however, That the Lord Chan-
cellor may cellor may make such orders for regulating the pro-
make orders
for reguiat- ccedings by and before the Judges of County Courts

iiig the pro-
ceedings in under this Act as he may think fit : and in Scotland

tliis respect.

the Court of Session shall have the like power by Act
of Sederunt as regards proceedings before sheriffs under this Act ;
and, subject to such orders and Acts of Sederunt respectively,
such judges and sheriffs may regulate the proceedings before them
respectively so as to render them as summary and inexpensive as
conveniently may be.
, ^ , XLIV. In the case of any Friendly Society estab-

In the case of ^ j j

societies ^ ^ lished for any of the purposes mentioned in Section IX.
fied^dLputes °^ *^^^ -^^*' ^^ ^^^ ^°7 purpose which is not illegal,
sociltran'r having written or printed rules, whose rules have not
bCTs tote'"'^' ^een certified by the Registrar, provided a copy of
casesof'certi- such rulcs shall havc been deposited with the Registrar,
every dispute between any member or members of
such society, and the trustees, treasurer, or other oflScer, or the
committee of such society, shall be decided in manner herein-

FRIENDLY SOCIETIES. 65

before provided with respect to disputes, and the decision thereof,
in the case of societies to be established under this Act, and the
sections in this Act provided for such decision, and also the section
in this Act vs^hich enacts a punishment in case of fraud or imposi-
tion by an officer, member, or person, shall be applicable to such
uncertified societies: Provided always, that nothing herein con-
tained shall be construed to confer on any such society whose rules
shall not have been certified by the Registrar, or any of the mem-
bers or officers of such society, any of the powers, exemptions, or
facilities of this Act, save and except as in and by this section is
expressly provided.

XLV. The trustees of Friendly Societies established

Returns to , .

theRegistrar, under this Act or under any of the repealed Acts, or

when and

how to be the officer thereof appointed to prepare returns, shall,

once in every year, in the months of January, February,
or March, transmit to the Registrar a general statement of the
funds and effects of such society during the past twelve months, or
a copy of the last annual report of such society, and shall also,
within three months after the expiration of the month of December
one thousand eight hundred and fifty- five, and so again within
three months after the expiration of every five years succeeding,
transmit to the said Registrar a return of the rate or amount of
sickness and mortality experienced by such society within the pre-
ceding five years, in such form as shall be prepared by the said
Registrar, and an abstract of the same shall be laid before Parlia-
ment ; and the Registrar shall also lay before Parliament every
year a report of his proceedings, in his office of Registrar, and of
the principal matters transacted by Friendly Societies which have
come under his cognizance during the past year.

XLVI. And whereas under the provisions of the

Certain so-
cieties esteh- Acts hereby repealed, or some of them, certain associa-

lishedfor . .

granting an- tious or socictics have been formed in Enffland and

nual pay- ^

mentsto Ireland for the provident and charitable purpose of

nominees '■ 2^ f ""^ "'■

yel?^85o°to securing annual payments to the nominees of the

let^lot'tiiis members thereof, contingent upon the death of such

members, and have invested their funds in the manner

provided by such Acts, and doubts may arise whether such asso-

66 APPENDIX ON

ciations or societies will be entitled to the exemptions and privi-
leges by this Act conferred in the event of such annual payments
amounting in the aggregate to more than thirty pounds ; and it is
expedient to remove such doubts, and to give protection to such
associations or societies, and to the funds thereof: Be it therefore
enacted, that notwithstanding anything in this Act contained to the
contrary, all such associations or societies as were founded and sub-
sisting under the provisions of the said Acts previously to the
fifteenth day of August one thousand eight hundred and fifty,
shall enjoy the exemptions and privileges by this Act conferred
on societies to be established under the provisions of this Act as
fully as if they had been registered and certified under this Act,
and notwithstanding that the contingent annual payments to which
the nominees of the present or future members of such associations
or societies may be come entitled shall exceed in the aggregate
the sum of thirty pounds.

XL VII. In any case where the rules of any society

Extra contn- •' .

bution may already enrolled or certified have provided that a mem-

be demanded •' ^

of a member ^^q^ shall be deprived of any benefit by reason of his

servmgmtlie '^ j j

mUitia. enrolment or service in the militia, it shall be lawful

for the trustees of such society to require of any member a contri-
bution exceeding the rate of contribution hitherto payable by such
member, to an amount not exceeding one-tenth of such rate,
during the time such member shall be serving out of the United
Kingdom, or to suspend all claim of such member to any benefits
of such society, and all claim of the society to any contributions
payable by such Member, during the time he may be serving in
the militia out of the United Kingdom, provided that such suspen-
sion shall cease so soon as the said member shall return to the
United Kingdom, and he shall thereupon be replaced on the same
footing as before he went abroad with the regiment to which he
belongs.

XLVni. All the provisions of this Act shall apply

Act to apply ^ ^^ •'

to societies ^q ^ socictics Constituted under the Industrial and

constituted

imfiistriai Providcnt Societies Act, 1852, in the same manner as
dentsocletics the laws in force relating to Friendly Societies at the
Act, 1852. ^^^^ ^£. ^^^ passing of the said Industrial and Provi-

FRIENDLY SOCIETIES. (57

(lent Societies Act, 1852, arc by the said last-mentioned Act
directed to apply' to societies constituted thereunder ; and the limi-
tation hereinbefore contained of the amount of annuities and sums
payable on the death of any person, or on any other contingency,
in the case of societies established under this Act, shall apply to
aU societies constituted under the said Industrial and Provident
Societies Act, 1852.

XLIX. The word " Society" shall extend to and

Interpreta- . , , i /. •

tion of include every branch of a society, by whatever name

"society."

it may be designated.
„ , , L. This Act shall extend to Great Britain and

Extension

of Act Ireland, and the Channel Isles, and the Isle of Man.

LI. This Act shall commence and take effect from

Commence-
ment ofAct ^jjg gj,gj. j^y q£ August one thousand eight hundred

and fifty-five.

APPENDIX ON

SCHEDULES referred to by the foregoing Act.

FIRST SCHEDULE.

Reference to Act.

Title of Act.

Extent of Repeal.

33 Geo. 3. c. 54.
35 Geo. 3. c. 111.

36Geo.3.c.68.(Irish)
43 Geo. 3. c. ill.

49 Geo. 3. c. 58.

49 Geo. 3. c. 125. -

59 Geo. 3. c. 128.

6 Geo, 4, c. 74.

An Act for the Encouragement and
Relief of Friendly Societies.

An Act for more effectually carrying
into execution an Act made in the
Thirty -third Year of the Reign of
His present Majesty, intituled "An
" Act for the Encouragement and
" Relief of Friendly Societies," and
for extending so much of the Powers
thereof as relates to the framing
Rules and Regulations for the better
Management of the Funds of such
Societies, and the Appointment of
Treasurers to other Institutions of
a charitable nature.

An Act for the Encouragement and
Relief of Friendly Societies,

An Act for enabling Friendly Socie-
ties intended to be established under
an Act passed in the Thirty-third
Year of the Reign of His present
Majesty to rectify Mistakes made
in the Registry of their Rules.

An Act to explain and render more
effectual an Act passed in the Par-
liament of Ireland, in the Thirty-
sixth Year of His present Majesty's
Reign, for the Encouragement and
Relief of Friendly Societies.

An Act to amend an Act made in the
Thirty-third Year of his present
Majesty, for the Encouragement
and Relief of Friendly Societies.

An Act for further Protection and
Encouragement of Friendly Socie-
ties, and for preventing Frauds and
Abuses therein.

An Act for consolidating and amend-
ing the Laws relating to Convey-
ances and Transfers of Estates and
Funds vested in Trustees who are
Infants, Idiots, Lunatics, or Trus-
tees of unsound Mind, or who can-
not be compelled or refuse to act;
and also the Laws relating to Stocks
and Securities belonging to Infants,
Idiots, Lunatics, and Persons of
unsound Mind.

The whole Act.
The whole Act.

The whole Act.

So much of
Section II. as
relates to
Friendly
Societies.

FRIENDLY SOCIETIES.

Reference to Act.

10 Geo. 4. c. 56.
2 W. 4. c. 37.

4 & 5 W. 4. c. 40. -

3 & 4 Vict. c. 73. -
9 & 10 Vict. c. 27.-
13 & 14 Vict. c. 115
15 & 16 Vict. c. 65

16&17 Vict. c. 123.
17 & 18 Vict. c. 50.

17&18Vict.c.l01.

Title of Act.

An Act to consolidate and amend the
Laws relating to Friendly Societies.

An Act to amend an Act of the Tenth
Year of His late Majesty King
George the Fourth, by extending
the Time within which pre-exist-
ing Societies must conform to the
Provisions of that Act.

An Act to amend an Act of the Tenth
Year of His late Majesty King
George the Fourth, to consolidate
and amend the Laws relating to
Friendly Societies.

An Act to explain and amend the
Acts relating to Friendly Societies.

An Act to amend the Laws relating
to Friendly Societies.

An Act to consolidate and amend the
Laws relating to Friendly Societies.

An Act to continue and amend an
Act passed in the Fourteenth Year
of the Reign of Her present Majesty,
to consolidate and amend the Laws
relating to Friendly Societies.

An Act to amend the Laws relating
to the Investments of Friendly
Societies.

An Act to continue an Act of the
Twelfth Year of Her present Ma-
jesty, for amending the Laws re-
lating to Savings Banks in Ireland,
and to authorise Friendly Societies
to invest the whole of their Funds
in Savings Banks.

An Act to continue and amend the
Acts now in force relating to
Friendly Societies.

Extent of Repeal.

The whole Act.

The whole Act.
The whole Act.

The whole Act.
Section 2.

The whole Act.

SECOND SCHEDULE.

FoRJi of Registrar's Certificate to Rules of Friendly Societies.

I hereby certify, That the foregoing Rules [or the Alterations or
Amendments of the Rules] of the Society at

in the County of are in conformity with Law, [and in

the Cdse of a new Societi/'] and that the Society is duly established from the
present Date, and is subject to the Provisions and entitled to the Privileges
of the Acts relating to Friendly Societies.

The Rates of Contributions and Payments are stated to have been prepared
by A. B., Actuary of or [as the Case may ie] are not stated

to have been prepared by any Actuary.

70 APPENDIX ON

THIRD SCHEDULE.

Form of Bond.

Know all Men by these Presents, That we, A.B. of Treasurer

&c. \_as the Case may 6e] of the Society, established

at in the County of and CD.

of (as Surety on behalf of the said A.B.)

are jointly and severally held and firmly bound to A B. of
CD. of and E.F. the Trustees of the said

Society, in the Sum of to be paid to the said A.B., CD.,

and E.F. as such Trustees or their Successors, Trustees for the Time being,
or their certain Attorney, for which Payment well and truly to be made we
jointly and severally bind ourselves, and each of us by himself, our and each
of our Heirs, Executors, and Administrators, firmly by these Presents, sealed
with our Seals. Dated the Day of

in the Year of our Lord

Whereas the above-bounden A.B. hath been duly appointed Treasurer, §-c.
\_as the Case may be'] of the Society, established as afore-

said, and he, together with the above-bounden CD. as his Surety, have
entered into the above-written Bond, subject to the Condition herein-after
contained : Now therefore the Condition of the above- written Bond is such,
that if the said A.B. shall and do jnstly and faithfully execute his OflBce of
Treasurer, i^c. [cis the Case may be] of the said Society established as afore-
said, and shall and do render a just and true Account of all Monies received
and paid by him, and shall and do pay over all tlw Monies remaining in his
Hands, and assign and transfer or deliver all Securities and Effects, Books,
Papers, and Property of or belonging to the said Society in his Hands or
Custody, to sucli Person or Persons as the said Society shall appoint,
according to the Rules of the said Society, together with the proper or legal
Receipts or Vouchers for such Payments, and likewise shall and do in all
respects well and truly and faithfully perform and fulfil his OflEice of Trea-
surer, l^c. \_as the Case may he] to the said Society, according to the Rules
thereof, then the above-written bond shall be void and of no effect ; otherwise
shall be and remain in full force and virtue.

tir/IVERSfTV OF SOarf^ERN CALfFORNfA LIBRAIIY

DIVISION I of Treatise on Associations for Provident Investment.

A PRACTICAL TREATISE

SAVINGS BANKS;

Containing a Review of

THEIE PAST HISTORY AND PEESENT CONDITION;

Exposition of the Measures required

for their internal re-Organization, and for placing

them on a sound Financial Basis.

Suggestions in referenca to Non- Government Deposit Banks

AND

The Audit of PuUic Institutions.

ARTHUR SCRATCHLEY, M.A., F.R.A.S.,

Of the Inner Temple, BarrUter-at-Laio ;

Formerly Fellow and Sadlerian Lecturer of Queens' College, Cambridge;

Author of a " Treatise on Industrial Investments," S[C.

LONDON :
LONGMAN, GREEN, LONGMAN, AND ROBERTS.

MDCCCLX.

Now EEADT, PEiCE 7s. 6d., [310 pages.]
(Six Shillings to Officials of Building SociEriES.)

27ie 2rd JEdition

DIVISION II of Treatise on Associations for Provident Investment.

THE TREATISE

BENEFIT BUILDING SOCIETIES,

TONTINES,

AND

EMIGE-ATIOIT SOCIETIES;

In which are Reviewed
THE ERRORS OF TERMINATING BUILDING SOCIETIES,

AND

The Impossibility of their Fulfilling their Engagements

IS EXPLAINED.

With Rules and Tables

FOB

THE FORMATION OF PERMANENT SOCIETIES

ON Cv-RRECT PRINCIPLES.

AETHUR SCRATCIILEY, M.A., F.RA.S.i

LONDON :

PUBLISHED AT THE FRIENDLY SOCIETIES' INSTITUTE,

3, PARLIAMENT STREET, S.W.

And may be obtained of the Corresponding Secretary, on forwarding the
necessary Postage Stamps.

In Preparation, (Division IV.)— A New Edition of the TEEATISE o
PARTNERSHIPS; with Eules, Acts of Parliament, &c., and Remarks o
Encouragement Societies, Courts of Arbitration, &c., designed as a Guic

INSTRUCTIONS UNDER THE NEW ACT AS TO THE

PRINCIPLES AKD PltACTICE

TO BE ADOPTED BY ACTUARIES, ESTATE AGENTS, A OTHERS

CONSULTED RESPECTINO THE ENFRANCHISEMENT OF COPYHOLD.

LIFE LEASEHOLD AND CHURCH PROPERTY.

BEING

Fourth Edition, price 3a-. Qd., [192 pages.]

A Continuation of DIVISION II of Treatise on Associations f or
Provident Investment.

A TREATISE

Oil the JEnfranchisement

COPYHOLD, LIFE-LEASEHOLD,

AND

CHURCH PROPERTY.

IN TWO PARTS.

AETHUR SCRATCHLEY, M.A., RR.A.S..

Formerly Fellow of Queens' College, Cambridge; Author o1 '■^Essays on the
Law of I'artno'skip, S[C.

PART I.

PRINCIPLES AND PRACTICE;

• Wiih

Rules/or the Formation of Copyhold Enfranchisement an f Freehold Land
Societies, and Remarks on the Transfer of Land Question.

LONDON :
CHARLES AND EDWIN LAYTON, 150, FLEET STREET;

AND

C. MITCHELL & Co., RED LION COURT, FLEET STREET.

1859.

)-OPERATrVE ASSOCIATIONS, or INDUSTRIAL TRADE
RIKES, TRADE UNIONS, Mutual Protection Societies, Local Enterprise
inaal to the managers and Promoters of such. Associations.

Now READT, Tenth Edition, Enlarged, price 7s. 6c?. [316 pages.]
(Six Shillings to Officials of Benefit Societies.)
DIVISION III of Treatise on Associations for Provident Investment-

TEE ATISE

FRIENDLY SOCIETIES,

CONTAINING

An Exposition of the True Law of Sickness,

RULES AND TABLES,

Remarks on the Extension of Industrial Life Assurance,

and the Principles involved in the Valuation of Post Obits,

Reversions, and the

Liabilities of Friendly and other Assurance Societies.

ARTHUR SCRATCHLEY, M.A., F.R.A.S.,

Of the Inner Temple, Barrister-at-Law ;
Formerly Fellow and Sadlerian Lecturer of Queens' College, Cambridge, Sfc.

LONDON :
SHAW AND SONS, FETTER LANE,

!'rinlei:i and PuUisheis of the lioolcs and Forms for Savings Banks, Friendly Societies,
Oovtinmcnt Annuity Societies, ^c.

CHARLES & EDWIN LAYTON, 150, FLEET STREET.

Dep6t for Books on Assurance.

MDCCCLIX.

N? 283

AGO

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Full text of "Industrial investment and emigration : being a treatise on benefit building societies and tontines, and on the general principles of associations for land investment and colonization : with some new theorems in the doctrines of compound interest"

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