Insurance
ANNUITIES. !LIFE annuities are in many ways the converse of life assuranee. In the latter we usually pay part of our Annual income in Order to secure a capital sum_ at some later date. iFor immediate life annuities we part with a capital sum to secure a regular income so long, as we live. By means of life policies we, in some sense, bet that we shall die soon ; when we buy an annuity we are betting that we shall live long. A group of annuitants can, between them, spend the whole of their capital, and the whole of the interest upon it, during their own life-time, but an individual annuitant may part with his capital and not survive long enough to receive even one annuity payment. On the other hand he may live long and prove to have made a most advan- tageous bargain.
Another contrast between life assurance and annuities is that the concessions in regard to Income Tax and Super Tax that are allowed in connexion with life assurance 'help to make a life policy an amazingly profitable.invest- ment. Annuities, however, are liable to Income Tax, 'which really means that the tax is levied upon a man's ;capital as. well as upon the interest that it earns. This tends to make an annuity somewhat unsatisfactory, Tonsidered merely from the point of view of the return which it yields. This, however, is by no means the only :consideration. -A man of 65 can obtain 111 per cent. per annum upon his capital, and a woman of the same age over 10 per cent., with the certainty that this income will be paid punctually so long as they live, consequently an annuity may be a most beneficial arrangement for those whose present income is inadequate for their needs, .and who have no dependants for whom it is necessary to provide. Naturally, the rate of- annuity increases with -age, and the rates are higher for men than for women, since experience shows that female, annuitants live much longer than men of the same age.
Frequently, two or more lives are concerned, in which case it is often advisable to use part, or even the whole, of the available capital to purchase an annuity that will continue so long as either of two people is living. For example, a man aged 70 and a wife aged 65 could devote £3,000 to the purchase of an annuity of £255, payable in half-yearly instalments of £127 10s., which would continue so long as either lived. On the other hand, they couldhuy three annuities .of £1.00 each for the same capital sum. This would give an income of poo a year, payable half-yearly while both were living, and £200 a year for the survivor. Since the expenses for two people are normally greater than for one, this arrangement of taking one annuity on the two lives, and one on each of the single lives, is frequently-the-more satisfactory plan.
Nobody quite likes the idea of parting with capital, and possibly in one sense losing the whole or the greater portion of it if death occurs before the- annuity has been enjoyed for any appreciable time. This difficulty can be overcome by arranging, in one way or- another, that part of the capital shall be returned in the event of early death, or that the annuity shall be paid as a certainty to someone or other for a specified number of years, while continuing for the whole life-time of the annuitant should he or she survive the specified period. Methods of this kind greatly lessen theamount of the annuity payable, and thus tend to defeat the purpose for which the annuity is purchased. Consequently it is only in exceptional circumstances that a plan of this kind is to be advised. People in somewhat impaired health may desire to have the advantage of the .increased income which an annuity gives, but being perhaps doubtful about their prospects 'of a long life -hesitate to use their capital in this way. Many life offices arc ready to meet such eases as these. If a medical examination shows the life to be impaired to an extent that is likely to shorten its duration, aInhitghhisercasraetethoef aannnnuuiittyantthacanle ntbie normal will hetligxn
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make as good a bargain as a thoroughly healthy man at an older age would make by buying an annuity.
WILLIAM SCHOOLING.
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