Annuity Purchase Research Articles

The Application of Actuarial Principles to the Transaction of Overseas Life Business

The last paper submitted to the Institute on the special problems arising from the transaction of overseas life business was that submitted by W. F. Gardner in 1935 (J.I.A. 66, 198). The expansion since that date in overseas life business justifies a further review of these problems. In 1935 the revenue premium income (other than annuity purchase money) from the overseas business of British life offices as recorded in the Board of Trade Returns was some £6.4 million, representing 7.9% of the total ordinary branch premium income of British life offices; in 1954 the premium income from overseas business was £34.4 million and represented 12.3% of the total.

The Taxation of Annuity Funds.

‘Income tax is another subject on which it is difficult for me to speak freely, but I cannot refrain from noting that the general taxation position, as it now affects life assurance and pensions business, has given rise to serious anomalies: …one has only to consider…that the terms quoted by offices for the purchase of life annuities vary to a quite remarkable extent, depending on the distribution of the company's business between various funds, as it exists at the moment, and the consequential incidence of tax;…’(J.I.A.Vol.LXXV, p. 7.)With these words Sir George Maddex, in his Presidential Address, directed our attention to the present system of taxation of annuity funds. M. E. Ogborn (1), on 27 October 1947, touched on the subject of uneven incidence of tax upon differing funds, and some uneasiness about the consequences was manifest in the discussion on that paper.Much has been written in recent years upon the general subject of taxation of annuities. S. J. Rowland and F. H. Wales (2), A. H. Shrewsbury (3), and M. E. Ogborn (1) have fully described and commented upon the present method. Relatively little attention, however, has been devoted to the effects of the system upon annuity funds, probably because it is only recently that we have become aware of its full implications. There is some need therefore to review the consequences and to investigate more closely the actuarial problems which follow.It is proposed here to analyse the effects of the system and, proceeding from some simple basic principles, to point to a method of solution of the actuarial problems connected with valuation, investment and the terms for new business and withdrawals.

The taxation of annuity funds

With these words Sir George Maddex, in his Presidential Address, directed our attention to the present system of taxation of annuity funds. M. E. Ogborn, on 27 October 1947, touched on the subject of uneven incidence of tax upon differing funds, and some uneasiness about the consequences was manifest in the discussion on that paper.‘Income tax is another subject on which it is difficult for me to speak freely, but I cannot refrain from noting that the general taxation position, as it now affects life assurance and pensions business, has given rise to serious anomalies: ...one has only to consider... that the terms quoted by offices for the purchase of life annuities vary to a quite remarkable extent, depending on the distribution of the company's business between various funds, as it exists at the moment, and the consequential incidence of tax;...’

Annuities: Right of Legatee, for Whose Benefit the Purchase of an Annuity Is Directed, to Receive the Principal in Lieu Thereof

Annuities: Right of Legatee, for Whose Benefit the Purchase of an Annuity Is Directed, to Receive the Principal in Lieu Thereof

Old-Age Security Abroad: The Background of Titles II and VIII of the Social Security Act

More than a hundred years ago Great Britain recognized in specific legislation that provision for old age through individual saving presented difficulties. In a statute enacted in i833,1 the British Parliament initiated a policy of offering old-age annuities through the National Debt Commissioner to persons who desired to make systematic preparation for income during their retirement period. Belgium, France and Italy2 enacted similar laws in the fifties. These measures had little practical result as the opportunities for purchase of old-age annuities secured by the public credit were not taken advantage of by appreciable numbers. More effective, of course, were the compulsory annuity arrangements set up in the latter half of the nineteenth century by various European countries3 for workers in selected industries, such as mining, navigation and later, railroading. In the case of mining, these schemes were but public organization on a compulsory basis of provident funds which provided accident and sickness insurance as well as old age protection. These funds dated back to the early middle ages and had always been, by virtue of custom more effective than any formal law, a required part of organized community life in mining villages.4 In point of time of origin the French Seamen's Invalidity and Old Age Insurance Fund commands special attention. It was established in i6735 and, barring occasional interruptions during periods of violent political change, continuously functioned thereafter. It was moreover not only the first compulsory insurance institution created by national law to provide old-age security but also in all probability the first

Income Taxes. Exemptions: Annuity Contract. Acceptance of Life Interest in Trust in Lieu of Dower as Purchase of Annuity

Income Taxes. Exemptions: Annuity Contract. Acceptance of Life Interest in Trust in Lieu of Dower as Purchase of Annuity

On the Purchase of a Complete Annuity—Investigation of Formulas

On the Purchase of a Complete Annuity—Investigation of Formulas