GOVERNMENT ANNUITIES—OPINIONS CONCERNING THEM—GREAT LOSS TO THE STATE.—MR. MOSES WING’S LETTER.—MR. FINLAISON.—NEW ANNUITY ACT—ITS ADVANTAGES TO JOBBERS.—ENDEAVOURS TO PROCURE OLD LIVES.—ANECDOTES CONCERNING THEM.—PHILIP COURTENAY.

Up to the year 1808 there was no mode of investing money in life annuities at once safe and profitable. Although the assurance were also annuity offices, yet, at this period, only three of any standing were in existence, and the public had seen and suffered so much from the failure of various joint stock companies, that they regarded all new societies with a proper degree of jealousy. At the time above named there had been a speculative excitement in the money market, followed by a disastrous panic. Many companies had been compelled to wind up their business, and others, having no business to wind up, had been left to their fate. And of annuities granted by private persons, the public had a well-founded horror; for the persons who had chiefly granted them were bankers, stock-jobbers, and mock millionnaires, who had often been swept away by panics on the Stock Exchange. In 1809 complaints were instituted that persons wishing to make provision for themselves or their families had no certain fund on which such annuities could be secured, and the ministers were made aware of many infamous practices which often plunged whole families into ruin. The Government, therefore, determined to become dealers in life annuities, and in the very outset made a considerable and almost fatal mistake. The tables of mortality known as the Northampton were the chief basis on which the various life assurance companies founded their premiums; and, by a singular error, the state adopted the same basis on which to grant annuities for life; but as the most intelligent men of the day were employed in calculating and constructing tables, the Government was scarcely to blame, particularly as they sought no profit, entering into the undertaking solely from a consideration of its advantages to the community.

From 1809 to 1819 this system continued. The speculators soon found out that the Government charge for a life annuity afforded a very remunerative investment, and the insurance offices made considerable profit by purchasing and reselling them. The Commissioners of Greenwich Hospital also selected many of the most healthy of their pensioners, and bought large annuities on them,—a proceeding productive of as much profit to the commissioners as of loss to the state. The mistake made by Government in its calculations was no secret. Actuaries and accountants were well aware of it; and Mr. Moses Wing wrote to the chancellor, informing him that the tables on which they were granted were productive of great loss to the revenue. The ordinary lassitude of Government was displayed in the chancellor’s reply, that it was not expedient to make any alteration, as “the compilation of new tables would be attended with much difficulty.” Mr. Wing then wrote again, showing that there was a loss of 15 per cent. on some, and on others of 20 and 24 per cent.; and that on a transfer of 12,000,000l. stock there was a loss of not less than 2,691,200l., and from this, the chancellor took refuge in a dignified silence.

In 1819 the attention of the authorities was again drawn to the same fact. But vainly for many years had they been informed that the public money was wasted; that no capitalist in London would grant annuities on the same terms; and that a serious loss was incurred. Government servants, like kings, can do no wrong, and the information was officially pooh-poohed! Letters might be written, and the receipt acknowledged; but the letters were shelved with due determination not to recur to them in a hurry. Among the assailants, however, was one who was important as well as vigorous, and very annoying questions were put in the House of Commons. It was the day when large majorities answered every unpleasant topic, and for a time the querists were silenced. At last it was stated that Mr. Finlaison had informed the Chancellor of the Exchequer that Government was losing 8000l. per month by its supineness, and “the patriots,”—so miscalled because they were in opposition,—seized on this important point to harass their opponents. It was triumphantly replied that the bill had been in operation since 1808, and was founded on the Northampton bills of mortality. As Dr. Price passed for an authority, and as a name goes a great way, the patriots were dumb, until one of more mark than the rest hinted that the value of life, as estimated by a life assurance company for its own benefit, and on which enormous profits had been made by them, would be just as unfavourable to the granters of life annuities; that the proportion of gain to the office would be the proportion of loss to the Government. The ministers shook their heads at this, and required time to consider. The economical members pressed their point, and urged an investigation. Night after night they pursued their foes with clamour, and day by day they reiterated their assertions in the clubs. The reports and rumours which were spreading in the financial world, and the assertions which were everywhere made, were, indeed, somewhat alarming. It was said that, according to Mr. Finlaison’s report, 400,000l. a-year was being lost; many, determined not to be outdone, asserted 100,000l. a-week was the lowest estimate; others, that an insurance office had realised 60 per cent. by dealing in them. Statements like these were so injurious to the financial character of the Government, that it was found necessary to stop them; and the chancellor said that, as only 640,000l. had been granted in the shape of life annuities, it was not very likely we were losing 100,000l. weekly; that Mr. Finlaison was employed in constructing tables; and that, though this gentleman had certainly stated the terms were too favourable, yet the true amount of loss would be difficult to attain, Mr. Finlaison’s estimate being an abstruse calculation as to the amount of the National Debt which would be redeemed in sixty years, compared with the amount which would have been redeemed had no annuities been granted. This he estimated at 3,200,000l. less than would have been attained by the Sinking Fund. At last, in 1829, Mr. Finlaison reported to the House, and the tables in connexion were certainly the most valuable of the kind then published. Access had been given to every document bearing on the subject. The registries of the tontines, the ages attained by the lives on which annuities had been granted a century previous—the experience of the offices—procured a mass of information which was turned to great advantage. The tables fill fifty folio pages, and show the rates of mortality, the value of annuities on single lives at all ages, among many classes of annuitants, separate and combined; the sexes being distinguished, both in exhibiting the law of mortality and the value of annuities.

These tables were satisfactory in the evidence they gave of a material improvement in the average duration of life. In forty years so great a change had taken place in the condition of the people, that the decrease of mortality was from 1 in 40 to 1 in 56. They proved, also, to demonstration, the extraordinary difference between the longevity of men and women, a circumstance not hitherto known to a certainty, but one which was most important to the granters of annuities. The result of all these calculations was comprised in the fact mentioned,—that the public, at the end of thirty-five years, will be burthened with a perpetual annuity of 96,000l., owing to the error so tardily rectified. We shall now see the mode in which these errors were amended.

There is something very provocative of mirth in the economical movements of Government. They had just been obliged to annul tables which had been in operation for twenty years; they had been compelled to acknowledge to the House that they had been wasting the public money; they had employed an actuary for ten years in procuring information on which new tables could be constructed, and scarcely had these been brought into operation than they found they were again in error. While the new act was preparing which was to enable the Government to sell life annuities and annuities for certain terms of years, the tables were shown to a gentleman in the Bank of England, who at once declared that those which were framed for lives above a certain age were too low in price. It was replied that they were taken from the experience of the assurance offices, and that they represented the average value of life at that period. “Yes!” was the reply, “but if select lives are brought, what becomes of your average?”

The act was passed; and by the tables which it authorized a man of ninety by paying 100l. would receive for life an annuity of 62l. The first payment commenced three months after the purchase, and if the nominee lived one year and a quarter, the nominator received back all the purchase money, so that every half year the annuitant lived after this was pure gain.[18]

The shrewd gentlemen of the Stock Exchange immediately saw and seized the advantage. Agents were employed to seek out in Scotland and elsewhere robust men of ninety years of age, to select none but those who were free from the hard labour which tells on advanced life, and to forward a list of their names. The Marquis of Hertford, of unenviable notoriety, added to his vast wealth by choosing as nominees those who were remarkable for high health; on two only, taking annuities of 2,600l. Wherever a person was found at the age of ninety, touched gently by the hand of time, he was sure to be discovered by the agents of the money market, the members of which speculated with, but scarcely perilled their wealth on the lives of these men, on such terms.

The inhabitants of the rural districts of Scotland, of Westmoreland, and of Cumberland, were surprised by the sudden and extraordinary attention paid to many of their aged members. If they were sick, the surgeon attended them at the cost of some good genius; and if they were poor, the comforts of life were granted them. In one village the clergyman was empowered to supply the wants of three old, hale fishermen during the winter season, to the envy of his sick and ailing parishioners. In another, all the cottagers were rendered jealous by the incessant watchful attention paid to a nonogenarian by the magnate of the place. It was whispered by the less favoured that he had been given a home near the great house; that the cook had orders to supply him with whatever was nice and nourishing; that the laird had been heard to say he took a great interest in his life, and that he even allowed the doctor twenty-five golden guineas a year, so long as he kept his ancient patient alive.

One man was chosen of above ninety who would walk eight miles any day for 6d. The hills and dales of the north of England, with the wild moors and heaths of Scotland, peopled by those who never breathed the air of cities, furnished nominees; and, lest there should be any lurking disease, they were examined by a medical man to confirm the appearance they bore. There were several curious anecdotes in connection with these shrewd speculations. There were two baronets offered, illustrative of an old story. Both were nonogenarians, both were sound, wind and limb; the one was remarkable for his extreme temperance, the other for drinking two bottles of wine daily, but both first-rate lives.

The offices were besieged with contracts on such men as these. Notwithstanding the heavy losses which Government had sustained by the previous tables, they lost much more by the present oversight, for against lives chosen with so much care and nursed with so much attention, there was not a chance.

One legend is extant to show the trouble which the nominators would take, in order to procure a person on which they could safely invest their money.

An eccentric, simple old man, an amateur angler in the streams which adorn the dales of Cumberland and Westmoreland, gave rise to the following attempt to procure him:—This man, named John Wilson, had not been born in the dales, but had come at an early age to take his lot among the single-minded people who dwell there. He had bought a small farm, on the produce of which, tilled by his sons and grandsons, he lived. He was soon found out by the agents of the speculators; but for some reason, known only to himself, refused to be speculated on, and as the secret of his birthplace was confined to his own breast, no register of his age could be procured without his consent. At ninety he would have passed for seventy. He would wander for whole days with only his fishing-rod and basket among the lakes and rivers of his adopted home. For a week together he would be away from his dwelling, lodging, when the night came, wherever he could procure a bed. In vain was he tempted with presents of fishing-rods; in vain the choicest London-made fly was offered; he turned away with an air of indifference and defied the temptation.

There came to reside in the village, apparently on account of his health, a young gentleman who took John’s fancy, for he was fond of fishing and had never asked the old man where he was born. To him he showed his choicest retreats for casting the fly, told him stories of wonderful throws he had made, and wonderful fish he had caught, and pleasant were the long summer days passed by these two in the deep recesses of the hills, following the course of rivers, and tracing streams to their rise. It never entered into the old man’s thoughts, that one of those who were interested in knowing his birthplace was becoming a bosom friend. But so it was. The invalid had only sought the neighbourhood for that purpose, and when he had thoroughly gained his confidence, he turned the conversation very cautiously to the old man’s early history. The latter showed no symptoms of anxiety, and the Londoner went yet further: still there was no alarm apparent. But the next question, which, if answered, would have settled the point, was too abruptly put. The ancient angler wheeled round, faced his companion sorrowfully, and merely saying—“Eh! man, the ways of the world, the ways of the world!” shouldered his rod, and disappeared down a ravine close by, leaving his companion to find his way home as best he could, and far too much annoyed to remain any longer in the neighbourhood where he had been so unsuccessful.

When schemes like these were resorted to, and this is only one of many[19], it is obvious that the expected gain must have been great. One house alone entered into contracts on the lives of men similar to those described, for thousands, and the first to open a contract was the Marquis of Hertford, whose attention was probably drawn to the speculation by Mr. Croker. Philip Courtenay, Queen’s Counsel and Member for Bridgewater, was another. He availed himself of his tour on the Northern Circuit to seek out old and healthy lives. Just at this time the House of Lords refused so resolutely to pass the Reform Bill, that the monarch was expected to force them into compliance. The mind of the people was greatly excited; and, unable to account for Mr. Courtenay’s avidity, a Yorkshire paper gravely asserted that Earl Grey, being determined to carry the Reform Bill, had employed the Member for Bridgewater to choose a sufficient number of aged persons to receive the honour of peerage, the prime minister being determined to swamp the Upper House with nonogenarians rather than fail in his purpose.

One firm alone, that of Benjamin and Mark Boyd of the Stock Exchange, took three-fourths of the entire contracts for their friends; and as the lives chosen by them were good, it is probable that their constituents averaged a profit of 100 per cent. The desire to speculate on nonogenarian lives soon became a mania. Barristers with a few thousands,—ladies with a small capital,—noblemen with cash at their bankers, availed themselves of the mistake. It is difficult to say to what extent it would have proceeded, had not Mr. Goulburn availed himself of a clause in the act, to cease granting annuities which might prove unfavourable to government.