nuity of $200. If he dies before he receives $250 in the form of annuity, the difference between that amount and the annuity received will be paid to his family. This and other annuity policies also participate in the profits of the savings insurance banks.

This combination policy is an attractive feature of the Massachusetts plan which is not included in the Canadian system. In the nature of the case it cannot be included, as the Canadian system is confined to annuities and does not include insurance at all. The form of policy under which the Canadian and Massachusetts schemes are comparable is the simple deferred annuity. In this comparison, as already indicated, the Canadian rates are markedly lower. The comparison may be briefly illustrated in tabular form. The amount of annuity at age 60 in each case is $100. The monthly rates compared are those for males:

It will be noticed that at the early ages an annuity under Plan A costs very little more in Canada than it would cost under Plan B in Massachusetts. At the last age given, the Canadian rate for Plan A is materially lower than the Massachusetts rate for Plan B. Moreover, in Canada, Plan A implies that the payments are returned with interest compounded at three per cent, while in Massachusetts return is made of the payments themselves only and without interest.

Such great differences in rates as these must, of course, have

1 Form issued by the state actuary, Massachusetts.

'The Massachusetts figures are taken from "Old Age Dependency in the United States," Squier, pp. 286-90; and were checked from "Pensions for Men," issued by the state actuary, Massachusetts.

an explanation. The difference is partly due to the fact that in Massachusetts the rates are "loaded" to cover expenses, while in Canada the expenses of administration are borne entirely by the government. This statement does not, however, represent the facts quite accurately. In Canada the expenses of administration are borne entirely by the government. But in Massachusetts the state by no means stands aloof. In all $19,500' is provided by the legislature for the expenses of the life-insurance departments of Massachusetts savings banks, and in addition publicity work is done by the Massachusetts Savings Insurance League, a voluntary association. The sum contributed by the state covers the offices of the state actuary, medical director, secretary, and also provides $2500 towards the cost of the publicity campaign. These state contributions are for the whole insurance propaganda, but they include similar expenses for the annuities. Thus in Massachusetts the state does bear a substantial part of the cost of selling annuities. Still the Massachusetts annuity premiums are "loaded" for expenses, while the Canadian rates are not "loaded."

"Loading" for expenses, then, provides a partial explanation of the difference between the Canadian and Massachusetts rates. But little calculation is needed to show that this element will not suffice to explain the whole difference. The lower Canadian rates are possible also because in reckoning the reserves the Canadian government allows interest at four per cent as against three and a half per cent in Massachusetts. The Canadian rate of interest was regarded by the initiators of the system as a contribution to the annuity fund; but up till now the government has been paying quite as much for money in the open market as it has been allowing to the purchasers of annuities.

Another fact which goes to explain the higher rates in Massachusetts than in Canada is the inclusion in the Bay State policies of the privilege of participation in the profits of the savings insurance banks. The banking and the insurance departments of these banks are entirely separate and their investments must

1 Massachusetts Acts, 1914, chapter 130; and 1915, chapter 168.

be kept separate under the law; and the insurance and annuity policies issued by the insurance departments participate in the profits earned by the insurance departments. Up till now the profits on annuities have amounted to two and a half per cent of the annual premium. This operates by way of a reduction in the rates, and constitutes a set-off against the "loading" for expenses. These profits show a tendency to increase, so that the net rates are likely to decline.

The fundamental point in a comparison of the two systems, which must always be kept in mind, is that the Canadian scheme is limited to annuities only, while the Massachusetts system is primarily an insurance scheme, in which annuities play a subsidiary and a minor part. The Massachusetts plan came into being as an effort to remove abuses in industrial insurance. The Canadian act grew out of a campaign for old-age pensions and the endeavor of the government of the day to substitute annuities for pensions. The Canadian annuities are sold directly by the state, and so have a direct state guarantee. In Massachusetts the policies are issued by the insurance departments of savings banks and not by the state; but the law provides for a supervision so strict as to approach closely to a state guarantee.

IV. ANNUITIES AND PENSIONS

Canada's government annuities, owing their existence to an effort to circumvent an agitation for old-age pensions, must pay the penalty of their origin, and submit to comparison with oldage pension schemes and other government plans for warding off want in old age. Under such systems the state contributes largely or gives the whole pension outright. An outstanding example of the former is the old-age insurance of Germany, and two prominent instances of the latter are the old-age pensions of the United Kingdom and of New Zealand.

2

It is unnecessary here to describe the German system of insurance against old age in any detail. Suffice it to say that

'Again I am indebted to the financial secretary of the Massachusetts Savings Insurance League for the information in regard to profits on annuities.

'The details here used are taken from W. Harbutt Dawson, Social Insurance for Germany, (1912), chapter vi.

the yearly benefit, which varies with the income earned by the worker during his years of activity, ranges from 110 to 230 marks; or from $26.18 to $54.74. In order to secure this the worker and the employer must make equal payments weekly during a period of 1200 weeks, or approximately twenty-five years, five weeks' margin being allowed for non-payment out of each year. The combined contributions of employer and employee by no means pay for the benefit, the state making a flat addition to the pension of fifty marks annually. The payment of the pension begins at the age of seventy.

Let us, then, see what these pensions would cost a working man under the Canadian system, as compared with the cost in Germany. If the Canadian workman begins to make his payments for the purchase of an annuity when he has reached the age of 45-this age will allow him about the same time to make the purchase as is the custom in Germany-the German minimum pension would cost him 5 cents per week; the German workman and employer combined pay 4 cents per week. Under the same conditions the German maximum pension would cost the Canadian workman 11 cents per week; the German employer and employee together pay 11 cents per week. But the Canadian workman may make his payments over a longer period and so reduce the weekly cost. If he begins at the age of 35, the total German pension would cost him only 2 cents per week for the minimum and 5 cents for the maximum. Beginning at 25, the Canadian workman can obtain the German minimum for 2 cents per week, the amount paid by the German workman alone; and the German maximum would cost him about 3 cents per week at the same age.

The British old-age pension is five shillings a week, beginning at the age of 70. On a yearly basis this is approximately $62.50. To purchase this annuity under the Canadian system would cost a Canadian workman 12 cents a week, if he began his payments at the age of 45. Ten years earlier he could purchase the same annuity for half that amount; and at 25 years of age it would cost him just 3 cents per week.

The New Zealand pension is double the British, and it begins five years earlier, at the age of 65. To purchase an annuity of

$125 to begin at the age of 65, a Canadian workman would have to pay 51 cents a week, if he began at 45; 25 cents at 35; and 10 cents at the age of 20.

The New Zealand pension is quite certainly out of the reach of all but the better-paid artisans, if it is to be purchased by the workman at the Canadian rates. Not that it would be financially impossible for a regularly employed laborer to save ten cents per week. The obstacle is moral rather than economic, using moral in its broadest sense. The period of waiting involved in continuing payments over a period of fifty-five years would rob the plan of any attractiveness in the mind of the workman. But this consideration would not apply with the same force to the British pension. From 45 to 70 is a comparatively short period, and the possibility of perseverance would increase in rapid proportion to the reduction of the waiting period. There are, it may be noted, a number of "laborers "-so described by themselves who have taken out annuities under the Canadian plan. In fact, laborers seem to be quite as ready to take up the scheme as the better-paid workmen of the artisan class.

The choice between annuities and pensions, as means of solving the problem of poverty in old age, must be settled by other considerations, however, than those of the cost to the worker. If it is true that the worker does not pay anything for the old-age pensions, from his point of view there is no choice between the two; and in a community where he has the ballot, there is little doubt how the choice will go. But this is an "if" which cannot be neglected. There is no doubt that under a tariff which applies to the common necessities of life, such as food and clothing, the workman does contribute—in all probability heavily in proportion to his means-to the cost of the upkeep of government; and consequently, where money is raised for pensions by such a system, he would contribute to the cost of these pensions. Even in the United Kingdom, with its comparatively simple system of customs taxation, he does contribute whenever, for example, he uses sugar in any form. Moreover, it is not improbable that the existence of a system of old-age pensions may affect the wages of a country. The influence would, of course, be indirect and slow; but in the long run it would make